Document:

exv10wxry

 

Exhibit 10(r)

EMPLOYMENT AGREEMENT

AGREEMENT made and entered into this ___day of                     , but as of the Effective Date
hereinafter defined, by and between Capitol Bancorp Ltd., a Michigan corporation, hereinafter
referred to as “Corporation”, and                     , hereinafter referred to as “Employee”.

WHEREAS, the Corporation has retained the services of the Employee and the Employee has accepted
such employment; and

WHEREAS, the parties desire to enter into this Agreement, which is intended to set forth in its
entirety the terms and conditions of the employment relationship between the Corporation and the
Employee;

NOW, THEREFORE, IT IS AGREED as follows:

1. Employment. The Employee is employed to render such services to the Corporation as directed
by its chief executive officer. The Employee’s current assignment carries the title of                     .

	 	 	 	Employee will, during the term hereof:
	 
	 	(a)	 	Faithfully and diligently do and perform all such acts and duties and furnish such
services as the Corporation shall direct, and do and perform all acts in the ordinary
course of Corporation’s business, with such limits as the Corporation may prescribe,
necessary and conducive to the Corporation’s best interests; and
	 
	 	(b)	 	Devote his full time, energy, and skill to the business of the Corporation and to the
promotion of the Corporation’s best interests, except for absences made necessary because
of illness and vacations. Employee may not be an employee, consultant, director or other
agent of any other person, firm or corporation (other than affiliates of Corporation)
without the prior signed written approval of the chief executive officer of the
Corporation. Employee may engage in passive business activities which do not interfere
with his employment under this Agreement and which do not conflict with the Corporation’s
interests. Employee may and is encouraged to engage in professional, civic and charitable
activities which do not conflict with the Corporation’s interests.

2. Compensation. The Corporation shall pay the Employee during the term of this Agreement a
salary commencing on the effective date of this agreement as hereinafter defined. The salary
provided herein shall be payable in accordance with periodic payment procedures for all employees
of the Corporation. The Employee’s salary shall be subject to the usual withholding taxes required
with respect to compensation paid by a corporation to an employee. The Employee’s salary shall be
reviewed by the Corporation annually and may be increased, but not decreased, from time to time in
such amounts as the Corporation in its absolute discretion may determine.

 

 

3. Discretionary Bonuses. In addition to the salary provided for in Paragraph 2, the Employee
shall be entitled to participate in discretionary bonuses as may be from time to time authorized
and declared by the board of directors of the Corporation to its executive employees. No other
compensation provided for in this Agreement shall be deemed a substitute for the Employee’s right
to participate in such bonuses when and as declared by the board of directors.

4. Retirement, Employee Benefit Plans and Fringe Benefits. The Employee shall be eligible to
participate in fringe benefits, including health benefits, which may be or may later become
applicable to the Corporation’s executive employees.

5. Expense Reimbursement. The Employee shall be eligible for expense reimbursement as approved by
the chief executive officer.

6. Term. The initial term of employment under this Agreement shall be for a period of
                    , commencing on the Effective Date hereof. Commencing with the ___anniversary
date of the Effective Date, and each year thereafter, this Agreement shall be extended
automatically for a period of one (1) year, unless either the Corporation or the Employee gives
contrary written notice in accordance with Paragraph 9 herein. If the Corporation decides not to
extend this agreement for any reason, the Corporation will be subject to the provisions of
Paragraph 9 and Paragraph 19 herein. This paragraph shall be limited by the terms and conditions
set forth in the “Termination of Employment” provisions set forth in Paragraph 9 of this Agreement
and the Change in Control provisions of Paragraph 19 of this Agreement.

7. Effective Date. For the purpose of this Agreement, the “Effective Date” is the date upon which
this Agreement is executed.

8. Standards. The Employee shall perform his duties under this Agreement in accordance with the
highest standards of fiduciary responsibility applicable to financial institutions in carrying out
their respective responsibilities to their depositors, customers and shareholders. These standards
shall conform to the highest standards of conduct imposed by any and every regulatory body having
jurisdiction over the Corporation. Performance standards for the Employee may be established from
time to time by the chief executive officer of the Corporation and are hereby incorporated within
the terms of this Agreement. It is recognized that the Corporation shall have wide latitude in
defining performance standards so as to ensure the safe and sound operation of its business
endeavors.

9. Termination of Employment.

	 	(a)	 	The Employee’s employment term under this Agreement may be terminated at any time by
the board of directors of the Corporation, with or without cause (as defined below).
Termination of this agreement by the Corporation without cause shall give rise to the
Employee’s right to receive compensation in accordance with Paragraph 2 of this Agreement
for a period of ___ subsequent to the termination, provided that Employee executes a
release agreement provided by the Corporation. Employee shall not receive compensation pay
in the event of his retirement, death, or disability. The

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	 	 	 	Employee shall have no right to receive compensation or any other remuneration whatsoever
under this Agreement for any period after voluntary termination or termination for cause.
For purposes of this Agreement, for “cause” shall mean termination for any of the following
reasons:

	 	i.	 	Personal dishonesty materially affecting the
Corporation or any affiliate;
	 
	 	ii.	 	Willful misconduct;
	 
	 	iii.	 	Willful breach of a fiduciary duty involving personal profit;
	 
	 	iv.	 	Intentional failure to perform stated duties;
	 
	 	v.	 	Willful violation of any law, rule, regulation, or
policy of or relating to the operation of the Corporation or any of its
affiliates;
	 
	 	vi.	 	The order of any court or supervising agency with
jurisdiction over the affairs of the Corporation or any subsidiary; or
	 
	 	vii.	 	The Employee’s willful violation of any provision
of this Agreement.
	 
	 	viii.	 	Unauthorized acts outside the scope of employment
which tend to disparage the corporation or lessen its good will. The
Corporation has the sole and absolute discretion in determining what is
disparaging or harmful to its good will.

	 	(b)	 	This Agreement may be terminated by the Employee at any time upon thirty (30) days
written notice to the Corporation or upon such shorter period as may be decided by the
board of directors of the Corporation subsequent to written notice. In the event of such
termination, the Corporation shall be obligated only to continue to pay the Employee’s
salary and provide the other benefits provided by this Agreement up to the date of the
termination.
	 
	 	(c)	 	In the event of the death of the Employee during the term of this Agreement, the
Employee’s estate shall be entitled to receive salary due the Employee through the last day
of the calendar month in which his death shall have occurred.
	 
	 	(d)	 	If the Employee is temporarily prohibited from participating in the conduct of the
Corporation’s affairs at the request of or by the order of any court or supervising agency
with jurisdiction over the Corporation, the Corporation’s obligations under this Agreement
shall not terminate and the Employee shall be placed on administrative leave with or
without pay at the discretion of the board of directors. If the charges in the proceeding
out of which such request or order is issued mature into a permanent prohibition order,
unless stayed by appropriate proceedings, the Corporation’s obligations hereunder shall
terminate as of the effective date of such permanent order.

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	 	(e)	 	All obligations under this agreement may be terminated, except to the extent determined
that continuation of the Agreement is necessary for the continued operation of the
Corporation:

	 	i.	 	By the Federal Deposit Insurance Corporation
(“FDIC”) at the time the FDIC enters into an agreement to provide
assistance to or on behalf of the Corporation or any affiliate; and
	 
	 	ii.	 	By the Federal Reserve Board (“FRB”), or any other
agency, at the time the FRB approves a supervisory merger to resolve
problems related to the operation of the Corporation or any affiliate or
when the Corporation is determined by the FRB to be in an unsafe or
unsound condition.

	 	(f)	 	Confidential Information. Employee recognizes and acknowledges that he will have
access to certain information concerning the Corporation and its affiliates and that such
information is Confidential Information, as defined herein, and constitutes valuable,
special and unique property of the Corporation and its affiliates. Employee shall not at
any time, either during or subsequent to the Term, disclose to others, use, copy or permit
to be copied, except in pursuance of his duties for and on behalf of the Corporation, its
successors, assigns or nominees, any Confidential Information of the Corporation
(regardless of whether developed by Employee) without the prior written consent of the
Corporation.

The term “Confidential Information” with respect to any person means any secret or
confidential information or know-how and shall include, but shall not be limited to,
the plans, customers, costs, prices, uses, and applications of products and
services, results of investigations, trade secrets, trade knowledge, formulae,
studies owned or used by such person, and all products, processes, compositions,
computer programs, and servicing, marketing or operational methods and techniques at
the time used, developed, investigated, made or sold by such person, before or
during the term or this Agreement, and any other information that is not readily
available to the public or that is maintained as confidential by such person.
Employee shall maintain in confidence any Confidential Information of third parties
received as a result of his employment with the Corporation in accordance with the
Corporation’s obligations to such third parties and the policies established by the
Corporation and its affiliates.

	 	(g)	 	Delivery of Documents Upon Termination. Employee shall deliver to the Corporation or
its designee at the termination of his employment all correspondence, memoranda, notes,
records, drawings, sketches, plans, customer lists, product compositions and other
documents and all copies thereof, made, composed or received by Employee, solely or jointly
with others, that are in Employee’s possession, custody or control at termination and that
are related in any manner to the past, present or anticipated business of the Corporation.

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	 	(h)	 	No Tampering. Throughout the Term and through the first anniversary of the expiration
thereof, Employee shall not (a) request, induce or attempt to influence any customers of
the Corporation or any affiliate to curtail or cancel any business they may transact with
Corporation; or (b) request, induce or attempt to influence any employee of the Corporation
or any affiliate to terminate his employment with the Corporation or any affiliate.
	 
	 	(i)	 	Remedies. Employee acknowledges that a remedy at law for any breach or attempted breach
of Employee’s obligations under this section 9 may be inadequate, agrees that the
Corporation may be entitled to specific performance and injunctive and other equitable
remedies in case of any such breach or attempted breach, and further agrees to waive any
requirement for the securing or posting of any bond in connection with the obtaining of any
such injunctive or other equitable relief. The termination of the Agreement for any reason
shall not be deemed to be a waiver by Corporation of any breach by Employee of this
Agreement or any other obligation owed the Corporation and notwithstanding such a
termination Employee shall be liable for all damages attributable to such a breach.

10. No Assignments. This Agreement is personal to each of the parties hereto, and neither party
may assign or delegate any of the rights or obligations hereunder without first obtaining the
written consent of the other party with the exception that this Agreement may be assigned by the
Corporation to an affiliate entity of the Corporation

11. Right to Attorney. The Employee acknowledges the ability to have consulted with counsel of
his choice, and if the Employee has not done so, it is solely the result of the Employee’s
conscious decision. The Employee acknowledges reading and understanding all the terms and
conditions of this Agreement and the Corporate Personnel Manual, and represents that there is no
unclear or ambiguous term or condition contained therein, and is executing this Agreement with a
complete and full understanding of all its terms and conditions.

12. Personnel Manual. Employee acknowledges receipt of the Personnel Manual and Code of Ethics
for the Corporation (“Manual”), and agrees by accepting employment that the Employee will be bound
by the terms, conditions, rules and regulations as set forth in said manual. Any benefit not set
forth herein, but included as a benefit in the Manual, shall also be a benefit provided to the
Employee.

13. Notices. Any notices under this Agreement shall be deemed given when in writing and delivered
personally or sent by certified mail, return receipt, postage prepaid, to the last known address of
the party to whom notice is given. If sent by mail, notice shall be deemed given on the day of
receipt.

14. Amendments. No amendments or additions to this Agreement shall be binding unless in writing
and signed by both parties, except as herein otherwise provided.

15. Paragraph Headings. The paragraph headings used in this Agreement are included solely for
convenience and shall not affect or be used in connection with the interpretation of this
Agreement.

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16. Severability. The provisions of this Agreement shall be deemed severable, and the invalidity
or unenforceability of any provision shall not affect the validity or enforceability of the other
provisions hereof.

17. Applicable Law. This Agreement shall be governed in all respects by the laws of the State
of Michigan.

18. Entire Agreement. This Agreement contains the entire agreement of the parties with respect
the transactions described herein and supersedes any and all other oral or written agreements
heretofore made, and there are no representations or inducements by or to, or any agreements
between, any of the parties hereto other than those contained herein in writing.

19. Change in Control. Employee shall be entitled to certain benefits in the event of a change in
control of the Corporation.

	 	(a)	 	In the event of a “Change in Control” (as defined in Subparagraph (d) below), of the
Corporation during the term of this agreement, Employee shall be entitled to terminate this
Agreement.
	 
	 	(b)	 	In the event that Employee terminates this Agreement pursuant to this Paragraph 19, the
Corporation will be obligated to pay or cause to be paid to Employee all amounts due and
owing to the date of termination of this Agreement and an amount equal to                                          of Employee’s “base amount” as defined in Section 280G(b)(3)(A) of the Internal Revenue
Code of 1986, as amended (the “Code”) provided that Employee executes a release agreement
provided by the Corporation.
	 
	 	(c)	 	In the event that the Corporation terminates this Agreement after a Change in Control
(as defined in subparagraph (d) below), The Corporation will be obligated to pay or cause
to be paid to Employee all amounts due and owing to the date of termination of this
Agreement (including any amounts required under paragraph 9) and an amount equal to                                          of Employee’s “base amount” as defined in Section 280G(b)(3)(A) of the
Internal Revenue Code of 1986, as amended (the “Code”) provided that Employee executes a
release agreement provided by the Corporation.
	 
	 	(d)	 	For the purpose of this Agreement, the term Change in Control shall mean any of the
following events:

	 	i.	 	After the Effective Date of this Agreement, any
non-affiliated entity of Corporation directly or indirectly, acquires
beneficial ownership of voting stock, or acquires irrevocable proxies or
any combination of voting stock and irrevocable proxies, representing
twenty-five percent (25%) or more of the voting securities of the
Corporation, or acquires control of in any manner the election of a
majority of the directors of the Corporation;
	 
	 	ii.	 	All or substantially all of the assets of the
Corporation are sold or otherwise transferred to or are acquired by any
other non-affiliated

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	 	 	 	corporation, association, or other person, entity, or group other than
Corporation.

Notwithstanding the other provisions of this Paragraph 19, a transaction or event shall not be
considered a Change in Control if, prior to the consummation or occurrence of such transaction or
event, Employee and the Corporation agree in writing that the same shall not be treated as a Change
in Control for purposes of this Agreement.

	 	(e)	 	Amounts payable pursuant to this Paragraph 19 shall be paid, at the option of the
Corporation either in one lump sum or in equal payments over the remaining term of this
Agreement.
	 
	 	(f)	 	It is the intent of the parties hereto that all payments made pursuant to this
Agreement be deductible by the Corporation and Bank for federal income tax purposes and not
result in the imposition of an excise tax on Employee. Notwithstanding anything contained
in this Agreement to the contrary, any payments to be made to or for the benefit of
Employee which are deemed to be “parachute payments” as that term is defined in Section
280G(b)(2) of the Code, shall be modified or reduced to the extent reasonably deemed to be
necessary by the Corporation to avoid the imposition of an excise tax on Employee under
Section 4999 of the Code or the disallowance of a deduction to the Corporation under
Section 280G(a) of the Code.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above
written.

	 	 	 	 	 
	Employer:	 	 
	 
	 	 	 	 
	CAPITOL BANCORP LTD.	 	 
	 
	 	 	 	 
	By
	 	 	 	 
	 

	 	 

	 	 
	 	 	Joseph D. Reid

Chairman of the Board
	 
	 	 	 	 
	Employee:	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 

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SCHEDULE

EMPLOYMENT AGREEMENTS

Each of the executive officers of Capitol named below executed an Employment Agreement on the date
set forth across from his or her name in substantially the form attached hereto.

	 	 	 
	Executive Officer
	 	Date of Agreement
	 
	 	 
	Cristin Reid English
	 	March 14, 2006
	 	 	 
	Bruce Thomas
	 	March 14, 2006

8<PAGE>

                                                                   EXHIBIT 10.36

                    *CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
                    DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED
                    WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE
                    24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

                                    AGREEMENT
                            UNDER AN NIH PRIME AWARD

     This Agreement ("Agreement") is entered into this 10th day of February,
2006 by and between The Children's Hospital of Philadelphia ("CHOP") and
Targeted Genetics Corporation (the "SUBAWARDEE").

     WHEREAS, CHOP is the sub-recipient of Contract No. HHSN266200500008C from
the National Institutes of Health ("NIH"), Department of Health and Human
Services ("DHHS") for support of a project entitled "HIV Vaccine Design and
Development Teams" (the "Prime Award") for which CHOP has received a cost
reimbursement Subcontract ("Subcontract"); and

     WHEREAS, the Subcontract includes authorization for the collaboration
between CHOP and the SUBAWARDEE; and

     WHEREAS, the SUBAWARDEE has the skilled personnel and resources available
to perform the services contemplated by this Agreement in accordance with the
Subcontract and this Agreement and all applicable federal laws, regulations and
policies, including but not limited to the NIH Grants Policy Statement (NIH
Publication No. 99-8, March 2001, as may be amended, the "NIH Grants Policy
Statement") that may be in effect from time to time.

     NOW THEREFORE, the parties agree as follows:

ARTICLE 1. STATEMENT OF WORK

     SUBAWARDEE agrees to use diligent efforts to perform the work described in
     its Statement of Work, which is attached as ATTACHMENT A and made part of
     this Agreement. Any significant change in the Statement of Work must be
     approved by CHOP in advance, and will be memorialized in an amendment to
     this Agreement.

ARTICLE 2. PERIOD OF PERFORMANCE

     The performance period for this Agreement will be effective 31 August 2005
     retroactively and will not extend beyond 30 August 2006 unless the period
     is extended by amendment to this Agreement.

ARTICLE 3. KEY PERSONNEL

     The CHOP Principal Investigator (the "CHOP PI") for the Agreement is Philip
     Johnson, M.D.

                                                                        Page - 1

<PAGE>

     The "Project Directors" for the SUBAWARDEE will be Barrie J. Carter, PhD,
     and Pervin Anklesaria, PhD. The Project Directors will be responsible for
     the conduct of the work performed under this Agreement.

     The Project Directors are considered essential to the work to be performed.
     The Project Directors may not be replaced, on a temporary or permanent
     basis, without the SUBAWARDEE first providing CHOP with notice of such
     request reasonably in advance along with justification in sufficient detail
     to permit evaluation of the impact on the program and CHOP granting its
     prior written approval. Additionally, the Project Directors may not
     significantly reduce his/her effort without the prior written approval of
     CHOP; for purposes of this Agreement, a significant reduction of the
     Project Directors effort is a reduction of 25% or more compared to the
     effort described in ATTACHMENT B.

ARTICLE 4. FINANCIAL CONDITIONS

4.1  ESTIMATED COSTS.

     The total cost of this Agreement, including direct and facilities and
     administration costs, will not exceed $3,087,023. ATTACHMENT B, which is
     attached and made part of this Agreement, reflects the agreed-upon budget.

     Fixed fee payments will be distributed based on the contract milestones
     outlined in APPENDIX B. A fixed fee of $51,634 will be paid to SUBAWARDEE
     for each completed milestone. Total fixed fee funds currently available for
     payment and allotted to SUBAWARDEE shall not exceed $154,901 (up to 3
     milestones).

4.2  ALLOWABLE COSTS.

     Allowability of costs will be determined in accordance with the NIH Grants
     Policy Statement and with applicable Office Management and Budget (OMB)
     cost principles.

4.3  INVOICING.

     SUBAWARDEE will invoice CHOP no more frequently than monthly and no less
     frequently than quarterly for services performed under this Agreement.
     Invoices will be paid upon certification by the CHOP PI that the work has
     been completed. The final invoice should be marked as such and SUBAWARDEE
     should send the final invoice to CHOP no later than thirty (30) days from
     the expiration or termination of this Agreement. If the final invoice is
     received after that time, it may not be honored.

     Invoices should be prepared in triplicate and sent to the Director,
     Research Finance, The Joseph Stokes Jr. Research Institute of The
     Children's Hospital of Philadelphia, 3615 Civic Center Boulevard,
     Philadelphia, PA 19104-4318 using the format provided in ATTACHMENT C or
     other format containing the same information. Upon request, the SUBAWARDEE
     will furnish CHOP with any necessary documentation to support invoiced
     amounts.

     SUBAWARDEE assumes sole responsibility for reimbursement to CHOP of a sum
     of money equivalent to the amount of any expenditure disallowed (as defined
     by the applicable Federal Acquisition Regulation) should CHOP or NIH rule,
     through audit

                                                                        Page - 2

<PAGE>

     exception or some other appropriate means, that any expenditure of funds
     allocated to the SUBAWARDEE was not made in compliance with the provisions
     of this Agreement.

ARTICLE 5. REPORTING REQUIREMENTS

5.1  FINANCIAL

     In addition to the final invoice, as specified in Section 4.3 above, the
     SUBAWARDEE will submit a financial report on Form NIH 2706 within thirty
     (30) days after the end of the performance period.

5.2  PROGRAMMATIC

     Reports of all programmatic findings related to the project will be sent to
     the CHOP PI when requested and in time to be included in annual or periodic
     reports and the final report to NIH. In general, this will follow Appendix
     A, flowdowns of the Prime Contract.

5.3  OTHER

     SUBAWARDEE will provide CHOP with documentation necessary to complete any
     additional reports required by NIH (such as human subject assurances,
     program income or invention statements).

ARTICLE 6. GENERAL CONDITIONS

     This Agreement will be administered in compliance with the provisions
     herein and the SUBAWARDEE agrees to comply with all applicable laws,
     regulations and policies pertaining to SUBAWARDEE's performance hereunder,
     including but not limited to the Contract, NIH Grants Policy Statement; 42
     C.F.R. Section 52 et seq; 45 C.F.R. Section 74 et seq.; 45 C.F.R. Section
     92 et seq. (as appropriate for the type of SUBAWARDEE and type of
     activity); and any other laws, regulations, or policies specifically
     referenced in this Agreement as they may be amended from time to time. The
     provisions of this Agreement may impose obligations on SUBAWARDEE in
     addition to those imposed by the Contract, NIH Grants Policy Statement and
     other applicable regulations.

ARTICLE 7. SPECIAL CONDITIONS

7.1  AWARD SPECIFIC TERMS AND CONDITIONS

     Subcontractor will comply with the terms and conditions, and Contract
     clauses identified as a flowdown from the Prime Contract (APPENDIX A) and
     Patent Rights Agreement (ATTACHMENT D).

7.2  INVENTIONS, PATENTS, COPYRIGHTS AND DATA

     Inventions: The determination of rights in ownership and disposition of
     inventions resulting from the performance of the Agreement and the
     administration of such patents will be in accordance with 37 CFR 401 and
     SUBAWARDEE agrees to comply with regulations regarding inventions as 37 CFR
     Part 401.

                                                                        Page - 3

<PAGE>

     SUBAWARDEE will promptly disclose any inventions resulting from the
     performance of this Agreement to CHOP and will cooperate with CHOP in
     making required notifications to NIH/DHHS.

     Final Invention Report: SUBAWARDEE agrees to submit Final Invention
     Statement Form, HHS 568, to CHOP no later than sixty (60) days after the
     termination or expiration of this Agreement.

     Copyrights: Disposition of any copyrights or any copyrightable material
     will be determined by the policy of the SUBAWARDEE. Any such copyrighted
     materials are subject to a royalty-free, non-exclusive, and irrevocable
     license for the U.S. Government to reproduce, publish, or otherwise use the
     copyrighted material and to authorize others to do so for federal purposes.
     Copies of all copyrighted or copyrightable materials will be provided to
     the CHOP PI.

     Data: SUBAWARDEE will own the data it generates under this Agreement. For
     the purposes or activities related to the Agreement CHOP will have the
     right to receive copies of such data and use data for educational and
     research purposes subject to the terms of the Patent Rights Agreement
     (Attachment D). Additionally, SUBAWARDEE acknowledges the rights of the
     U.S. Government to use such data.

7.3  PUBLICATION AND ACKNOWLEDGMENT OF SUPPORT.

     SUBAWARDEE is encouraged to publish the results of its effort carried out
     pursuant to this Agreement. In so doing the SUBAWARDEE will comply with the
     NIH's policies that pertain to the title and disposition of Rights in Data,
     Publication and Copyrighting as such policies are set forth in the NIH
     Grants Policy Statement and in HHSAR 352.270-6. Publication policies are
     defined in Attachment D- Patent Rights Agreement. The SUBAWARDEE will
     provide an advance copy of every publication involving data associated with
     this agreement to the CHOP PI.

     All publications, reports and other materials resulting from the study will
     acknowledge NIH support and should use a statement to the effect:

     "The project described was supported by funds from The Children's Hospital
     of Philadelphia under contract number HHSN266200500008C from the National
     Institute of Health/Department of Health and Human Services and the content
     of the publication do not necessarily represent the views or policies of
     the DHHS or The Children's Hospital of Philadelphia," nor does mention of
     trade names, commercial products, or organizations imply endorsement by the
     U.S. Government.

     As required by Department of Health and Human Services ("DHHS")
     appropriations acts, all DHHS award recipients must acknowledge Federal
     funding when issuing statements, press releases, requests for proposals,
     bid invitations, and other documents describing projects or programs funded
     in whole or in part with Federal money. Grantees are required to state (1)
     the percentage and dollar amounts of the total program or project costs
     financed with Federal money and (2) the percentage and dollar amount of the
     total costs financed by nongovernmental sources.

7.4  PROGRAMMATIC AND BUDGETARY CHANGES

                                                                        Page - 4

<PAGE>

     For all actions requiring NIH/DHHS prior approval, SUBAWARDEE must obtain
     prior written approval of CHOP. SUBAWARDEE agrees to provide CHOP with
     sufficient justification and supporting materials to support the requested
     change.

7.5  SALARY RATE LIMITATION

     SUBAWARDEE is subject to Public Law 108-447, which stipulates that no NIH
     fiscal year funds may be used to pay the direct salary of an individual
     through an award at a rate in excess of:

<TABLE>
<S>                                                      <C>
          FY 2005 (Executive Level I)
             January 1, 2005 through December 31, 2005   $180,100
</TABLE>

     (direct salary is exclusive of overhead, fringe benefits and facilities and
     administrative expenses.)

     The SUBAWARDEE shall include the following certification on every invoice
     for reimbursable costs incurred with Fiscal Year funds subject to the
     salary rate limitation provisions as specified in this Agreement. For
     billing purposes, certified invoices are required for the billing period
     during which the applicable Fiscal Year funds were initially charged
     through the final billing period utilizing the applicable Fiscal Year
     funds:

     "I hereby certify that the salaries charged in this invoice are in
     compliance with P.L. 108-447 and ARTICLE 7.5 of the above referenced
     Agreement."

ARTICLE 8. USE OF NAME

     CHOP and SUBAWARDEE each agree not to use the name of the other, or the
     name of any staff of the other, in news releases, commercial or
     non-commercial advertising or in other publications (with the exception of
     scholarly publications), without the prior written permission of a duly
     authorized officer of the other party and the affected individual (if any).

ARTICLE 9. AUDITS, INSPECTIONS AND RECORDS

     SUBAWARDEE will comply with the requirements of OMB Circular A-133 as
     implemented by 45 C.F.R. Section 74.26 and 45 C.F.R. Section 92.26, (or the
     audit requirements stated in 45 C.F.R. Section 74.26(d) for types of
     organizations to which OMB A-133 or other federal audit requirements does
     not directly apply), as applicable. SUBAWARDEE will submit a copy of its
     most recent financial compliance and audit report to the Director, Research
     Finance, The Joseph Stokes Jr. Research Institute of The Children's
     Hospital of Philadelphia, 3615 Civic Center Boulevard, Philadelphia, PA
     19104-4318.

     CHOP will have the right, at mutually agreeable times and upon reasonable
     notice, to inspect and review the progress of work conducted by the
     SUBAWARDEE hereunder, including the right to inspect SUBAWARDEE's
     facilities and records related to work conducted by SUBAWARDEE hereunder.

                                                                        Page - 5

<PAGE>

     Financial records, supporting documents, research data and other records
     pertinent to this Agreement will be retained for a period of three (3)
     years from the date of submission of CHOP's final expenditure report to
     NIH. Records pertaining to audits, appeals, litigation or settlement of
     claims arising out of the performance of this Agreement will be retained
     until such audits, appeals or litigation or claims have been settled.

ARTICLE 10. LIABILITY

     The SUBAWARDEE's relationship to CHOP under this Agreement will be that of
     an Independent Contractor and not an agent, joint venturer, partner or
     employee of CHOP. As such an independent contractor, the SUBAWARDEE assumes
     risk and all responsibility for work conducted under this Agreement. The
     SUBAWARDEE will, during the course of this Agreement, maintain in force
     adequate insurance to cover risk or liability arising out of this work.

ARTICLE 11. TERMINATION

     This Agreement will immediately terminate upon receipt of written
     notification from CHOP to SUBAWARDEE that the Contract has been terminated
     by the funding agency or if CHOP does not approve a replacement Project
     Director as such approval is required by Article 3 above. Furthermore, CHOP
     may terminate this Agreement by giving notice in writing to SUBAWARDEE if
     SUBAWARDEE is in breach of this Agreement and has failed to cure such
     breach within thirty (30) days or within a mutually agreed upon cure
     period, of receipt of notice thereof from CHOP.

ARTICLE 12. CHANGES

     CHOP may from time to time request changes in the scope of the activities
     to be performed by the SUBAWARDEE as described in ATTACHMENT A, Statement
     of Work. Changes that are mutually agreed upon between the SUBAWARDEE and
     CHOP shall be incorporated into this Agreement via written amendment(s).

ARTICLE 13. NOTICE

     All notices required under this Agreement shall be in writing and sent to:

          To CHOP:

             Assistant Director, Research Services
             Office of Research Services and Project Development
             The Children's Hospital of Philadelphia
             The Joseph Stokes, Jr. Research Institute
             3615 Civic Center Boulevard
             Philadelphia, PA 19104-4318

             Tel: (215) 590-3800
             Fax: (215) 590-3804

             Notices regarding programmatic matters only should be sent to:

             Philip Johnson, M.D.

                                                                        Page - 6

<PAGE>

             The Children's Hospital of Philadelphia
             The Joseph Stokes, Jr. Research Institute
             3615 Civic Center Boulevard
             Philadelphia, PA 19104-4318

          To SUBAWARDEE:

             Ralph W. Paul, Ph.D
             Director, Technology Evaluation
             Targeted Genetics Corporation
             1100 Olive Way, Suite 100
             Seattle, WA 98101

             Tel: (206) 521-7830
             Fax: (206) 521-7830

             With a copy sent to::

             Legal Department
             Targeted Genetics Corporation
             1100 Olive Way, Suite 100
             Seattle, WA 98101

ARTICLE 14. ASSIGNMENT

     This Agreement is for professional services. Neither party may assign,
     delegate or otherwise transfer any of its rights or obligations under this
     Agreement in whole or in part to another party without the express written
     consent of the non-assigning party.

     SUBAWARDEE agrees not to subcontract any of the research effort required
     under this Agreement without the prior written approval of CHOP.

ARTICLE 15. INDEMNIFICATION

15.1 INDEMNIFICATION BY SUBAWARDEE

     SUBAWARDEE will indemnify and hold harmless CHOP, its board members,
     officers, agents, servants and employees from and against any and all
     liability, loss, damage, claims, costs, actions, and suits, including
     costs, expenses, and attorneys' fees, arising out of, resulting from, or
     relating to, directly or indirectly, any action or inaction of the
     SUBAWARDEE under this Agreement.

15.2 INDEMNIFICATION BY CHOP

     CHOP will indemnify and hold harmless SUBAWARDEE, its board members,
     officers, agents, servants and employees from and against any and all
     liability, loss, damage, claims, costs, actions and suits, including costs,
     expenses, and attorneys' fees, arising out of, resulting from, or relating
     to, directly or indirectly, any action or inaction of CHOP under this
     Agreement.

                                                                        Page - 7

<PAGE>

ARTICLE 16. ENTIRE AGREEMENT

     This Agreement constitutes the entire agreement and understanding between
     CHOP and SUBAWARDEE. It merges all prior discussions between the parties
     and neither party will be bound by conditions, definitions, warranties,
     understanding or representations concerning such subject matter except as
     provided in this Agreement. Any changes or modifications to this Agreement
     or to any attachment to this Agreement will be made in writing and executed
     by the duly authorized representatives of CHOP and SUBAWARDEE.

ARTICLE 17. ASSURANCES AND CERTIFICATIONS

17.1 GENERAL

     SUBAWARDEE will comply with all applicable Public Policy Requirements and
     Objectives as specifically described in the Contract and NIH Grants Policy
     Statement, which are hereby incorporated into this Agreement by reference.
     Furthermore, SUBAWARDEE represents, warrants and certifies that it has
     filed and will maintain all assurances or other documentation with the
     appropriate government agencies to the extent such assurances and
     documentation are required.

17.2 NON-DISCRIMINATION

     SUBAWARDEE certifies that the SUBAWARDEE is in compliance with the Civil
     Rights Act of 1964, the Age Discrimination Act of 1975, Title IX of the
     Education Amendments of 1972; the Rehabilitation Act of 1973; and the
     Americans With Disabilities Act and all implementing regulations.

17.3 DEBARMENT

     SUBAWARDEE does certify that neither SUBAWARDEE nor any of its employees or
     agents performing any service under this Agreement (including the
     SUBAWARDEE PI) are presently debarred, suspended, proposed for debarment,
     declared ineligible or voluntarily excluded from participation in this
     transaction, under investigation for a crime or otherwise engaged in
     conduct for which a person can be debarred by any federal agency, and
     SUBAWARDEE will immediately notify CHOP upon any inquiry concerning
     commencement of any such proceeding concerning SUBAWARDEE or such person
     referred to in this subparagraph.

17.4 FEDERAL DEBT

     SUBAWARDEE certifies that SUBAWARDEE is not delinquent on any Federal debt
     in accordance with OMB Circular No. A-129.

17.5 LOBBYING

     SUBAWARDEE certifies that no federally appropriated funds have been paid or
     will be paid to any person for influencing or attempting to influence an
     officer or employee of any agency, a Member of Congress, an officer or
     employee of Congress, or an employee of an Member of Congress in connection
     with this Agreement, and that if any funds other than federally
     appropriated funds have been paid or will be paid to any person for

                                                                        Page - 8

<PAGE>

     influencing or attempting to influence an officer or employee of any
     agency, a Member of Congress, an officer or employee of Congress, or an
     employee of an Member of Congress in connection with this NIH Prime award,
     grant loan or cooperative agreement the SUBAWARDEE will complete and submit
     standard Form-LLL, "Disclosure Form to Report Lobbying."

17.6 PROTECTION OF HUMAN SUBJECTS

     The SUBAWARDEE will comply with all requirements relating to human subject
     protections as set forth at 45 C.F.R. Part 46 and 21 C.F.R. Part 50
     (Protection of Human Subjects).

     SUBAWARDEE agrees that it will obtain the approval of the appropriate
     external institutional review board (the "IRB") prior to conducting any
     studies involving human subjects and will comply with all IRB policies and
     requirements regarding such research. SUBAWARDEE will notify CHOP
     immediately if IRB approval of the study has to be revoked or suspended for
     any reason.

     SUBAWARDEE certifies that the cognizant IRB is in full compliance with all
     relevant federal regulations. SUBAWARDEE further agrees to notify CHOP
     immediately of any actions taken by the FDA or OHRP in relation to the IRB.

     Unanticipated events, drug reactions, or other reports of project activity
     that could assist CHOP and other subcontractors, if any, in protecting the
     health or safety of study subjects will be immediately reported to the CHOP
     PI, in addition to reporting to the extent required to the NIH and FDA, as
     applicable.

17.7 VERTEBRATE ANIMALS

     SUBAWARDEE will comply with all federal government, Public Health Service,
     and NIH requirements, policies, and guidelines relating to the humane care
     and use of laboratory animals including but not limited to The Animal
     Welfare Act as amended, at 7 U.S.C. Section 2131 et. seq., and comply with
     any local or state government laws, regulations or policies concerning such
     matters. In accordance with the applicable regulations, SUBAWARDEE agrees
     that any animal research protocol conducted under this Agreement will be
     reviewed and approved by SUBAWARDEE's Animal Care and Use Committee (IACUC)
     and certifies that this IACUC is in full compliance with all federal
     regulations and has an approved Assurance on file with DHHS.

17.8 USE OF RECOMBINANT DNA

     SUBAWARDEE agrees that, to the extent applicable, it will comply with the
     requirements of the NIH Guidelines for Research Involving Recombinant DNA
     Molecules (59 FR 34496, July 5, 1994) including establishing a standing
     Institutional Biosafety Committee.

17.9 MISCONDUCT IN SCIENCE

     SUBAWARDEE agrees to comply with regulations at 42 C.F.R. Part 50, Subpart
     A, "Responsibilities for PHS Awards and Applicant Institutions for Dealing
     with and Reporting Possible Misconduct in Science"; immediately notify CHOP
     if the conduct of

                                                                        Page - 9

<PAGE>

     any employee or agent of SUBAWARDEE performing any service under this
     Agreement, including the SUBAWARDEE PI, is under investigation for
     misconduct in science; and keep CHOP fully informed about any such
     investigation to enable CHOP to meet its obligations under the NIH Grants
     Policy Statement.

17.10 OBJECTIVITY IN RESEARCH

     SUBAWARDEE will comply with all federal government, Public Health Service,
     and NIH requirements, policies, and guidelines relating to actual or
     potential conflicts of interest, including but not limited to the
     requirements of 42 C.F.R. Part 50, Subpart F, "Responsibility of Applicants
     for Promoting Objectivity in Research for which NIH Funding is Sought".
     Acceptance of this Agreement constitutes certification that SUBAWARDEE has
     implemented a written and enforced policy consistent with the above
     referenced policy and with any subsequent amendments to this policy.

17.11 DRUG-FREE WORKPLACE

     By signing this Agreement, the SUBAWARDEE assures that it is in compliance
     with the provisions of the Drug-Free Workplace Act of 1988 (45 CFR Part 76,
     Subpart F).

17.12 BIOTERRORISM PREPAREDNESS AND RESPONSE

     The SUBAWARDEE will comply with the Public Health Security and Bioterrorism
     Preparedness and Response Act of 2002 (P.L. 107-188).

17.13 USA PATRIOT ACT

     The SUBAWARDEE will comply with the Uniting and Strengthening America by
     Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
     Act (USA PATRIOT Act P.L. 107-56).

17.14 INDIVIDUALLY IDENTIFIABLE HEALTH INFORMATION

     The SUBAWARDEE will comply with the "Standards for Privacy of Individually
     Identifiable Health Information (45 C.F.R. 164 Subpart E)." This regulation
     under the Health Insurance Portability and Accountability Act (HIPAA) of
     1996 governs the protection of individually identifiable health
     information.

17.15 STEM CELL RESEARCH

     The SUBAWARDEE will comply with "Notice of Criteria for Federal Funding of
     Research on Existing Embryonic Stem Cells and Establishment of NIH
     Embryonic Stem Cell Registry" (NOT-OD-02-005; 11/07101) and the "NIH
     Guidelines for Research Using Human Pluripotent Stem Cells."

17.16 CHANGES

     SUBAWARDEE agrees to notify CHOP immediately if there is any change of
     status in any of the above.

                                                                       Page - 10

<PAGE>

ARTICLE 18. ADDITIONAL DISCLOSURES

     In addition to all other reporting and notification requirements set forth
     in this Agreement, the SUBAWARDEE will immediately disclose to CHOP in
     writing each of the following:

     (a) The existence of any "Significant Financial Interests" as defined in 42
     C.F.R. Part 50, Subpart F, "Responsibility of Applicants for Promoting
     Objectivity in Research for which NIH Funding is Sought," that are required
     by such regulations to be reported to NIH, along with an explanation as to
     whether the identified Interest is being managed, reduced or eliminated by
     the SUBAWARDEE and any other information about the Interest that CHOP may
     reasonably request;

     (b) Formal findings of noncompliance with any law, regulation or other term
     or condition incorporated into the Agreement that could reasonably affect
     the awarding, administration, conduct, reliability or reporting of the
     results of the Prime Award;

     (c) Receipt of formal discovery requests, notices of suit or litigation or
     other formal adversary proceedings with respect to any aspect of the
     Agreement; and

     (d) Suspensions, disciplinary actions or other enforcement actions by an
     external agency or authority that concern any Investigator on the Agreement
     and are related to that Investigator's performance under the Agreement or
     the Agreement itself. For purposes of this Agreement, "Investigator" will
     be as defined in the federal regulations on "Responsibility of Applicants
     for Promoting Objectivity in Research for which PHS Funding is Sought"
     (Conflicts of Interest), at 42 C.F.R. Part 50, Subpart F.

ARTICLE 19. GOVERNING LAW

     This Agreement will be construed under the laws of Pennsylvania.

APPENDIX A and ATTACHMENT D are hereby incorporated as part of this subcontract.

                                                                       Page - 11

<PAGE>

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives.

For The Children's Hospital of             For Targeted Genetics Corporation
Philadelphia:                              SUBAWARDEE:

/s/ Sara Dubberly                            /s/ Barrie Carter
------------------------------------       ------------------------------------
Signature                                  Signature

Sara Dubberly                              Barrie Carter
Typed Name                                 Typed Name

Director, Sponsored Projects               Senior Executive Vice President and
Children's Hospital of Philadelphia        Chief Scientific Officer
The Joseph Stokes Jr. Research Institute   Targeted Genetics Corporation

------------------------------------       ------------------------------------
Title/Organization                         Title/Organization
Date 2/10/06                               Date 2/13/06

                                                                       Page - 12

<PAGE>

                                                 CHOP REFERENCE NO. 22852 -01-01

APPENDIX A - PRIME CONTRACT FLOWDOWNS

The Prime Contract clauses identified below are hereby incorporated by
reference. Furthermore, at a minimum, this Subcontract hereby incorporates by
reference any of those FAR and FAR Supplement clauses that are part of the Prime
Contract.

When any of the clauses incorporated herein by reference specify a period of
time within which the contractor is to provide any notice, information, or
document to the Government, the Subcontractor must provide any such notice,
information, or document to CHOP within a sufficiently shorter time in order to
provide CHOP a reasonable opportunity to consider the Subcontractor's material
and prepare its own submission before the Prime Contract deadline.

As used in the Prime Contract clauses that are incorporated herein by reference,
the term "contract" shall mean this Agreement, the terms "Government,"
"Contracting Officer," and the like shall mean CHOP, the term "Contractor" shall
mean the SUBAWARDEE.

PART I

SECTION A - SUPPLIES OR SERVICES AND PRICES/COSTS

ARTICLE A.1 PROVISIONS APPLICABLE TO DIRECT COSTS

a.   Items Unallowable Unless Otherwise Provided

     Notwithstanding the clauses, ALLOWABLE COST AND PAYMENT and FIXED FEE,
     incorporated in this contract, unless authorized in writing by the
     Contracting Officer, the costs of the following items or activities shall
     be unallowable as direct costs:

     (1)  Acquisition, by purchase or lease, of any interest in real property;

     (2)  Special rearrangement or alteration of facilities;

     (3)  Purchase or lease of ANY item of general purpose office furniture or
          office equipment regardless of dollar value. (General purpose
          equipment is defined as any items of personal property which are
          usable for purposes other than research, such as office equipment and
          furnishings, pocket calculators, etc.);

     (4)  Travel to attend general scientific meetings;

     (5)  Foreign travel - See Paragraph b.(2) below;

     (6)  Consultant costs;

     (7)  Subcontracts;

     (8)  Patient care costs;

     (9)  Accountable Government property (defined as both real and personal
          property with an acquisition cost of $1,000 or more and a life
          expectancy of more than two years) and "sensitive items" (defined and
          listed in the Contractor's Guide for Control of Government Property),
          1990, regardless of acquisition value.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

b.   Travel Costs

     (1)  Domestic Travel

          (a)  Total expenditures for domestic travel (transportation, lodging,
               subsistence, and incidental expenses) incurred in direct
               performance of this contract shall not exceed $43,022 without the
               prior written approval of the Contracting Officer.

          (b)  The Contractor shall invoice and be reimbursed for all travel
               costs in accordance with Federal Acquisition Regulations (FAR)
               31.205-46.

     (2)  Foreign Travel

          Requests for foreign travel must be submitted at least six weeks in
          advance and shall contain the following: (a) meeting(s) and place(s)
          to be visited, with costs and dates; (b) name(s) and title(s) of
          Contractor personnel to travel and their functions in the contract
          project; (c) contract purposes to be served by the travel; (d) how
          travel of Contractor personnel will benefit and contribute to
          accomplishing the contract project, or will otherwise justify the
          expenditure of NIH contract funds; (e) how such advantages justify the
          costs for travel and absence from the project of more than one person
          if such are suggested; and (f) what additional functions may be
          performed by the travelers to accomplish other purposes of the
          contract and thus further benefit the project.

ARTICLE A.2. ADVANCE UNDERSTANDINGS

Other provisions of this contract notwithstanding, approval of the following
items within the limits set forth is hereby granted without further
authorization from the Contracting Officer.

a.   To negotiate a cost reimbursement type subcontract with Children's Hospital
     of Philadelphia for an amount not to exceed $18,902,433. Award of the
     subcontract shall not proceed without the prior written approval of the
     Contracting Officer upon review of the draft subcontract agreement. After
     written approval of the subcontract by the Contracting Officer, a copy of
     the signed, approved subcontract shall be provided to the Contracting
     Officer.

b.   To negotiate a cost reimbursement type lower tier subcontract with Targeted
     Genetics Corporation for an amount not to exceed $18,243,919. Award of the
     lower tier subcontract shall not proceed without the prior written approval
     of the Contracting Officer upon review of the draft subcontract agreement.
     After written approval of the subcontract by the Contracting Officer, a
     copy of the signed, approved lower tier subcontract shall be provided to
     the Contracting Officer.

c.   Targeted Genetics Corporation is authorized to bill indirect costs as
     follows for the period August 31, 2005 through August 30, 2010: Fringe
     Benefits of 13.02% of salaries and wages; Overhead of 100% of direct labor
     plus fringe benefits; and G&A of 14.93% of Direct Labor, Fringe Benefits,
     Overhead and Other Direct Costs.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

     In no event shall the final amount reimbursable for Overhead for the
     Targeted Genetics Corporation exceed a ceiling of 100% of direct labor and
     fringe benefits.

d.   To negotiate fixed price type lower tier subcontracts with Targeted
     Genetics Corporation for the following amounts not to exceed:

          [*]   [*]   [*]
          [*]   [*]   [*]
          [*]   [*]   [*]
          [*]   [*]   [*]
          [*]   [*]   [*]
          [*]   [*]   [*]
          [*]   [*]   [*]
          [*]   [*]   [*]
          [*]   [*]   [*]

          Award of the lower tier subcontracts shall not proceed without the
          prior written approval of the Contracting Officer upon review of the
          draft subcontract agreements. After written approval of the
          subcontracts by the Contracting Officer, a copy of the signed,
          approved lower tier subcontracts shall be provided to the Contracting
          Officer.

e.   Invoices - Cost and Personnel Reporting, and Variances from the Negotiated
     Budget

     (1)  The Contractor agrees to provide a detailed breakdown on invoices of
          the following cost categories:

          (a)  Direct Labor - List individuals by name, title/position,
               hourly/annual rate, level of effort, and amount claimed.

          (b)  Fringe Benefits - Cite rate and amount.

          (c)  Overhead - Cite rate and amount.

          (d)  Materials & Supplies - Include detailed breakdown when total
               amount is over $1,000.

          (e)  Travel - Identify travelers, dates, destination, purpose of trip,
               and amount. Cite COA, if appropriate. List separately, domestic
               travel, general scientific meeting travel, and foreign travel.

                                            [*]CONFIDENTIAL TREATMENT REQUESTED.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

          (f)  Subcontracts - Attach subcontractor invoice(s).

          (g)  Equipment - Cite authorization and amount.

          (h)  Other Direct Costs

          (i)  Patient Care Costs

          (j)  G&A - Cite rate and amount.

          (k)  Total Cost

          (l)  Fixed Fee

          (m)  Total CPFF

     Monthly invoices must include the cumulative total expenses to date,
     adjusted (as applicable) to show any amounts suspended by the Government.

     (2)  The Contractor agrees to immediately notify the Contracting Officer in
          writing if there is an anticipated overrun (any amount) or unexpended
          balance (greater than 10 percent) of the amount allotted to the
          contract, and the reasons for the variance. Also refer to the
          requirements of the Limitation of Funds and Limitation of Cost Clauses
          in the contract.

f.   Confidential Treatment of Sensitive Information

     The Contractor shall guarantee strict confidentiality of the
     information/data that it is provided by the Government during the
     performance of the contract. The Government has determined that the
     information/data that the Contractor will be provided during the
     performance of the contract is of a sensitive nature.

     Disclosure of the information/data, in whole or in part, by the Contractor
     can only be made after the Contractor receives prior written approval from
     the Contracting Officer. Whenever the Contractor is uncertain with regard
     to the proper handling of information/data under the contract, the
     Contractor shall obtain a written determination from the Contracting
     Officer,

g.   Contract Number Designation

     On all correspondence submitted under this contract, the Contractor agrees
     to clearly identify the two contract numbers that appear on the face page
     of the contract as follows:

          Contract No. HHSN266200500008C
          ADB Contract No. N01-AI-50008

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

h.   NIH NIAID DAIDS-contracted Audit of Production Facility

     The Contractor and all Subcontractors will be audited for GMP, GLP, and
     QC/QA capabilities within three months of contract award. Noted
     deficiencies shall be corrected (or addressed) within three months after
     issuance of the audit report.

i.   Contract Milestones

     The Contractor shall complete all work in accordance with the Statement of
     Work and the contract milestones set forth below. The distribution of the
     fixed fee shall be paid in installments based on the Project Officer's
     written certification regarding the completion of these milestones as
     follows:

<TABLE>
<CAPTION>
                              MILESTONES                                          FIXED FEE
                              ----------                                          ---------
<S>                                                                               <C>
                     Multi-gene HIV VRP Vaccine for Phase I
 1   Immunogenicity testing                                                        $38,028
 2   Selection of VRP construct and mfg process                                    $38,028
 3   Pass DAIDS-contracted GMP audit of production facility intended for use in
     VRP production.                                                               $38,028
 4   Submit clinical trial concept to HVTN                                         $38,028
 5   Prepare/submit pre-IND documents to CBER                                      $38,028
 6   Complete pilot lot production                                                 $38,028
 7   Technology transfer for GMP production                                        $38,028
 8   Pre-IND meeting                                                               $38,028
 9   Complete GMP production                                                       $38,028
10   Complete GMP immunogenicity testing                                           $38,028
11   Develop clinical trial protocol with HVTN                                     $38,028
12   Complete QC release testing for GMP product                                   $38,028
13   Complete pivotal toxicology study                                             $38,028
14   Prepare/submit IND                                                            $38,028
15   Complete Phase I clinical trial                                               $38,028

                     Multi-gene HIV VRP Vaccine for Phase II
</TABLE>

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

<TABLE>
<S>                                                                                <C>
16   Review and prepare summary of critical data                                   $38,028
17   Begin GMP production                                                          $38,028
18   Develop clinical trial protocol with HVTN                                     $38,028
19   Complete QC release testing for GMP product                                   $38,028
20   Prepare/submit IND amendment                                                  $38,028
21   Begin Phase II clinical trial                                                 $38,028
22   Review Phase II data                                                          $38,028
</TABLE>

SECTION B - DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

ARTICLE B.1. REPORTING REQUIREMENTS AND DELIVERABLES

The Contractor is required to formally report progress once per year, through
submission of a written Technical Report, and once by holding a formal Site
Visit review to be attended by appropriate NIAID contract staff and program
officials, and the External Advisory Committee of the Team. The Contractor is
also required to submit Goals and Milestones Achievement Reports during the
contract period at appropriate times. Distribution of written reports is listed
in Article E.1.

GOALS AND MILESTONES ACHIEVEMENT REPORTS. SINCE THE PAYMENT OF CONTRACT FEE
PORTIONS WILL BE TIED TO THE ACCOMPLISHMENT OF NEGOTIATED, PREDETERMINED GOALS
AND MILESTONES, THE CONTRACTOR WILL SUBMIT GOALS AND MILESTONES ACHIEVEMENT
REPORTS DURING THE CONTRACT PERIOD AS APPROPRIATE. THE ORIGINAL SHALL BE
SUBMITTED TO THE CONTRACTING OFFICER, AND TWO (2) COPIES (ONE HARD COPY AND A
COPY IN A DIGITAL MEDIUM) TO THE PROJECT OFFICER. EACH REPORT MUST CONSIST OF:

     1.   A COVER PAGE.

     2.   Reports shall include but not be limited to the following:

               Section A - An introduction covering the goal or milestone.

               Section B - A description of the results. Description shall
               include pertinent data and/or figures in sufficient detail to
               explain any significant results from analysis and scientific
               evaluation of data accumulated to date under the goal or
               milestone. When appropriate this report should detail specific
               requests and approvals for the conduct of human trials.

Clinical Trials Protocol(s). NIAID has a responsibility to ensure that
mechanisms and procedures are in place to protect the safety of participants in
NIAID-supported studies. Therefore, as described in the NIAID Clinical Terms of
Award and Guidance (http://www.niaid.nih.gov/ncn/clinical/default_human.htm),
the Contractor shall develop a protocol for each clinical trial and submit it
for approval by the NIAID Prevention

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

Science Review Committee (PSRC). Protocols should include a description of the
research design and protocol development including definition of objectives and
approaches, planning, implementation, participant recruitment and follow-up,
data collection, quality control, data and safety monitoring, final data
analysis and interpretation, and publication of results. Final approval of this
protocol must take place prior to participant enrollment. [For trials to be
conducted through the DAIDS-sponsored HVTN, the protocol should be developed in
conjunction with the HVTN.]

     Annual Technical Report. By the fifteenth working day of the twelfth month
     of each contract year, the Contractor shall submit Annual Technical
     Progress Reports as described below. The original shall be submitted to the
     Contracting Officer, and two (2) copies (one hard copy and one copy in a
     digital medium) to the Project Officer. The report should be factual and
     concise and consist of the following:

     1. A cover page.

     2. Reports shall include, but not be limited to the following:

          Section A - An introduction covering the purpose and scope of the
          contract effort.

          Section B - A description of overall progress plus a separate
          description for each task or other logical segment of work on which
          effort was expended during the reporting period. The description shall
          include pertinent data and/or figures in sufficient detail to explain
          any significant results from analysis and scientific evaluation of
          data accumulated to date under the project. Special emphasis shall be
          placed on goals or milestones that were reached, or problems that were
          encountered that prevented reaching a scheduled goal or milestone
          during the reporting period and how those problems were/will be
          addressed, and requests and approvals to conduct human trials.

          Section C - A summary of the proposed goals and milestones for the
          duration of the contract, including any proposed revisions based on
          results generated to date.

Annual Site Visit Review and Report. At the middle (6 month mark) of each
contract year, the Contractor shall host, for NIAID contract and program staff
and their External Advisory Board, a site visit review. The Contractor's
Principal Investigator and all Co-investigators shall attend this meeting. An
update and summary of results generated on each sub-project shall be presented
by the co-investigator and/or other pertinent staff. These presentations shall
include summaries of all goals or milestones reached during the review period
and include a description of all problems encountered that will impact the
achievement of particular goals and milestones as outlined in the Contractor's
research plan. The Principal Investigator, Co-investigator and staff
representing each project and sub-project shall describe goals and milestones
and development objectives for the coming year. Additionally, application of the
policies and procedures for monitoring the direction of specific projects shall
be presented. For Contractors with foreign subcontracts, this annual site visit
will also report details about approvals for manufacturing or testing that have
been obtained from both the U.S. and foreign governments. A report of the plan
for, and results of, this site visit shall be prepared by

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

the Contractor and submitted to the Project Officer (in hard copy and digital
medium) and the Contracting Officer (original hard copy).

Final Technical Report. The Contractor shall submit the final report documents,
two (2) copies (one hard copy and one copy in a digital medium) to the Project
Officer, and the original to the Contracting Officer, which shall summarize the
results of the entire contract work for the complete performance period, and
shall include the specifications of the optimized AIDS vaccine product developed
during the course of this contract. These specifications shall include: 1) the
identity of the vaccine strain or strains in the final product, 2) a detailed
description of the manipulations used in the vaccine design, 3) a detailed
description of all processes used to expand, attenuate, inactivate, or purify
the final vaccine product, 4) a detailed description of any adjuvants or other
potentiating agents used in the delivery of the final optimized product, 5) a
detailed description of the suggested immunization schedule to be used for
optimal reactivity in humans, and 6) evidence that the vaccine product can be
manufactured under GMP/GLP conditions for use in human vaccine trials. In
addition, the Contractor shall indicate whether any INDs were filed in relation
to vaccine products developed during the course of the contract, and provide a
description of the IND and the results of the filings. For Contractors with
foreign subcontracts, this report shall include details concerning approvals for
manufacturing or testing that have been obtained for or by the foreign
subcontractors. The final report shall be submitted by the completion date of
the contract.

Deliverables. The Contractor shall submit samples of candidate HIV/AIDS
vaccines, as well as selected plasma/cell samples from preclinical animal
immunogenicity studies of candidate HIV/AIDS vaccines, prior to GMP manufacture,
for testing in DAIDS-sponsored core laboratories. Contractors may also be asked
to provide samples of GMP vaccine product for similar analyses in conjunction
with clinical trials.

ARTICLE B.2. INVENTION REPORTING REQUIREMENT

All reports and documentation required by FAR Clause 52.227-11 including, but
not limited to, the invention disclosure report, the confirmatory license, and
the government support certification, shall be directed to the Extramural
Inventions and Technology Resources Branch, OPERA, NIH, 6705 Rockledge Drive,
Room 1040 A, MSC 7980, Bethesda, Maryland 20892-7980 (Telephone: 301-435-1986).
In addition, one copy of an annual utilization report, and a copy of the final
invention statement, shall be submitted to the Contracting Officer. The final
invention statement (see FAR 27.303(a)(2)(ii)) shall be submitted to the
Contracting Officer within 90 days after the expiration date of the contract to
the following address:

     Contracting Officer
     National Institutes of Health
     National Institute of Allergy and Infectious Diseases, CMP
     6700-B Rockledge Drive, Room 3214, MSC 7612
     Bethesda, Maryland 20892 -7612

If no invention is disclosed or no activity has occurred on a previously
disclosed invention during the applicable reporting period, a negative report
shall be submitted to the Contracting Officer at the address listed above.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

To assist Contractors in complying with invention reporting requirements of the
clause, the NIH has developed "Interagency Edison," an electronic invention
reporting system. Use of Interagency Edison is encouraged as it streamlines the
reporting process and greatly reduces paperwork. Access to the system is through
a secure interactive Web site to ensure that all information submitted is
protected. Interagency Edison and information relating to the capabilities of
the system can be obtained from the Web (http://www.iedison.gov), or by
contacting the Extramural Inventions and Technology Resources Branch, OPERA,
NIH.

SECTION C - PACKAGING, MARKING AND SHIPPING

All deliverables required under this contract shall be packaged, marked and
shipped in accordance with Government specifications. At a minimum, all
deliverables shall be marked with the contract number and contractor name. The
Contractor shall guarantee that all required materials shall be delivered in
immediate usable and acceptable condition.

SECTION D - INSPECTION AND ACCEPTANCE

a.   The Contracting Officer or the duly authorized representative will perform
     inspection and acceptance of materials and services to be provided.

b.   For the purpose of this SECTION, the Project Officer is the authorized
     representative of the Contracting Officer.

c.   Inspection and acceptance will be performed at the address listed in
     Article G.1.

     Acceptance may be presumed unless otherwise indicated in writing by the
     Contracting Officer or the duly authorized representative within 30 days of
     receipt.

d.   This contract incorporates the following clause by reference, with the same
     force and effect as if it were given in full text. Upon request, the
     Contracting Officer will make its full text available.

     FAR Clause No. 52.246-9, INSPECTION OF RESEARCH AND DEVELOPMENT (SHORT
     FORM) (APRIL 1984).

SECTION E - DELIVERIES OR PERFORMANCE

ARTICLE E.1. DELIVERIES

Satisfactory performance of the final contract shall be deemed to occur upon
performance of the work described in Attachment A and upon delivery and
acceptance by the Contracting Officer, or the duly authorized representative, of
the following items in accordance with the stated delivery schedule:

a.   The items specified below as described in SECTION B, ARTICLE B.1 will be
     required to be delivered F.O.B. Destination as set forth in FAR 52.247-35,
     F.O.B. DESTINATION, WITHIN CONSIGNEES PREMISES (APRIL 1984), and in
     accordance with and by the dates specified below:

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

<TABLE>
<CAPTION>
Item                 Description                        Delivery Schedule
----                 -----------                        -----------------
<S>    <C>                                       <C>
  1    Goals and Milestones Achievement Report   As required by the Project Officer
  2    Clinical Trials Protocol(s)               As required by the Project Officer
  3    Annual Technical Report                   15th day of the twelfth month of each
                                                 contract year
  4    Annual Site Visit Review and Report       6th month of each contract year
  5    Final Technical Report                    On or before contract expiration
</TABLE>

b.   The above items shall be addressed and delivered to:

<TABLE>
<CAPTION>
Addressee                                  Deliverable Item               Quantity
---------                                  ----------------               --------
<S>                             <C>                                       <C>
Contracting Office              Goals and Milestones Achievement Report        --
CMP, NIAID, NIH                 Clinical Trials Protocol(s)                    --
Room 3214, MSC 7612             Annual Technical Report                    1 Copy
6700-B Rockledge Drive          Annual Site Visit Review and Report        1 Copy
Bethesda, MD 20892-7612         Final Technical Report                     1 Copy

Project Officer                 Goals and Milestones Achievement Report    1 Copy*
Vaccine & Prevention Research   Clinical Trials Protocol(s)                1 Copy*
Program                         Annual Technical Report                    1 Copy*
Division of AIDS, NIAID, NIH    Annual Site Visit Review                   1 Copy*
Room 5136, MSC 7628             Final Technical Report                     1 Copy*
6700-B Rockledge Drive
Bethesda, MD 20892-7628
</TABLE>

*    Plus one copy on 3.5 inch, high density computer diskette or other digital
     medium approved by the Project Officer.

ARTICLE E.2. CLAUSES INCORPORATED BY REFERENCE, FAR 52.252-2 (FEBRUARY 1998)

This contract incorporates the following clause by reference, with the sane
force and effect as if it were given in full text. Upon request, the Contracting
Officer will make its full text available. Also, the full text of a clause may
be accessed electronically at this address: http://www.arnet.gov/far/.

FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSE:

     52.242-15, Stop Work Order (AUGUST 1989) with ALTERNATE I (APRIL 1984).

SECTION F - CONTRACT ADMINISTRATION DATA

ARTICLE F.1 PROJECT OFFICER

The following Project Officer will represent the Government for the purpose of
this contract:

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

     Michael N. Pensiero, Ph.D.  Product Development Team Leader
     Preclinical Research and Development Branch Vaccine and Prevention Research
     Program Division of AIDS, NAID, NIH, DHHS Room 5136, MSC 7628 6700-B
     Rockledge Drive Bethesda, MD 20892-7628
     Phone: (301) 435-3749 Fax: (301) 402-3684
     Email: mpensiero@niaid.nih.gov

The Project Officer is responsible for: (1) monitoring the Contractor's
technical progress, including the surveillance and assessment of performance and
recommending to the Contracting Officer changes in requirements; (2)
interpreting the Statement of Work and any other technical performance
requirements; (3) performing technical evaluation as required; (4) performing
technical inspections and acceptances required by this contract; and (5)
assisting in the resolution of technical problems encountered during
performance.

The Contracting Officer is the only person with authority to act as agent of the
Government under this contract. Only the Contracting Officer has authority to:
(1) direct or negotiate any changes in the Statement of Work; (2) modify or
extend the period of performance; (3) change the delivery schedule; (4)
authorize reimbursement to the Contractor any costs incurred during the
performance of this contract; or (5) otherwise change any terms and conditions
of this contract.

The Contracting Officer hereby delegates the Project Officer as the Contracting
Officer's authorized representative responsible for signing software license
agreements issued as a result of this contract.

The Government may unilaterally change its Project Officer designation.

ARTICLE F2. KEY PERSONNEL

Pursuant to the Key Personnel clause incorporated in Section I of this contract,
the following individuals are considered to be essential to the work being
performed hereunder:

<TABLE>
<CAPTION>
          NAME                                    TITLE
          ----                                    -----
<S>                        <C>
Philip Johnson, M.D.       Principal Investigator (Children's Hospital of
                           Philadelphia)
K. Reed Clark, Ph.D.       Co- Principal Investigator (Children's Research
                           Institute)
Barrie Carter, Ph. D.      Co-Investigator (Targeted Genetics)
Pervin Anklesaria, Ph.D.   Co-Investigator (Targeted Genetics)
</TABLE>

ARTICLE F.3. GOVERNMENT PROPERTY

a.   In addition to the requirements of the clause, GOVERNMENT PROPERTY,
     incorporated in SECTION I of this contract, the Contractor shall comply
     with the provisions of DHHS Publication, Contractor's Guide for Control of
     Government Property, 1990, which is incorporated into this contract by
     reference. Among other issues, this publication provides a summary of the
     Contractor's responsibilities regarding purchasing authorizations and
     inventory and reporting requirements under the contract.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

     A copy of this publication is available upon request to the Contracts
     Property Administrator.

     Requests for information regarding property under this contract should be
     directed to the following office:

     Division of Personal Property Services, NIH
     6011 Building, Suite 637
     6011 EXECUTIVE BLVD MSC 7670
     BETHESDA MD 20852-7670
     (301) 496-6466

b.   Notwithstanding the provisions outlined in the DHHS Publication,
     CONTRACTOR'S GUIDE FOR CONTROL OF GOVERNMENT PROPERTY, 1990 which is
     incorporated in this contract in paragraph a. above, the Contractor shall
     use the form entitled, "Report of Government Owned, Contractor Held
     Property" for performing annual inventories required under this contract.
     This form is included as an attachment in SECTION J of this contract.

c.   Contractor-Acquired Government Property - Schedule I-A

     Pursuant to the clause, GOVERNMENT PROPERTY, incorporated in this contract,
     the Contractor is hereby authorized to acquire the property listed in the
     attached Schedule I-A, Attachment 8, for use in direct performance of the
     contract. This contract is for scientific research and is with a nonprofit
     institution whose primary purpose is the conduct of scientific research.
     Therefore, in accordance with the clause, GOVERNMENT PROPERTY, ALTERNATE I,
     title to equipment having an acquisition cost of less than $ 5,000 shall
     vest in the Contractor and title to equipment having an acquisition cost of
     $ 5,000 or more purchased with funds made available under the contract
     shall vest in the Contractor subject to the provisions of the clause,
     GOVERNMENT PROPERTY; provided that the Government may direct transfer of
     the title to the Government or to a third party within twelve months after
     completion or termination of the contract. The transfer of title to such
     equipment to the Government or to a third party shall not be the basis for
     any claim against the Government by the Contractor.

ARTICLE F.4. POST AWARD EVALUATION OF CONTRACTOR PERFORMANCE

a.   Contractor Performance Evaluations

     Interim and final evaluations of Contractor performance will be prepared on
     this contract in accordance with FAR 42.15. The final performance
     evaluation will be prepared at the time of completion of work. In addition
     to the final evaluation, interim evaluations will be prepared annually to
     coincide with the anniversary date of the contract.

     Interim and final evaluations will be provided to the Contractor as soon as
     practicable after completion of the evaluation. The Contractor will be
     permitted thirty days to review the document and to submit additional
     information or a rebutting statement. If agreement cannot be reached
     between the parties, the matter will be referred to an individual one level
     above the Contracting Officer, whose decision will be final.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

     Copies of the evaluations, Contractor responses, and review comments, if
     any, will be retained as part of the contract file, and may be used to
     support future award decisions.

SECTION G - SPECIAL CONTRACT REQUIREMENTS

ARTICLE G.1. RESTRICTION FROM USE OF HUMAN SUBJECTS

NOTICE: UNDER GOVERNING REGULATIONS, FEDERAL FUNDS ADMINISTERED BY THE
DEPARTMENT OF HEALTH AND HUMAN SERVICES SHALL NOT BE EXPENDED FOR RESEARCH
INVOLVING HUMAN SUBJECTS, AND INDIVIDUALS SHALL NOT BE ENROLLED IN SUCH
RESEARCH, WITHOUT PRIOR APPROVAL BY THE OFFICE FOR HUMAN RESEARCH PROTECTIONS
(OHRP) OF AN ASSURANCE TO COMPLY WITH THE REQUIREMENTS OF 45 CFR 46 TO PROTECT
HUMAN RESEARCH SUBJECTS. THIS RESTRICTION APPLIES TO ALL COLLABORATING SITES
WITHOUT OHRP-APPROVED ASSURANCES, WHETHER DOMESTIC OR FOREIGN, AND COMPLIANCE
MUST BE ENSURED BY THE AWARDEE.

PRISONERS SHALL NOT BE ENROLLED IN ANY HHS RESEARCH ACTIVITIES UNTIL ALL
REQUIREMENTS OF HHS REGULATIONS AT 45 CFR PART 46, SUBPART C HAVE BEEN MET. IF A
RESEARCH SUBJECT BECOMES A PRISONER DURING THE PERIOD OF THIS CONTRACT, 45 CFR
PART 46, SUBPART C WILL APPLY TO RESEARCH INVOLVING THAT INDIVIDUAL.

ARTICLE G.2. REQUIRED EDUCATION IN THE PROTECTION OF HUMAN RESEARCH PARTICIPANTS

NIH policy requires education on the protection of human subject participants
for all investigators receiving NIH contract awards for research involving human
subjects. For a complete description of the NIH Policy announcement on required
education in the protection of human subject participants, the Contractor should
access the NIH Guide for Grants and Contracts Announcement dated June 5, 2000 at
the following website:
http://grants.nih.gov/garants/guide/notice-files/NOT-OD-00-039.html. The
information below is a summary of the NIHPolicy Announcement:

The Contractor shall maintain the following information: (1) a list of the names
and titles of the Principal Investigator and any other individuals working under
the contract who are responsible for the design and/or conduct of the research;
(2) the title of the education program(s) in the protection of human subjects
that has been completed for each named personnel and; (3) a one sentence
description of the educational program(s) listed in (2) above. This requirement
extends to investigators and all individuals responsible for the design and/or
conduct of the research who are working as subcontractors or consultants under
the contract.

Prior to any substitution of the Principal Investigator or any other individuals
responsible for the design and/or conduct of the research under the contract,
the Contractor shall provide the following written information to the
Contracting Officer: the title of the education program and a one sentence
description of the program that has been completed by the replacement.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

ARTICLE G.3. DATA AND SAFETY MONITORING IN CLINICAL TRIALS

The Contractor is directed to the full text of the NIH Policy regarding Data and
Safety Monitoring and Reporting of Adverse Events, which may be found at the
following web sites:

     http://grants.nih.gov/grants/guide/notice-files/not98-084.html
     http://grants.nih.gov/grants/guide/notice-files/not99-107.html
     http://grants.nih.gov/grants/guide/notice-files/NOT-OD-00-038.html

THE CONTRACTOR MUST COMPLY WITH THE NIH POLICY CITED IN THESE NIH ANNOUNCEMENTS,
THE NIAID CLINICAL TERMS OF AWARD
(HTTP://WWW.NIAID.NIH.GOV/NCN/CLINIEALL/DEFAULT HUMAN.HTM), AND ANY OTHER DATA
AND SAFETY MONITORING REQUIREMENTS FOUND ELSEWHERE IN THIS CONTRACT.

Data and Safety Monitoring shall be performed in accordance with the approved
Data and Safety Monitoring Plan.

The Data and Safety Monitoring board and plan shall be established and approved
prior to beginning the conduct of the clinical trial.

ARTICLE G.4. HUMAN MATERIALS

The acquisition and supply of all human specimen material (including fetal
material) used under this contract shall be obtained by the Contractor in full
compliance with applicable State and Local laws and the provisions of the
Uniform Anatomical Gift Act in the United States, and no undue inducements,
monetary or otherwise, will be offered to any person to influence their donation
of human material.

ARTICLE G.5. CONTINUED BAN ON FUNDING OF HUMAN EMBRYO RESEARCH

a.   Pursuant to Public Law(s) cited in paragraph b., below, NIH is prohibited
     from using appropriated funds to support human embryo research. Contract
     funds may not be used for (1) the creation of a human embryo or embryos for
     research purposes; or (2) research in which a human embryo or embryos are
     destroyed, discarded, or knowingly subjected to risk of injury or death
     greater than that allowed for research on fetuses in utero under 45 CFR
     46.208(a)(2) and Section 498(b) of the Public Health Service Act (42 U.S.C.
     289g(b)). The term "human embryo or embryos" includes any organism, not
     protected as a human subject under 45 CFR 46 as of the date of the
     enactment of this Act, that is derived by fertilization, parthenogenesis,
     cloning, or any other means from one or more human gametes or human diploid
     cells.

     Additionally, in accordance with a March 4, 1997 Presidential Memorandum,
     Federal funds may not be used for cloning of human beings.

<TABLE>
<CAPTION>
b.   PUBLIC LAW AND SECTION NO.   FISCAL YEAR     PERIOD COVER
     --------------------------   -----------     ------------
<S>                               <C>           <C>
     P.L. 108-447, Title
     V-General Provisions,
     Section 509                      2005      10/1/04-9/30/05
</TABLE>

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

ARTICLE G.6. NEEDLE EXCHANGE

a.   Pursuant to Public Law(s) cited in paragraph b., below, contract funds
     shall not be used to carry out any program of distributing sterile needles
     or syringes for the hypodermic injection of any illegal drug.

<TABLE>
<CAPTION>
b.   PUBLIC LAW AND SECTION NO.   FISCAL YEAR     PERIOD COVER
     --------------------------   -----------     ------------
<S>                               <C>           <C>
     P.L. 108-447, Title
     V-General Provisions,
     Section 505                      2005      10/1/04-9/30/05
</TABLE>

ARTICLE G.7. PRIVACY ACT

This procurement action requires the Contractor to do one or more of the
following: design, develop, or operate a system of records on individuals to
accomplish an agency function in accordance with the Privacy Act of 1974, Public
Law 93-579, December 31, 1974 (5 USC 552a) and applicable agency regulations.
Violation of the Act may involve the imposition of criminal penalties.

The Privacy Act System of Records applicable to this project is Number
09-25-0200. This document may be accessed on the Internet at the following URL:
http://oma.od.nih.gov/ms/privacy/pa-files/0200.htm.

ARTICLE G.8. ANIMAL WELFARE

All research involving live, vertebrate animals shall be conducted in accordance
with the Public Health Service Policy on Humane Care and Use of Laboratory
Animals. This policy may be accessed at
http://rantsl.nih.gov/grants/olaw/references/phspol.htm.

ARTICLE G.9. RESTRICTION FROM USE OF LIVE VERTEBRATE ANIMALS

UNDER GOVERNING POLICY, FEDERAL FUNDS ADMINISTERED BY THE PUBLIC HEALTH SERVICE
(PHS) SHALL NOT BE EXPENDED FOR RESEARCH INVOLVING LIVE VERTEBRATE ANIMALS
WITHOUT PRIOR APPROVAL BY THE OFFICE OF LABORATORY ANIMAL WELFARE (OLAW), OF [AN
ASSURANCE TO COMPLY WITH THE PHS POLICY ON HUMANE CARE AND USE OF LABORATORY
ANIMALS AND/OR A VALID INSTITUTIONAL ANIMAL CARE AND USE COMMITTEE (IACUC)
APPROVAL]. THIS RESTRICTION APPLIES TO ALL PERFORMANCE SITES (e.g. COLLABORATING
INSTITUTIONS, SUBCONTRACTORS, SUBGRANTEES) WITHOUT OLAW-APPROVED ASSURANCES,
WHETHER DOMESTIC OR FOREIGN.

ARTICLE G.10. SUBCONTRACTING PROVISIONS

a.   Small Business Subcontracting Plan

     (1)  The Small Business Subcontracting Plan, dated March 7, 2005 is
          attached hereto and made a part of this contract.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

     (2)  The failure of any Contractor or subcontractor to comply in good faith
          with FAR Clause 52.219-8, entitled "Utilization of Small Business
          Concerns" incorporated in this contract and the attached
          Subcontracting Plan, will be a material breach of such contract or
          subcontract and subject to the remedies reserved to the Government
          under FAR Clause 52.219-16 entitled, "Liquidated
          Damages-Subcontracting Plan."

b.   Subcontracting Reports

     (1)  Subcontracting Report for Individual Contracts, SF-294

          The Contractor shall submit the original and one (1) copy of
          Subcontracting Report for Individual Contracts, SF-294 in accordance
          with the instructions on the report as referenced in Public Law
          95-507, Section 211. In addition to the information contained in the
          General Instructions on the back of this form for Block 17, "Remarks,"
          the Contractor shall provide an explanation for any category of small
          business subcontracting for which there were no dollars reported since
          the last reporting period.

          Regardless of the effective date of this contract, the Report shall be
          submitted on the following dates for the entire life of this contract:

               April 30th
               October 30th

          The Report shall be sent to the Contracting Officer at following
          address:

               Contracting Officer
               Contracts Management Program
               National Institutes of Allergy and Infectious Diseases
               6700B Rockledge Dr.
               Room 3124, MSC 7612
               Bethesda, MD 20892-7612

     (2)  Summary Subcontract Report, SF-295

          The Contractor shall submit two (2) copies of Summary Subcontract
          Report, SF-295 in accordance with the instructions on the report as
          referenced in Public Law 95-507, Section 211. Regardless of the
          effective date of this contract, the Summary Subcontract Report shall
          be submitted annually on the following date for the entire life of
          this contract:

               October 30th

          One copy of this report shall be sent to the Contracting Officer at
          the address above. One copy of this Report shall be mailed to the
          Office of Small and Disadvantaged Business Utilization, DHHS at the
          following addresses:

               Office of Small and Disadvantaged Business Utilization Department
               of Health and Human Services

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

               Hubert H. Humphrey Bldg., Room 517-D
               200 Independence Avenue, S.W.
               Washington, D.C. 20201

     (3)  The Contractor shall also send an "Information Copy" of the SF-295 to
          the Cognizant Commercial Representative (CMR) at the address provided
          by the SBA. The Contractor should call SBA Headquarters in Washington,
          DC at (202) 606-4000, X234 for the correct address if unknown.

ARTICLE G.11. SALARY RATE LIMITATION LEGISLATION PROVISIONS

a.   Pursuant to Public Law(s) cited in paragraph b., below, no NIH Fiscal Year
     funds may be used to pay the direct salary of an individual through this
     contract at a rate in excess of applicable amount shown for the fiscal year
     covered. Direct salary is exclusive of fringe benefits, overhead, and
     general and administrative expenses (also referred to as "indirect cost" or
     "facilities and administrative (F&A) costs"). Direct salary has the same
     meaning as the term "institutional base salary." An individual's direct
     salary (or institutional base salary) is the annual compensation that the
     Contractor pays for an individual's appointment whether that individual's
     time is spent on research, teaching, patient care or other activities.
     Direct salary (or institutional base salary) excludes any income that an
     individual may be permitted to earn outside of duties to the Contractor.
     The per year salary rate limit also applies to individuals proposed under
     subcontracts. It does not apply to fees paid to consultants. If this is a
     multiple year contract, it may be subject to unilateral modifications by
     the Government if an individual's salary rate exceeds any salary rate
     ceiling established in future HHS appropriation acts.

<TABLE>
<CAPTION>
                                                                  DOLLAR AMOUNT
                                                                    OF SALARY
b.   PUBLIC LAW AND SECTION NO.                   FISCAL YEAR      LIMITATION
     --------------------------                   -----------   -----------------
<S>                                               <C>           <C>
     P.L. 108-447, Title II-General Provisions,
     Section 204                                      2005      Executive Level I
</TABLE>

c.   Direct salaries are limited to the Executive Level I rate which was in
     effect on the date(s) the expense was incurred.

LINK to EXECUTIVE LEVEL SALARIES: www.opm.gov/oca/PAYRATES/index. htm (Click on
"Executive Schedule" for the current Fiscal Year's salary rate or scroll down to
the "General Schedule Salary Tables from Previous Years" to locate the Executive
Level salary rates from previous years.)

ARTICLE G.12. PUBLICATION AND PUBLICITY

The Contractor shall acknowledge the support of the National Institutes of
Health whenever publicizing the work under this contract in any media by
including an acknowledgment substantially as follows:

          "This project has been funded in whole or in part with Federal funds
          from the National Institute of Allergy and Infectious Diseases,
          National Institutes of

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

          Health, Department of Health and Human Services, under Contract No.
          HHSN266200500008C, ADB No. NO1-AI-50008."

ARTICLE G.13. PRESS RELEASES

a.   Pursuant to Public Law(s) cited in paragraph b., below, the Contractor
     shall clearly state, when issuing statements, press releases, requests for
     proposals, bid solicitations and other documents describing projects or
     programs funded in whole or in part with Federal money: (1) the percentage
     of the total costs of the program or project which will be financed with
     Federal money; (2) the dollar amount of Federal funds for the project or
     program; and (3) the percentage and dollar amount of the total costs of the
     project or program that will be financed by nongovernmental sources.

<TABLE>
<CAPTION>
b.   PUBLIC LAW AND SECTION NO.                   FISCAL YEAR      PERIOD COVER
     --------------------------                   -----------   -----------------
<S>                                               <C>           <C>
     P.L. 108-447, Title V-General Provisions,
     Section 506                                      2005      10/1/04 - 9/30/05
</TABLE>

ARTICLE G.14. REPORTING MATTERS INVOLVING FRAUD, WASTE AND ABUSE

Anyone who becomes aware of the existence or apparent existence of fraud, waste
and abuse in NIH funded programs is encouraged to report such matters to the HHS
Inspector General's Office in writing or on the Inspector General's Hotline. The
toll free number is 1-800-HHS-TIPS (1-800-447-8477). All telephone calls will be
handled confidentially. The e-mail address is Htips@os.dhhs.gov and the mailing
address is:

          Office of Inspector General
          Department of Health and Human Services
          TIPS HOTLINE
          P.O. Box 23489
          Washington, D.C. 20026

ARTICLE G.15. ANTI -LOBBYING

a.   Pursuant to Public Law(s) cited in paragraph c., below, contract funds
     shall only be used for normal and recognized executive-legislative
     relationships. Contract funds shall not be used, for publicity or
     propaganda purposes; or for the preparation, distribution, or use of any
     kit, pamphlet, booklet, publication, radio, television, or video
     presentation designed to support or defeat legislation pending before the
     Congress or any State legislature, except in presentation to the Congress
     or any State legislature itself.

b.   Contract funds shall not be used to pay salary or expenses of the
     Contractor or any agent acting for the Contractor, related to any activity
     designed to influence legislation or appropriations pending before the
     Congress or any State legislature.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

<TABLE>
<CAPTION>
c.   PUBLIC LAW AND SECTION NO.                   FISCAL YEAR     PERIOD COVER
     --------------------------                   -----------   -----------------
<S>                                               <C>           <C>
     for a., above:  P.L. 108-447, Title V
     - General Provisions, Section 503a               2005      10/1/04 - 9/30/05
     for b., above: P.L. 108-447, Title V
     - General Provisions, Section 503b               2005      10/1/04 - 9/30/05
</TABLE>

ARTICLE G.16. OBTAINING AND DISSEMINATING BIOMEDICAL RESEARCH RESOURCES

Unique research resources arising from NIH-funded research are to be shared with
the scientific research community. NIH provides guidance, entitled, "Sharing
Biomedical Research Resources: Principles and Guidelines for Recipients of NIH
Research Grants and Contracts," (Federal Register Notice, December 23, 1999 [64
FR 72090]), concerning the appropriate terms for disseminating and acquiring
these research resources. This guidance, found at:
http://ott.od.nih.gov/NewPages/64FR72090.pdf. is intended to help Contractors
ensure that the conditions they impose and accept on the transfer of research
tools will facilitate further biomedical research, consistent with the
requirements of the Bayh-Dole Act and NIH funding policy.

Note: For the purposes of this Article, the terms, "research tools," "research
materials," and "research resources" are used interchangeably and have the same
meaning.

ARTICLE G.17. SHARING RESEARCH DATA

The data sharing plan submitted by the Contractor is acceptable. The Contractor
agrees to adhere to its plan and shall request prior approval of the Contracting
Officer for any changes in its plan.

The NIH endorses the sharing of final research data to expedite the translation
of research results into knowledge, products, and procedures to improve human
health. This contract is expected to generate research data that must be shared
with the public and other researchers. NIH's data sharing policy may be found at
the following Web site:

          http://grants.nih.gov/grants/guide/notice-files/NOT-OD-03-032.htm1.

NIH recognizes that data sharing may be complicated or limited, in some cases,
by institutional policies, local IRB rules, as well as local, state and Federal
laws and regulations, including the Privacy Rule (see HHS-published
documentation on the Privacy Rule at http://www.hhs.govlocro. The rights and
privacy of people who participate in NIH-funded research must be protected at
all times; thus, data intended for broader use should be free of identifiers
that would permit linkages to individual research participants and variables
that could lead to deductive disclosure of the identity of individual subjects.

ARTICLE G.18. NIH POLICY ON ENHANCING PUBLIC ACCESS TO ARCHIVED PUBLICATIONS
RESULTING FROM NIH-FUNDED RESEARCH

The Policy requests that beginning May 2, 2005, NIH-funded investigators submit
to the NIH National Library of Medicine's (NLM) PubMed Central (PMC) an
electronic version of the author's final manuscript, upon acceptance for
publication, resulting from research supported in whole or in part with direct
costs from NIH. NIH defines the author's final manuscript as the

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

final version accepted for journal publication, and includes all modifications
from the publishing peer review process. The PMC archive will preserve
permanently these manuscripts for use by the public, health care providers,
educators, scientists, and NIH. The Policy directs electronic submissions to the
NIH/NLM/PMC: http://www.pubmedcentral.nih.gov.

Additional information is available at
http://grants.nih.gov/grants/guide/notice-files/NOT-OD-05-022.html.

                           PART II - CONTRACT CLAUSES

SECTION I - CONTRACT CLAUSES

ARTICLE 1.1. GENERAL CLAUSES FOR A COST-REIMBURSEMENT RESEARCH AND DEVELOPMENT
CONTRACT - FAR 52.252-2, CLAUSES INCORPORATED BY REFERENCE (FEBRUARY 1998)

This contract incorporates the following clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available. Also, the full text of
a clause may be accessed electronically at this address:
http://www.arnet.gov/far/.

A.   FEDERAL ACQUISITION REGULATION (FAR) (48 CFR CHAPTER 1) CLAUSES:

<TABLE>
<CAPTION>
FAR
CLAUSE NO.        DATE                                          TITLE
----------        ----                                          -----
<S>          <C>               <C>
52.202-1            Jul 2004   Definitions (Over $ 100,000)
52.203-3            Apr 1984   Gratuities (Over $ 100,000)
52.203-5            Apr 1984   Covenant Against Contingent Fees (Over $ 100,000)
52.203-6            Jul 1995   Restrictions on Subcontractor Sales to the Government (Over $ 100,000)
52.203-7            Jul 1995   Anti-Kickback Procedures (Over $ 100,000)
52.203-8            Jan 1997   Cancellation, Rescission, and Recovery of Funds for Illegal or Improper
                               Activity (Over $ 100,000)
52.203-10           Jan 1997   Price or Fee Adjustment for Illegal or Improper Activity (Over $
                               100,000)
52.203-12           Jun 2003   Limitation on Payments to Influence Certain Federal Transactions (Over
                               $ 100,000)
52.204-4            Aug 2000   Printed or Copied Double-Sided on Recycled Paper (Over $ 100,000)
52.204-7            Oct 2003   Central Contractor Registration
52.209-6            Jan 2005   Protecting the Government's Interests When Subcontracting With
                               Contractors Debarred, Suspended, or Proposed for Debarment (Over $
                               25,000)
52.215-2            Jun 1999   Audit and Records - Negotiation (Over $ 100,000)
52.215-8            Oct 1997   Order of Precedence - Uniform Contract Format
52.215-10           Oct 1997   Price Reduction for Defective Cost or Pricing Data
</TABLE>
<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

<TABLE>
<S>         <C>                <C>
52.215-12           Oct 1997   Subcontractor Cost or Pricing Data (Over $ 500,000)
52.215-14           Oct 1997   Integrity of Unit Prices (Over $ 100,000)
52.215-15           Oct 2004   Pension Adjustments and Asset Reversions
52.215-18           Jul 2005   Reversion or Adjustment of Plans for Post-Retirement Benefits (PRB)
                               other than Pensions
52.215-19           Oct 1997   Notification of Ownership Changes
52.215-21           Oct 1997   Requirements for Cost or Pricing Data or Information Other Than Cost or
                               Pricing Data - Modifications
52.216-7            Dec 2002   Allowable Cost and Payment
52.216-8            Mar 1997   Fixed Fee
52.219-8            May 2004   Utilization of Small Business Concerns (Over $ 100,000)
52.219-9            Jan 2002   Small Business Subcontracting Plan (Over $ 500,000)
52.219-16           Jan 1999   Liquidated Damages - Subcontracting Plan (Over $ 500,000)
52.222-2            Jul 1990   Payment for Overtime Premium (Over $ 100,000) (Note: The dollar amount
                               in paragraph (a) of this clause is $ 0 unless otherwise specified in
                               the contract.)
52.222-3            Jun 2003   Convict Labor
52.222-21           Feb 1999   Prohibition of Segregated Facilities
52.222-26           Apr 2002   Equal Opportunity
52.222-35           Dec 2001   Equal Opportunity for Special Disabled Veterans, Veterans of the
                               Vietnam Era, and other Eligible Veterans
52.222-36           Jun 1998   Affirmative Action for Workers with Disabilities
52.222-37           Dec 2001   Employment Reports on Special Disabled Veterans, Veterans of the
                               Vietnam Era, and other Eligible Veterans
52.223-6            May 2001   Drug-Free Workplace
52.223-14           Aug 2003   Toxic Chemical Release Reporting (Over $ 100,000)
52.225-1            Jun 2003   Buy American Act - Supplies
52.225-13           Mar 2005   Restrictions on Certain Foreign Purchases
52.227-1            Jul 1995   Authorization and Consent, Alternate I (Apr 1984)
52.227-2            Aug 1996   Notice and Assistance Regarding Patent and Copyright Infringement (Over
                               $ 100,000)
52.227-11           Jun 1997   Patent Rights - Retention by the Contractor (Short Form) (Note: In
                               accordance with FAR 27.303(a)(2), paragraph (f) is modified to include
                               the requirements in FAR 27.303(a)(2)(i) through (iv).  The frequency of
                               reporting in (i) is annual.
52.227-14           Jun 1987   Rights in Data - General
52.232-9            Apr 1984   Limitation on Withholding of Payments
52.232-17           Jun 1996   Interest (Over $ 100,000)
52.232-20           Apr 1984   Limitation of Cost
52.232-23           Jan 1986   Assignment of Claims
52.232-25           Oct 2003   Prompt Payment, Alternate I (Feb 2002)
52.232-33           Oct 2003   Payment by Electronic Funds Transfer--Central Contractor Registration
52.233-1            Jul 2002   Disputes
</TABLE>

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

<TABLE>
<S>          <C>               <C>
52.233-3            Aug 1996   Protest After Award, Alternate I (Jun 1985)
52.233-4            Oct 2004   Applicable Law for Breach of Contract Claim
52.242-1            Apr 1984   Notice of Intent to Disallow Costs
52.242-3            May 2001   Penalties for Unallowable Costs (Over $ 500,000)
52.242-4            Jan 1997   Certification of Final Indirect Costs
52.242-13           Jul 1995   Bankruptcy (Over $ 100,000)
52.243-2            Aug 1987   Changes - Cost Reimbursement, Alternate V (Apr 1984)
52.244-2            Aug 1998   Subcontracts, Alternate II (Aug 1998) *If written consent to
                               subcontract is required, the identified subcontracts are listed in
                               ARTICLE B, Advance Understandings.
52.244-5            Dec 1996   Competition in Subcontracting (Over $ 100,000)
52.244-6            Dec 2004   Subcontracts for Commercial Items
52.245-5            May 2004   Government Property (Cost-Reimbursement, Time and Material, or
                               Labor-Hour Contract)
52.246-23           Feb 1997   Limitation of Liability (Over $ 100,000)
52.249-6            Sep 1996   Termination (Cost-Reimbursement)
52.249-14           Apr 1984   Excusable Delays
52.253-1            Jan 1991   Computer Generated Forms
</TABLE>

b.   DEPARTMENT OF HEALTH AND HUMAN SERVICES ACQUISITION REGULATION (HHSAR) (48
     CFR CHAPTER 3) CLAUSES:

<TABLE>
<CAPTION>
HHSAR
CLAUSE NO.     DATE                             TITLE
----------     ----                             -----
<S>          <C>        <C>
352.202-1    Jan 2001   Definitions - with Alternate paragraph (h) (Jan 2001)
352.216-72   Oct 1990   Additional Cost Principles
352.228-7    Dec 1991   Insurance - Liability to Third Persons
352.232-9    Apr 1984   Withholding of Contract Payments
352.233-70   Apr 1984   Litigation and Claims
352.242-71   Apr 1984   Final Decisions on Audit Findings
352.270-5    Apr 1984   Key Personnel
352.270-6    Jul 1991   Publications and Publicity
352.270-7    Jan 2001   Paperwork Reduction Act
</TABLE>

End of GENERAL CLAUSES FOR A COST-REIMBURSEMENT RESEARCH AND DEVELOPMENT
CONTRACT - Rev. 07/2005.

ARTICLE I.2 AUTHORIZED SUBSTITUTION OF CLAUSES

ARTICLE I.1. OF THIS SECTION IS HEREBY MODIFIED AS FOLLOWS:

FAR Clause 52.216-11, Cost Contract--No Fee (April 1984) is deleted in its
entirety and FAR Clause 52.216-8 Fixed Fee (March 1997) is substituted therefor.

FAR Clause 52.232-17, Interest (June 1996) is added.

FAR Clause 52.232-20, Limitation Of Cost (April 1984), is deleted in its
entirety and FAR Clause 52.232-22, Limitation Of Funds (April 1984) is
substituted therefor. [NOTE When this

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

contract is fully funded, FAR Clause 52.232-22, LIMITATION OF FUNDS will no
longer apply and FAR Clause 52.232-20, LIMITATION OF COST will become
applicable]

Alternate I (July 1985) of FAR Clause 52.245-5, Government Property
(Cost-Reimbursement, Time-And-Material, Or Labor-Hour Contracts) (January 1986)
is deleted.

FAR Clause 52.249-5, Termination For Convenience Of the Government (Educational
And Other Non-Profit Institutions) (April 1984) is deleted in its entirety and
FAR Clause 52.249-6, Termination (Cost-Reimbursement) (May 1986) is substituted
therefor.

HHSAR Clause 352.249-14, Excusable Delays (April 1984) is deleted in its
entirety and FAR Clause 52.249-14, Excusable Delays (April 1984) is substituted
therefor.

ARTICLE I.3. ADDITIONAL CONTRACT CLAUSES

This contract incorporates the following clauses by reference, with the same
force and effect, as if they were given in full text. Upon request, the
Contracting Officer will make their full text available.

A.   FEDERAL ACQUISITION REGULATION (FAR) (48 CFR CHAPTER 1) CLAUSES

     (1)  FAR Clause 52.219-4, Notice of Price Evaluation Preference for HUBZone
          Small Business Concerns (July 2005).

          "(c) Waiver of evaluation preference.

          [ ]  Offeror elects to waive the evaluation preference."

     (2)  FAR Clause 52.224-1, Privacy Act Notification (April 1984).

     (3)  FAR Clause 52.224-2, Privacy Act (April 1984).

     (4)  FAR Clause 52.227-14, Rights in Data - General (June 1987).

     (5)  FAR Clause 52.230-2, Cost Accounting Standards (April 1998).

     (6)  FAR Clause 52.230-6, Administration of Cost Accounting Standards
          (April 2005)

     (7)  FAR Clause 52.242-3, Penalties for Unallowable Costs (May 2001).

     (8)  FAR Clause 52.251-1, Government Supply Sources (April 1984).

B.   DEPARTMENT OF HEALTH AND HUMAN SERVICES ACQUISITION REGULATION (HHSAR) (48
     CHAPTER 3) CLAUSES:

     (1)  HHSAR 352.223-70, Safety and Health (JANUARY 2001). [This clause is
          provided in full text in SECTION J - ATTACHMENTS.]

     (2)  HHSAR 352.270-8, Protection of Human Subjects (March 2005).

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

     (3)  HHSAR 352.270-9, Care of Live Vertebrate Animals (March 2005).

C.   NATIONAL INSTITUTES OF HEALTH (NIH) RESEARCH CONTRACTING (RC) CLAUSES:

     The following clauses are attached and made a part of this contract:

     (3)  NIH(RC)-7, Procurement of Certain Equipment (APRIL 1984) (OMB Bulletin
          81-16).

     (4)  NIH(RC)-11, Research Patient Care Costs (4/1/84).

ARTICLE I.4. ADDITIONAL FAR CONTRACT CLAUSES INCLUDED IN FULL TEXT

This contract incorporates the following clauses in full text.

FEDERAL ACQUISITION REGULATION (FAR)(48 CFR CHAPTER 1) CLAUSES:

THERE ARE NO APPLICABLE CLAUSES IN THIS SECTION.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

                                    PART III

LIST OF ATTACHMENTS

The following documents are attached and incorporated in this contract:

1.   Inclusion Enrollment Report, 5/01 (Modified OAMP: 10/01), 1 page.

2.   Annual Technical Progress Report Format for Each Study, July 1994, 1 page.

3.   Safety and Health, HHSAR Clause 352.223-70, (1/01), 1 page.

4.   Procurement of Certain Equipment, NIH(RC)-7, 4/1/84, 1 page.

5.   Research Patient Care Costs, NIH(RC)-11, 4/1/84, 1 page.

6.   Government Property - Schedule I-A, 1 page.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

INCLUSION ENROLLMENT REPORT

     This report format should NOT be used for data collection from study
     participants

Study Title: ________________________
Total Enrollment: ___________________   Protocol Number: _______________________
Contract Number: ____________________

PART A. TOTAL ENROLLMENT REPORT: Number of Subjects Enrolled to Date
(Cumulative) by Ethnicity and Race

<TABLE>
<CAPTION>
                                                Sex/Gender
                                                -------------------------------------------------
               Ethnic Category                  Females   Males   Unknown or Not Reported   Total
               ---------------                  -------   -----   -----------------------   -----
<S>                                             <C>       <C>     <C>                       <C>
Hispanic or Latino
Not Hispanic or Latino
Unknown (Individuals not reporting ethnicity)
Ethnic Category: Total of All Subjects*

              Racial Categories

American Indian/Alaska Native
Asian
Native Hawaiian or Other Pacific Islander
Black or African American
White
More than one race
Unknown or not reported
Racial Categories: Total of All Subjects*
</TABLE>

PART B. HISPANIC ENROLLMENT REPORT: Number of Hispanics or Latinos Enrolled to
Date (Cumulative)

<TABLE>
<CAPTION>
              Racial Categories                 Females   Males   Unknown or Not Reported   Total
              ---------------                   -------   -----   -----------------------   -----
<S>                                             <C>       <C>     <C>                       <C>
American Indian or Alaska Native
Asian
Native Hawaiian or Other Pacific Islander
Black or African American
White
More Than One Race
Unknown or not reported
Racial Categories: Total of Hispanics or
Latinos**
</TABLE>

*    These totals must agree

**   These totals must agree

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

             ANNUAL TECHNICAL PROGRESS REPORT FORMAT FOR EACH STUDY

Study Title: ________________________

Date: _______________________________

Provide the number of subject enrolled in the study to date according to the
following categories:

<TABLE>
<CAPTION>
           American               Black,                White,
          Indian or   Asian or    not of                not of     Other
           Alaskan     Pacific   Hispanic              Hispanic      or
           Native     Islander    Origin    Hispanic    Origin    Unknown   Total
          ---------   --------   --------   --------   --------   -------   -----
<S>       <C>         <C>        <C>        <C>        <C>        <C>       <C>
Female
Male
Unknown
TOTAL
</TABLE>

Subpopulations of the minority groups should also be reported, using a similar
format.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

HHSAR 352.223-70 SAFETY AND HEALTH (JANUARY 2001)

(a)  To help ensure the protection of the life and health of all persons, and to
     help prevent damage to property, the Contractor shall comply with all
     Federal, State and local laws and regulations applicable to the work being
     performed under this contract. These laws are implemented and/or enforced
     by the Environmental Protection Agency, Occupational Safety and Health
     Administration and other agencies at the Federal, State and local levels
     (Federal, State and local regulatory/enforcement agencies).

(b)  Further, the Contractor shall take or cause to be taken additional safety
     measures as the Contracting Officer in conjunction with the project or
     other appropriate officer, determines to be reasonably necessary. If
     compliance with these additional safety measures results in an increase or
     decrease in the cost or time required for performance of any part of work
     under this contract, an equitable adjustment will be made in accordance
     with the applicable "Changes" Clause set forth in this contract.

(c)  The Contractor shall maintain an accurate record of, and promptly report to
     the Contracting Officer, all accidents or incidents resulting in the
     exposure of persons to toxic substances, hazardous materials or hazardous
     operations; the injury or death of any person; and/or damage to property
     incidental to work performed under the contract and all violations for
     which the Contractor has been cited by any Federal, State or local
     regulatory/enforcement agency. The report shall include a copy of the
     notice of violation and the findings of any inquiry or inspection, and an
     analysis addressing the impact these violations may have on the work
     remaining to be performed. The report shall also state the required
     action(s), if any, to be taken to correct any violation(s) noted by the
     Federal, State or local regulatory/enforcement agency and the time frame
     allowed by the agency to accomplish the necessary corrective action.

(d)  If the Contractor fails or refuses to comply promptly with the Federal,
     State or local regulatory/enforcement agency's directive(s) regarding any
     violation(s) and prescribed corrective action(s), the Contracting Officer
     may issue an order stopping all or part of the work until satisfactory
     corrective action (as approved by the Federal, State or local
     regulatory/enforcement agencies) has been taken and documented to the
     Contracting Officer. No part of the time lost due to any stop work order
     shall be subject to a claim for extension of time or costs or damages by
     the Contractor.

(e)  The Contractor shall insert the substance of this clause in each
     subcontract involving toxic substances, hazardous materials, or operations.
     Compliance with the provisions of this clause by subcontractors will he the
     responsibility of the Contractor.

                                 (End of clause)

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

                        PROCUREMENT OF CERTAIN EQUIPMENT

Notwithstanding any other clause in this contract, the Contractor will not be
reimbursed for the purchase, lease, or rental of any item of equipment listed in
the following Federal Supply Groups, regardless of the dollar value, without the
prior written approval of the Contracting Officer.

     67 - Photographic Equipment
     69 - Training Aids and Devices
     70 - General Purpose ADP Equipment, Software, Supplies and Support
          (Excluding 7045-3 ADP Supplies and Support Equipment.)
     71 - Furniture
     72 - Household and Commercial Furnishings and Appliances
     74 - Office Machines and Visible Record Equipment
     77 - Musical Instruments, Phonographs, and Home-type Radios
     78 - Recreational and Athletic Equipment

When equipment in these Federal Supply Groups is requested by the Contractor and
determined essential by the Contracting Officer, the Government will endeavor to
fulfill the requirement with equipment available from its excess personal
property sources, provided the request is made under a contract. Extensions or
renewals of approved existing leases or rentals for equipment in these Federal
Supply Groups are excluded from the provisions of this article.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

                           RESEARCH PATIENT CARE COSTS

(a)  Research patient care costs are the costs of routine and ancillary services
     provided to patients participating in research programs described in this
     contract.

(b)  Patient care costs shall be computed in a manner consistent with the
     principles and procedures used by the Medicare Program for determining the
     part of Medicare reimbursement based on reasonable costs. The Diagnostic
     Related Group (DRG) prospective reimbursement method used to determine the
     remaining portion of Medicare reimbursement shall not be used to determine
     patient care costs. Patient care rates or amounts shall be established by
     the Secretary of HHS or his duly authorized representative.

(c)  Prior to submitting an invoice for patient care costs under this contract,
     the contractor must make every reasonable effort to obtain third party
     payment, where third party payors (including Government agencies) are
     authorized or are under a legal obligation to pay all or a portion of the
     charges incurred under this contract for patient care.

(d)  The contractor must maintain adequate procedures to identify those research
     patients participating in this contract who are eligible for third party
     reimbursement.

(e)  Only those charges not recoverable from third party payors or patients and
     which are consistent with the terms and conditions of the contract are
     chargeable to this contract.

<PAGE>

APPENDIX A - PRIME CONTRACT FLOWDOWNS            CHOP REFERENCE NO. 22852 -01-01

                       GOVERNMENT PROPERTY - SCHEDULE I-A

                                      List

                         Forma CryoPlus freezer $9,176

              REPORT OF GOVERNMENT OWNED, CONTRACTOR HELD PROPERTY

CONTRACTOR __________________________   CONTRACT NUMBER ________________________

ADDRESS _____________________________   REPORT DATE: ___________________________

        _____________________________   FISCAL YEAR: ___________________________

<TABLE>
<CAPTION>
                             BEGINNING OF
CLASSIFICATION                  PERIOD                 ADJUSTMENTS               END OF PERIOD
--------------              -------------   ---------------------------------    -------------
                            ITEMS   VALUE   GFP ADDED   CAP ADDED   DELETIONS   #ITEMS   VALUE
                            -----   -----   ---------   ---------   ---------   ------   -----
<S>                         <C>     <C>     <C>         <C>         <C>         <C>      <C>
LAND>=$ 25K
LAND<$ 25K
OTHER REAL>=$ 25K
OTHER REAL< $ 25K
PROPERTY UNDER
CONSTR>=$ 25K
PROPERTY UNDER
CONSTR<$ 25K
PLANT EQUIP>=$ 25 K
PLANT EQUIP<$ 25 K
SPECIAL TOOLING>=$ 25K
SPECIAL TOOLING<$ 25K
SPECIAL TEST EQUIP>=$ 25K
SPECIAL TEST EQUIP<$ 25K
AGENCY PECULIAR>=$ 25K
AGENCY PECULIAR<$ 25K
MATERIAL>=$ 25K
(CUMULATIVE)
PROPERTY UNDER
MFR>=$ 25K
PROPERTY UNDER
MFR<$ 25K
</TABLE>

SIGNED BY:                                            DATE SIGNED:
           --------------------------                              -------------

<PAGE>

APPENDIX B - AGREEMENT MILESTONES                CHOP REFERENCE NO. 22852 -01-01

The SUBAWARDEE shall complete all work in accordance with the Statement of Work
and the milestones set forth below. The distribution of the fixed fee shall be
paid in installments based on CHOP's written certification regarding the
completion of these milestones as follows:

<TABLE>
<CAPTION>
                      MILESTONES                     FIXED FEE
                      ----------                     ---------
<S>  <C>                                             <C>
     Multi-gene HIV VRP Vaccine for Phase I
1    Selection of VRP construct and mfg process       $51,634
2    Pass DAIDS-contracted GMP audit of production
     facility intended for use in VRP production.     $51,634
3    Submit clinical trial concept to HVTN            $51,634
4    Prepare/submit pre-IND documents to CBER         $51,634
5    Complete pilot lot production                    $51,634
6    Technology transfer for GMP production           $51,634
7    Pre-IND meeting                                  $51,634
8    Complete GMP production                          $51,634
9    Develop clinical trial protocol with HVTN        $51,634
10   Complete QC release testing for GMP product      $51,634
11   Complete pivotal toxicology study                $51,634
12   Prepare/submit IND                               $51,634
13   Complete phase I clinical trial                  $51,634
     Multi-gene HIV VRP Vaccine for Phase II
14   Review and prepare summary of critical data      $51,634
15   Begin GMP production                             $51,634
16   Develop clinical trial protocol with HVTN        $51,634
17   Complete QC release testing for GMP product      $51,634
18   Prepare/submit IND amendment                     $51,634
19   Begin Phase II clinical trial                    $51,634
20   Review Phase II data                             $51,634
</TABLE>

<PAGE>

                                                                    ATTACHMENT A

                                STATEMENT OF WORK
                          TARGETED GENETICS CORPORATION

Independently, and not as an agent of the Children's Hospital of Philadelphia,
Targeted Genetics Corporation (TGC), (the Sub-contractor) shall use its
commercial reasonable efforts to furnish all the necessary services, qualified
personnel, materials, equipment, and facilities, not otherwise provided by the
Government, Columbus Children's Research Institute (CCRI), or Children's
Hospital of Philadelphia (CHOP), under the terms of this contract, as needed to
perform the work set forth below.

SPECIFICALLY, THE SUB-CONTRACTOR SHALL:

     1.   Provide expertise for the selection of a specific vaccine concept and
          provide the necessary personnel, scientific expertise, process
          development, cGMP production, clinical, and regulatory expertise
          required for the targeted development effort culminating in the
          production and clinical testing of a promising AIDS vaccine candidate.

     2.   Have in place all the necessary qualified personnel (Pages 85 to 90 of
          the HVDDT Technical Proposal for RFP NIH-NIAID-DAIDS-04-42, hereafter
          "The Technical Proposal"), physical plant (Pages 94-95 of The
          Technical Proposal), and clinical trial design and implementation
          experience (Pages 73-75 of The Technical Proposal) to carry out all
          work described in this statement.

     3.   The specific work to be conducted by the sub-contractor prior to GMP
          manufacturing is as follows:

          a.   Generate suitable quantities of recombinant AAV (rAAV) vectors
               for research and preclinical studies using a plasmid transfection
               protocol. These rAAV preparations will meet or exceed all
               requisite quantity, quality, purity, and potency parameters
               required for these applications. The details of this work are
               described on pages 26 to 28 of The Technical Proposal.

          b.   In preparation for large scale manufacture of rAAV vectors,
               optimize the Adenovirus-hybrid (Ad-hybrid) method for rAAV1
               (recombinant AAV serotype 1) production and generate a viral seed
               for vaccine constructs, as described on pages 28-29 of The
               Technical Proposal.

          c.   Provide appropriate outside vendors with materials from the rAAV1
               purification process for characterization analyses of the
               purification process and demonstration of Adenovirus (Ad)
               clearance during purification as described on page 32 and 59-60
               of The Technical Proposal. Monitor the analyses and incorporate
               findings into a production process document to be transferred for
               GMP manufacturing.

                                                                          Page 1

<PAGE>

                                                                    ATTACHMENT A

                                STATEMENT OF WORK
                          TARGETED GENETICS CORPORATION

          d.   Generate packaging lines for rAAV serotype 2 (rAAV2) and rAAV1
               HIV Clade B antigen expressing vectors as described on pages 30
               -31 of The Technical Proposal. Characterize these packaging lines
               for their suitability for use in large scale GMP manufacturing as
               required for attainment of subsequent milestones in the program.

          e.   Develop appropriate upstream and downstream processes for the
               production, purification, and final formulation compositions for
               the rAAV1 and rAAV2 Clade B antigen expressing vectors, as
               described on pages 31 and 32 of The Technical Proposal.

          f.   Provide the appropriate outside vendor rAAV1 Clade B antigen
               expressing vectors for a rabbit biodistribution study which will
               be conducted and analyzed as described on pages 43-47 of The
               Technical Proposal. Part of the analysis will require the
               development of a limit of detection polymerase chain reaction
               assay (LOD-PCR) at another outside vendor. Audit both vendors and
               monitor progress throughout the study. Audit the final report(s)
               generated by these vendors and incorporate findings into the
               appropriate regulatory documents required for an Investigational
               New Drug (IND) filing.

          g.   Develop a PCR based assay for the characterization and identity
               testing of the rAAV vectors expressing Clade B antigens, to be
               used for analysis in the research, pre-clinical, process
               development, and GMP manufacturing activities.

     4.   Perform specific work related to GMP (Good Manufacturing Practices, as
          defined in the US Code of Federal Regulations - 21 CFR Section 211)
          manufacturing of the vaccine candidate(s) as follows:

          a.   Transfer the Ad-hybrid production process document for both rAAV1
               and rAAV2 vectors from process development to the GMP
               manufacturing group and facility as described on page 32 of The
               Technical Proposal.

          b.   Prepare and characterize Master and Working cell banks for the
               packaging cell lines to be used in GMP manufacture of the rAAV1
               and rAAV2 Clade B antigen expressing vectors as described on
               pages 49-51 of The Technical Proposal.

          c.   Manufacture, characterize, test and release Adenovirus 5 (Ad5)
               Master and Working viral seeds which are critical raw materials
               to be used in the rAAVI, and rAAV2 manufacturing processes as
               described on pages 51-52 of The Technical Proposal.

                                                                          Page 2

<PAGE>

                                                                    ATTACHMENT A

                                STATEMENT OF WORK
                          TARGETED GENETICS CORPORATION

          d.   Manufacture, characterize, test and release Ad-Hybrid Master and
               Working viral seeds which are critical raw materials for
               production of both AAV1 and AAV2 Clade B antigen expressing
               vectors as described on pages 51 and 52 of The Technical
               Proposal.

          e.   Provide cell bank materials from Master and Working Cell Banks,
               as well as viral seed materials to appropriate outside vendors
               for characterization analyses not performed in house at TGC.
               Monitor progress, and incorporate reports into appropriate GMP
               manufacturing and IND documentation.

          f.   Provide cell materials from packaging cell lines for both AAV1
               and AAV2 vectors to outside vendor for tumorigenicity testing, as
               described on pages 61-62 of The Technical Proposal. Monitor
               progress, and incorporate reports into appropriate GMP
               manufacturing and IND documentation.

          g.   Conduct GMP Manufacturing to generate sufficient supply of rAAV
               HIV Clade B antigen expressing vaccine product adequate for all
               release testing, stability analysis, and proposed Phase I
               clinical trial design. Monitor progress from all outside vendors
               conducting release testing related assays and incorporate all
               reports into appropriate GMP manufacturing and IND documentation.
               GMP Manufacturing, characterization, and release testing to be
               carried out as described on pages 51-58 and 63-68 of The
               Technical Proposal.

          h.   Carry out product fill validation, prepare final filled product
               and release of final filled product to be used in a Phase I
               Clinical trial.

          i.   Provide GMP materials for any and all AAV1 and AAV2 Clade B
               antigen expressing vectors to outside vendor for Safety/Local
               Tolerability testing, as described on pages 69-72 of The
               Technical Proposal. Monitor progress, and incorporate reports
               into appropriate IND documentation.

     5.   Perform specific work related to obtaining Regulatory approvals for
          and initiation of a Phase I clinical trial as follows:

          a.   Provide all documentation, materials, and expertise in developing
               a concept sheet for submission to the HIV Vaccine Trials Network
               (HVTN).

          b.   In conjunction with CCRI, CHOP, and the HVTN develop a protocol
               for a Phase I trial of the vaccine candidates.

          c.   In conjunction with CCRI, CHOP, and the HVTN have a pre-IND
               (Investigational New Drug) meeting with the FDA (United States
               Food

                                                                          Page 3

<PAGE>

                                                                    ATTACHMENT A

                                STATEMENT OF WORK
                          TARGETED GENETICS CORPORATION

               and Drug Administration), and thereafter prepare regulatory
               materials including a CMC document for submission of an IND
               application to the FDA.

          d.   Provide all necessary documentation, expertise, and clinical
               trial site initiation support for the initiation of a Phase I
               clinical trial of the vaccine candidates.

          e.   In conjunction with CCRI, CHOP, and the HVTN analyze all data
               generated by the Phase I clinical trial in preparation for a
               Phase II clinical trial.

     6.   Perform specific work related to obtaining Regulatory approvals for
          and initiation of a Phase II clinical trial as follows:

          a.   Provide all documentation, materials, and expertise in developing
               a concept sheet for submission to the HIV Vaccine Trials Network
               (HVTN).

          b.   In conjunction with CCRI, CHOP, and the HVTN develop a protocol
               for a Phase II trial of the vaccine candidates.

          c.   In conjunction with CCRI, CHOP, and the HVTN have a pre-IND
               meeting with the FDA (United States Food and Drug
               Administration), and thereafter prepare regulatory materials
               including a CMC document for submission of an IND application to
               the FDA.

          d.   Provide all necessary documentation, expertise, and clinical
               trial site initiation support for the initiation of a Phase II
               clinical trial of the vaccine candidates.

     7.   Perform specific work related to development of an Alternative Cell
          Substrate for the GMP manufacturing of the vaccine candidate(s) as
          follows:

          a.   Transfer technology from CCRI and CHOP pertaining to the use of
               an alternative cell substrate for the production of rAAV vectors
               as described on pages 35-38 of The Technical Proposal.

          b.   Develop a scalable GMP compliant process for the generation of
               rAAV vectors from an alternative cell substrate, through
               generation and characterization of appropriate raw materials,
               banking of master and working cells as described on pages 48-62
               of The Technical Proposal.

          c.   Provide cell materials from the alternative cell substrate
               packaging cell lines for both AAV1 and AAV2 vectors to outside
               vendor for tumorigenicity testing, as described on pages 61-62 of
               The Technical

                                                                          Page 4

<PAGE>

                                                                    ATTACHMENT A

                                STATEMENT OF WORK
                          TARGETED GENETICS CORPORATION

          Proposal. Monitor progress, and incorporate reports into appropriate
          GMP manufacturing and IND documentation.

     8.   Report progress according to Reporting Requirements (refer to the
          "Reporting Requirements and Deliverables" in this contract).

     9.   Meet with the Project Officer and the External Advisory Committee
          associated with this contract.

          a.   The Primary Contractor (CCRI), CHOP, TGC and the NIH, after
               contract award, shall jointly establish an External Advisory
               Committee for the contract. In conjunction with key personnel
               from CCRI and CHOP, the subcontractor's (TGC) key personnel shall
               meet with the Project Officer and the Team's External Advisory
               Committee at periodic intervals to be scheduled after contract
               award to review progress and anticipated or existing problems.

          b.   In the middle (6 month mark) of each contract year, the
               Sub-Contractor shall take part in a site visit review for NIAID
               contract and program staff, and their External Advisory
               Committee. The Sub-Contractor's Principal Investigator and all
               pertinent staff shall attend this meeting. The Co-Investigator
               and/or other pertinent staff shall present an update and summary
               of results generated on each sub-project. These presentations
               shall include summaries of all goals or milestones reached during
               the review period and a description of all problems encountered
               that will impact on the achievement of particular goals and
               milestones pertaining to the Sub-Contractor's work as outlined in
               the Contractor's research plan. The Sub-Contractor's Principal
               Investigator, and pertinent staff representing each project and
               sub-project shall describe goals and milestones and development
               objectives for the coming year. Additionally, application of the
               policies and procedures for monitoring the direction of specific
               projects shall be presented.

                                                                          Page 5

<PAGE>

SUMMARY OF PROPOSED COSTS                                           Attachment B
TARGETED GENETICS CORPORATION
RFP #: NIH-NIAID-DAIDS-04-42

<TABLE>
<CAPTION>
                                       PERIOD I    PERIOD II   PERIOD III   PERIOD IV    PERIOD V
                                       8/31/2005   8/31/2006    8/31/2007   8/30/2008   8/31/2009
                                        Through     Through      Through     Through     Through
                  ***Period (dates)    8/30/2006   8/30/2007    8/29/2008   8/30/2009   8/30/2010      TOTAL
                                      ----------   ---------   ----------   ---------   ---------   -----------
<S>                                   <C>          <C>         <C>          <C>         <C>         <C>
DIRECT LABOR - PERCENT OF EFFORT             [*]      [*]          [*]         [*]         [*]              [*]
FRINGE BENEFITS - PERCENT OF EFFORT          [*]      [*]          [*]         [*]         [*]              [*]
DIRECT LABOR - HOURLY                        [*]      [*]          [*]         [*]         [*]              [*]
FRINGE BENEFITS - HOURLY                     [*]      [*]          [*]         [*]         [*]              [*]
TOTAL DIRECT LABOR & FRINGE BENEFITS         [*]      [*]          [*]         [*]         [*]              [*]

*OVERHEAD                                    [*]      [*]          [*]         [*]         [*]              [*]

MATERIAL AND SUPPLIES                        [*]      [*]          [*]         [*]         [*]              [*]
PROFESSIONAL TRAVEL                          [*]      [*]          [*]         [*]         [*]              [*]
EQUIPMENT                                    [*]      [*]          [*]         [*]         [*]              [*]
CONSULTANTS                                  [*]      [*]          [*]         [*]         [*]              [*]
OTHER DIRECT COSTS - SUITE USAGE             [*]      [*]          [*]         [*]         [*]              [*]
PATIENT CARE COSTS                           [*]      [*]          [*]         [*]         [*]              [*]
SUBCONTRACTORS                               [*]      [*]          [*]         [*]         [*]              [*]
TOTAL OTHER DIRECT COSTS                     [*]      [*]          [*]         [*]         [*]              [*]

SUBTOTAL: DIRECT LABOR, FRINGE               [*]      [*]          [*]         [*]         [*]              [*]
BENEFITS, OVERHEAD, & OTHER DIRECTS
*EXCLUSIONS(S) FROM BASE FOR G&A             [*]      [*]          [*]         [*]         [*]              [*]
*ADJUSTED BASE FOR G&A                       [*]      [*]          [*]         [*]         [*]              [*]
*G&A                                         [*]      [*]          [*]         [*]         [*]              [*]
TOTAL PROPOSED COST EXCLUDING FEE            [*]      [*]          [*]         [*]         [*]              [*]
PROPOSED FEE/PROFIT                          [*]      [*]          [*]         [*]         [*]              [*]
                                      ----------                                                    -----------
TOTAL PROPOSED COST PLUS FEE/PROFIT   $3,087,023      [*]          [*]         [*]         [*]      $18,243,919
                                      ==========                                                    ===========
</TABLE>

*    NOT ALL ORGANIZATIONS ALLOCATE INDIRECT COST IN THE SAME WAY. IT IS
     IMPORTANT THAT YOU USE THE INDIRECT RATE STRUCTURE APPLICABLE TO YOUR
     ORGANIZATION. FOR EXAMPLE, IF YOU HAVE A THREE TIER INDIRECT RATE
     STRUCTURE, THEN YOU WILL USE A THREE TIER STRUCTURE WHEN PROPOSING INDIRECT
     COSTS.

     GENERALLY, UNIVERSITIES AND NON-PROFIT HAVE FRINGE BENEFIT AND G&A (OR
     SOMETIMES CALLED F&A) RATES, WHILE FOR-PROFIT COMPANIES CAN HAVE VARIOUS
     INDIRECT RATES SUCH AS FRINGE BENEFITS, OVERHEAD, G&A, ETC.

     THE BASE FOR OVERHEAD COSTS INCLUDES DIRECT LABOR AND FRINGE BENEFITS.
     PLEASE MODIFY IF YOUR BASE IS DIFFERENT.

     IF APPLICABLE, INSERT EXCLUSIONS TO THE G&A BASE IN ROW 26.

**   PLEASE INSERT THE COMPANY'S NAME AND THE RFP #.

***  ENTER THE CONTRACT START DATE IN CELL C5 AND MAKE ADJUSTMENTS FOR LEAP
     YEAR.

                                           [*] CONFIDENTIAL TREATMENT REQUESTED.

<PAGE>

                                                                    ATTACHMENT C

Subcontractee Name ______________________   Invoice
Subcontractee Address ___________________   No. 97 _____________________________

_________________________________________   ____________________________________
Subcontractee City, State, Zip              Date Voucher Prepared

_________________________________________   ____________________________________
                                            Institution Reference Number

                                            ____________________________________
                                            Total Budget

Phone: xxx-xxx-xxx

             This invoice request represents reimbursable costs from
                            xx/xx/xx through xx/xx/xx

<TABLE>
<CAPTION>
                                              Cumulative Amt.
                           Amount Billed      From Inception
Direct Costs             For Current Period   Date of Billing
------------             ------------------   ---------------
<S>                      <C>                  <C>
                                 0.00               0.00
Direct Labor                     0.00               0.00
Fringe Benefits                  0.00               0.00
Materials and Supplies           0.00               0.00
Consultant Fees                  0.00               0.00
Patient Care                     0.00               0.00
Travel-Domestic                  0.00               0.00
Travel-Foreign                   0.00               0.00
Subcontract Costs                0.00               0.00
Other                            0.00               0.00
Total Direct Costs               0.00               0.00
Indirect Costs (Rate)            0.00               0.00
                                -----              -----
Total Costs                     $0.00              $0.00
                                =====              =====
</TABLE>

"I certify that all payments are for the appropriate purposes and in accordance
with the subcontract."

--------------------------------------   ---------------------------------------
Name of Official                         (Title)

<PAGE>

                                                 CHOP REFERENCE NO. 22852 -01-01

                                  ATTACHMENT D

Flowdown from subcontract between Children's Research Institute ("CRI") to The
Children's Hospital of Philadelphia ("CHOP"), dated (2/3/06) and further from
CHOP to Targeted Genetics Corporation ("TGC"), dated (2/10/06).

                             PATENT RIGHTS AGREEMENT

This Agreement between CHOP, a not-for-profit corporation having a principal
place of business at 3615 Civic Center Boulevard, Philadelphia, PA 19104,
Children's Hospital, Inc., a not for profit corporation and having a principal
place of business at 700 Children's Drive, Columbus, Ohio 43205, its subsidiary,
CRI, and Targeted Genetics Corporation, a private corporation having a principal
place of business at 1100 Olive Way; Suite 100, Seattle, WA 98101, is entered
into on the _10_ day of February ____, 2006 ("Effective Date") for the purpose
of allocating between the Parties certain rights relating to the cooperative
effort being proposed to the National Institutes of Health in response to
Request for Proposal NIH-NIAID-DAIDS-04-42 entitled "HIV Vaccine Design and
Development Teams" (HVDDT), to be carried out by CRI, CHOP and TGC (hereinafter
with CHI referred to as the "Parties") if funding is awarded by the National
Institutes of Health (NIH) to CRI via subcontract to fund the Proposal ("HVDDT
Project").

1.   APPLICABILITY OF THIS AGREEMENT.

     (a)  This Agreement shall be applicable only to matters relating to the
          HVDDT Project referred to in the preamble above.

     (b)  If a funding agreement for a HVDDT Project is awarded to CHOP based
          upon the HVDDT proposal referred to in the preamble above, CRI will
          make a sub-award to CHOP, CHOP will make a sub-sub-award to TGC in
          accordance with the funding agreement, the HVDDT Project, and this
          Agreement. If the terms of such funding agreement appear to be
          inconsistent with the provisions of this Agreement, the Parties will
          attempt in good faith to resolve any such inconsistencies. However, if
          such resolution is not achieved within a reasonable period, neither
          CRI nor CHOP shall not be obligated to subaward, nor TGC to accept the
          subaward, as the case may be. If a subaward is made by CRI to CHOP and
          further subawarded and accepted by TGC, this Agreement shall not be
          applicable to contradict the terms of such subaward or of the funding
          agreement awarded by the NIH to CRI via Subcontract, but shall be
          considered to resolve ambiguities in the terms of the subaward. In no
          event shall any Party be deemed to have breached the terms of this
          Agreement in the event its actions or inactions are necessary to
          comply with the HVDDT Project.

     (c)  The responsibilities of the Parties in this Agreement shall not be
          delegated to any and all consultants, subcontractors, independent
          contractors, or other individuals employed by CHI, CHOP or TGC for the
          purposes of performing under this HVDDT Project without the written
          permission of CRI.

<PAGE>

                                                 CHOP REFERENCE NO. 22852 -01-01

2.   BACKGROUND INTELLECTUAL PROPERTY.

     The Parties possess rights in intellectual property not otherwise subject
     to this Agreement and in existence prior to the Effective Date, which would
     be useful or essential to the practice or commercialization of the results
     of the research performed pursuant to the terms of the HVDDT Project under
     this Agreement ("Background Intellectual Property"). Where the Parties
     determine that Background Intellectual Property exists, the Parties agree
     that unless contractually prohibited, they shall negotiate in good faith to
     license these Background Intellectual Property rights as necessary to
     practice and commercialize the Subject Inventions. The Parties acknowledge
     that some existing intellectual property of CHI is already the subject of
     an exclusive license for commercial purposes to TGC and that such
     intellectual property may constitute Background Intellectual Property of
     CHI hereunder.

3.   PROJECT INTELLECTUAL PROPERTY.

     (a)  "Project Intellectual Property" means the legal rights in and to
          inventions (including Subject Inventions as defined in 37 CFR 401 and
          35 U.S.C., Section 201), patent applications, patents, copyrights,
          trademarks, mask works, trade secrets, and any other legally
          protestable information, including computer software, conceived or
          created during the performance of the HVDDT Project.

     (b)  The rights of the Parties to Subject Inventions made by their
          employees in the performance of this HVDDT Agreement shall be as set
          forth in 35 U.S.C., Section 200 et al. and 37 CFR Part 400 et al. The
          Parties agree to incorporate those provisions into this Agreement.

          Unless otherwise agreed in writing, Project Intellectual Property
          shall be owned by the Party whose employees conceive of the Project
          Intellectual Property. Project Intellectual Property that is jointly
          conceived shall be jointly owned by the Parties unless otherwise
          agreed in writing ("Joint Intellectual Property"). The Parties agree
          to negotiate in good faith to determine which Party shall have the
          first option to file and prosecute patent applications on Joint
          Intellectual Property, however the Parties agree that the Party
          responsible for filing and prosecuting Joint Intellectual Property
          will copy the others on all correspondence and seek the input of the
          Parties on all matters related to the Joint Intellectual Property. The
          Parties agree to promptly execute or require its employees (whether or
          not such employees are currently employed by the Parties) to so
          execute and deliver to the Party responsible for filing and
          prosecuting Joint Intellectual Property or its legal representative
          any and all papers, instruments or affidavits requested to prepare,
          file and prosecute such joint Project Intellectual Property. TGC shall
          reimburse CHOP or CHI for the costs of such preparation, filing and
          prosecution during the Option Period (defined below).

          Subject to the rights of the U.S. Government arising from its
          sponsorship of the HVDDT Project:

<PAGE>

                                                 CHOP REFERENCE NO. 22852 -01-01

               (1) CHI and CHOP grant to TGC an exclusive option under the CHI
               and CHOP Project Intellectual Property and the Joint Intellectual
               Property of CHI and CHOP on terms that are commercially
               reasonable at the time of the exercise of the option. TGC shall
               have ninety (90) days following disclosure of Project
               Intellectual Property or Joint Intellectual Property ("Option
               Period") to exercise its option. In the event TGC declines to so
               exercise its option during the Option Period, CHI and CHOP shall
               have no further obligation to TGC regarding such rights.

               (2) TGC hereby grants to CHI and CHOP a non-exclusive fully
               paid-up sublicenseable license under the TGC Project Intellectual
               Property for research and educational purposes.

               (3) In the event TGC does not exercise its option as provided in
               (1) above:

          (i)  Any expenses or liabilities, including patent expenses, resulting
               from the practice, licensing, or exploitation of Joint
               Intellectual Property shall be allocated between the Parties, as
               appropriate, and shall be determined by good faith negotiations.

          (ii) Any revenues and profits resulting from the practice, licensing,
               or exploitation of such Joint Project Intellectual Property shall
               be allocated between the Parties, as appropriate, as determined
               by good faith negotiations, and shall take into account the
               relative contributions of each collaborator in the conception and
               reduction to practice of the Joint Project Intellectual Property
               which generated said revenues.

               (4)  If any Party opts to not practice or license its Project
               Intellectual Property and Joint Project Intellectual Property for
               purposes of commercialization, the Parties agree to negotiate in
               good faith to license the Party(ies) who is commercializing,
               directly or through license, the Project Intellectual Property
               and Joint Intellectual Property.

     (c)  The Parties agree to disclose to each other, in writing and in
          confidence, each and every Subject Invention, which may be patentable
          or otherwise protectable under the United States patent laws in Title
          35, U.S.C. The Parties acknowledge that they will use best efforts to
          disclose Subject Inventions to each other within thirty (30) days
          after their respective inventor(s) first disclose the invention in
          writing to the person(s) responsible for patent matters of the
          disclosing Party. All written disclosures of such Subject Inventions
          shall contain sufficient detail of the invention, identification of
          any statutory bars, and shall be marked confidential, in accordance
          with 35 U.S.C. Section 205.

     (d)  During the term of the HVDDT Project, each Party hereto may use
          Project Intellectual Property of the other nonexclusively and without
          compensation for the sole purpose of performing the activities
          provided for in this HVDDT Project, including confidential inclusion
          in: HVDDT project reports to the NIH and proposals to the NIH for
          continued funding of this HVDDT project through additional phases.

<PAGE>

                                                 CHOP REFERENCE NO. 22852 -01-01

     (e)  The Parties hereby agree to negotiate in good faith during the Option
          Period such Project Intellectual Property rights issues such as the
          choice of patent attorney selection and prosecution matters and
          ameliorate any effect thereof that would threaten the commercial
          viability of the Subject Inventions.

4.   CONFIDENTIALITY/PUBLICATION.

     (a)  Background Intellectual Property and Project Intellectual Property of
          a Party, as well as other proprietary or confidential information of a
          Party, disclosed by that Party to the other in connection with this
          HVDDT Project shall be received and held in confidence by the
          receiving Party and, except with the consent of the disclosing Party
          or as required for regulatory or statutory compliance under the HVDDT
          Project and shall neither be used by the receiving Party, other than
          to perform under the HVDDT Project, nor disclosed by the receiving
          Party to others, provided that the receiving Party has notice that
          such information is regarded by the disclosing Party as proprietary or
          confidential. However, these confidentiality obligations shall not
          apply to use or disclosure by the receiving Party after such
          information is or becomes known to the public without breach of this
          Agreement or is or becomes known to the receiving Party from a third
          party lawfully entitled to disclose, as evidenced by receiving Party's
          written records, or is developed by or for the receiving Party
          independently of its knowledge of or access to the disclosing Party's
          confidential information, as evidenced by receiving Party's written
          records. If the receiving Party is required by law to disclose any of
          the Background Intellectual Property or Project Intellectual Property,
          the receiving party shall notify disclosing party promptly and
          reasonably assist the disclosing Party to obtain a protective order or
          other remedy of disclosing Party's election. The receiving Party shall
          furnish only that portion of the information that is legally required,
          exercise reasonable efforts to obtain reliable assurance that the
          information shall be held in confidence and allow disclosing Party
          prior review of such disclosure.

     (b)  Subject to the terms of paragraph (a) above, any Party may publish its
          results from this HVDDT Project. However, the publishing Party shall
          provide the other Parties a thirty-day period in which to review
          proposed publications, identify proprietary or confidential
          information, and submit comments. The publishing Party shall not
          publish or otherwise disclose proprietary or confidential information
          identified and owned by another Party and the publishing Party will
          give full consideration to all comments before publication.
          Furthermore, upon request of the reviewing Party, publication will be
          deferred for up to sixty additional days for preparation and filing of
          a patent application. Following such deferred period, each Party has
          the right to make publicly available the results of the research
          funded by the HVDDT Project, in accordance with scientific custom.

<PAGE>

                                                 CHOP REFERENCE NO. 22852 -01-01

5.   LIABILITY.

     (a)  EACH PARTY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES RUNNING TO THE
          OTHER OR THROUGH THE OTHER TO THIRD PARTIES, WHETHER EXPRESS,
          STATUTORY OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF
          MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND FREEDOM FROM
          INFRINGEMENT. NO PARTY SHALL BE LIABLE FOR LOSS OF USE, LOSS OF
          PROFITS OR ANY OTHER CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES.

     (b)  Each Party ("Indemnitor") shall indemnify, defend and hold harmless
          the other Parties and their respective affiliates, officers,
          directors, boards, trustees, employees, agents and consultants
          ("Indemnitee") with regard to any claims, losses damages, and/or
          liability of whatsoever kind or nature, as well as all costs and
          expenses, including, reasonable attorneys' fees and court costs
          (collectively "Loss") arising now or in the future from any action or
          inaction by Indemnitor, including a breach of this Agreement or any
          other agreement related to the HVDDT Project, and/or any negligent or
          malfeasant act or omission by the Indemnitor, its consultants,
          subcontractors, independent contractors or other individuals employed
          Indemnitor, except to the extent such Loss is attributable to an
          indemnification obligation of an Indemnitee hereunder.

6.   TERMINATION.

     (a)  This Agreement shall terminate immediately upon the completion of the
          HVDDT Project or in the event no funding is received from the NIH
          thereunder. This Agreement may also be terminated by any Party in the
          event of an uncured breach by another Party following thirty days'
          written notice of such breach; provided that if any other agreement
          related to the HVDDT Project is still in effect, this Agreement shall
          survive for the benefit of the non-breaching Party(ies).

     (b)  The termination or expiration of this Agreement shall not affect the
          rights and obligations of the Parties accruing prior thereto,
          including its share of any uncancelable commitments as of the
          termination date. The confidentiality, use, and/or non-disclosure
          obligations of this Agreement shall survive any termination of this
          Agreement, until the information falls within one of the exceptions in
          4(a).

7.   MISCELLANEOUS PROVISIONS.

     (a)  Entire Agreement. This Agreement constitutes the entire agreement
          between the three Parties with respect to the subject matter of the
          HVDDT Project and supersedes all prior communications, agreements or
          understandings, written, electronic or oral. No modification,
          amendment, or waiver of this Agreement, or any of its provisions,
          shall be effective unless executed by all Parties in

<PAGE>

                                                 CHOP REFERENCE NO. 22852 -01-01

          writing. Each Party acknowledges that, in entering into this
          Agreement, it did not rely on any representation, warranty or other
          assurance from the other Party except as expressly provided herein.
          Notwithstanding the foregoing, nothing in this Agreement shall affect
          the liability of either Party for any fraudulent misrepresentation.
          Each Party acknowledges that it was provided an opportunity to seek
          advice of counsel and as such this Agreement shall not be strictly
          construed for or against either Party.

     (b)  Severability. The provisions of this Agreement are severable, and in
          the event that any provision of this Agreement is determined to be
          invalid or unenforceable under any controlling body of law, such
          invalidity or non-enforceability shall not in any way affect the
          validity or enforceability of the remaining provisions.

     (c)  Assignment. Either Party may assign or otherwise transfer this
          Agreement only to the assignee or transferee of its entire business or
          of that part of its business to which this Agreement relates. Any
          assignment or transfer in contravention with this section shall be
          null and void. This Agreement shall be binding on and inure to the
          sole benefit of the Parties and their permitted successors and
          assigns.

     (d)  Use of Names. No Party shall use the names or trademarks of the other
          nor any adaptation thereof without prior written consent obtained from
          the other in each separate case, except that the Parties may state the
          existence of the HVDDT Project and their roles thereunder, and shall
          be free to list name of party as required for publication in
          peer-reviewed journals, and as requested for grant applications.

     (e)  Non-waiver. The delay or failure of either Party to assert a right
          hereunder or to insist upon compliance with any term or condition of
          this Agreement shall not constitute a waiver of that right or excuse a
          similar subsequent failure to perform any such term or condition by
          the other Party. A valid waiver must be executed in writing and signed
          by the Party granting such waiver.

     (f)  Attorney Fee Recovery. In any litigation arising under or relating to
          this Agreement, the prevailing Party shall be entitled to recover
          reasonable attorney's fees and litigation costs.

     (g)  No Third Party Benefit. This Agreement is for the sole benefit of the
          Parties and their permitted successors and assigns and shall not be
          construed as conferring any rights to any third party.

     (h)  Independent Contractors. Nothing contained in this Agreement shall
          place the Parties in a partnership, joint venture or agency
          relationship and neither Party shall have the right or authority to
          obligate or bind the other Party in any manner.

<PAGE>

                                                 CHOP REFERENCE NO. 22852 -01-01

     (i)  Executed in Counterparts. This Agreement may be executed in two or
          more counterparts, each of which shall be deemed an original but all
          of which taken together constitute one and the same instrument.

The Parties have hereunto set their hands and seals and duly execute this
Agreement as of the Effective Date.

AGREED TO AND ACCEPTED:

TARGETED GENETICS CORPORATION

BY: /s/ Barrie Carter                   DATE: 2/13/06
   ----------------------------------
PRINT NAME: Barry Carter
TITLE: Chief Scientific Officer

CHILDREN'S HOSPITAL OF PHILADELPHIA

BY: /s/ Sara Dubberly                   DATE: 2/10/06
    ---------------------------------
PRINT NAME: Sara Dubberly
TITLE: Director, Sponsored Programs

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