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<SEC-DOCUMENT>0001144204-07-015314.txt : 20070329
<SEC-HEADER>0001144204-07-015314.hdr.sgml : 20070329
<ACCEPTANCE-DATETIME>20070329170912
ACCESSION NUMBER:		0001144204-07-015314
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		12
CONFORMED PERIOD OF REPORT:	20061231
FILED AS OF DATE:		20070329
DATE AS OF CHANGE:		20070329

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TARGETED GENETICS CORP /WA/
		CENTRAL INDEX KEY:			0000921114
		STANDARD INDUSTRIAL CLASSIFICATION:	BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836]
		IRS NUMBER:				911549568
		STATE OF INCORPORATION:			WA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-23930
		FILM NUMBER:		07728424

	BUSINESS ADDRESS:	
		STREET 1:		1100 OLIVE WAY
		STREET 2:		STE 100
		CITY:			SEATTLE
		STATE:			WA
		ZIP:			98101
		BUSINESS PHONE:		2066237612

	MAIL ADDRESS:	
		STREET 1:		1100 OLIVE WAY
		STREET 2:		STE 100
		CITY:			SEATTLE
		STATE:			WA
		ZIP:			98101
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>v06961210k.htm
<TEXT>
<!doctype html public "-//IETF//DTD HTML//EN">
<HTML>
<HEAD>
<TITLE>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</TITLE>
<META NAME="author" CONTENT="Julia Temkin">
<META NAME="date" CONTENT="03/27/2007">
</HEAD>
<BODY style="line-height:12pt; font-family:Times New Roman; font-size:10pt; color:#000000">
<P style="margin-top:0pt; margin-bottom:6.65pt; padding-bottom:3pt; border-bottom:12pt double #000000" align=right><FONT FACE="Times New Roman" COLOR=#000000><B>&nbsp;</B></FONT></P>
<P style="line-height:10pt; margin:0pt" align=center><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B></P>
<P style="line-height:10pt; margin-top:0pt; margin-bottom:3.35pt" align=center><B>Washington, D.C. 20549</B></P>
<P style="line-height:10pt; margin:0pt; font-size:10.5pt" align=center><B><SUP>______________</SUP></B></P>
<P style="line-height:10pt; margin-top:4pt; margin-bottom:0pt; font-size:12pt" align=center><B>FORM 10-K</B></P>
<P style="line-height:10pt; margin-top:0pt; margin-bottom:4pt; font-size:10.5pt" align=center><B><SUP>______________</SUP></B></P>
<P style="line-height:10pt; margin:0pt; padding-left:96pt; font-size:7.5pt">(Mark One)</P>
<P style="line-height:10pt; margin-top:4pt; margin-bottom:0pt; font-family:Wingdings" align=center><FONT FACE="Wingdings">&#253;</FONT><FONT FACE="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:3.35pt" align=center><FONT FACE="Times New Roman">For the fiscal year ended December&nbsp;31, 2006</FONT></P>
<P style="line-height:10pt; margin-top:0pt; margin-bottom:3pt" align=center>OR</P>
<P style="line-height:10pt; margin-top:6pt; margin-bottom:0pt; font-family:Wingdings" align=center><FONT FACE="Wingdings">&#168;</FONT><FONT FACE="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)<BR>
OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:0pt" align=center><FONT FACE="Times New Roman">For the transition period from _______ to ________&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></P>
<P style="line-height:12.5pt; margin-top:3.5pt; margin-bottom:5.25pt; font-size:10.5pt" align=center><B>Commission file number 0-23930</B></P>
<P style="line-height:4pt; margin-top:0pt; margin-bottom:12pt; font-size:10.5pt" align=center><B>______________</B></P>
<P style="line-height:22pt; margin-top:2.65pt; margin-bottom:0pt; font-size:16pt" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="line-height:10pt; margin-top:0pt; margin-bottom:2.65pt; font-size:8pt" align=center><SUP>(Exact Name of Registrant as Specified in its Charter)</SUP></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=269.45></TD><TD width=35.95></TD><TD width=160.2></TD><TD width=60></TD></TR>
<TR><TD valign=top width=359.267><P style="margin:0pt" align=center><B>Washington</B></P>
</TD><TD valign=bottom width=47.933><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=213.6><P style="margin:0pt" align=center><B>91-1549568</B></P>
</TD><TD valign=bottom width=80><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=359.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(State of Incorporation)</P>
</TD><TD valign=bottom width=47.933><P style="margin:0pt; font-size:8pt">&nbsp;</P>
</TD><TD valign=top width=213.6><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center>(IRS Employer Identification No.)</P>
</TD><TD valign=bottom width=80><P style="margin:0pt; font-size:8pt">&nbsp;</P>
</TD></TR>
</TABLE>
<P style="line-height:11pt; margin-top:3.35pt; margin-bottom:0pt" align=center><B>1100 Olive Way, Suite 100<BR>
Seattle, WA 98101</B></P>
<P style="line-height:10pt; margin-top:0pt; margin-bottom:2.65pt; font-size:8pt" align=center>(Address of principal executive offices, including, zip code)</P>
<P style="line-height:11pt; margin:0pt" align=center><B>(206) 623-7612</B></P>
<P style="line-height:10pt; margin-top:0pt; margin-bottom:5.35pt; font-size:8pt" align=center>(Registrant&#146;s telephone number, including area code)</P>
<P style="line-height:4pt; margin-top:12pt; margin-bottom:12pt; font-size:10.5pt" align=center><B>______________</B></P>
<P style="line-height:11pt; margin:0pt" align=center>Securities registered pursuant to Section 12(b) of the Act: <B>None</B></P>
<P style="line-height:11pt; margin-top:3.35pt; margin-bottom:0pt" align=center>Securities registered pursuant to Section 12(g) of the Act: <BR>
<B>Common Stock, $0.01 Par Value</B></P>
<P style="line-height:11pt; margin-top:3.35pt; margin-bottom:2.5pt; text-indent:18pt">Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes&nbsp;<FONT FACE="Wingdings">&#168;</FONT>&nbsp;&nbsp;No&nbsp;<FONT FACE="Wingdings">&#253;</FONT></P>
<P style="line-height:11pt; margin-top:0pt; margin-bottom:2.5pt; text-indent:18pt">Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes&nbsp;<FONT FACE="Wingdings">&#168;</FONT>&nbsp;&nbsp;No&nbsp;<FONT FACE="Wingdings">&#253;</FONT></P>
<P style="line-height:11pt; margin-top:0pt; margin-bottom:2.5pt; text-indent:18pt">Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes&nbsp;<FONT FACE="Wingdings">&#253;</FONT>&nbsp;&nbsp;No&nbsp;<FONT FACE="Wingdings">&#168;</FONT></P>
<P style="line-height:11pt; margin-top:0pt; margin-bottom:2.5pt; text-indent:18pt">Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant&#146;s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. <FONT FACE="Wingdings">&#253;</FONT></P>
<P style="line-height:11pt; margin-top:0pt; margin-bottom:2.5pt; text-indent:18pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in Rule 12b-2 of the Exchange Act. (Check one):</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=175.2></TD><TD width=175.25></TD><TD width=175.15></TD></TR>
<TR><TD valign=bottom width=233.6><P style="line-height:10pt; margin-top:0pt; margin-bottom:2.5pt; padding-left:6pt; text-indent:18pt" align=center>Large Accelerated Filer <FONT FACE="Wingdings">&#168;</FONT></P>
</TD><TD valign=bottom width=233.667><P style="margin-top:0pt; margin-bottom:2.5pt; text-indent:18pt" align=center>Accelerated Filer <FONT FACE="Wingdings">&#168;</FONT></P>
</TD><TD valign=bottom width=233.533><P style="margin-top:0pt; margin-bottom:2.5pt; text-indent:18pt" align=center>Non-accelerated Filer <FONT FACE="Wingdings">&#253;</FONT></P>
</TD></TR>
</TABLE>
<P style="line-height:11pt; margin-top:0pt; margin-bottom:2.5pt; text-indent:18pt">Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes&nbsp;<FONT FACE="Wingdings">&#168;</FONT>&nbsp;&nbsp;No&nbsp;<FONT FACE="Wingdings">&#253;</FONT></P>
<P style="line-height:11pt; margin-top:0pt; margin-bottom:2.5pt; text-indent:18pt; font-family:Times New (W1)"><FONT FACE="Times New (W1)">The aggregate market value of common stock held by non-affiliates of the Registrant as of June 30, 2006 was approximately $22.7 million based on the closing price of $2.30 per share of the Registrant&#146;s common stock as listed on the NASDAQ Capital Market.</FONT></P>
<P style="line-height:11pt; margin-top:0pt; margin-bottom:2.5pt; text-indent:18pt"><FONT FACE="Times New Roman">Indicate the number of shares outstanding of each of the Registrant&#146;s classes of common stock as of March 16, 2007</FONT></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=269.45></TD><TD width=35.95></TD><TD width=160.2></TD><TD width=60></TD></TR>
<TR><TD valign=top width=359.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Title of Class</B></P>
</TD><TD valign=bottom width=47.933><P style="margin:0pt; font-size:8pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=top width=213.6><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Number of Shares</B></P>
</TD><TD valign=bottom width=80><P style="margin:0pt; font-size:8pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD></TR>
<TR><TD valign=top width=359.267><P style="margin:0pt" align=center>Common Stock, $0.01 par value</P>
</TD><TD valign=bottom width=47.933><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=top width=213.6><P style="margin:0pt" align=center>13,108,735</P>
</TD><TD valign=bottom width=80><P style="margin:0pt">&nbsp;</P>
</TD></TR>
</TABLE>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:1.65pt" align=center><B>DOCUMENTS INCORPORATED BY REFERENCE</B></P>
<P style="line-height:11pt; margin:0pt; text-indent:18pt">(1) The information required by Part III of this report, to the extent not set forth in this report, is incorporated by reference from the Proxy Statement for the 2007 annual meeting of shareholders to be held on May 17, 2007, pursuant to General Instruction G3 to Form 10-K. The definitive proxy statement for the 2007 annual meeting of shareholders will be filed with the Securities and Exchange Commission within 120 days after December 31, 2006, the end of the fiscal year to which this report relates.</P>
<P style="margin:0pt; padding-bottom:3pt; font-size:6pt; border-bottom:12pt double #000000">&nbsp;</P>
<A NAME="toc"></A><P style="margin:0pt" align=center><BR>
<BR>
<BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION<BR>
ANNUAL REPORT ON FORM 10-K</B></P>
<P style="margin-top:10pt; margin-bottom:10pt" align=center><B>TABLE OF CONTENTS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=35.6></TD><TD width=10></TD><TD width=389.95></TD><TD width=10></TD><TD width=22.45></TD></TR>
<TR><TD valign=top width=47.467>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=519.933><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=29.933><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Page</B></P>
</TD></TR>
<TR><TD valign=top width=47.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=29.933>&nbsp;</TD></TR>
<TR><TD valign=top width=47.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt"><B>PART I</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933>&nbsp;</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 1.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Business</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>1</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 1A.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Risk Factors</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>13</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 2.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Properties</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>22</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 3.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Legal Proceedings</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>23</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 4.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Submission of Matters to a Vote of Security Holders</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>23</P>
</TD></TR>
<TR><TD valign=top width=47.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933>&nbsp;</TD></TR>
<TR><TD valign=top width=47.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt"><B>PART II</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933>&nbsp;</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 5.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Market for Registrant&#146;s Common Equity, Related Shareholder Matters and Issuer Purchases of&nbsp;Equity Securities</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>24</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 6.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Selected Financial Data</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>25</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 7.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>26</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 7A.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Quantitative and Qualitative Disclosures About Market Risk</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>37</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 8.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Financial Statements and Supplementary Data</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>39</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 9.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item&nbsp;9A.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Controls and Procedures</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=top width=47.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933>&nbsp;</TD></TR>
<TR><TD valign=top width=47.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt"><B>PART III</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933>&nbsp;</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 10.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Directors and Executive Officers of Registrant</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 11.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Executive Compensation</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 12.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 13.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Certain Relationships and Related Transactions</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>61</P>
</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 14.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Principal Accounting Fees and Services</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>62</P>
</TD></TR>
<TR><TD valign=top width=47.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933>&nbsp;</TD></TR>
<TR><TD valign=top width=47.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt"><B>PART IV</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933>&nbsp;</TD></TR>
<TR><TD valign=top width=47.467><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Item 15.</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=519.933><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:8.45pt; text-indent:-8.45pt">Exhibits, Financial Statement Schedules and Reports on Form 8-K</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=29.933><P style="margin-top:1.65pt; margin-bottom:0pt" align=right>62</P>
</TD></TR>
</TABLE>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>i</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>PART I</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 1. Business.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>This annual report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Forward-looking statements include statements about our product development and commercialization goals and expectations, potential market opportunities, our plans for and anticipated results of our clinical development activities and the potential advantage of our product candidates, our cash resources and future financial condition, our ability to obtain additional funding or enter into strategic collaborations and other statements that are not historical facts. Words such as &#147;may,&#148; &#147;can be,&#148; &#147;may depend,&#148; &#147;will,&#148; &#147;believes,&#148; &#147;estimates,&#148; &#147;expects,&#148; &#147;anticipates,&#148; &#147;plans,&#148; &#147;projects,&#148; &#147;intends,&#148; or statements concerning &#147;potential&#148; or &#147;opportunity&#148; and other words of similar meaning or the negative
thereof may identify forward-looking statements, but the absence of these words does not mean that the statement is not forward-looking. In making these statements, we rely on a number of assumptions and make predictions about the future. Our actual results could differ materially from those stated in or implied by forward-looking statements for a number of reasons, including the risks described in the section entitled &#147;Factors Affecting Our Operating Results, Our Business and Our Stock Price&#148; in Part I, Item 1A of this annual report.</I></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>You should not unduly rely on these forward-looking statements, which speak only as of the date of this annual report. We undertake no obligation to publicly revise any forward-looking statement after the date of this annual report to reflect circumstances or events occurring after the date of this annual report or to conform the statement to actual results or changes in our expectations. You should, however, review the factors, risks and other information we provide in the reports we file from time to time with the Securities and Exchange Commission, or SEC.</I></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Business Overview</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Targeted Genetics Corporation is a clinical-stage biotechnology company. We are at the forefront of developing, with the goal of commercializing, a new class of therapeutic products called gene therapeutics. We believe that a wide range of diseases may potentially be treated or prevented with gene therapeutics. In addition to treating diseases that have not had treatments in the past, we believe that there is a significant opportunity to use gene therapeutics to more effectively treat diseases that are currently treated using other therapeutic classes of drugs including proteins, monoclonal antibodies or small molecule drugs. We are developing several product candidates, two of which are currently in clinical trials. Our clinical-stage candidates are aimed at inflammatory arthritis and HIV/AIDS. Our preclinical product candidates, both in development with collaboration partners, are aimed at congestive heart failure and
Huntington&#146;s disease.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our gene therapeutics consist of a delivery vehicle, called a vector, and genetic material. The role of the vector is to carry the genetic material into a target cell. Once delivered into the cell, the gene can express or direct production of the specific proteins encoded by the gene. Gene therapeutics may be used to treat disease by facilitating the normal protein production or gene regulation capabilities of cells. In addition, gene therapeutics may be used to enable cells to produce more of a certain protein or different proteins than they would normally produce thereby treating a disease state. A new class of gene therapeutics currently receiving attention is RNA interference or RNAi. RNAi comprises small RNA molecules, which once delivered into the cell, may shut down or interfere with cellular functions. The vectors developed by us may be particularly useful for the delivery of this new class of gene therapeutics.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We are a leader in the preclinical and clinical development of adeno-associated viral vectors, or AAV-based gene therapeutics and in the manufacture of AAV-vectors. We have treated over 300 subjects in clinical trials using AAV-based gene therapeutic product candidates. Through our research and development activities, we have acquired expertise and intellectual property related to a variety of gene therapeutic technologies. We believe that our activities have resulted in important characteristics of our business, including:</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Diverse product development pipeline</I>. Each of our clinical and preclinical product candidates addresses a different market, in which we believe there is significant medical need for new or improved therapies.</P>
<P style="margin:6.65pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>1</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt; page-break-before:always">We are focused on the following product development programs:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=137.05></TD><TD width=10></TD><TD width=79.35></TD><TD width=10></TD><TD width=40.25></TD><TD width=10></TD><TD width=40></TD><TD width=10></TD><TD width=40></TD><TD width=10></TD><TD width=40></TD><TD width=10></TD><TD width=31.35></TD></TR>
<TR><TD valign=bottom width=182.733>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=105.8>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=53.667>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=241.8 colspan=7><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Development Status</B></P>
</TD></TR>
<TR><TD valign=bottom width=182.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Description</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=105.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Indication</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=53.667><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Research&nbsp;&amp; <BR>
Preclinical</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Phase&nbsp;I</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Phase&nbsp;I/II</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Phase&nbsp;II</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000; border-bottom:0.5pt solid #000000" valign=bottom width=41.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Phase&nbsp;III</B></P>
</TD></TR>
<TR><TD style="border-top:0.5pt solid #000000" valign=bottom width=182.733>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=105.8>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.667>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=41.8>&nbsp;</TD></TR>
<TR><TD valign=top width=182.733><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">AAV delivery of TNF-alpha antagonist (tgAAC94)</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=105.8><P style="margin:0pt">Inflammatory Arthritis</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.667><P style="margin:0pt" align=center>xxxxxxxx</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333><P style="margin:0pt" align=center>xxxxxxxx</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333><P style="margin:0pt" align=center>xxxxxxxx</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=41.8>&nbsp;</TD></TR>
<TR><TD valign=top width=182.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">AAV delivery of HIV antigen (tgAAC09 &amp; HVDDT)</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=105.8><P style="margin-top:3.35pt; margin-bottom:0pt">HIV/AIDS</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.667><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>xxxxxxxx</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>xxxxxxxx</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>xxxxxxxx</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=41.8>&nbsp;</TD></TR>
<TR><TD valign=top width=182.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">AAV delivery of SERCA2a </P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=105.8><P style="margin-top:3.35pt; margin-bottom:0pt">Congestive Heart Failure</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.667><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>xxxxxxxx</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=41.8>&nbsp;</TD></TR>
<TR><TD valign=top width=182.733><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">AAV expression of htt shRNA (RNAi)</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=105.8><P style="margin-top:3.35pt; margin-bottom:0pt">Huntington&#146;s disease</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.667><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>xxxxxxxx</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=53.333>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=41.8>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Significant development and manufacturing expertise</I>. We believe we are leaders in the development and application of processes to manufacture our potential products at a scale amenable to late-stage clinical development and expandable to large-scale commercial production. We have established broad capabilities in applying our AAV-based gene therapeutic technologies to multiple product candidates and therapeutic indications. Through our efforts to develop a new class of therapeutics, we have built the development, manufacturing, quality, clinical and regulatory expertise necessary to move candidates from research to the clinic and into clinical development. We believe these capabilities and the expertise gained will serve as critical assets in attracting product collaboration partners and provide a necessary foundation to move gene therapeutics and other product candidates from product discovery to commercialization.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Intellectual property assets</I>. We have developed proprietary intellectual property, including methods of transferring genetic material into cells, processes to manufacture and purify gene therapeutic candidates, uses of AAV to deliver RNA therapeutics including RNAi and other proprietary technologies and processes. Because patent and license rights are important assets of our business, our strategy is to file or license patent applications to protect technology, inventions and improvements to inventions that we consider important to developing our business. We have filed or licensed numerous patents or patent applications with the United States Patent and Trademark Office, or USPTO, and foreign jurisdictions. We also rely on unpatented proprietary technology such as trade secrets, know-how and continuing technological innovations.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Business Strategy</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our current strategic focus includes:</P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman"><I>Continuing aggressive development of our pipeline</I></FONT>. We plan to continue to focus on clinical development efforts that will accelerate development and lead to nearer term clinical trial results and, ultimately, commercialization. Our current priorities are the advancement of tgAAC94 as a therapy to treat inflammatory arthritis and the advancement of our partnered programs, including the development of an HIV/AIDS vaccine and product candidates for the treatment of congestive heart failure and Huntington&#146;s disease.</P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman"><I>Maximizing the value of our manufacturing and development expertise and our intellectual property</I></FONT>. Our strategy is to utilize our product development, regulatory and manufacturing capabilities in new product collaboration opportunities, similar to the collaborations we have entered into with Celladon Corporation, or Celladon, and Sirna Therapeutics, Inc., or Sirna, now a wholly-owned subsidiary of Merck &amp; Co., Inc. In addition, we may evaluate opportunities to exploit the value we have built in manufacturing viral vectors, including AAV vectors, by producing other biologics, or by pursuing contract manufacturing relationships during periods of excess capacity in our manufacturing facility. We also expect to pursue opportunities to license our technology and leverage our portfolio of AAV-related intellectual property assets to generate revenue and value for our shareholders.</P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman"><I>Pursuing additional product opportunities</I></FONT>. Although we have made substantial progress toward the commercialization of AAV-based gene therapeutics, gene therapeutic products have not yet reached commercialization in the U.S., Europe or Japan. We are committed to gene therapeutics but realize it may be prudent to pursue product development opportunities within other classes of therapeutics that have </P>
<P style="margin-top:5pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>2</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:5pt; margin-bottom:0pt; padding-left:36pt; page-break-before:always">reached commercialization, have garnered acceptance by users and may have shorter and more predictable paths to commercial success. Our focus as a product development company provides us with the expertise to develop products for a variety of disease indications. We are evaluating a range of opportunities that include mergers and acquisitions and product diversification with a particular focus on candidates to which we can apply our significant development expertise. We believe that a combination of novel candidates developed from our expertise in gene therapeutics, along with complementary candidates, may provide a beneficial balance of value and risk diversification for our shareholders.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>2006 Achievements</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2006, we made progress in our development collaborations and our product development programs, expanded and leveraged our patent portfolio and realigned our cost structure to focus our resources on our inflammatory arthritis program. More specifically:</P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">In the first half of 2006, we expanded our Phase II HIV/AIDS vaccine clinical trials to Uganda and Zambia.</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">In March&nbsp;2006, we sold 1.3&nbsp;million shares of our common stock in a registered offering at a price of $3.90 per share and received net proceeds of approximately $4.8&nbsp;million.</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">In March&nbsp;2006, we received approval from the FDA to amend our protocol for the tgAAC94 clinical trial to include a higher dose group and increase the number of patients from 40 to 120. Under the amended protocol, the study is now designated as a Phase I/II trial.</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">In June&nbsp;2006, we entered into a collaboration and license agreement with the International Aids Vaccine Initiative, or IAVI, a non-profit organization, Columbus Children&#146;s Research Institute, or CCRI, at Columbus Children&#146;s Hospital and The Children&#146;s Hospital of Philadelphia, or CHOP, in support of the development and commercialization of HIV/AIDS vaccines for the developing world. This agreement supersedes our previous agreements with IAVI and CCRI.</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">We reported initial data in June&nbsp;2006 and additional data in November&nbsp;2006 on the results of our ongoing Phase I/II clinical trial of our inflammatory arthritis candidate that demonstrated favorable safety and toxicity profiles at all three dose levels and trends toward improvement in signs and symptoms of the disease as measured by a decrease in tenderness and swelling scores.</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">In August&nbsp;2006, we reported interim results of IAVI&#146;s Phase I clinical trial of our investigational HIV/AIDS vaccine candidate; no safety concerns were identified and the vaccine was well tolerated and modestly immunogenic at the dose levels tested.</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">In November&nbsp;2006, we entered into an agreement with Biogen Idec to restructure approximately $8.15&nbsp;million of debt. Under the terms of the agreement, we exchanged $5.65&nbsp;million of debt for one million shares of our common stock and modified the payment schedule of the remaining debt.</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">In December&nbsp;2006, we leveraged our portfolio of AAV intellectual property through a license agreement with Amsterdam Molecular Therapeutics B.V., or AMT, providing an upfront license fee of $1.75&nbsp;million as well as potential milestone payments due upon achievement of certain product development benchmarks and royalties on the sale of any products commercialized using the licensed technology.</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">We were issued additional patents from the USPTO covering our AAV vector patent portfolio, including one for the use of AAV to deliver RNA therapeutics such as RNAi.</FONT></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Programs in Clinical Trials</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Inflammatory Arthritis</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">According to the College of Rheumatology and the Centers for Disease Control and Prevention, two to three million people in the U.S. are living with inflammatory arthritis, including rheumatoid arthritis, psoriatic arthritis and ankylosing spondylitis. Researchers have found that the cytokine called tumor necrosis factor-alpha, or TNF-alpha, plays a pivotal role in this disease process and have shown anti-TNF-alpha therapies to be a valuable strategy to treat inflammatory arthritis. TNF-alpha inhibition is a validated therapeutic strategy for treating a variety of inflammatory diseases. Three TNF-alpha inhibitors are now sold world wide. These products, which are delivered systemically by intravenous infusion or sub-cutaneous injection, can improve the signs and symptoms of the disease, </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">inhibit the structural damage in the joints and positively impact functional outcomes in patients with these inflammatory arthritis conditions. However, some patients do not have a complete response to systemically delivered anti-TNF-alpha agents and still have significant room for improvement in inflammation and tender and swollen joint counts. These patients are potentially ideal candidates for a localized, more concentrated delivery of anti-TNF-alpha therapy administered directly to the joint.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We are developing a product candidate, which we call tgAAC94, for the treatment of inflammatory arthritis. tgAAC94 is an AAV vector product candidate designed to deliver a DNA sequence encoding a potent inhibitor of TNF-alpha. We believe that there may be market receptivity to local delivery of a TNF-alpha antagonist for several types of inflammatory arthritis. In addition, we believe that patients who are partial responders to systemically delivered anti-TNF-alpha therapy or those who are contraindicated for systemic therapy may also be strong candidates for a localized TNF-alpha inhibitor approach. We are designing tgAAC94 for administration by direct injection into affected joints and developing it for use in patients who have one or more joints that have not responded to other therapies, or for patients who may have only a few inflamed joints and may benefit from localized rather than systemic treatment of their disease.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2004, we initiated a Phase I clinical trial to evaluate the safety of escalating doses of tgAAC94 in subjects with rheumatoid arthritis, psoriatic arthritis or ankylosing spondylitis. This double-blinded, randomized trial evaluated safety of a single dose of tgAAC94 injected locally into an arthritic joint of subjects suffering from inflammatory arthritis. The subjects of the trial included 12 females and two males with rheumatoid arthritis and one male with ankylosing spondylitis. Subjects received an injection into the knee or ankle and were followed for 24 weeks. Data from the trial demonstrated that intra-articular injections were safe and well-tolerated in subjects who were also taking conventional disease-modifying anti-rheumatic drugs, there were no serious adverse events in treated subjects and those treated with a single dose exhibited measurable improvements in swelling and tenderness. The data also suggested that there may
be a dose response effect as subjects who received a higher dose of drug appeared to have greater reductions in mean tenderness and swelling scores than subjects who received the lower dose. There was some improvement in mean tenderness and swelling scores in subjects receiving placebo. In the non-injected joints of the tgAAC94 treated subjects, there also appeared to be a trend in the decrease in mean tenderness and swelling scores over time. These data were presented at the American Society for Gene Therapy-sponsored meeting in the second quarter of 2006.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2005, we
  initiated a follow-on Phase I/II clinical trial of tgAAC94 administered directly
  to affected joints of subjects with inflammatory arthritis. This double-blinded,
  placebo-controlled study was designed to evaluate higher doses of tgAAC94 in
  patients with rheumatoid arthritis, psoriatic arthritis or ankylosing spondylitis
  who may be receiving concomitant treatments of anti-TNF-alpha therapy, but are
  partial responders who continue to experience signs and symptoms of inflammatory
  arthritis in some joints. In the study, approximately 120 adults are being randomized
  into three dose groups to receive a single intra-articular injection of either
  tgAAC94 or a placebo, followed by an open-label injection of tgAAC94 after 12
  to 30 weeks, depending on when the target joint meets criteria for re-injection.
  As of October&nbsp;2006, approximately 61 subjects in the first three cohorts,
  34 of whom were receiving concurrent TNF-alpha antagonists, received an injection
  of blinded study drug into the knee, ankle, wrist, metacarpophalangeal joint
  or elbow. Preliminary data indicate tgAAC94 is safe and well-tolerated at doses
  of up to 5x10<SUP>13</SUP> particles in subjects with and without systemic TNF-alpha
  antagonists. The primary endpoint of the study is the establishment of the safety
  of higher doses and of repeat administration of tgAAC94 into the joints of subjects
  with and without concomitant TNF-alpha inhibitor therapy. Secondary endpoints
  include evaluation of pain, swelling, duration of response and overall disease
  activity following intra-articular administration of tgAAC94 to affected joints.
  Additionally, changes in joint inflammation and joint damage will be assessed
  in a subset of subjects using magnetic resonance imaging.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We reported initial data in June&nbsp;2006 and additional data in November&nbsp;2006 that demonstrated:</P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">no significant safety concerns have been identified after 4 to 60 weeks of follow-up;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">fewer subjects receiving tgAAC94 had symptoms requiring re-injection prior to the 30-week time point, compared with subjects in the placebo arm;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the time to second injection in subjects randomized to receive tgAAC94 was longer than those who were randomized to receive placebo;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">a trend toward improvement in tenderness and swelling of injected joint in subjects receiving tgAAC94; and</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">these improvements were noted in subjects taking concurrent systemic TNF-alpha antagonist therapy as well as those subjects who were not on these therapies.</FONT></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Based on the favorable safety profile of the first three dose-escalation cohorts, in October&nbsp;2006, the Data Monitoring Committee overseeing the study gave permission for the remaining 60 subjects to be enrolled (20 each at the same three dose levels) in order to enhance the understanding of the safety and therapeutic index of tgAAC94. We expect to complete the trial in 2007 and to present data from this trial in upcoming scientific meetings in 2007 and 2008 as appropriate.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>HIV/AIDS Vaccine</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">There is an urgent need to stop the spread of human immunodeficiency virus (HIV) infection worldwide. More than 60&nbsp;million people have been infected and more than 25&nbsp;million have died due to HIV/AIDS since the worldwide epidemic began in 1981. In 2005, over 5&nbsp;million new infections occurred. Of these, more than 85% were in Sub-Saharan Africa and Southeast Asia. Further rises of HIV incidence can only be slowed by a massive expansion of prevention efforts. Historically, vaccines have been the most powerful public health tool able to provide a safe, cost-effective and efficient means of preventing illnesses, disability and death from infectious diseases. A safe and effective preventive HIV vaccine, as part of a comprehensive prevention plan, will significantly reduce the spread of HIV.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Since 2000, we have been developing, as part of a collaboration with IAVI, CHOP and CCRI, an AAV vector prophylactic vaccine candidate, which we call tgAAC09, for high-risk populations in developing nations to protect against the progression of HIV infection to AIDS. The tgAAC09 vaccine contains antigens from HIV Clade C, the clade that is prevalent in the developing world. The program is completely funded by IAVI. This product candidate is currently in Phase I and Phase II clinical trials.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2003, IAVI initiated a Phase I initial dose escalation safety trial in humans for tgAAC09 in Europe. Subsequently, this study was amended to include a cohort of volunteers in India. This dose-escalation safety trial was designed to enroll up to 80 volunteers who were uninfected with HIV and in good health. Each participant in this trial received a single injection of the vaccine candidate or placebo and was monitored for safety and immune response. This trial was amended further for the European cohort to evaluate the safety and immunogenicity of this vaccine after a second dose. In August&nbsp;2006, we reported interim data on the expanded trial demonstrating that no safety concerns identified and the vaccine was well tolerated in healthy volunteers from Belgium, Germany and India who were not infected with HIV. In a subset of the volunteers receiving a single administration of the highest dose of the vaccine, modest immune
responses to the HIV antigens were observed.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">A Phase II clinical trial of tgAAC09 is ongoing in South Africa, Uganda and Zambia to evaluate a higher dose and to systematically evaluate the utility and optimal timing of boost vaccination. We expect follow-up and data collection and analysis to be complete in the first half of 2007 and to report results of the trial in the second half of 2007.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As part of this public-private collaboration, IAVI funds us, CHOP and CCRI for work that is focused on development and preclinical studies of a vaccine candidate. IAVI funds our development activities based upon an agreed upon annual work plan and budget. IAVI also coordinates and directly funds the cost of clinical trials conducted under the collaboration. We expect to continue to receive funding from IAVI for the development of HIV/AIDS vaccines for the developing world.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Prior to June&nbsp;2006, we and IAVI extended and expanded the collaboration agreement several times. In June&nbsp;2006, we and IAVI entered into a new agreement that superseded prior agreements and extended the program term until the expiration of the last patent within the patent rights controlled by us that is utilized in the IAVI vaccine. Among other rights granted under this agreement, IAVI retains the exclusive rights in the developing world for commercialization of any HIV/AIDS vaccine that is developed under the collaboration, and will receive a royalty on income received by us from the development and commercialization of certain vaccines. We also received the rights to utilize the findings from the collaboration to develop and commercialize HIV/AIDS vaccines for the developed world and additional vaccine candidates for any other disease indications. Also as part of this agreement, we granted IAVI the rights to technology and
intellectual property utilized in the programs and issued IAVI a small number of shares of our common stock. Either party has the right to terminate the agreement under certain conditions. If IAVI terminates the agreement at will or for technical non-viability, then IAVI will be obligated to pay for the activities contemplated in the work plan in effect for the notice period, which ranges from four to six </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">months. In these cases of termination, IAVI would retain a non-exclusive license to use certain of our intellectual property to research HIV vaccines for the developing world. In other cases of termination, the licenses granted to IAVI under the agreement would remain in effect and we would be obligated to transfer the intellectual property necessary for IAVI to make the HIV vaccine developed under the agreement.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2005, we extended the scope of our HIV/AIDS vaccine program to the developed world via a contract awarded by the National Institute of Allergy and Infectious Diseases, or NIAID, to CCRI in collaboration with CHOP and us. NIAID is a component of the National Institutes of Health, Bethesda, Maryland. The NIAID vaccine program will complement work performed under the IAVI vaccine program but will be focused on developing a multi-component vaccine that will contain various antigens from different HIV Clades. This AAV-based HIV vaccine, which we call HVDDT, will be tested in a prime-boost approach using different AAV serotypes. Under this program, we may receive up to $18.2&nbsp;million over five years for the development, manufacture and preclinical testing of vaccine candidates. Investigators at CHOP and CCRI will design the vaccine candidates and we will manufacture the vectors for testing in clinical trials, which will be conducted in
the U.S. The direct costs of any clinical trials will be borne directly by the NIAID. This product candidate is currently undergoing preclinical tests before advancing into clinical trials in healthy volunteers. The NIAID funds this program in annual installments based on an approved work plan and achievement of milestones. Under the terms of the agreement, any party can terminate upon 30 days notice. Upon termination, we would be reimbursed for costs related to the program that occurred up to the termination date.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Preclinical Programs</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Congestive Heart Failure</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Congestive heart failure, or CHF, is a leading cause of morbidity and mortality in about 5&nbsp;million Americans. CHF involves a loss of contractility of the heart muscle that in turn decreases the ability of the heart to pump blood. The contraction and expansion of the heart muscle is dependent upon movement of calcium within the heart muscle. One protein that is central to the process of calcium movement in the heart muscle is SERCA2a. The SERCA2a protein is a pump that moves calcium. The relative amount and activity of SERCA2a is decreased in failing hearts. It has not yet been possible to develop conventional pharmaceutical drugs to address this problem. Delivery of the SERCA2a gene directly to the heart muscle should lead to production of more SERCA2a protein and may improve the ability of the heart to contract and thus improve its ability to pump blood.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2004, we formed a collaboration with Celladon to evaluate delivery of genes to the heart that may have a therapeutic benefit in the treatment of CHF. This collaboration combines our expertise in the development, manufacture and clinical evaluation of AAV-based therapies with Celladon&#146;s portfolio of genes and cardiovascular expertise.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As part of this collaboration, Celladon provides its intellectual property and funds our product development and manufacturing efforts. We are contributing our proprietary AAV technology for use in the field of CHF to deliver the SERCA2a gene. We will manufacture under cGMP the rAAV1-SERCA2a vector and file appropriate regulatory filings to support the use of the product in clinical trials that are sponsored by Celladon. Celladon made their regulatory filings in the last quarter of 2006 to initiate a Phase I clinical trial in the first half of 2007.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In late 2004, in connection with the formation of this collaboration, we received $6.0&nbsp;million cash from the sale of our shares of our common stock to investors of Celladon. Since 2004, we have incurred $7.0&nbsp;million of program related costs to support development activities under the Celladon agreement, which consisted primarily of internal development efforts. We agreed to contribute up to $2.0&nbsp;million to support these development activities and we are reimbursed for efforts over that amount. As a result, we have recognized cumulative revenue of $5.0&nbsp;million from Celladon for those costs in excess of the first $2.0&nbsp;million incurred by us. In the future, we are also entitled to development milestones, royalties on sales and manufacturing profits on potential future products that result from the collaboration.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Both parties have the right to terminate the agreement under certain conditions with a 60 day notice and cure period in some cases. If Celladon were to terminate the agreement in the midst of an approved development plan, Celladon would be obligated to pay us for the following six months of the budget agreed to pursuant to the development plan. If Celladon were to terminate the agreement due to our breach of the agreement or to our insolvency, then the licenses granted to Celladon under the agreement would remain in effect and we would be </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">obligated to transfer, to another manufacturer, the manufacturing technology necessary for Celladon to make the CHF product developed under the agreement. Upon termination of the agreement by either party, other than due to our breach or insolvency, all rights and licenses granted under the agreement would revert to the granting party.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Huntington&#146;s Disease</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Huntington&#146;s Disease, or HD, generally shows onset in mid-life and there are currently about 30,000 patients in the U.S. and an additional 120,000 to 250,000 at risk of onset. HD is an incurable neurodegenerative disorder that results from a mutation in the gene that codes for the huntingtin protein. Genes express their information by being copied into a messenger RNA, or mRNA, that instructs the cell machinery to make a specific protein. This mutant HD gene produces a defective huntingtin protein that interferes with normal function of nerve cells in the brain leading to eventual development of the progressive disease. There are no effective drugs to treat or prevent this disease.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">HD is a dominant genetic disease, which means that a single copy of the mutant gene can cause the disease. It also means that delivery of a correct copy of the gene will not be effective. Rather, the function of the mutant HD gene must be blocked. A potentially effective way to do this is to use recently discovered entities called small interfering RNA, or siRNA. siRNAs can bind to mRNAs and cause their degradation before the mRNA is used for production of protein. In this way, shRNA can be used to prevent or reduce the production of proteins.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2005, we formed a collaboration with Sirna to develop therapies for the treatment of HD. This collaboration also includes two academic groups at the University of Iowa, or UI, and the University of California, San Francisco. Sirna is a leader in the effort to create RNAi-based therapies.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our HD program is focused on developing therapeutic siRNA to target the gene that encodes the HD protein. This siRNA must be administered directly to the brain, which is the site of the disease. Therefore, infrequent dosing is highly desirable. Consequently, this program uses the AAV delivery system to deliver a gene for a siRNA that targets the HD gene and can be expressed for a prolonged period. The program is based upon initial proof of concept of correction of HD using this approach in a mouse model of HD that was reported by our collaborators at UI.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">This program takes advantage of our expertise and intellectual property in AAV delivery systems. In the late 1990&#146;s, as therapeutic RNA molecules such as RNAi, siRNA and shRNA were initially tested in animals, we believe we were the first to develop and file patent applications on the use of AAV vectors to express these potential therapeutics. Expressed therapeutic RNA molecules may have significant advantages over delivery of the oligonucleotides by having increased drug availability and drug half life. Our HD program combines our expertise and intellectual property in production and use of the AAV delivery system and Sirna&#146;s expertise in design of siRNA molecules. The program currently is focused upon generating AAV vectors that express siRNAs that target the HD gene and testing these in animals to select a lead product for formal preclinical testing and progression to clinical studies. We and Sirna are co-developing product
candidates under the collaboration and share the costs of development and any future revenues that result from the collaboration. We expect that a substantial portion of our development costs will consist of internal development and manufacturing efforts.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Former Collaborations</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Biogen Idec</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In connection with our acquisition of Genovo in 2000, we established a three-year, multiple-product development and commercialization collaboration with Biogen, now Biogen Idec. This collaboration ended in 2003 upon the completion of the development period.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Under this collaboration, Biogen paid us $8.0&nbsp;million in research funding and upfront payments and $1.0&nbsp;million per year in research and development funding over the initial three-year development period. In connection with an equity purchase commitment agreed to as part of the collaboration, in 2002 and 2003, we raised a total of $8.8&nbsp;million through the sale of a total of 832,000 shares of our common stock to Biogen at an average price of $10.57 per share. The equity purchase commitment with Biogen has expired. In addition, we borrowed $10.0&nbsp;million from Biogen under a loan commitment within the collaboration agreement. In 2005, we repaid $2.5&nbsp;million of the $10.0&nbsp;million loan principal and modified the loan payment schedule on the remaining $8.15&nbsp;million of debt so that payments of $2.5&nbsp;million of principal amount plus accrued interest were due on each of August&nbsp;1, 2007, 2008 and 2009 and
the $650,000 promissory note to Biogen was due August&nbsp;1, 2007. In </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">November&nbsp;2006, we signed an agreement to further restructure the remaining $8.15&nbsp;million of debt payable to Biogen Idec, under which Biogen Idec agreed to exchange $5.65&nbsp;million of debt for one million shares of our common stock with a fair value of $2.9&nbsp;million. At the time of signing the November&nbsp;2006 agreement, we made a payment of $500,000 towards the remaining loan balance and agreed to repay the remaining $2.0&nbsp;million principal balance in two equal installments of $1.0&nbsp;million each on August&nbsp;1, 2007 and August&nbsp;1, 2008. In addition, we agreed to apply one-third of certain up-front payments received from potential future corporate collaborations to the outstanding balance on this loan payable, first to repayment of any accrued and unpaid interest and second to the repayment of outstanding principal in reverse order of maturity. Our outstanding debt to Biogen Idec continues to bear
interest at the rate of LIBOR plus 1%. According to SFAS No. 15, &#147;<I>Accounting by Debtors and Creditors of Troubled Debt Restructurings</I>,&#148; we accounted for this transaction as a troubled debt restructuring which resulted in a gain on debt restructuring of $2.6&nbsp;million. We calculated the gain as the difference between the original principal and interest payments due on the Biogen Idec debt as compared to the cash payments made, the fair value of the shares of our common stock issued in the debt restructuring and the remaining principal and interest payments due. We recorded the loan as the $2.0&nbsp;million principal amount plus the total estimated future interest payments of $167,000. As a result of the share purchases made under the equity purchase commitment, the shares exchanged as a result of the November&nbsp;2006 debt restructure and the shares Biogen Idec first received when we purchased Genovo, as of December&nbsp;31, 2006, Biogen Idec held 2.17&nbsp;million shares of our
common stock, or 19.9% of our common shares outstanding.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In December&nbsp;2006, we made a $583,000 advance payment to Biogen Idec in accordance with the terms of the note, which requires one-third of certain up-front payments received from potential future collaborators to be applied toward the outstanding loan balance. The receipt of a $1.75&nbsp;million license fee from AMT triggered this payment which, according to the agreement, was applied first to interest owed through the payment date and then to the long term portion of the note. As a result of this payment, our loan balance obligation is $1.7&nbsp;million as of December&nbsp;31, 2006.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">From the inception of the collaboration in 2000 through completion of the collaboration in 2003, we earned $11.0&nbsp;million in revenue from Biogen under this collaboration and received $18.8&nbsp;million in proceeds from the issuance of debt and sales of equity securities.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Emerald Gene Systems, Ltd.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 1999, we formed Emerald Gene Systems, Ltd., or Emerald, our joint venture with Elan International Services, Ltd., a wholly-owned subsidiary of Elan Corporation plc, or Elan. Emerald was formed to develop enhanced gene delivery systems. Emerald&#146;s three-year development period ended during 2002 and Emerald had no operating activities after 2002. From inception through March&nbsp;2004, we accounted for our investment in Emerald under the equity method of accounting. In March&nbsp;2004, we became the 100% owner of Emerald and consolidated the results into our financial statements until we dissolved Emerald in January&nbsp;2005.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2004, we entered into a termination agreement with Elan. In accordance with the termination agreement, our Series B preferred stock held by Elan was converted into 4.3&nbsp;million shares of our common stock. As of December&nbsp;31, 2006, Elan held 1.2&nbsp;million shares of our common stock, approximately 10.6% of our outstanding common stock. Under the termination agreement Elan is permitted to trade these shares of our common stock in quantities equal to 175% of the volume limitation set forth in Rule 144(e)(1) promulgated under the Securities Act of 1933, as amended, subject to certain exceptions.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Cystic Fibrosis Foundation</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Until 2005, we were developing tgAAVCF, a product candidate for treating cystic fibrosis. In 2003, we established a collaboration with the Cystic Fibrosis Foundation related to Phase II clinical trials for tgAAVCF. In 2005, we discontinued the development of tgAAVCF and concluded the collaboration with the Cystic Fibrosis Foundation following the analysis of Phase II clinical trial data in which tgAAVCF failed to achieve the efficacy endpoints of the trial.</P>
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<P style="margin-top:10pt; margin-bottom:0pt; page-break-before:always"><B>Patents, License Agreements and Proprietary Rights</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our patent position, licensing arrangements and proprietary technology are subject to certain risks and uncertainties. We have included information about these risks and uncertainties in Item 1A. &#147;Risk Factors&#148; and we encourage you to read that discussion.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Patents and licenses are important to our business. Our strategy is to file or license patent applications to protect technology, inventions and improvements to inventions that we consider important to developing our business. We seek patent protection for and license technologies that relate to the candidates in our pipeline and/or that may be important to future product candidates. We have filed or licensed numerous patent or patent applications with the USPTO and foreign jurisdictions. This proprietary intellectual property includes methods of transferring genetic material into cells, processes to manufacture and purify gene delivery product candidates and other proprietary technologies and processes. We also rely on unpatented proprietary technology such as trade secrets, know-how and continuing technological innovations to develop and maintain our competitive position.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The patent positions of pharmaceutical and biotechnology firms, including our patent position, are uncertain and involve complex legal and factual questions for which important legal tenets are largely unresolved, particularly with regard to gene therapy uses. Patent applications may not result in the issuance of patents and the coverage claimed in a patent application may be significantly reduced before a patent is issued.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have licensed technology underlying several issued and pending patents, including two licenses to patents for the manufacture of AAV vectors and the use of AAV vectors for gene delivery. Our exclusive license with Alkermes, Inc. provides us with rights to patents broadly covering a manufacturing method that we believe is critical to making AAV-based products in a commercially viable, cost-effective manner. This technology, developed by Children&#146;s Hospital in Columbus, Ohio, covers the use of cell lines for manufacturing AAV vectors in multiple disease areas. Our license with the University of Pennsylvania, or Penn, provides us with exclusive and non-exclusive licenses to a group of patents and patent applications filed by Penn with claims that cover AAV and adenoviral vector technologies including manufacturing methods. In addition, the Penn license provides us with exclusive rights to components of a specific serotype of AAV
called AAV1. AAV vectors may be particularly well suited for the development of certain product candidates based on characteristics of the AAV1 serotype.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Many of our exclusive licenses include the right to sublicense the rights thereunder to third parties. We have the right to sublicense many of the patent rights in the Penn license and when we enter into such a sublicense, we must pay Penn certain financial payments including sublicense fees. In December&nbsp;2006, we entered into our first non-exclusive, perpetual sublicense under the Penn license with Amsterdam Molecular Therapeutics B.V., or AMT. Under the AMT license, we sublicensed certain patent rights that we are licensing under the Penn license and AMT paid us an upfront payment of $1.75&nbsp;million. We may also receive milestone payments based on the progress of the licensed products from clinical trial phases to regulatory approvals and royalties based on a percentage of net sales of the licensed products. We have an obligation to pay Penn a portion of the payments we receive from AMT.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our licenses have many financial and other obligations. It is standard to pay a licensing upfront payment, annual maintenance fees, product development milestones and a royalty on sales. It is also standard for the term of the license to extend through the life of the patent rights granted under the license. In general, the licensors have the right to terminate the license if we breach the agreement or become insolvent. Exclusive licenses often include diligence requirements that must be met to retain exclusivity. In general, the result of not meeting the diligence hurdles is to lose exclusivity for certain or all indications included in the license field.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Licensing of intellectual property critical to our business involves complex legal, business and scientific issues. If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop or commercialize the affected product candidates.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In connection with our formation in 1989, we entered into a Gene Transfer Technology License Agreement, or Immunex License Agreement, with Immunex Corporation, our parent company at the time of formation. Under the Immunex License Agreement, we received, among other things, an exclusive worldwide license to certain Immunex proprietary technology specifically applicable to gene therapy applications. We and Immunex (and later Amgen, Inc., which acquired Immunex in 2002) have had many discussions regarding, among other things, differing views about our rights to the gene construct coding for TNFR:Fc used in the development of our inflammatory arthritis product candidate tgAAC94. In 2004, Amgen sent a letter to us taking the position that we were not licensed, either </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">exclusively or non-exclusively, under Immunex intellectual property covering TNFR:Fc or therapeutic uses for TNFR:Fc. We promptly responded to that letter confirming our confidence that the Immunex License Agreement gives us an exclusive worldwide license to use the gene construct coding for TNFR:Fc for gene therapy applications. Although we have had many conversations since that letter exchange in 2004 this matter has not come to a final resolution. We expect to have further communications with Amgen regarding our differences. Notwithstanding our confidence, it is possible that a resolution of those differences, through litigation or otherwise, could cause delay or discontinuation of our development of tgAAC94 or our inability to commercialize any resulting product.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In addition to patent protection, we rely on trade secret protection for our confidential and proprietary information and technology. To protect our trade secrets, we generally require our employees, consultants, scientific advisors and parties to collaborative agreements to execute confidentiality agreements. In the case of employees and consultants, the agreements also provide that all inventions resulting from work performed by them while employed by us will be our exclusive property. Despite these agreements and other precautions we take to protect our trade secrets and other proprietary unpatented intellectual property, we may be unable to meaningfully protect our trade secrets and other intellectual property from unauthorized use or misappropriation by a third party. These agreements may not provide adequate remedies in the event of unauthorized use or disclosure of our confidential information. In addition, our competitors could
obtain rights to our nonexclusively licensed proprietary technology or may independently develop substantially equivalent proprietary information and technology. If our competitors develop and market competing products using our unpatented or nonexclusively licensed intellectual property or substantially similar technology or processes, our products could suffer a reduction in sales or be forced out of the market.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">A number of pharmaceutical and biotechnology companies and research and academic institutions have developed technologies, filed patent applications or received patents for technologies that may be related to our business. Some of these technologies, applications or patents may conflict with our technologies or patent applications. This conflict could limit the scope of any patents that we may obtain for our technologies or result in denial of our patent applications. In addition, if patents or patent applications that cover our activities are or have been issued to other companies, we may be required to either obtain a license from the owner or develop or obtain alternative technology. A license may not be available on acceptable terms, if at all, and we may be unable to develop or obtain alternative technology.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As the biotechnology industry expands and more patents are issued, the risk increases that our processes and potential products may give rise to claims that they infringe on the patents of others. These other parties could bring legal actions against us claiming damages and seeking to stop clinical testing, manufacturing and marketing of the affected product or use of the affected process. If we are found by a court to have infringed on the proprietary rights of others, we could also face potential liability for significant damages and be required to obtain a license to the proprietary technology at issue if we continue to commercialize. A required license may not be available on acceptable terms, if at all, which could impair our ability to commercialize our product candidates. Similarly, administrative proceedings, litigation or both may be necessary to enforce patents issued to us, to protect trade secrets or know-how owned by us or
to determine the enforceability, scope and validity of the proprietary rights of others. This type of litigation, regardless of its merit, could result in substantial expense to us and significantly divert the efforts of our technical and management personnel. An adverse outcome could adversely affect our business.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Competition</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Competition among biotechnology and pharmaceutical companies that research, develop, manufacture and commercialize therapeutic products is significant. Even in the field of gene therapy, numerous companies and institutions are developing or considering the development of gene therapy treatments, including other gene delivery companies, biotechnology companies, pharmaceutical companies, universities, research institutions, governmental agencies and other healthcare providers.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In addition to competition from sources developing competitive gene therapy technologies, our potential products will compete with non-gene therapy products in development and on the market for the therapeutic indications we are targeting. These competitive products could include small molecules, proteins, monoclonal antibodies and other pharmaceutical products, medical devices and surgery. Products in development could make our products obsolete before they ever get to the market. Products on the market could negatively affect the commercial opportunity for our products. Intense competition could heighten disputes pursued in an effort to slow our development including lawsuits, demands, threats or patent challenges. We also compete with others to acquire </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">products or technology from research institutions, universities and other companies. In addition, we compete with others to maintain and attract the necessary scientific and business personnel to advance our programs.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Many of our competitors have substantially more financial and other resources, larger research and development staffs and more experience and capabilities in researching, developing and testing products in clinical trials, obtaining U.S. Food and Drug Administration, or FDA, and other regulatory approvals and manufacturing, marketing and distributing products. In addition, the competitive positions of other companies may be strengthened through collaborative relationships, such as those with large pharmaceutical companies or academic institutions. As a result, our competitors may develop, obtain patent protection, receive FDA and other regulatory approvals or commercialize products more rapidly than we do or may manufacture and market their products more successfully than we do.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our competitors&#146; technologies and products may be more effective or economically feasible than our potential products. If we are successful in commercializing our products, we will be required to compete with respect to commercial manufacturing efficiency and marketing capabilities, areas in which we have no experience. These developments could limit the prices we are able to charge for any products we are able to commercialize or render our products less competitive or obsolete.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our lead product candidate, tgAAC94, is aimed at the target market of inflammatory arthritis. A number of products are currently successfully marketed to treat people with inflammatory arthritis, including products which work by the same mechanism of action, TNF-alpha inhibition. TNF-alpha inhibitor products currently on the market include products from Amgen, Johnson &amp; Johnson and Abbott Laboratories. Although tgAAC94 is targeted to people not completely responding to these systemic TNF inhibitor drugs, other companies are also developing products to complement the systemic TNF inhibitors. Products in development or on the market for inflammatory arthritis could negatively affect the development path and market opportunity for tgAAC94.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Governmental Regulation</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">All of our potential products must receive regulatory approval before they can be marketed. Human therapeutic products are subject to rigorous preclinical and clinical testing and other pre-market approval procedures administered by the FDA and similar authorities in foreign countries. In accordance with the Federal Food, Drug and Cosmetics Act, the FDA exercises regulatory authority over the development, testing, formulation, manufacture, labeling, storage, record keeping, reporting, quality control, advertising, promotion, export and sale of our potential products. Similar requirements are imposed by foreign regulatory agencies. In some cases, state regulations may also apply.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Gene therapeutics are based on relatively new technologies that have not been extensively tested or shown to be effective in humans. The FDA reviews all product candidates for safety at each stage of clinical testing. Safety standards must be met before the FDA permits clinical testing to proceed to the next stage. Also, efficacy must be demonstrated before the FDA grants product approval. Obtaining approval from the FDA and other regulatory authorities for a new therapeutic product candidate, if approval is ever obtained, is likely to take several years. We may encounter difficulties or unanticipated costs in our efforts to secure necessary governmental approvals, which could delay or prevent the marketing of our product candidates. In addition, the regulatory requirements governing gene therapy product candidates and commercialized products are subject to change. The approval process, and ongoing compliance with applicable regulations
after approval, involves substantial expenditures of financial and other resources.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Preclinical studies generally require studies in the laboratory or in animals to assess the potential product&#146;s safety and effectiveness. Preclinical studies include laboratory evaluation of toxicity, pharmacokinetics, how the body processes and reacts to the drug and pharmacodynamics, the effects the drug is actually having on the body. Preclinical studies must be conducted in accordance with the FDA&#146;s Good Laboratory Practice regulations and, before any proposed clinical testing in humans can begin, the FDA must review the results of these preclinical studies as part of an Investigational New Drug application.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If preclinical studies of a product candidate, including animal studies, demonstrate safety, and laboratory test results are acceptable, then the potential product will undergo clinical trials to test the therapeutic agent in humans. Human clinical trials are subject to numerous governmental regulations that provide detailed procedural and administrative requirements designed to protect the trial participants. Each institution that conducts human clinical trials has an Institutional Review Board or Ethics Committee charged with evaluating each trial and any trial </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">amendments to ensure that the trial is ethical, subjects are protected and the trial meets the institutional requirements. These evaluations include reviews of how the institution will communicate the risks inherent in the clinical trial to potential participants so that the subjects may give their informed consent. Clinical trials must be conducted in accordance with the FDA&#146;s Good Clinical Practices regulations and the protocols the company establishes to govern the trial objectives, the parameters to be used for monitoring safety, the criteria for evaluating the efficacy of the potential product and the rights of each trial participant with respect to safety. FDA regulations require us to submit these protocols as part of the application. A FDA review or approval of the protocols, however, does not necessarily mean that the trial will successfully demonstrate safety and/or efficacy of the potential product.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Institutions that receive NIH funding for research involving recombinant DNA must also comply with the NIH Recombinant DNA Guidelines, and the clinical trials conducted at those institutions are subject to a review by the NIH&#146;s Office of Biotechnology Activities Recombinant DNA Advisory Committee, or RAC. The outcome of this review can be either an approval to initiate the trial without a public review or a requirement that the proposed trial be reviewed at a quarterly committee meeting. A clinical trial will be publicly reviewed when at least three of the committee members or the Director of the Office of Biotechnology Activities recommends a public review. Should the RAC require a public hearing, the start of the trial must be delayed until after the hearing date. Although the NIH guidelines do not have regulatory status, the RAC review process can impede the initiation of the trial, even if the FDA has reviewed the trial and
approved its initiation. Additionally, before any clinical trial can be initiated at an NIH-funded site, the Institutional Biosafety Committee of that site must perform a review of the proposed clinical trial and ensure there are no safety issues associated with the trial.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Clinical trials are typically conducted in three phases often involving multiple clinical trials in each phase. In Phase I, clinical trials generally involve a small number of subjects, who may or may not be afflicted with the target disease, to determine the preliminary safety profile. In Phase II, clinical trials are conducted with larger groups of subjects afflicted with the target disease in order to establish preliminary effectiveness and optimal dosages and to obtain additional evidence of safety. In Phase III, large-scale, multi-center, comparative clinical trials are conducted with subjects afflicted with the target disease in order to provide enough data for the statistical proof of efficacy and safety required by the FDA and other regulatory agencies for market approval. We report our progress in each phase of clinical testing to the FDA, which may require modification, suspension or termination of the clinical trial if it
deems patient risk too high. The length of the clinical trial period, the number of trials conducted and the number of enrolled subjects per trial vary, depending on our results and FDA requirements for the particular clinical trial. Although we and other companies in our industry have made progress in the field of gene therapy, we cannot predict what the FDA will require in any of these areas to establish to its satisfaction the safety and effectiveness of the product candidate.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If we successfully complete clinical trials for a product candidate, we must obtain FDA approval or similar approval required by foreign regulatory agencies, as well as the approval of several other governmental and nongovernmental agencies, before we can market the product in the U.S. or in foreign countries. Current FDA regulations relating to biologic therapeutics require us to submit an acceptable Biologics License Application, or BLA, to the FDA and receive approval before the FDA will permit commercial marketing. The BLA includes a description of our product development activities, the results of preclinical studies and clinical trials and detailed manufacturing information. Unless the FDA gives expedited review status, this stage of the review process generally takes at least one year. Should the FDA have concerns with respect to the potential product&#146;s safety and efficacy, it may request additional data, which could delay
product review or approval. The FDA may ultimately decide that the BLA does not satisfy its criteria for approval and might require us to do any or all of the following:</P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">modify the scope of our desired product claims;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">add warnings or other safety-related information; and/or</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">perform additional testing.</FONT></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Because the FDA has not yet approved any gene therapy products, it is not clear what, if any, unforeseen issues may arise during the approval process. While we expect this regulatory structure to continue, we also expect the FDA&#146;s regulatory approach to product approval, and its requirements with respect to product testing, to become more predictable as its scientific knowledge and experience in the field of gene therapy increases. Adverse events in the field of gene therapy or other biotechnology-related fields, however, could result in greater governmental regulation, stricter labeling requirements and potential regulatory delays in the testing or approval of gene therapy products.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">Once approved by the FDA, marketed products are subject to continual FDA review. Later discovery of previously unknown problems or failure to comply with applicable regulatory requirements may result in restrictions on marketing a product or in its withdrawal from the market, as well as potential criminal penalties or sanctions. In addition, the FDA requires that manufacturers of a product comply with current Good Manufacturing Practices requirements, both as a condition to product approval and on a continuing basis. In complying with these requirements, we expend significant amounts of time, money and effort in production, record keeping and quality control. Our manufacturing facilities are subject to periodic inspections by the FDA. If major problems are identified during these inspections that could impact patient safety, the FDA could subject us to possible action, such as the suspension of product
manufacturing, product seizure, withdrawal of approval or other regulatory sanctions. The FDA could also require us to recall a product.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other federal, state and local regulations. For example, our controlled use of hazardous materials in our research and development activities must comply with standards prescribed by state and federal law.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Employees</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As of December&nbsp;31, 2006, we had 70 full-time-equivalent employees. Nine of our employees have Ph.D. or M.D. degrees and a significant number of our management and professional employees have prior experience with other biotechnology or pharmaceutical companies. We also rely on a number of temporary staff positions and third party consultants. None of our employees are covered by a collective bargaining agreement.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Available Information</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We were incorporated in the state of Washington in 1989. Our executive offices are located at 1100 Olive Way, Suite 100, Seattle, Washington 98101, and our telephone number is (206) 623-7612. We file annual, quarterly and current reports, proxy statements and other information with the SEC. We make available in the investor relations portion of our website, free of charge, copies of our annual report on Form 10-K, quarterly reports on Form&nbsp;10-Q, current reports on Form 8-K and amendments to these reports after filing these reports to the SEC. Our website is located at www.targetedgenetics.com. You may also obtain free copies of our periodic reports on the SEC web site at http://www.sec.gov.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 1A. Risk Factors.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In addition to the other information contained in this annual report, you should carefully read and consider the following risk factors. If any of these risks actually occur, our business, operating results or financial condition could be harmed. This could cause the trading price of our stock to decline, and you could lose all or part of your investment.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Risks Related to Our Business</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>The audit report prepared by our independent registered public accounting firm includes an explanatory paragraph expressing the substantial doubt about our ability to continue as a going concern.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We estimate that our cash and cash equivalents on hand, which includes the net proceeds of approximately $8.1&nbsp;million received in our January&nbsp;2007 private placement of common stock and warrants to purchase common stock, plus expected funding from our partners, will be sufficient to fund our operations into the fourth quarter of 2007. This estimate is based on our ability to perform planned research and development activities and the receipt of expected funding from our partners. Prior to that time, we will need to raise additional capital to continue to fund operations at their current level. In addition, as of December&nbsp;31, 2006, we owed to Biogen Idec approximately $1.5&nbsp;million in aggregate principal amount pursuant to an outstanding promissory note. In December&nbsp;2006, we made a $583,000 advance payment to Biogen Idec in accordance with the terms of the promissory note, which requires one-third of certain
up-front payments received from potential future collaborators to be applied toward the outstanding loan balance in reverse order of maturity. The receipt of the $1.75&nbsp;million license fee from AMT triggered this payment, which was applied first to interest owed through the payment date and then to the long term portion of the promissory note. The terms of the promissory note require us to make annual interest payments and scheduled principal payments of $1.0&nbsp;million in August&nbsp;2007 and $525,000 in August&nbsp;2008.</P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">If we do not raise additional funds, we would be forced to preserve our cash position through a combination of additional cost reduction measures, sales of assets likely at values significantly below their potential worth, or the pursuit of alternative financing transactions that would likely be on terms substantially more disadvantageous to us and dilutive to our shareholders. We may need to augment our cash through additional and possibly repetitive dilutive financings. If we are unable to raise additional funds, we could be forced to discontinue our operations.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>If we are unable to raise additional capital when needed, we will be unable to conduct our operations and develop our potential products.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Because internally generated cash flow will not fund development and commercialization of our product candidates, we will require substantial additional financial resources. Our future capital requirements will depend on many factors, including:</P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the rate and extent of scientific progress in our research and development programs;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the timing, costs and scope of, and our success in, conducting clinical trials, obtaining regulatory approvals and pursuing patent prosecutions;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">competing technological and market developments;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the timing and costs of, and our success in, any product commercialization activities and facility expansions, if and as required; and</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the existence and outcome of any litigation or administrative proceedings involving intellectual property.</FONT></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Additional sources of financing could involve one or more of the following:</P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">entering into additional product development collaborations;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">mergers and acquisitions;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">issuing equity in the public or private markets;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">extending or expanding our current collaborations;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">selling or licensing our technology or product candidates;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">borrowing under loan or equipment financing arrangements; and/or</FONT></P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Additional funding may not be available to us on reasonable terms, if at all. Our ability to issue equity, and our ability to issue it at the current market price, may be adversely affected by the fact that we are presently ineligible under SEC rules to utilize Form S-3 for primary offerings of our securities because the aggregate market value of our outstanding common stock held by non-affiliates is less than $75.0&nbsp;million. Moreover, our ability to raise additional capital may be adversely affected by the fact that the audit report prepared by our independent registered public accounting firm relating to our financial statements for the year ended December&nbsp;31, 2006 includes a going concern qualification.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The perceived risk associated with the possible sale of a large number of shares of our common stock could cause some of our shareholders to sell their stock, thus causing the price of our stock to decline. In addition, actual or anticipated downward pressure on our stock price due to actual or anticipated sales of stock could cause some institutions or individuals to engage in short sales of our common stock, which may itself cause the price of our stock to decline.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If our stock price declines, we may be unable to raise additional capital. A sustained inability to raise capital could force us to go out of business. Significant declines in the price of our common stock could also impair our ability to attract and retain qualified employees, reduce the liquidity of our common stock and result in the delisting of our common stock from the NASDAQ Capital Market.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The funding that we expect to receive from our collaborations depends on continued scientific progress under the collaborations and our collaborators&#146; ability and willingness to continue or extend the collaboration. If we are unable to successfully access additional capital, we may need to scale back, delay or terminate one or more of our development programs, curtail capital expenditures or reduce other operating activities. We may also be required to </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">relinquish some rights to our technology or product candidates or grant or take licenses on unfavorable terms, either of which would reduce the ultimate value to us of our technology or product candidates.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>We expect to continue to operate at a loss and may never become profitable.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Substantially all of our revenue to date has been derived under collaborative research and development agreements relating to the development of our potential product candidates. We have incurred, and will continue to incur for the foreseeable future, significant expense to develop our research and development programs, conduct preclinical studies and clinical trials, seek regulatory approval for our product candidates and provide general and administrative support for these activities. As a result, we have incurred significant net losses since inception, and we expect to continue to incur substantial additional losses in the future. As of December&nbsp;31, 2006, we had an accumulated deficit of $284.0&nbsp;million. We may never generate profits and, if we do become profitable, we may be unable to sustain or increase profitability.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>All of our product candidates are in early-stage clinical trials or preclinical development, and if we are unable to successfully develop and commercialize our product candidates we will be unable to generate sufficient capital to maintain our business.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In March&nbsp;2006, we initiated a Phase I/II trial for our inflammatory arthritis product candidate in the United States and Canada. We will not generate any product revenue for at least several years and then only if we can successfully develop and commercialize our product candidates. Commercializing our potential products depends on successful completion of additional research and development and testing, in both preclinical development and clinical trials. Clinical trials may take several years or more to complete. The commencement, cost and rate of completion of our clinical trials may vary or be delayed for many reasons. If we are unable to successfully complete preclinical and clinical development of some or all of our product candidates in a timely manner, we may be unable to generate sufficient product revenue to maintain our business.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Even if our potential products succeed in clinical trials and are approved for marketing, these products may never achieve market acceptance. If we are unsuccessful in commercializing our product candidates for any reason, including greater effectiveness or economic feasibility of competing products or treatments, the failure of the medical community or the public to accept or use any products based on gene delivery, inadequate marketing and distribution capabilities or other reasons discussed elsewhere in this section, we will be unable to generate sufficient product revenue to maintain our business.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Failure to recruit subjects could delay or prevent clinical trials of our potential products, which could delay or prevent the development of potential products.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Identifying and qualifying subjects to participate in clinical trials of our potential products is critically important to our success. The timing of our clinical trials depends on the speed at which we can recruit subjects to participate in testing our product candidates. We have experienced delays in some of our clinical trials, and we may experience similar delays in the future. If subjects are unwilling to participate in our gene therapy trials because of negative publicity from adverse events in the biotechnology or gene therapy industries or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting subjects, conducting trials and obtaining regulatory approval of potential products will be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical
trials altogether.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>The regulatory approval process for our product candidates is costly, time-consuming and subject to unpredictable changes and delays, and our product candidates may never receive regulatory approval.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">No gene therapy products have received regulatory approval for marketing from the FDA. Because our product candidates involve new and unproven technologies, we believe that the regulatory approval process may proceed more slowly compared to clinical trials involving traditional drugs. The FDA and applicable state and foreign regulators must conclude at each stage of clinical testing that our clinical data suggest acceptable levels of safety in order for us to proceed to the next stage of clinical trials. In addition, gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the NIH are subject to review by the NIH&#146;s Office of Biotechnology Activities Recombinant DNA Advisory Committee, or RAC. Although NIH guidelines do not have regulatory status, the RAC review process can impede the initiation of the trial, even if the FDA has </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">reviewed the trial and approved its initiation. Moreover, before a clinical trial can begin at an NIH-funded institution, that institution&#146;s Institutional Biosafety Committee must review the proposed clinical trial to assess the safety of the trial.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The regulatory process for our product candidates is costly, time-consuming and subject to unpredictable delays. The clinical trial requirements of the FDA, NIH and other agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use of the potential products. In addition, regulatory requirements governing gene therapy products have changed frequently and may change in the future. Accordingly, we cannot predict how long it will take or how much it will cost to obtain regulatory approvals for clinical trials or for manufacturing or marketing our potential products. Some or all of our product candidates may never receive regulatory approval. A product candidate that appears promising at an early stage of research or development may not result in a commercially successful product. Our clinical trials may fail to
demonstrate the safety and efficacy of a product candidate or a product candidate may generate unacceptable side effects or other problems during or after clinical trials. Should this occur, we may have to delay or discontinue development of the product candidate, and the partner, if any, that supports development of such product candidate may terminate its support. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market will decrease our ability to generate sufficient product revenue to maintain our business.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>If we are unable to obtain or maintain licenses for necessary third-party technology on acceptable terms or to develop alternative technology, we may be unable to develop and commercialize our product candidates.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have entered into exclusive and nonexclusive license agreements that give us and our partners rights to use technologies owned or licensed by commercial and academic organizations in the research, development and commercialization of our potential products. For example, we have a gene therapy technology license agreement with Amgen as the successor to Immunex under which we have licensed rights to certain Immunex proprietary technology specifically applicable to gene therapy applications. In a February&nbsp;2004 letter, Amgen took the position that we are not licensed, either exclusively or nonexclusively, to use Immunex intellectual property covering TNFR:Fc or therapeutic uses for TNFR:Fc. We have responded with a letter confirming our confidence that the gene therapy technology license agreement provides us with an exclusive worldwide license to use the gene construct coding for TNFR:Fc for gene therapy applications. We have had,
and expect to have further, communications with Amgen regarding our differences. Notwithstanding our confidence, it is possible that a resolution of those differences, through litigation or otherwise, could cause delay or discontinuation of our development of tgAAC94 or our inability to commercialize any resulting product.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We believe that we will need to obtain additional licenses to use patents and unpatented technology owned or licensed by others for use, compositions, methods, processes to manufacture compositions, processes to manufacture and purify gene delivery product candidates and other technologies and processes for our present and potential product candidates. If we are unable to maintain our current licenses for third-party technology or obtain additional licenses on acceptable terms, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates. In addition, the license agreements for technology for which we hold exclusive licenses typically contain provisions that require us to meet minimum development milestones in order to maintain the license on an exclusive basis for some or all fields of the
license. We also have license agreements for some of our technologies that may require us to sublicense certain of our rights. If we do not meet these requirements, our licensor may convert all or a portion of the license to a nonexclusive license or, in some cases, terminate the license.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In many cases, patent prosecution of our licensed technology is controlled solely by the licensor. If our licensors fail to obtain and maintain patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and is complicated by the rapid pace of scientific discovery in our industry. Disputes may arise regarding intellectual property subject to a licensing agreement, including:</P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the scope of rights granted under the license agreement and other interpretation-related issues;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the sublicensing of patent and other rights under our collaborative development relationships;</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and</FONT></P>
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<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the priority of invention of patented technology.</FONT></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Litigation involving intellectual property, product liability or other claims and product recalls could strain our resources, subject us to significant liability, damage our reputation or result in the invalidation of our proprietary rights.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As our product development efforts progress, most particularly in potentially significant markets such as HIV/AIDS, congestive heart failure or inflammatory arthritis therapies, the risk increases that others may claim that our processes and product candidates infringe on their intellectual property rights. In addition, administrative proceedings, litigation or both may be necessary to enforce our intellectual property rights or determine the rights of others. Defending or pursuing these claims, regardless of their merit, would be costly and would likely divert management&#146;s attention and resources away from our operations. If there were to be an adverse outcome in litigation or an interference proceeding, we could face potential liability for significant damages or be required to obtain a license to the patented process or technology at issue, or both. If we are unable to obtain a license on acceptable terms, or to develop or
obtain alternative technology or processes, we may be unable to manufacture or market any product or potential product that uses the affected process or technology.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Clinical trials and the marketing of any potential products may expose us to liability claims resulting from the testing or use of our products. Gene therapy treatments are new and unproven, and potential known and unknown side effects of gene therapy may be serious and potentially life-threatening. Product liability claims may be made by clinical trial participants, consumers, healthcare providers or other sellers or users of our products. Although we currently maintain liability insurance, the costs of product liability and other claims against us may exceed our insurance coverage. In addition, we may require increased liability coverage as additional product candidates are used in clinical trials or commercialized. Liability insurance is expensive and may not continue to be available on acceptable terms. A product liability or other claim or product recall not covered by or exceeding our insurance coverage could significantly harm
our financial condition. In addition, adverse publicity resulting from a product recall or a liability claim against us, one of our partners or another gene therapy company could significantly harm our reputation and make it more difficult to obtain the funding and collaborative partnerships necessary to maintain our business.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>If we lose our collaborative partners, we may be unable to develop our potential products.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">A portion of our operating expenses are funded through our collaborative agreements with third parties. Our HIV/AIDS vaccine collaboration with CHOP and CCRI is funded through a subcontract with the NIAID, which is a U.S. government agency. We also have contracts with two biotechnology companies, Celladon and Sirna and one public health organization, IAVI. Each of these collaborations provides for funding, collaborative development, intellectual property rights or expertise to develop certain of our product candidates. With limited exceptions, each collaborator has the right to terminate its obligation to provide research funding at any time for scientific or business reasons. In addition, to the extent that funding is provided by a collaborator for non-program-specific uses, the loss of significant amounts of collaborative funding could result in the delay, reduction or termination of additional research and development programs, a
reduction in capital expenditures or business development and other operating activities, or any combination of these measures.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>If we do not attract and retain qualified personnel, we may be unable to develop and commercialize some of our potential products.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our future success depends in large part on our ability to attract and retain key technical and management personnel. All of our employees, including our executive officers, can terminate their employment with us at any time. We have programs in place designed to retain personnel, including competitive compensation packages and programs to create a positive work environment. Other companies, research and academic institutions and other </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">organizations in our field compete intensely for employees, however, and we may be unable to retain our existing personnel or attract additional qualified employees and consultants. If we experience significant turnover or difficulty in recruiting new personnel, our research and development of product candidates could be delayed and we could experience difficulty in generating sufficient revenue to maintain our business.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>If our partners or scientific consultants terminate, reduce or delay our relationships with them, we may be unable to develop our potential products.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our partners provide funding, manage regulatory filings, aid and augment our internal research and development efforts and provide access to important intellectual property and know-how. Their activities include, for example, support in processing the regulatory filings of our product candidates and funding clinical trials. Our outside scientific consultants and contractors perform research, develop technology and processes to advance and augment our internal efforts and provide access to important intellectual property and know-how. Their activities include, for example, clinical evaluation of our product candidates, product development activities performed under our research collaborations, research under sponsored research agreements and contract manufacturing services. Collaborations with established pharmaceutical and biotechnology companies and academic, research and public health organizations often provide a measure of
validation of our product development efforts in the eyes of securities analysts, investors and the medical community. The development of certain of our potential products, and therefore the success of our business, depends on the performance of our partners, consultants and contractors. If they do not dedicate sufficient time, regulatory or other technical resources to the research and development programs for our product candidates or if they do not perform their obligations as expected, we may experience delays in, and may be unable to continue, the preclinical or clinical development of those product candidates. Each of our collaborations and scientific consulting relationships concludes at the end of the term specified in the applicable agreement unless we and our partners agree to extend the relationship. Any of our partners may decline to extend the collaboration, or may be willing to extend the collaboration only with a significantly reduced scope. Competition for scientific consultants and
partners in gene therapy is intense. We may be unable to successfully maintain our existing relationships or establish additional relationships necessary for the development of our product candidates on acceptable terms, if at all. If we are unable to do so, our research and development programs may be delayed or we may lose access to important intellectual property or know-how.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>The success of our clinical trials and preclinical studies may not be indicative of results in a large number of subjects of either safety or efficacy.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The successful results of our technology in preclinical studies using animal models may not be predictive of the results that we will see in our clinical trials. In addition, results in early-stage clinical trials are based on limited numbers of subjects and generally test for drug safety rather than efficacy. Our reported progress and results from our early phases of clinical testing of our product candidates may not be indicative of progress or results that will be achieved from larger populations, which could be less favorable. Moreover, we do not know if the favorable results we have achieved in clinical trials will have a lasting or repeatable effect. If a larger group of subjects does not experience positive results or if any favorable results do not demonstrate a beneficial effect, our product candidates that we advance to clinical trials may not receive approval from the FDA for further clinical trials or commercialization. For
example, in March&nbsp;2005, we discontinued the development of tgAAVCF, our product candidate for the treatment of cystic fibrosis, following the analysis of Phase II clinical trial data in which tgAAVCF failed to achieve the efficacy endpoints of the trial.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>We may be unable to adequately protect our proprietary rights domestically or overseas, which may limit our ability to successfully market any product candidates.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our success depends substantially on our ability to protect our proprietary rights and operate without infringing on the proprietary rights of others. We own or license patents and patent applications, and will need to license additional patents, for genes, processes, practices and techniques critical to our present and potential product candidates. If we fail to obtain and maintain patent or other intellectual property protection for this technology, our competitors could market competing products using those genes, processes, practices and techniques. The patent process takes several years and involves considerable expense. In addition, patent applications and patent positions in the field of biotechnology are highly uncertain and involve complex legal, scientific and factual questions. Our patent applications may not result in issued patents and the scope of any patent may be reduced both before and after </P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">the patent is issued. Even if we secure a patent, the patent may not provide significant protection and may be circumvented or invalidated.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We also rely on unpatented proprietary technology and technology that we have licensed on a nonexclusive basis. While we take precautions to protect our proprietary unpatented technology, we may be unable to meaningfully protect this technology from unauthorized use or misappropriation by a third party. Our competitors could also obtain rights to our nonexclusively licensed proprietary technology. In any event, other companies may independently develop equivalent proprietary information and techniques. If our competitors develop and market competing products using our unpatented or nonexclusively licensed proprietary technology or substantially similar technology, our products, if successfully developed, could suffer a reduction in sales or be forced out of the market.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>If we do not develop adequate development, manufacturing, sales, marketing and distribution capabilities, either alone or with our business partners, we will be unable to generate sufficient product revenue to maintain our business.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our potential products require significant development of new processes and design for the advancement of the product candidate through manufacture, preclinical and clinical testing. We may be unable to continue development or meet critical milestones with our partners due to technical or scientific issues related to manufacturing or development. We currently do not have the physical capacity to manufacture large-scale quantities of our potential products. This could limit our ability to conduct large clinical trials of a product candidate and to commercially launch a successful product candidate. In order to manufacture product at such scale, we will need to expand or improve our current facilities and staff or supplement them through the use of contract providers. If we are unable to obtain and maintain the necessary manufacturing capabilities, either alone or through third parties, we will be unable to manufacture our potential
products in quantities sufficient to sustain our business. Moreover, we are unlikely to become profitable if we, or our contract providers, are unable to manufacture our potential products in a cost-effective manner.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In addition, we have no experience in sales, marketing and distribution. To successfully commercialize any products that may result from our development programs, we will need to develop these capabilities, either on our own or with others. We intend to enter into collaborations with other entities to utilize their mature marketing and distribution capabilities, but we may be unable to enter into marketing and distribution agreements on favorable terms, if at all. If our current or future collaborative partners do not commit sufficient resources to timely marketing and distributing our future products, if any, and we are unable to develop the necessary marketing and distribution capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Post-approval manufacturing or product problems or failure to satisfy applicable regulatory requirements could prevent or limit our ability to market our products.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Commercialization of any products will require continued compliance with FDA and other federal, state and local regulations. For example, our current manufacturing facility, which is designed for manufacturing our AAV vectors for clinical and development purposes, is subject to the Good Manufacturing Practices requirements and other regulations of the FDA, as well as to other federal, state and local regulations such as the Occupational Health and Safety Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and the Environmental Protection Act. Any future manufacturing facility that we may construct for large-scale commercial production will also be subject to regulation. We may be unable to obtain regulatory approval for or maintain in operation this or any other manufacturing facility. In addition, we may be unable to attain or maintain compliance with current or future regulations relating to manufacture,
safety, handling, storage, record keeping or marketing of potential products. If we fail to comply with applicable regulatory requirements or discover previously unknown manufacturing, contamination, product side effects or other problems after we receive regulatory approval for a potential product, we may suffer restrictions on our ability to market the product or be required to withdraw the product from the market.</P>
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<P style="margin-top:10pt; margin-bottom:0pt; page-break-before:always"><B>Risks Related to Our Industry</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Adverse events in the field of gene therapy could damage public perception of our potential products and negatively affect governmental approval and regulation.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Public perception of our product candidates could be harmed by negative events in the field of gene transfer. For example, in 2003, fourteen subjects in a French academic clinical trial being treated for x-linked severe combined immunodeficiency in a gene therapy trial using a retroviral vector showed correction of the disease, although three of the subjects subsequently developed leukemia. Serious adverse events, including patient deaths, have occurred in clinical trials. Adverse events in our clinical trials and the resulting publicity, as well as any other adverse events in the field of gene therapy that may occur in the future, could result in a decrease in demand for any products that we may develop. The commercial success of our product candidates will depend in part on public acceptance of the use of gene therapy for preventing or treating human diseases. If public perception is influenced by claims that gene therapy is unsafe,
our product candidates may not be accepted by the general public or the medical community. The public and the medical community may conclude that our technology is unsafe.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Future adverse events in gene therapy or the biotechnology industry could also result in greater governmental regulation, unfavorable public perception, stricter labeling requirements and potential regulatory delays in the testing or approval of our potential products. Any increased scrutiny could delay or increase the costs of our product development efforts or clinical trials.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Our use of hazardous materials exposes us to liability risks and regulatory limitations on their use, either of which could reduce our ability to generate product revenue.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our research and development activities involve the controlled use of hazardous materials, including chemicals, biological materials and radioactive compounds. Our safety procedures for handling, storing and disposing of these materials must comply with federal, state and local laws and regulations, including, among others, those relating to solid and hazardous waste management, biohazard material handling, radiation and air pollution control. We may be required to incur significant costs in the future to comply with environmental or other applicable laws and regulations. In addition, we cannot eliminate the risk of accidental contamination or injury from hazardous materials. If a hazardous material accident were to occur, we could be held liable for any resulting damages, and this liability could exceed our insurance and financial resources. Accidents unrelated to our operations could cause federal, state or local regulatory agencies
to restrict our access to hazardous materials needed in our research and development efforts, which could result in delays in our research and development programs. Paying damages or experiencing delays caused by restricted access could reduce our ability to generate revenue and make it more difficult to fund our operations.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>The intense competition and rapid technological change in our market may result in failure of our potential products to achieve market acceptance.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We face increasingly intense competition from a number of commercial entities and institutions that are developing gene therapy technologies. Our competitors include early-stage and more established gene delivery companies, other biotechnology companies, pharmaceutical companies, universities, research institutions and government agencies developing gene therapy products or other biotechnology-based therapies designed to treat the diseases on which we focus. We also face competition from companies using more traditional approaches to treating human diseases, such as surgery, medical devices and pharmaceutical products. If our product candidates become commercial gene therapy products, they may affect commercial markets of the analogous protein or traditional pharmaceutical therapy. This may result in lawsuits, demands, threats or patent challenges by others in an effort to reduce our ability to compete. In addition, we compete with
other companies to acquire products or technology from research institutions or universities. Many of our competitors have substantially more resources, including research and development personnel, capital and infrastructure, than we do. Many of our competitors also have greater experience and capabilities than we do in:</P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">research and development;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">clinical trials;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">obtaining FDA and other regulatory approvals;</FONT></P>
<P style="margin-top:5pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>20</P>
<P style="margin:0pt"><BR></P>
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<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt; page-break-before:always"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">manufacturing; and</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">marketing and distribution.</FONT></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In addition, the competitive positions of other companies, institutions and organizations, including smaller competitors, may be strengthened through collaborative relationships. Consequently, our competitors may be able to develop, obtain patent protection for, obtain regulatory approval for, or commercialize new products more rapidly than we do, or manufacture and market competitive products more successfully than we do. This could limit the prices we could charge for the products that we are able to market or result in our products failing to achieve market acceptance.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Gene therapy is a rapidly evolving field and is expected to continue to undergo significant and rapid technological change and competition. Rapid technological development by our competitors, including development of technologies, products or processes that are more effective or more economically feasible than those we have developed, could result in our actual and proposed technologies, products or processes losing market share or becoming obsolete.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Healthcare reform measures and the unwillingness of third-party payors to provide adequate reimbursement for the cost of our products could impair our ability to successfully commercialize our potential products and become profitable.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Sales of medical products and treatments, both domestically and abroad, substantially depend on the availability of reimbursement to the consumer from third-party payors. Our potential products may not be considered cost-effective by third-party payors, who may not provide coverage at the price set for our products, if at all. If purchasers or users of our products are unable to obtain adequate reimbursement, they may forego or reduce their use of our products. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Increasing efforts by governmental and third-party payors, such as Medicare, private insurance plans and managed care organizations, to cap or reduce healthcare costs will affect our ability to commercialize our product candidates and become profitable. We believe that third-party payors will attempt to reduce healthcare costs by limiting both coverage and level of reimbursement for new products approved by the FDA. There have been and will continue to be a number of federal and state proposals to implement government controls on pricing, the adoption of which could affect our ability to successfully commercialize our product candidates. Even if the government does not adopt any such proposals or reforms, their announcement could impair our ability to raise capital.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Risks Related to Our Common Stock</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>If we sell additional shares, our stock price may decline as a result of the dilution that will occur to existing shareholders.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Until we are profitable, we will need significant additional funds to develop our business and sustain our operations. Any additional sales of shares of our common stock are likely to have a dilutive effect on our then-existing shareholders. Subsequent sales of these shares in the open market could also have the effect of lowering our stock price, thereby increasing the number of shares we may need to issue in the future to raise the same dollar amount and consequently further diluting our outstanding shares. These future sales could also have an adverse effect on the market price of our shares and could result in additional dilution to the holders of our shares.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The perceived risk associated with the possible sale of a large number of shares could cause some of our shareholders to sell their stock, thus causing the price of our stock to decline. In addition, actual or anticipated downward pressure on our stock price due to actual or anticipated sales of stock could cause some institutions or individuals to engage in short sales of our common stock, which may itself cause the price of our stock to decline.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">If our stock price declines, we may be unable to raise additional capital. A sustained inability to raise capital could force us to go out of business. Significant declines in the price of our common stock could also impair our ability to attract and retain qualified employees, reduce the liquidity of our common stock and result in the delisting of our common stock from the NASDAQ Capital Market.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>21</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:10pt; margin-bottom:0pt; page-break-before:always"><B><I>Concentration of ownership of our common stock may give certain shareholders significant influence over our business.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">A small number of investors own a significant number of shares of our common stock. As of March&nbsp;16, 2007, Biogen Idec held approximately 2.2&nbsp;million shares and Elan held approximately 1.2&nbsp;million shares of our common stock. Together these holdings represent approximately 25% of our common shares outstanding as of March&nbsp;16, 2007. This concentration of stock ownership may allow these shareholders to exercise significant control over our strategic decisions and block, delay or substantially influence all matters requiring shareholder approval, such as:</P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">election of directors;</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">amendment of our charter documents; or</FONT></P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">approval of significant corporate transactions, such as a change of control of us.</FONT></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The interests of these shareholders may conflict with the interests of other holders of our common stock with regard to such matters. Furthermore, this concentration of ownership of our common stock could allow these shareholders to delay, deter or prevent a third party from acquiring control of us at a premium over the then-current market price of our common stock, which could result in a decrease in our stock price.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Both Biogen Idec and Elan have sold shares of our common stock and may continue to do so. Sales of significant value of stock by these investors may introduce increased volatility to the market price of our common stock. In accordance with the termination agreement that we entered into with Elan in March&nbsp;2004, Elan is only permitted to sell quantities of our stock equal to 175% of the volume limitation set forth in Rule 144(e)(1) promulgated under the Securities Act of 1933, as amended, subject to certain exceptions.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Market fluctuations or volatility could cause the market price of our common stock to decline and limit our ability to raise capital.</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The stock market in general and the market for biotechnology-related companies in particular have experienced extreme price and volume fluctuations, often unrelated to the operating performance of the affected companies. The market price of the securities of biotechnology companies, particularly companies such as ours without earnings and product revenue, has been highly volatile and is likely to remain so in the future. Any report of clinical trial results that are below the expectations of financial analysts or investors could result in a decline in our stock price. We believe that in the past, similar levels of volatility have contributed to the decline in the market price of our common stock, and may do so again in the future. Trading volumes of our common stock can increase dramatically, resulting in a volatile market price for our common stock. The trading price of our common stock could decline significantly as a result of sales
of a substantial number of shares of our common stock, or the perception that significant sales could occur. In addition, the sale of significant quantities of stock by Elan, Biogen Idec or other holders of significant amounts of shares of our stock, could adversely impact the price of our common stock.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 2. Properties.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We lease approximately 42,000 square feet of laboratory, manufacturing and office space in two buildings in Seattle, Washington. The lease on our primary laboratory, manufacturing and office space (representing 37,000 square feet) expires in April&nbsp;2009 and has one option to renew for an additional five-year period. In the second quarter of 2006, we amended the lease on our administrative office space to reduce our square footage to 5,000 square feet three years before the end of the original lease term. As a result the lease on our administrative space expires in March&nbsp;2014 and has one option to renew for an additional five-year period. We believe that our Seattle facilities are sufficient to support our research, manufacturing and administrative needs under our current operating plan.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We also lease approximately 76,000 square feet of space in Bothell, Washington, intended for future large-scale manufacturing of our products. The lease on this facility expires in September&nbsp;2015 and includes an option for us to extend its term for one additional five-year period. While preliminary design activities have been completed, we have never occupied this facility and do not currently plan to commence the construction of this facility unless and until product demands warrant resumption of construction activities. As a result, we are trying to sublease all or part of the facility. Any decision to resume use of the facility will be based on a number of factors, including the progress of our product candidates in clinical development, the estimated duration of facility design and construction, the estimated timing of product manufacturing requirements, the ability of our current manufacturing capabilities to meet demand, and
the availability of financial resources.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>22</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:10pt; margin-bottom:0pt; page-break-before:always"><B>Item 3. Legal Proceedings.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We are not a party to any material legal proceedings.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 4. Submission of Matters to a Vote of Security Holders.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">No matters were submitted to a vote of our security holders during the fourth quarter of 2006.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>23</P>
<P style="margin:0pt"><BR></P>
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<P style="margin:0pt; page-break-before:always" align=center><B>PART II</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 5. Market for Registrant&#146;s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Market Information</I>. Our common currently stock trades on the NASDAQ Capital Market under the symbol TGEN. From May&nbsp;20, 1994 until January&nbsp;8, 2003, our common stock was traded on the NASDAQ National Market (now known as the NASDAQ Global Market) under the symbol TGEN.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following table lists, for each calendar quarter indicated, the high and low bid quotations for our common stock, as quoted on the NASDAQ Capital Market. These quotes reflect inter-dealer prices, without retail mark-up or commission, and may not necessarily represent actual transactions. This historical stock price information has been adjusted to reflect our 1-for-10 reverse stock split, which was effected on May&nbsp;11, 2006.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=197.3></TD><TD width=14></TD><TD width=5></TD><TD width=22.5></TD><TD width=14></TD><TD width=5></TD><TD width=23></TD></TR>
<TR><TD valign=bottom width=263.067>&nbsp;</TD><TD valign=top width=18.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=36.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>High</B></P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=37.333 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Low</B></P>
</TD></TR>
<TR><TD valign=bottom width=263.067>&nbsp;</TD><TD valign=top width=18.667><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=36.667 colspan=2>&nbsp;</TD><TD valign=top width=18.667><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=37.333 colspan=2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>2006:</B></P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30.667>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">4th Quarter</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>7.16</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667><P style="margin:0pt">$ &nbsp;</P>
</TD><TD valign=bottom width=30.667><P style="margin:0pt" align=right>1.77</P>
</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">3rd Quarter</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>2.40</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30.667><P style="margin:0pt" align=right>1.71</P>
</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2nd Quarter</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>4.70</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30.667><P style="margin:0pt" align=right>1.77</P>
</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">1st Quarter</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>6.30</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30.667><P style="margin:0pt" align=right>3.90</P>
</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt"><B>2005:</B></P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30>&nbsp;</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30.667>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">4th Quarter</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>7.20</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=30.667><P style="margin:0pt" align=right>4.80</P>
</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">3rd Quarter</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>9.20</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30.667><P style="margin:0pt" align=right>6.00</P>
</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">2nd Quarter</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>12.50</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30.667><P style="margin:0pt" align=right>5.00</P>
</TD></TR>
<TR><TD valign=bottom width=263.067><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">1st Quarter</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30><P style="margin:0pt" align=right>19.00</P>
</TD><TD valign=top width=18.667>&nbsp;</TD><TD valign=top width=6.667>&nbsp;</TD><TD valign=bottom width=30.667><P style="margin:0pt" align=right>4.00</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The last reported bid quotation for our common stock, as quoted on the NASDAQ Capital Market on March&nbsp;16, 2007 was $2.79 per share.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Holders</I>. As of March&nbsp;16, 2007, we had 359 shareholders of record and approximately 18,000 beneficial holders of our common stock.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Dividends</I>. We have never paid cash dividends and do not anticipate paying them in the foreseeable future. In addition, our loan agreement with Biogen Idec restricts the amount of cash dividends we could pay.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Recent Sales of Unregistered Securities</I>. On June&nbsp;21, 2006, we issued 20,000 shares of common stock to Needham &amp; Company, LLC in lieu of cash payments for expenses and fees, and the issuance of warrants. The compensation due to Needham was in connection with our engagement of Needham and the referral of one of the investors in our registered offering in March&nbsp;2006 from Needham. We received a release of any claims Needham may have had against us as consideration for the shares. The securities were issued under Section 4(2) of the Securities Act of 1933, as amended, to an institutional investor.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On July&nbsp;10, 2006, we issued 25,000 shares of common stock to the International AIDS Vaccine Initiative as part of the consideration for the Collaboration and License Agreement, dated January&nbsp;1, 2005, by and among the International AIDS Vaccine Initiative, Children&#146;s Research Institute, The Children&#146;s Hospital of Philadelphia, and the Company. The securities were issued under Section 4(2) of the Securities Act of 1933, as amended, to an accredited investor.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On November&nbsp;7, 2006, we issued 1,000,000 shares of common stock to Biogen Idec as part of the consideration for Amendment Number 2 to the Funding Agreement, dated November&nbsp;7, 2006. The securities were issued under Section 4(2) of the Securities Act of 1933, as amended, to an accredited investor.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Performance Graph</I>. The following graph shows a comparison of cumulative total shareholder return for Targeted Genetics, the NASDAQ Composite Index, and the NASDAQ Biotechnology Index, or NBI. The graph shows the value, as of December&nbsp;31, 2006, of $100 invested on December&nbsp;31, 2001 in our common stock, the NASDAQ Composite Index, and the NASDAQ Biotechnology Index.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>24</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always" align=center><BR></P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt"><I>The information contained in the performance graph shall not be deemed to be &#147;soliciting material&#148; or to be &#147;filed&#148; with the SEC, and such information shall not be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.</I></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 6. Selected Financial Data.</B></P>
<P style="margin-top:5pt; margin-bottom:5pt; text-indent:18pt">The selected consolidated financial data set forth below at December&nbsp;31, 2006 and 2005, and for the fiscal years ended December&nbsp;31, 2006, 2005 and 2004, are derived from our audited consolidated financial statements included elsewhere in this report. This information should be read in conjunction with those consolidated financial statements, the notes thereto, and with &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations.&#148; The selected consolidated financial data set forth below at December, 2004, 2003 and 2002, and for the years ended December&nbsp;31, 2003 and 2002, are derived from our audited consolidated financial statements that are contained in reports previously filed with the SEC, not included herein. All share and per share information herein (including shares outstanding and earnings per share) reflect the retroactive adjustment for a one-for-ten reverse stock split we
implemented in May&nbsp;2006.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=167.9></TD><TD width=6></TD><TD width=5></TD><TD width=48.35></TD><TD width=6></TD><TD width=5></TD><TD width=48.35></TD><TD width=6></TD><TD width=5></TD><TD width=48.35></TD><TD width=6></TD><TD width=5></TD><TD width=48.35></TD><TD width=6></TD><TD width=5></TD><TD width=48.35></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=223.867><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=8><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=387.667 colspan=14><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>Year Ended December 31,</B></P>
</TD><TD valign=bottom width=4.467><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=223.867><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=8><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2006<BR>
(1)(4)(5)</B></P>
</TD><TD valign=bottom width=8><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2005<BR>
(1)</B></P>
</TD><TD valign=bottom width=8><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2004<BR>
(1)(2)</B></P>
</TD><TD valign=bottom width=8><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2003<BR>
(1)</B></P>
</TD><TD valign=bottom width=8><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2002<BR>
(1)</B></P>
</TD><TD valign=bottom width=4.467><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=223.867><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt"><B>Statement of Operations Data</B></P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=4.467><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=223.867><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Revenue</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>9,864,000</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>6,874,000</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>9,652,000</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>14,073,000</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>19,333,000</P>
</TD><TD valign=bottom width=4.467><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=223.867><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Operating expenses</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>46,593,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>26,221,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>24,822,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>27,877,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>42,074,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=223.867><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Loss from operations</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(36,729,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(19,347,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(15,170,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(13,804,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(22,741,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="line-height:10pt; margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=223.867><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Net loss applicable to common stock</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(33,990,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(19,198,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(14,257,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(14,833,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(23,767,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="line-height:10pt; margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=223.867><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Net loss per basic and diluted common share</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(3.47</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(2.24</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(1.79</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(2.58</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>(5.19</P>
</TD><TD valign=bottom width=4.467><P style="line-height:10pt; margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=223.867><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Shares used in computing basic and diluted net loss per common share</P>
</TD><TD valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>9,788,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>8,564,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>7,945,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>5,749,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10pt; margin:0pt" align=right>4,577,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
</TABLE>
<P style="line-height:8pt; margin:0pt; text-indent:18pt; font-size:8pt">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=167.5></TD><TD width=10></TD><TD width=5></TD><TD width=45></TD><TD width=10></TD><TD width=5></TD><TD width=45></TD><TD width=10></TD><TD width=5></TD><TD width=45></TD><TD width=10></TD><TD width=5></TD><TD width=45></TD><TD width=8></TD><TD width=5></TD><TD width=45></TD><TD width=2.5></TD></TR>
<TR><TD valign=bottom width=223.333><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=384 colspan=14><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>December 31,</B></P>
</TD><TD valign=bottom width=3.333><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=223.333><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=66.667 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=13.333><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=66.667 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=13.333><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=66.667 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=13.333><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=66.667 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2003</B></P>
</TD><TD valign=bottom width=10.667><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>2002</B></P>
</TD><TD valign=bottom width=3.333><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=223.333><P style="line-height:10pt; margin:0pt; padding-left:6pt; text-indent:-6pt"><B>Balance Sheet Data</B></P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=10.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=3.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=223.333><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Cash and cash equivalents</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>6,206,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>14,122,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>34,096,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>21,057,000</P>
</TD><TD valign=bottom width=10.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>12,606,000</P>
</TD><TD valign=bottom width=3.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=223.333><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Total assets</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>17,467,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>48,798,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>69,965,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>57,672,000</P>
</TD><TD valign=bottom width=10.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>52,713,000</P>
</TD><TD valign=bottom width=3.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=223.333><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Long-term obligations</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>570,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>8,177,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>10,182,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>11,227,000</P>
</TD><TD valign=bottom width=10.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>20,494,000</P>
</TD><TD valign=bottom width=3.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=223.333><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Preferred stock(3)</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>12,015,000</P>
</TD><TD valign=bottom width=10.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>12,015,000</P>
</TD><TD valign=bottom width=3.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=223.333><P style="line-height:10pt; margin:0pt; padding-left:18pt; text-indent:-6pt">Total shareholders&#146; equity</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>5,367,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>30,571,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>49,762,000</P>
</TD><TD valign=bottom width=13.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>33,479,000</P>
</TD><TD valign=bottom width=10.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=60><P style="line-height:10pt; margin:0pt" align=right>5,896,000</P>
</TD><TD valign=bottom width=3.333><P style="line-height:10pt; margin:0pt">&nbsp;</P>
</TD></TR>
</TABLE>
<P style="line-height:13pt; margin:0pt; font-size:11pt">&#151;&#151;&#151;&#151;&#151;&#151;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:18pt; text-indent:-18pt">(1)</P>
<P style="margin-top:0pt; margin-bottom:2.5pt; padding-left:18pt">Operating expenses include restructure charges of $2.0&nbsp;million in 2006, $1.7&nbsp;million in 2005, $884,000 in 2004, $5.2&nbsp;million in 2003, and $2.3&nbsp;million in 2002. See Note 4 of the notes to our consolidated financial statements.</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:18pt; text-indent:-18pt">(2)</P>
<P style="margin-top:0pt; margin-bottom:2.5pt; padding-left:18pt">Results reflect a $1.0&nbsp;million gain on the sale of a majority-owned subsidiary in July&nbsp;2004. See Note 7 of the notes to our consolidated financial statements.</P>
<P style="margin-top:0pt; margin-bottom:2.5pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>25</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:18pt; text-indent:-18pt; page-break-before:always">(3)</P>
<P style="margin-top:0pt; margin-bottom:2.5pt; padding-left:18pt">As a result of the expiration of an exchange right of the holder in April&nbsp;2003, we reclassified the Series B preferred stock from mezzanine equity to shareholders&#146; equity. The Series B preferred stock was converted by the holder into common stock in March&nbsp;2004.</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:18pt; text-indent:-18pt">(4)</P>
<P style="margin-top:0pt; margin-bottom:2.5pt; padding-left:18pt">Operating expenses include a goodwill impairment charge of $23.7&nbsp;million in 2006. See Note 8 of the notes to our consolidated financial statements.</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:18pt; text-indent:-18pt">(5)</P>
<P style="margin-top:0pt; margin-bottom:2.5pt; padding-left:18pt">Reflects a November&nbsp;2006 $2.6&nbsp;million gain on the restructuring of our Biogen Idec debt. See Note 5 of the notes to our consolidated financial statements.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 7. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations.</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Overview</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Targeted Genetics Corporation is a clinical-stage therapeutic biotechnology company. We are at the forefront of developing, with the goal of commercializing, a new class of therapeutic products called gene therapeutics. We believe that a wide range of diseases may potentially be treated or prevented with gene therapeutics. In addition to treating diseases that have not had treatments in the past, we believe that there is also a significant opportunity to use gene therapeutics to more effectively treat diseases that are currently treated using other therapeutic classes of drugs such as protein-based drugs, monoclonal antibodies, or small molecule drugs.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Gene therapeutics consist of a delivery vehicle, called a vector, and genetic material. The role of the vector is to carry the genetic material into a target cell. Once delivered into the cell, the gene can express or direct production of the specific proteins encoded by the gene. Gene therapeutics may be used to treat disease facilitating the normal protein production or gene regulation capabilities of cells. In addition, gene therapeutics may be used to enable cells to produce more of a certain protein or different proteins than they normally produce thereby treating a disease state. A new class of gene therapeutics currently receiving attention is RNA interference or RNAi. RNAi comprises small RNA molecules that once delivered into the cell may shut down or interfere with cellular functions. The vectors developed by us for delivery of genes may be particularly useful for the delivery of this new class of genetic therapeutics.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have four product candidates, two of which are currently in clinical trials. Our clinical-stage candidates are aimed at inflammatory arthritis and HIV/AIDS. Our lead product candidate, tgAAC94, for the treatment of inflammatory arthritis is in Phase I/II clinical trials. Our HIV/AIDS prophylactic vaccine product candidate for the developing world, which we are developing in collaboration with IAVI, is in Phase II clinical trials. Our preclinical product candidates, all in development with collaboration partners, are aimed at congestive heart failure, Huntington&#146;s disease and at protecting against the progression of HIV infection to AIDS in the developed world.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Most of our expenses are related to the development of our research and development programs, the conduct of preclinical studies and clinical trials and general and administrative support for these activities. We have financed the company primarily through proceeds from public and private sales of our equity securities, through cash payments received from our collaborative partners for product development and manufacturing activities and through proceeds from the issuance of debt and loan funding under equipment financing arrangements. On January&nbsp;11, 2007, we sold 2.2&nbsp;million shares of our common stock in a private placement at a price of $4.00 per share and received net proceeds of approximately $8.1&nbsp;million. In addition, in connection with the financing we issued warrants to purchase up to 763,000 shares of our common stock.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As of December&nbsp;31, 2006, our accumulated deficit totaled $284.0&nbsp;million. We expect to generate substantial additional losses for the foreseeable future, primarily due to the costs associated with funding our inflammatory arthritis clinical development program, developing and maintaining our manufacturing capabilities and developing our intellectual property assets.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We will require access to significantly higher amounts of capital than we currently have in order to successfully develop our lead inflammatory arthritis product candidate or our partnered product candidates. We may be unable to obtain required funding when needed or on acceptable terms, obtain or maintain corporate partnerships or complete acquisition transactions necessary or desirable to complete the development of our product candidates.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>26</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:10pt; margin-bottom:0pt; page-break-before:always"><B>Critical Accounting Policies, Estimates and Assumptions</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our discussion and analysis of our financial condition and results of operations is based upon financial statements that we have prepared in accordance with accounting principles generally accepted in the United States. As we prepare our financial statements we are required to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an on-going basis, we evaluate these estimates, including those related to revenue, accrued restructure charges, goodwill and stock-based compensation. Estimates are based on historical experience, information received from third parties and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these
estimates under different assumptions or conditions. Note 1 of the notes to our consolidated financial statements, &#147;<I>Description of Business and Summary of Significant Accounting Policies</I>,&#148; summarizes our significant accounting policies that we believe are critical to the presentation of our consolidated financial statements. Our most critical accounting policies, estimates and assumptions are:</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Revenue Recognition Policy</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We generate revenue from technology licenses, collaborative research arrangements and agreements to provide research, development and manufacturing services. Revenue under technology licenses and collaborative agreements typically consists of nonrefundable, up-front license fees, collaborative research funding, technology access fees and various other payments. We initially defer revenue from nonrefundable, up-front license fees and technology access payments and then recognize it systematically over the service period of the collaborative agreement, which is often the development period. We recognize revenue associated with performance milestones as earned, typically based upon the achievement of the specific milestones defined in the applicable agreements or ratably amortized over the remaining contract period. We recognize revenue under research and development contracts as the related costs are incurred. When contracts include
multiple elements, we follow the Emerging Issues Task Force, or EITF, Issue No. 00-21, &#147;<I>Revenue Arrangements with Multiple Deliverables</I>&#148;, which requires us to satisfy the following before revenue can be recognized: 1)&nbsp;the delivered items have value to the customer on a stand-alone basis, 2)&nbsp;any undelivered items to have objective and reliable evidence of fair value of the undelivered items, and 3)&nbsp;delivery or performance to be probable and within our control for any delivered items that have a right of return. We have determined that for these contracts the manufacturing and the research and development activities can be accounted for as separate units of accounting and we allocate the revenue to each unit based on relative fair value. We classify advance payments received in excess of amounts earned as deferred revenue.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Estimated Restructuring Charges Associated with the Bothell Facility</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have adopted the provisions of Statement of Financial Accounting Standards No. 146, or SFAS No. 146, &#147;<I>Accounting for Costs Associated with Exit or Disposal Activities</I>,&#148; as it relates to our facility in Bothell, Washington and our former facility in Sharon Hill, Pennsylvania and we have recorded restructure charges on the related operating leases. Accrued restructuring charges, and in particular, those charges associated with exiting a facility, are subject to many assumptions and estimates. Under SFAS No. 146, an accrued liability for lease termination costs is initially measured at fair value, based on the remaining lease payments due under the lease and other costs, reduced by sublease rental income that could be reasonably obtained from the property, and discounted using a credit-adjusted risk-free interest rate.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our assumptions of estimated sublease rental income and the period of time and concessions that we estimate will be necessary to enter into a sublease can significantly impact the accrual and may differ from what actually occurs. We periodically evaluate these restructuring estimates and assumptions and record additional restructure charges as necessary to reflect current market conditions and delays in subleasing the Bothell facility. Changes to our restructuring estimates and assumptions can be material. For example in 2006, we updated our estimates of the cost and anticipated sublease income as well as extended the expected lead time for subleasing the facility. These updates resulted in additional restructure charges of $860,000. As a result of periodic evaluations and updates, we have recorded $7.1&nbsp;million in additional restructure charges since December&nbsp;2002 when we first established a restructuring reserve for exiting
the Bothell facility. We also record accretion expense based upon changes in the accrued restructure liability that results from the passage of time at an assumed discount rate of 10%. We record accretion expense as a restructuring charge, which totaled $751,000 in 2006, $577,000 in 2005 and $513,000 in 2004.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>27</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">As indicated above the estimated lease restructuring liability includes the benefit of estimated future sublease income, net of related commission costs and lease concessions. If instead, we assumed that the facility would not be subleased before the expiration of the lease in 2015, we would have increased the lease restructuring liability by $1.3&nbsp;million as of December&nbsp;31, 2006.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We will continue to evaluate any additional information that may become available with respect to the estimates and assumptions as they relate to the facility, which may result in further significant charges to our results of operations. If circumstances with the lease change, or if we decide to resume use of this facility, any remaining accrued restructure charges related to the facility will be reversed. This reversal would be reflected as a reduction of restructuring expenses and reflected in the period in which use is resumed. We are unable to determine the likelihood of any future adjustments to our accrued restructuring charges.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Goodwill and Other Intangible Assets</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">When we purchased Genovo in 2000 we recorded intangible assets of $39.5&nbsp;million on our financial statements, which represented know-how, an assembled workforce and goodwill. Between 2000 and 2002 we recognized $8.1&nbsp;million of amortization of the goodwill and intangible assets and in 2002 we implemented SFAS No. 142, &#147;<I>Goodwill and Other Intangible Assets</I>.&#148; SFAS No. 142 discontinued amortization of goodwill and requires us to perform goodwill impairment tests annually or more frequently if events and changes in business conditions indicate that the carrying amount of our goodwill may not be recoverable. We assess any potential impairment using a two-step process. Since we have only one reporting unit for purposes of applying SFAS No. 142, the first step requires us to compare the fair value of our total company, as measured by market capitalization to the company&#146;s net book value. If our fair value is
greater, then no impairment is indicated. If our fair value is less then the net carrying value of our assets, then we are required to perform the second step to determine the amount, if any, of goodwill impairment. In step two, the implied fair value of goodwill is calculated and compared to its carrying amount. If the goodwill carrying amount exceeds the implied fair value, an impairment loss must be recognized equal to that excess. The implied goodwill amount is determined by allocating our fair value to all of our assets and liabilities including intangible assets such as in process research and development and developed technology as if the company had been acquired in a hypothetical business combination as of the date of the impairment test. We engaged an independent valuation firm to assist with the evaluation, including the assessment of our estimated fair value and the hypothetical purchase price allocations.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As a result of an interim goodwill impairment test performed in the second quarter of 2006, we recognized a non-cash loss on impairment of goodwill of $23.7&nbsp;million based on an assessment that the implied value of goodwill was $7.9&nbsp;million.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment. In estimating our fair value, we make estimates and judgments about our future revenues and cash flows, application of a discount rate, and the potential control premium relative to the market price of our stock at the valuation date. In estimating the fair value of our net assets, including intangible assets, we make estimates and judgments relating to the fair value of specific assets and liabilities. These estimates generally involve projections of the cash flows which may be provided by specific assets such as in process research and development, completed technology and trademarks and trade names, including assumptions as to the probability of bringing drug candidates to market, the timing of product development, the market size addressed by our potential products, and the application of discount rates. Changes in these
estimates could affect our conclusion as to whether an impairment has occurred and could also significantly impact the amount of impairment recorded.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Stock-Based Compensation</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Prior to January&nbsp;1, 2006, we had applied the intrinsic value method of accounting for stock options granted to our employees and directors under the provisions of Accounting Principles Board, or APB, Opinion No. 25, &#147;Accounting for Stock Issued to Employees,&#148; and related interpretations, as permitted by SFAS No. 123 &#147;Accounting for Stock-Based Compensation.&#148; Accordingly, in 2005 and 2004 we did not recognize any stock-based compensation expense for options granted to employees or directors because we grant all options at fair market value on the date of grant.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">On January&nbsp;1, 2006, we adopted SFAS No. 123R, &#147;Share-Based Payment.&#148; We have adopted the SFAS No. 123R fair value recognition provisions using the modified prospective transition method. Under the modified </P>
<P style="margin:6.65pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>28</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:6.65pt; margin-bottom:6.65pt; page-break-before:always">prospective method, compensation expense includes: (a)&nbsp;compensation cost for all share-based stock options granted prior to, but not yet vested as of January&nbsp;1, 2006, based on the grant-date fair value used for prior pro forma disclosures adjusted for forfeitures and (b)&nbsp;compensation cost for all share-based payments granted subsequent to January&nbsp;1, 2006, based on the grant-date fair value estimate in accordance with the provisions of SFAS No. 123R. Results for periods prior to January&nbsp;1, 2006 have not been restated. As a result of adopting SFAS No. 123R, we recorded $861,000 for the year ended December&nbsp;31, 2006. This expense is classified as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=220.4></TD><TD width=10></TD><TD width=6.2></TD><TD width=44.2></TD></TR>
<TR><TD valign=bottom width=293.867>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended<BR>
December 31, 2006</B></P>
</TD></TR>
<TR><TD valign=bottom width=293.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=8.267>&nbsp;</TD><TD valign=bottom width=58.933>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Research and development</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=8.267><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.933><P style="margin:0pt" align=right>465,000</P>
</TD></TR>
<TR><TD valign=bottom width=293.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">General and administrative</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=8.267>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>396,000</P>
</TD></TR>
<TR><TD valign=bottom width=293.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total stock-based compensation</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:2pt double #000000" valign=bottom width=8.267><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:2pt double #000000" valign=bottom width=58.933><P style="margin:0pt" align=right>861,000</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The proforma cost of stock option compensation was $1.4&nbsp;million in 2005 and $1.6&nbsp;million in 2004 for which no expense was recorded as allowed under the provisions of APB Opinion No. 25. As of December&nbsp;31, 2006, total unrecognized compensation cost related to unvested options was approximately $581,000, net of estimated forfeitures. We expect to recognize this compensation expense over a weighted average period of approximately 8&nbsp;months.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Determining the appropriate fair value model and calculating the fair value of share-based payment awards require the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. We based our volatility and expected life estimates based on our historical data. The assumptions used in calculating the fair value of share-based payment awards represent our best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different
from what we have recorded in the current period. See Note 1 of the notes to our consolidated financial statements for a further discussion on stock-based compensation.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Application of New Accounting Standards</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In July&nbsp;2006, the FASB issued FASB Interpretation No. 48, &#147;<I>Accounting for Uncertainty in Income Taxes</I>,&#148; or FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise&#146;s financial statements in accordance with FASB Statement No. 109, &#147;Accounting for Income Taxes.&#148; FIN 48 prescribes a recognition threshold and measurement factors for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard is effective for fiscal years beginning after December&nbsp;15, 2006 and provides guidance on classification, disclosure, and transition. We are in the process of evaluating the impact of this standard on our financial statements.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September&nbsp;2006, the FASB issued SFAS No. 157, &#147;<I>Fair Value Measurements</I>,&#148; or SFAS No. 157. SFAS No.&nbsp;157 provides guidance for using fair value to measure assets and liabilities and requires expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for fiscal years beginning after November&nbsp;15, 2007. We are in the process of evaluating the adoption of SFAS No. 157.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September&nbsp;2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, &#147;<I>Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements</I>,&#148; or SAB 108. SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for the purposes of determining whether the current year financial statements are materially misstated. SAB 108 became effective for accounting years ending after November&nbsp;15, 2006. The adoption of this SAB did not have any impact on our financial statements.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>29</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">The summary of significant accounting policies should be read in conjunction with our consolidated financial statements and related notes and the following discussion of our results of operations and liquidity and capital resources.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Results of Operations</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B><I>Revenue</I></B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=266.15></TD><TD width=10></TD><TD width=5></TD><TD width=50.9></TD><TD width=10></TD><TD width=5></TD><TD width=50.9></TD><TD width=10></TD><TD width=5></TD><TD width=50.9></TD><TD width=4.15></TD></TR>
<TR><TD valign=bottom width=354.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=250.267 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended December 31,</B></P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=74.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=74.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenue from collaborative agreements:</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=74.533 colspan=2><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=74.533 colspan=2><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=74.533 colspan=2><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">HIV/AIDS vaccine &#150; IAVI</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>2,262,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>5,588,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>8,340,000</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">HIV/AIDS vaccine &#150; NIAID</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>1,548,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Congestive heart failure &#150; Celladon</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>4,220,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>777,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Huntington&#146;s disease &#150; Sirna</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>47,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>315,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Contract manufacturing revenue and other</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>37,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>194,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>1,312,000</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other revenues:</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">License agreements &#150; AMT</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>1,750,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total revenue</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>9,864,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>6,874,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>9,652,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our total revenue in 2006 was $9.9&nbsp;million, compared to $6.9&nbsp;million in 2005. Our revenue in 2006 consists primarily of amounts we earned under our congestive heart failure collaboration with Celladon which increased to $4.2&nbsp;million in 2006 from $777,000 in 2005. This increase in revenue reflects internal development efforts and the completion of two manufacturing campaigns during 2006. Our revenue in 2006 also includes $1.5&nbsp;million from our NIAID-funded HIV/AIDS vaccine collaboration with CCRI and CHOP. Our research and development activity in support of this project began in the first quarter of 2006. Revenue from our IAVI collaboration decreased to $2.3&nbsp;million in 2006 from $5.6&nbsp;million in 2005 due to the progress of planned development activities and scheduled product manufacturing and the shift of the program toward support of clinical trials. The IAVI vaccine candidate is currently in Phase II
clinical trials that are managed, monitored and funded independently by IAVI. We recognized $1.8&nbsp;million in licensing revenue in 2006 from a license fee received from AMT for a non-exclusive license to certain of our AAV1 vector gene delivery system patent rights. The decrease in total revenue for 2005 compared to 2004 is the result of lower revenues earned in 2005 under our development collaboration with IAVI. Revenue recognized under this collaboration was $5.6&nbsp;million in 2005 compared to $8.3&nbsp;million in 2004. The decrease in 2005 revenue earned under our IAVI HIV/AIDS vaccine collaboration as compared to 2004 revenue reflects the completion of several development activities as the program progressed into the Phase I and Phase II clinical trials.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We expect that substantially all of our 2007 revenue will consist of research and development revenue from the NIAID-funded HIV/AIDS vaccine subcontract with CCRI and CHOP and our collaborations with Celladon and IAVI. We expect revenue associated with our NIAID-funded HIV/AIDS vaccine collaboration to increase substantially compared to 2006 due to product development progress and increased manufacturing activities. We expect our revenues associated with IAVI to decline in 2007 compared to 2006 and 2005 due to the continuation of the current Phase II clinical trials during 2007. We also expect our revenues associated with the Celladon collaboration to decrease due to less manufacturing activity as our work transitions towards supporting a Phase I clinical trial. Our revenue for the next several years will depend on the successful achievement of milestones in our current product development collaborations and whether we enter into any
new product development collaborations, manufacturing arrangements or licenses.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Operating Expenses</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Research and Development</I>. Research and development expenses totaled $14.5&nbsp;million in 2006, compared to $18.2&nbsp;million in 2005. This decrease reflects lower costs related to our HIV/AIDS vaccine collaboration with IAVI preclinical development, lower indirect costs as a result of the restructuring efforts implemented in January&nbsp;2006 and lower costs as a result of suspending our cystic fibrosis program in 2005. These decreases were partly offset by higher costs related to our inflammatory arthritis project during 2006 and costs of the NIAID-funded HIV/AIDS vaccine development program. The increase in research and development expenses in 2005 compared to 2004 reflects the costs associated with our programs in preclinical development, which totaled $8.1&nbsp;million in 2005 as compared to $5.3&nbsp;million in 2004. The increase is primarily due to the continued progress of our inflammatory arthritis program and
initiation of the Celladon and Sirna collaborations in early 2005. These increases for 2005 </P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>30</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">compared to 2004 were offset by decreased HIV/AIDS vaccine development costs related to the IAVI collaboration as the project progresses through the clinical stages of development.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We currently expect our research and development expenses in 2007 to increase moderately as compared to 2006, as the result of increased levels of development and manufacturing activities relating to the NIAID project and higher clinical trial costs related to our rheumatoid arthritis program. Our research and development expenses fluctuate due to the timing of expenditures for the varying stages of our research, product development and clinical development programs and the availability of capital resources. We expect that our expenses will continue to fluctuate as we proceed with our current development collaboration and enter into potential new development collaborations and licensing agreements.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following is an allocation of our total research and development expenses between our programs in clinical development and those that are in research or preclinical stages of development:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=266.15></TD><TD width=10></TD><TD width=5></TD><TD width=50.9></TD><TD width=10></TD><TD width=5></TD><TD width=50.9></TD><TD width=10></TD><TD width=5></TD><TD width=50.9></TD><TD width=4.15></TD></TR>
<TR><TD valign=bottom width=354.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=250.267 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended December 31,</B></P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=74.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=74.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Programs in clinical development:</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=74.533 colspan=2><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=74.533 colspan=2><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=74.533 colspan=2><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Inflammatory arthritis (initiated Phase I clinical trial in March 2004)</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>2,888,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>2,444,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>1,771,000</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">IAVI HIV/AIDS vaccine </P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>1,602,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>2,836,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>3,704,000</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cystic fibrosis(1)&nbsp;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>40,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>534,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>823,000</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Indirect costs</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>2,823,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>4,246,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>5,660,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total programs in clinical development</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>7,353,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>10,060,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=67.867><P style="margin:0pt" align=right>11,958,000</P>
</TD><TD valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Programs in research and preclinical development</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>7,129,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>8,139,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>5,330,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total research and development expense</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>14,482,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>18,199,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=67.867><P style="margin:0pt" align=right>17,288,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=5.533><P style="margin:0pt">&nbsp;</P>
</TD></TR>
</TABLE>
<P style="line-height:13pt; margin:0pt; font-size:11pt">&#151;&#151;&#151;&#151;&#151;&#151;</P>
<P style="margin-top:0pt; margin-bottom:-12pt; padding-left:18pt; text-indent:-18pt">(1)</P>
<P style="margin-top:0pt; margin-bottom:2.5pt; padding-left:18pt">No longer in development.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Research and development costs attributable to programs in clinical development include the costs of salaries and benefits, clinical trial costs, outside services, materials and supplies incurred to support the clinical programs. Indirect costs allocated to clinical programs include facility and building occupancy costs, research and development administrative costs, and license and royalty payments. These costs are further allocated between clinical and preclinical programs based on relative levels of program activity. IAVI separately manages and independently funds the clinical trial costs of our AIDS vaccine program. As a result, we do not include those costs in our research and development expenses.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Costs attributed to research and preclinical programs represent our earlier-stage development activities and include research and development and preclincial costs incurred for the NIAID-funded HIV/AIDS vaccine development activities and the congestive heart failure programs as well as other programs prior to their transition into clinical trials. Research and preclinical program expense also includes costs that are not allocable to a clinical development program, such as unallocated manufacturing infrastructure costs. Because we conduct multiple research projects and utilize resources across several programs, our research and preclinical development costs are not directly assigned to individual programs.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">For purposes of reimbursement from our collaboration partners, we capture the level of effort expended on a program through our project management system, which is based primarily on human resource time allocated to each program, supplemented by an allocation of indirect costs and other specifically identifiable costs, if any. As a result, the costs allocated to programs identified in the table above do not necessarily reflect the actual costs of the program.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>General and Administrative</I>. We incurred general and administrative expenses of $6.4&nbsp;million in 2006 compared to $6.3&nbsp;million in 2005. The increase in our general and administrative expense for 2006 reflects inclusion of stock-based compensation expense for general and administrative employees partially offset by lower payroll expenses as a result of a January&nbsp;2006 restructuring. We incurred general and administrative expenses of $6.3&nbsp;million in 2005 compared to $6.7&nbsp;million in 2004. This decrease primarily reflects costs eliminated as a result of our July&nbsp;2004 sale of CellExSys. We expect our general and administrative expenses in 2007 to increase modestly as compared to 2006, primarily as the result of increased compensation expense.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>31</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always"><I>Restructure Charges</I>. Accrued restructuring charges represent our best estimate of the fair value of the liability to exit the Bothell facility as determined under SFAS No. 146, &#147;<I>Accounting for Costs Associated with Exit or Disposal Activities,</I>&#148; and are computed as the fair value of the difference between the remaining lease payments due on these leases and estimated sub-lease costs and rental income. During 2006, we adjusted our liability in March and September to reflect our updated subleasing assumptions for our Bothell facility.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Restructure charges consist of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=266.35></TD><TD width=10></TD><TD width=5></TD><TD width=51.1></TD><TD width=10></TD><TD width=5></TD><TD width=51.1></TD><TD width=8.95></TD><TD width=5></TD><TD width=51.15></TD><TD width=4.35></TD></TR>
<TR><TD valign=bottom width=355.133><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=249.733 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended December 31,</B></P>
</TD><TD valign=bottom width=5.8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=355.133><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=74.8 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=74.8 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=11.933><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.867 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=5.8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=355.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=68.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=68.133>&nbsp;</TD><TD valign=bottom width=11.933>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=68.2>&nbsp;</TD><TD valign=bottom width=5.8>&nbsp;</TD></TR>
<TR><TD valign=bottom width=355.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Charges related to changes in assumptions</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=68.133><P style="margin:0pt" align=right>860,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=68.133><P style="margin:0pt" align=right>1,132,000</P>
</TD><TD valign=bottom width=11.933><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=68.2><P style="margin:0pt" align=right>371,000</P>
</TD><TD valign=bottom width=5.8><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=355.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accretion expense</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=68.133><P style="margin:0pt" align=right>751,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=68.133><P style="margin:0pt" align=right>577,000</P>
</TD><TD valign=bottom width=11.933><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=68.2><P style="margin:0pt" align=right>513,000</P>
</TD><TD valign=bottom width=5.8><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=355.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Employee termination and partial lease termination fee</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=68.133><P style="margin:0pt" align=right>395,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=68.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=11.933><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=68.2><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=5.8><P style="margin:0pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=355.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total restructuring charges</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=68.133><P style="margin:0pt" align=right>2,006,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=68.133><P style="margin:0pt" align=right>1,709,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=11.933><P style="margin:0pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=68.2><P style="margin:0pt" align=right>884,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=5.8><P style="margin:0pt">&nbsp;</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As of December&nbsp;31, 2006, our accrued restructure was $7.4&nbsp;million.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Restructure charges increased to $2.0&nbsp;million for the year ended December&nbsp;31, 2006, compared to $1.7&nbsp;million in 2005 and $884,000 in 2004. Restructuring charges of $860,000 in 2006, $1.1&nbsp;million in 2005 and $371,000 in 2004 reflect changes in our expectations regarding market conditions for the Bothell facility subleasing market.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In January&nbsp;2006, we recorded a $221,000 charge related to the employee termination benefits of our restructuring efforts to realign our resources to advance our lead inflammatory arthritis product through clinical trials. In the second quarter of 2006, as a result of first quarter 2006 staff count reductions, we recorded additional restructure charges of $174,000 to reflect a lease buyout for a portion of our Seattle facility lease.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Goodwill Impairment Charge</I>. We periodically and annually on October&nbsp;1st evaluate the carrying value of our goodwill in accordance with SFAS No. 142, &#147;<I>Goodwill and Other Intangible Assets</I>&#148; and if there is evidence of an impairment in value, we reduce the carrying value of the asset. As discussed in Note 8 of the notes to our consolidated financial statements, we recognized a non-cash loss on impairment of goodwill during second quarter of 2006. As a result of a decline in our share price during June&nbsp;2006, to a level which reduced market capitalization to an amount less than the fair value of the our net assets, we were required to perform an interim goodwill impairment test. As a result of this evaluation, we recognized a non-cash impairment charge of $23.7&nbsp;million, which is equal to the recorded value of goodwill in excess of its implied value.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Gain on debt restructure</I>. In November&nbsp;2006, we signed an agreement to restructure $8.15&nbsp;million of debt payable to Biogen Idec. Under the agreement, we exchanged $5.65&nbsp;million of debt for one million shares of our common stock with a fair value of $2.9&nbsp;million with Biogen Idec and recorded a $2.6&nbsp;million gain on debt restructuring. Inherent in our determination of the gain on debt restructuring is an estimate of the amounts and timing of future principal and interest payments. To the extent that changes in our estimates result in increases in estimated future interest payments such costs will be accrued, however, to the extent that changes in our estimates result in decreases in estimated future interest payments such gain will be deferred until realized.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Investment Income</I>. Our investment income decreased to $567,000 in 2006 compared to $661,000 in 2005 due to lower average cash balances during 2006 resulting in less earned interest. Our investment income was $661,000 in 2005 compared to $383,000 in 2004, as a result of higher yields on our investments during 2005 due to rising interest rates. Investment income primarily reflects interest income earned on our cash balances. In 2005, our investment income includes the net impact of a loss due to the write down of debentures from Chromos (discussed below) offset by a gain recorded when we received stock in payment of the previously written down debentures. The net affect of these two events was $1,000. See Note 7 of the notes to our consolidated financial statements for further details.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Interest Expense</I>. Our interest expense relates to interest on outstanding loans from Biogen Idec and obligations under equipment financing arrangements that we used to finance purchases of laboratory and computer equipment, furniture and leasehold improvements. Our interest expense decreased to $411,000 in 2006 from $512,000 in 2005 due to average lower debt balances in 2006. In 2005, we made a payment of $2.5&nbsp;million and in November&nbsp;2006 we restructured the note to exchange $5.65&nbsp;million of the balance and made a $500,000 payment. Interest expense increased to $512,000 in 2005 from $476,000 in 2004. The increase in 2005 is due to rising interest rates, which increased the interest due on the Biogen Idec note payable. As a result of the restructuring of the Biogen Idec debt, </P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>32</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:6.65pt; margin-bottom:0pt; page-break-before:always">the carrying value of the remaining debt includes the related estimated future interest payments and accordingly, we do not expect to record future interest charges on this restructured debt.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Gain on sale of majority-owned subsidiary</I>. In 2004, Chromos Molecular Systems, Inc., or Chromos, acquired all of the outstanding shares of our majority-owned subsidiary, CellExSys, through a merger between CellExSys and Chromos Inc., a wholly-owned subsidiary of Chromos. Under the terms of the merger agreement, Chromos issued CellExSys shareholders 1,500,000 shares of Chromos common stock and a secured convertible debenture totaling approximately $3.4&nbsp;million Canadian (approximately $2.5&nbsp;million at the time of close). As a result, we recorded a gain of $1.0&nbsp;million representing the deposits received from Chromos to fund pre-closing operating costs, the fair value of our share of the stock and debenture received and the net liabilities assumed by Chromos.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Liquidity and Capital Resources</B></P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">We had cash and cash equivalents balances of $6.2&nbsp;million at December&nbsp;31, 2006, as compared to $14.1&nbsp;million at December&nbsp;31, 2005 and $34.1&nbsp;million at December&nbsp;31, 2004. Our cash and cash equivalents decreased in 2006 primarily reflecting our net loss and the resulting cash used in operations of $11.6&nbsp;million partially offset by the net proceeds of $4.8&nbsp;million from our March&nbsp;2006 sale of our common stock. Our cash and cash equivalents decreased in 2005 primarily reflecting our net loss and the resulting cash used in operations of $16.4&nbsp;million and an early loan repayment to Biogen Idec of $2.5&nbsp;million.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">Our primary sources of capital are from public and private sales of our equity securities, through cash payments received from our collaborative partners and proceeds from the issuance of debt. To a lesser degree, we have also financed our operations through interest earned on our cash and loan funding under equipment leasing agreements and research grants. Our primary expenses are related to the development of our research and development programs, the conduct of preclinical studies and clinical trials and general and administrative support for these activities.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">Substantially all of our revenue has been derived under collaborative research and development agreements relating to the development of our potential product candidates. We do not expect the revenue generated from our current or future collaborative research and development arrangement to be sufficient to fully fund the development and commercialization of our product candidates. As a result, we do not expect to generate ongoing positive cash flow from our operations for the foreseeable future and our ability to generate any sustained positive cash flow is dependent upon our success at developing and commercializing our product candidates.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">We will require substantial additional financial resources to fund development and commercialization of our lead product candidate in inflammatory arthritis.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">We are currently focusing our development funding on our inflammatory arthritis product candidate which is in Phase I/II clinical trials. During 2006, we spent approximately $2.9&nbsp;million on this program in outside costs and allocated staff costs to support research and development activities and clinical trial costs, and we expect to spend approximately $3&nbsp;million to $4&nbsp;million in 2007 on this program, largely for clinical trial expenses. We currently fund all costs of this program from our working capital and expect to do so for the foreseeable future, although our strategy is to ultimately seek a partner to fund later-stage development of this program.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">Our operating cash flows are primarily influenced by our losses from operations, net of the effect of non-cash items such as stock-based compensation, depreciation and amortization of our property and equipment, accounts receivable, deferred revenue and restructuring activity. Depreciation and amortization charges for 2006 were $720,000&nbsp;million, which were down from $1.3&nbsp;million in 2005 and 2004. The decrease in 2006 as compared to 2005 and 2004 primarily reflects lower depreciation on lab equipment. Stock compensation expense was $861,000 for 2006 compared to no expense in 2005 and 2004 due to the implementation of FASB 123R beginning January&nbsp;1, 2006. Accounts receivable was higher in 2006 than previous years due to the timing of cash received and significant billings in the fourth quarter of 2006. Deferred revenue activity in 2006 and 2005 compared to 2004 reflects changes in the levels of pre-funded work under our
collaborative agreements. Increases in our restructure reserve, offset by payments of rent for our Bothell facility resulted in net increases in reserves of $228,000 in 2006 and $802,000 in 2005. In 2004, rent payments were partially offset by charges, which resulted in a net decrease of $523,000.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">Our cash used financing activities in 2006 included $1.2&nbsp;million of loan repayments including $1.0&nbsp;million to Biogen Idec and $155,000 to financing companies in payment of our obligations under equipment financing arrangements. This compares to $3.0&nbsp;million of loan repayments including $2.5&nbsp;million to Biogen Idec and $499,000 of equipment financing payments in 2005 and $866,000 of equipment financing payments in 2004.</P>
<P style="margin-top:5pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>33</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">Sales of the shares of our common stock contributed significantly to our cash flows from investing activities in both 2006 and in 2004. Our financial results in 2006 include approximately $4.8&nbsp;million of net proceeds as a result of the sale of 1.3&nbsp;million shares of our common stock and our financial results in 2004 include approximately $29.8&nbsp;million of net proceeds as a result of the sale of 1.5&nbsp;million shares of our common stock.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">On January&nbsp;11, 2007, we sold 2.2&nbsp;million shares of our common stock in a private placement at a price of $4.00 per share and received net proceeds of approximately $8.1&nbsp;million. In addition, in connection with the financing we issued warrants to purchase up to 763,000 shares of our common stock. On March&nbsp;10, 2006, we sold 1.3&nbsp;million shares of our common stock in a public offering at a price of $3.90 per share and received net proceeds of approximately $4.8&nbsp;million. We intend to continue to seek appropriate opportunities to access the public and private capital markets, however, our ability to issue equity securities at the current market price will likely be adversely affected by the fact that we are presently ineligible under SEC rules to utilize Form S-3 for primary offerings of our securities because the aggregate market value of our outstanding common stock held by non-affiliates is less than
$75&nbsp;million.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our near-term financing strategy includes leveraging our development capabilities and intellectual property assets into additional capital raising opportunities, advancing our clinical development programs and accessing the public and private capital markets at appropriate times.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our development collaborations have typically provided us with funding in several forms, including purchases of our equity securities, loans, payments for reimbursement of research and development costs and milestone fees and payments. We and our partners typically agree on a target disease and create a development plan for the product candidate, which generally extends for multiple one-year terms and is subject to termination or extension. For example, when the IAVI collaboration was initiated in 2000, it originally had a three-year term yet the work plan was established and funded on an annual basis. In 2004, we and IAVI agreed to extend the underlying program through the end of 2006 and in 2006 the program was further extended until the expiration of the term of the last patent within the patent rights controlled by us and utilized in the IAVI vaccine. In 2005, we announced that we extended the scope of our HIV/AIDS vaccine program
activities, primarily to the developed world, via the NIAID-funded collaboration with CCRI and CHOP. During 2006, we received $838,000 under this collaboration and our portion of the funding could be up to an additional $17.4&nbsp;million over the remaining four years of the contract. The funding is awarded to us in annual installments based on an approved work plan and achievement of milestones. The funding from each of our collaborative partners fully offsets our incremental program costs from each collaboration and also partially funds development of our company-funded inflammatory arthritis product candidate and our overhead and fixed costs. Our revenue from collaborative agreements and licenses revenues totaled $9.9&nbsp;million in 2006, $6.9&nbsp;million in 2005 and $9.7&nbsp;million in 2004 and assuming that we complete all of the planned development activities for each of these funded projects, we expect to earn revenue from our collaborative partners of up to $10&nbsp;million in 2007.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Each of our collaborations has provisions that allow our partners the right to terminate the underlying collaboration and the obligation to provide research funding at any time with as little as 90 days notice. If we were to lose the collaborative funding expected from the NIAID, Celladon or IAVI collaborations and were unable to obtain alternative sources of funding, we would be unable to continue our research and development program for that product candidate and our cash horizon would be shortened.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">In addition to the funding necessary to advance our product development and fund our ongoing operating costs, we also have significant outstanding debt, lease commitments and long-term obligations which draw on our cash resources. The following table presents our contractual commitments:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=135.65></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36.05></TD><TD width=6></TD><TD width=4.5></TD><TD width=40.55></TD><TD width=2.25></TD></TR>
<TR><TD valign=bottom width=180.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=432.133 colspan=20><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Payments Due through Year Ended December 31:</B></P>
</TD><TD valign=bottom width=3><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Contractual Obligations</B></P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=54 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2007</B></P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=54 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2008</B></P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=54 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2009</B></P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=54 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2010</B></P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=54 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2011</B></P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=54.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Thereafter</B></P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Total</B></P>
</TD><TD valign=bottom width=3><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD style="border-top:0.5pt solid #000000" valign=bottom width=180.867>&nbsp;</TD><TD valign=bottom width=8>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=8>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=8>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=8>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=48>&nbsp;</TD><TD valign=bottom width=8>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom
width=48>&nbsp;</TD><TD valign=bottom width=8>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=48.067>&nbsp;</TD><TD valign=bottom width=8>&nbsp;</TD><TD valign=bottom width=6>&nbsp;</TD><TD valign=bottom width=54.067>&nbsp;</TD><TD valign=bottom width=3>&nbsp;</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Long-term debt obligations</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,000,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>525,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=48.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD valign=bottom width=54.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,525,000</P>
</TD><TD valign=bottom width=3><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Interest related to long-term debt obligations</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>103,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>45,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=54.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>148,000</P>
</TD><TD valign=bottom width=3><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Equipment financing obligations</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>26,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=54.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>27,000</P>
</TD><TD valign=bottom width=3><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Interest related to equipment financing obligations</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=54.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,000</P>
</TD><TD valign=bottom width=3><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Operating lease obligations:</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; font-size:9pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; font-size:9pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; font-size:9pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; font-size:9pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="margin:0pt; font-size:9pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48.067><P style="margin:0pt; font-size:9pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=54.067><P style="margin:0pt; font-size:9pt" align=right>&nbsp;</P>
</TD><TD valign=bottom width=3><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Seattle facilities &#150; occupied</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>754,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>758,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>276,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>115,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>115,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>258,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=54.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>2,276,000</P>
</TD><TD valign=bottom width=3><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Bothell facility &#150; not occupied</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,362,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,362,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,362,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,431,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,636,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=48.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>6,134,000</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD valign=bottom width=54.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>13,287,000</P>
</TD><TD valign=bottom width=3><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:9.5pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Purchase obligations</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,585,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=54.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,585,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=3><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=180.867><P style="line-height:10pt; margin-top:1.5pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt; font-size:9pt">Total</P>
</TD><TD valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>4,831,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>2,691,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,638,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,546,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=48><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>1,751,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=48.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>6,392,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=8><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6><P style="line-height:11pt; margin:0pt; font-size:9pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=54.067><P style="line-height:11pt; margin:0pt; font-size:9pt" align=right>18,849,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=3><P style="margin:0pt; font-size:9pt">&nbsp;</P>
</TD></TR>
</TABLE>
<P style="margin:5.35pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>34</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:6.65pt; page-break-before:always"><BR>
<BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=135.65></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36></TD><TD width=6></TD><TD width=4.5></TD><TD width=36.05></TD><TD width=6></TD><TD width=4.5></TD><TD width=40.55></TD><TD width=2.25></TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2001, we borrowed $10&nbsp;million from Biogen Idec to fund our general operations. This note was originally due in August&nbsp;2006. In 2005, we restructured the repayment of this $10&nbsp;million of debt and a separate $650,000 loan owed to Biogen Idec we incurred as part of our acquisition of Genovo. Under the amended terms of these loans, we paid $2.5&nbsp;million of the outstanding debt in 2005 and agreed to make additional payments of $2.5&nbsp;million in each of August&nbsp;2007, 2008 and 2009. In addition, we agreed to repay the $650,000 loan in August&nbsp;2007. Further as part of the September&nbsp;2005 restructuring agreement, we agreed to apply one-third of certain up-front or milestone payments received from potential corporate collaborations to repayment of the outstanding debt, first to the payment of any accrued and unpaid interest on the principal being repaid, and second to the payment of outstanding principal in
reverse order of maturity.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In November&nbsp;2006, we signed an agreement to further restructure the remaining $8.15&nbsp;million of debt payable to Biogen Idec. Under the agreement, Biogen Idec agreed to exchange $5.65&nbsp;million of debt for million shares of our common stock with a fair value of $2.9&nbsp;million and we agreed to immediately pay $500,000 of the remaining debt. The remaining $2.0&nbsp;million principal balance bears interest at the rate of LIBOR plus 1% and we agreed to re-pay it in two equal installments of $1.0&nbsp;million each on August&nbsp;1, 2007 and August&nbsp;1, 2008. In addition, the agreement provides for early repayment of the 2007 installment within thirty days of a change in control of the Company. Several of the provisions of the modified loan agreement entered into in 2005 continue including the requirement to apply one-third of certain up-front payments received from potential future corporate collaborations to the outstanding
balance on this loan payable. According to SFAS No. 15, &#147;<I>Accounting by Debtors and Creditors of Troubled Debt Restructurings</I>,&#148; we accounted for this transaction as a troubled debt restructuring which resulted in a gain on debt restructuring of $2.6&nbsp;million. We calculated the gain as the difference between the original principal and interest payments due on the Biogen Idec debt as compared to the cash payments made, the fair value of the common stock issued in the debt restructuring and the remaining principal and interest payments due. We recorded the loan as the $2.0&nbsp;million principal amount plus the total estimated future interest payments of $167,000.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In December&nbsp;2006, we made a $583,000 advance payment to Biogen Idec in accordance with the terms of the note which requires one-third of certain up-front payments received from potential future collaborators to be applied toward the outstanding loan balance. The receipt of a $1.75&nbsp;million license fee from AMT triggered this payment which, according to the agreement, was applied first to interest owed through the payment date and then to the long term portion of the note. As a result of this payment, our loan balance obligation is $1.7&nbsp;million as of December&nbsp;31, 2006.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Operating lease obligations represent our commitments for our facilities in Seattle and Bothell, Washington. Lease payments for our laboratory, manufacturing and office space facilities in Seattle will total $2.3&nbsp;million between January&nbsp;1, 2007 and the end of the lease in 2014. Lease payments on the Bothell facility will total $13.3&nbsp;million between January&nbsp;1, 2007 and the end of the lease in 2015. We are pursuing efforts to sublease or otherwise reduce the costs of our Bothell facility and we may seek to sublease a portion of our laboratory space in our Seattle facility. When we make leasehold improvements to our facilities, we amortize them over the shorter of the useful life of the asset or the remaining term of the lease.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our research and development expenses fluctuate due to the timing of expenditures for the varying stages of our research, product development and clinical development programs and the availability of capital resources. Because a portion of our revenue and expense is directly tied to our research and development activities, our revenue will fluctuate in part with the level of future research and development activities. We expect that our revenue and expense will continue to fluctuate as we proceed with our current development collaborations, enter into potential new development collaborations and licensing agreements and potentially earn milestone payments.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Over the past several years, we have scaled our development activities to the level of available cash resources and financial support from collaboration partners. Research and development and general and administrative expenses decreased by approximately 15% in 2006 compared to 2005, increased by approximately 2% in 2005 compared to 2004 and are expected to increase modestly in 2007 as a result of additional clinical trial costs to support the advancement of our inflammatory arthritis program and certain incremental costs necessary to support our NIAID-funded HIV/AIDS vaccine project and our collaboration with Celladon. Assuming that our product development programs progress at the rates currently planned, we believe that our net cash requirements during 2007 will range from $13&nbsp;million to $16&nbsp;million. This amount is subject to change as the result of the outcome of our product development and business development initiatives
and other efforts.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>35</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; page-break-before:always">We need to raise additional capital to complete our current inflammatory arthritis clinical trial, evaluate the trial results, and assuming satisfactory results, to plan and initiate further clinical testing of our potential inflammatory arthritis product. We expect that our cash and cash equivalents at December&nbsp;31, 2006, plus the funding expected from our collaborative partners to fund 2007 work activities and proceeds from the sale of shares of our common stock in January&nbsp;2007, will be sufficient to fund our operations into the fourth quarter of 2007.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">The audit report prepared by our independent registered public accounting firm relating to our financial statements for the year ended December&nbsp;31, 2006 contains a going concern qualification as a result of our limited working capital.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">Our near-term financing strategy includes leveraging our development capabilities and intellectual property assets into additional capital raising opportunities, advancing our clinical development programs and accessing the public and private capital markets at appropriate times. Our financing strategy is focused around the advancement of our two programs in clinical development, advancement of our newer development collaborations and generating value out of our other intellectual assets and capabilities. In the biotechnology industry there is a low level of success in clinical trials and our ability to raise capital depends in part on clinical trial success.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">We are currently evaluating additional sources of financing that could involve one or more of the following:</P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">entering into additional product development collaborations;</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">mergers and acquisitions;</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">issuing equity in the public or private markets;</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">extending or expanding our current collaborations;</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">selling or licensing our technology or product candidates;</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">borrowing under loan or equipment financing arrangements; and/or</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">issuing debt.</FONT></P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">Additional funding may not be available to us on reasonable terms, if at all. Our ability to issue equity, and our ability to issue it at the current market price, will likely be adversely affected by the fact that we are presently ineligible under SEC rules to utilize Form S-3 for primary offerings of our securities because the aggregate market value of our outstanding common stock held by non-affiliates is less than $75&nbsp;million.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">If our stock price declines, we may be unable to raise additional capital. A sustained inability to raise capital could force us to go out of business. Significant declines in the price of our common stock could also impair our ability to attract and retain qualified employees, reduce the liquidity of our common stock and result in the delisting of our common stock from the NASDAQ Capital Market.</P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">We expect the level of our future operating expenses to be driven by the needs of our product development programs, our debt obligations and our lease obligations offset by the availability of funds through equity offerings, partner-funded collaborations or other financing or business development activities. The size, scope and pace of our product development activities depend on the availability of these resources. Our future cash requirements will depend on many factors, including:</P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the rate and extent of scientific progress in our research and development programs;</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the timing, costs and scope of, and our success in, conducting clinical trials, obtaining regulatory approvals and pursuing patent prosecutions;</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">competing technological and market developments;</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the timing and costs of, and our success in, any product commercialization activities and facility expansions, if and as required; and</FONT></P>
<P style="line-height:10pt; margin-top:3.35pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman">the existence and outcome of any litigation or administrative proceedings involving intellectual property.</FONT></P>
<P style="margin-top:5pt; margin-bottom:0pt; text-indent:18pt">Depending on our ability to successfully access additional funding, we may be forced to implement additional cost reduction measures, such as the reduction in force we implemented in January&nbsp;2006. Further adjustments may include scaling back or delaying our inflammatory arthritis development program, staff reductions, scaling back our intellectual property prosecution, subleasing portions of our lab facilities, curtailing capital expenditures or reducing other operating activities. We may also be required to relinquish some rights to our technology or product candidates or grant licenses on unfavorable terms, either of which would reduce the ultimate value to us of the technology or product candidates.</P>
<P style="margin-top:5pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>36</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:10pt; margin-bottom:0pt; page-break-before:always"><B>Off-Balance Sheet Arrangements</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Although we do not have any joint ventures or other similar off-balance sheet items, in the ordinary course of business we enter into agreements that require us to indemnify counterparties against third-party claims. These may include agreements with vendors and suppliers, under which we may indemnify them against claims arising from our use of their products or services; agreements with clinical investigators, under which we may indemnify them against claims arising from their use of our product candidates; real estate and equipment leases, under which we may indemnify lessors against third-party claims relating to use of their property; agreements with licensees or licensors, under which we may indemnify the licensee or licensor against claims arising from their use of our intellectual property or our use of their intellectual property; and agreements with initial purchasers and underwriters of our securities, under which we may
indemnify them against claims relating to their participation in the transactions.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The nature and terms of these indemnifications vary from contract to contract and generally a maximum obligation is not stated. Because we are unable to estimate our potential obligation, and because management does not expect these indemnifications to have a material adverse effect on our consolidated financial position, results of operations or cash flows, no related liabilities are recorded at December&nbsp;31, 2006 or 2005. We hold insurance policies that mitigate potential losses arising from certain indemnifications and, historically, we have not incurred significant costs related to performance under these obligations.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Impact of New Accounting Pronouncements</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In July&nbsp;2006, the FASB issued FASB Interpretation No. 48, &#147;<I>Accounting for Uncertainty in Income Taxes</I>,&#148; or FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise&#146;s financial statements in accordance with FASB Statement No. 109, &#147;<I>Accounting for Income Taxes</I>.&#148; FIN 48 prescribes a recognition threshold and measurement factors for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard is effective for fiscal years beginning after December&nbsp;15, 2006 and provides guidance on classification, disclosure, and transition. We are in the process of evaluating the impact of this standard on our financial statements.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September&nbsp;2006, the FASB issued SFAS No. 157, &#147;<I>Fair Value Measurements</I>,&#148; or SFAS No. 157. SFAS No.&nbsp;157 provides guidance for using fair value to measure assets and liabilities and requires expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for fiscal years beginning after November&nbsp;15, 2007. We are in the process of evaluating the adoption of SFAS No. 157.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September&nbsp;2006, the SEC issued Staff Accounting Bulletin No. 108, &#147;<I>Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements</I>,&#148; or SAB 108. SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for the purposes of determining whether the current years financial statements are materially misstated. SAB 108 became effective for accounting years ending after November&nbsp;15, 2006. The adoption of this SAB did not have any impact on our financial statements.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 7A. Quantitative and Qualitative Disclosures About Market Risk.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Items with interest rate risk:</P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman"><I>Short term investments</I></FONT>: Because of the short-term nature of our investments, we believe that our exposure to market rate fluctuations on our investments is minimal. Currently, we do not use any derivative or other financial instruments or derivative commodity instruments to hedge any market risks and do not plan to employ these instruments in the future. At December&nbsp;31, 2006, we held $6.2&nbsp;million in cash and cash equivalents, which are invested in money market funds and denominated in U.S. dollars. An analysis of the impact on these securities of a hypothetical 10% change in short-term interest rates from those in effect at December&nbsp;31, 2006, indicates that such a change in interest rates would not have a significant impact on our financial position or on our expected results of operations in 2007.</P>
<P style="margin-top:0pt; margin-bottom:5.35pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>37</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="line-height:10pt; margin-top:0pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt; page-break-before:always"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin-top:0pt; margin-bottom:6.65pt; padding-left:36pt"><FONT FACE="Times New Roman"><I>Notes payable</I></FONT>: Our results of operations are affected by changes in short-term interest rates as a result of a loan from Biogen Idec that contains a variable interest rate. Interest payments on this loan are established quarterly based upon LIBOR, plus 1%. In connection with the restructuring of this debt, as of December&nbsp;31, 2006, we accrued $167,000 for the related estimated remaining future interest payments on the promissory note at a rate of 6.33%. Changes in market interest rates and the timing of remaining interest payments may ultimately result in adjustments to the gain on debt restructuring we recognized in 2006. The carrying amount of the note payable approximates fair value because the interest rate on this instrument changes with, or approximates, market rates. The following table provides information as of December&nbsp;31, 2006, about our obligations that are sensitive to
changes in interest rate fluctuations:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=145.5></TD><TD width=10></TD><TD width=5></TD><TD width=40></TD><TD width=10></TD><TD width=5></TD><TD width=36.3></TD><TD width=10></TD><TD width=5></TD><TD width=37.85></TD><TD width=10></TD><TD width=5></TD><TD width=37.9></TD><TD width=10></TD><TD width=5></TD><TD width=37.95></TD><TD width=10></TD><TD width=5></TD><TD width=40></TD><TD width=2.5></TD></TR>
<TR><TD valign=bottom width=194><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=413.333 colspan=17><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Expected Maturity Date</B></P>
</TD><TD valign=bottom width=3.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=194><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2007</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=55.067 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2008</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=57.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2009</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=57.2 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2010</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=57.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2011</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Total</B></P>
</TD><TD valign=bottom width=3.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=194>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=48.4>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=50.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=50.533>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid
#000000" valign=bottom width=50.6>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=3.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=194><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Variable rate note (principal only)</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>1,000,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=48.4><P style="margin:0pt" align=right>525,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=50.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=50.533><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=50.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>1,525,000</P>
</TD><TD valign=bottom width=3.333><P style="margin:0pt">&nbsp;</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Items with market and foreign currency exchange risk:</P>
<P style="line-height:10pt; margin-top:5pt; margin-bottom:-10pt; padding-left:36pt; text-indent:-18pt; font-family:Symbol; font-size:8pt"><FONT FACE="Symbol">&#183;</FONT></P>
<P style="margin:0pt; padding-left:36pt"><FONT FACE="Times New Roman"><I>Investment in Chromos Molecular Systems, Inc.</I></FONT>: At December&nbsp;31, 2006, we held 2.5&nbsp;million shares of Chromos Molecular Systems, Chromos, common stock with a market value of $0.15 per common share denominated in Canadian dollars. As of December&nbsp;31, 2006, the Canadian to US exchange rate was US $0.8581 per CA $1.00. As of December&nbsp;31, 2006, the investment is recorded at $317,000 with a $39,000 unrealized loss and is classified within prepaid expenses and other. We hold these shares of common stock as available-for-sale securities as we periodically sell them on the Toronto Stock Exchange. As a result of selling 280,000 shares of Chromos stock in 2006, we recorded $8,000 of net realized losses and received $49,000 in cash. The amount of potential realizable value in this investment will be determined by the market, the exchange rate between the Canadian and US dollar and our ability to sell the shares in
the open market.</P>
<P style="margin-top:0pt; margin-bottom:10pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>38</P>
<P style="margin:0pt"><BR></P>
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<P style="margin-top:0pt; margin-bottom:10pt; page-break-before:always"><B>Item 8. Financial Statements and Supplementary Data.</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=436></TD><TD width=10></TD><TD width=22></TD></TR>
<TR><TD valign=bottom width=581.333>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=29.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Page</B></P>
</TD></TR>
<TR><TD valign=bottom width=581.333>&nbsp;</TD><TD valign=top width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=29.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=581.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Report of Independent Registered Public Accounting Firm</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=29.333><P style="margin:0pt" align=center>40</P>
</TD></TR>
<TR><TD valign=bottom width=581.333><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Balance Sheets as of December&nbsp;31, 2006 and 2005</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=29.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>41</P>
</TD></TR>
<TR><TD valign=bottom width=581.333><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Operations for the years ended December&nbsp;31, 2006, 2005 and 2004</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=29.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>42</P>
</TD></TR>
<TR><TD valign=bottom width=581.333><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Preferred Stock and Shareholders&#146; Equity for the years ended December&nbsp;31, 2006, 2005 and 2004</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=29.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>43</P>
</TD></TR>
<TR><TD valign=bottom width=581.333><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Cash Flows for the years ended December&nbsp;31, 2006, 2005 and 2004</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=29.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>44</P>
</TD></TR>
<TR><TD valign=bottom width=581.333><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Notes to Consolidated Financial Statements</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=29.333><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>45</P>
</TD></TR>
</TABLE>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>39</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">The Board of Directors and Shareholders of Targeted Genetics Corporation</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have audited the accompanying consolidated balance sheets of Targeted Genetics Corporation as of December&nbsp;31, 2006 and 2005, and the related consolidated statements of operations, preferred stock and shareholders&#146; equity, and cash flows for each of the three years in the period ended December&nbsp;31, 2006. These financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these financial statements based on our audits.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company&#146;s internal control over financial statement reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Targeted Genetics Corporation at December&nbsp;31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December&nbsp;31, 2006, in conformity with U.S. generally accepted accounting principles.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2 to the consolidated financial statements, the Company has incurred recurring losses and negative cash flows from operations that, due to its limited working capital, raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As discussed in Note 10 to the consolidated financial statements, in 2006 the Company changed its method of accounting for stock-based compensation upon the adoption of Statement of Financial Accounting Standards No. 123R &#150; &#147;Share-Based Payment&#148;, effective January&nbsp;1, 2006.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; padding-left:252pt">/s/ Ernst &amp; Young LLP</P>
<P style="margin-top:6.65pt; margin-bottom:0pt">Seattle, Washington<BR>
March&nbsp;28, 2007</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>40</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:10pt" align=center><B>CONSOLIDATED BALANCE SHEETS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=327.85></TD><TD width=10></TD><TD width=5></TD><TD width=53.35></TD><TD width=10></TD><TD width=5></TD><TD width=53.45></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=437.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=169.067 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=77.8 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=77.933 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=center><B>ASSETS</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Current assets:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cash and cash equivalents</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>6,206,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>14,122,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts receivable</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>1,498,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>380,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Prepaid expenses and other</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>531,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.267><P style="margin:0pt" align=right>683,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total current assets</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>8,235,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>15,185,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Property and equipment, net</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>1,100,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>1,747,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Goodwill</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>7,926,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>31,649,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other assets</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>206,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.267><P style="margin:0pt" align=right>217,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total assets</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>17,467,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=71.267><P style="margin:0pt" align=right>48,798,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=center><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Current liabilities:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accounts payable and accrued expenses</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>1,901,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>1,770,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accrued employee expenses</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>861,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>587,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Current portion of accrued restructure charges</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>1,046,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>1,838,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Deferred revenue</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>251,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>278,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Current portion of long-term obligations</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>1,129,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.267><P style="margin:0pt" align=right>155,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total current liabilities</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>5,188,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>4,628,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accrued restructure charges and deferred rent</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>6,342,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>5,422,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Long-term obligations</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>570,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>8,177,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Commitments and contingencies (Notes 2 and 6)</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Shareholders&#146; equity:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Preferred stock, $0.01 par value, 600,000 shares authorized:<BR>
Series A preferred stock, 180,000 shares designated, none issued and outstanding</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Common stock, $0.01 par value, 18,000,000 shares authorized, 10,921,736 shares issued and outstanding at December&nbsp;31, 2006 and 8,569,424 shares issued and outstanding at December&nbsp;31, 2005</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>109,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>86,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Additional paid-in capital</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>289,324,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>280,543,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accumulated deficit</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>(284,027,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.267><P style="margin:0pt" align=right>(250,037,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Accumulated other comprehensive loss</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>(39,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.267><P style="margin:0pt" align=right>(21,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total shareholders&#146; equity</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>5,367,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.267><P style="margin:0pt" align=right>30,571,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=437.133><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total liabilities and shareholders&#146; equity</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>17,467,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=71.267><P style="margin:0pt" align=right>48,798,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center>See accompanying notes to consolidated financial statements</P>
<P style="margin:0pt" align=center>41</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:10pt" align=center><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=274.5></TD><TD width=10></TD><TD width=5></TD><TD width=48.35></TD><TD width=10></TD><TD width=5></TD><TD width=48.35></TD><TD width=10></TD><TD width=5></TD><TD width=48.45></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=366>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=240.2 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended December&nbsp;31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=71.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.6>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenue:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Collaborative revenue</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>8,114,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>6,874,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>9,652,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Licensing revenue</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>1,750,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total revenue</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>9,864,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>6,874,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>9,652,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Operating expenses:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Research and development</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>14,482,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>18,199,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>17,288,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">General and administrative</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>6,382,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>6,313,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>6,650,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Restructure charges</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>2,006,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>1,709,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>884,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Goodwill impairment charge</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>23,723,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Total operating expenses</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>46,593,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>26,221,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>24,822,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Loss from operations</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(36,729,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(19,347,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>(15,170,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Investment income</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>567,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>661,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>383,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Interest expense</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(411,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(512,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>(476,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Gain on debt restructuring</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>2,583,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Gain on sale of majority-owned subsidiary</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>1,006,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net loss</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(33,990,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(19,198,000</P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>(14,257,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net loss per common share (basic and diluted)</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(3.47</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(2.24</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>(1.79</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=366><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Shares used in computation of basic and diluted net loss per common share</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>9,788,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>8,564,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>7,945,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center>See accompanying notes to consolidated financial statements</P>
<P style="margin:0pt" align=center>42</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:10pt" align=center><B>CONSOLIDATED STATEMENTS OF PREFERRED STOCK<BR>
AND SHAREHOLDERS&#146; EQUITY</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=181.15></TD><TD width=8></TD><TD width=32.1></TD><TD width=11.25></TD><TD width=5.15></TD><TD width=31.3></TD><TD width=8></TD><TD width=45></TD><TD width=10></TD><TD width=5></TD><TD width=32.5></TD><TD width=10></TD><TD width=5></TD><TD width=56></TD><TD width=10.85></TD><TD width=5></TD><TD width=53.35></TD><TD width=8></TD><TD width=5></TD><TD width=56></TD><TD width=10.9></TD><TD width=5.05></TD><TD width=50.05></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=241.533 rowspan=2>&nbsp;</TD><TD valign=bottom width=10.667 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=106.4 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><BR>
<B>Series B Preferred Stock</B></P>
</TD><TD valign=bottom width=10.667 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=123.333 colspan=4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><BR>
<BR>
<B>Common Stock</B></P>
</TD><TD valign=bottom width=13.333 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=81.333 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Additional<BR>
Paid-In-Capital</B></P>
</TD><TD valign=bottom width=14.467 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=77.8 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Accumulated<BR>
Deficit</B></P>
</TD><TD valign=bottom width=10.667 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=81.333 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Accumulated<BR>
Other<BR>
Comprehensive<BR>
Loss</B></P>
</TD><TD valign=bottom width=14.533 rowspan=2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=73.467 colspan=2 rowspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Total<BR>
Shareholders&#146;<BR>
Equity</B></P>
</TD><TD valign=bottom width=4.467 rowspan=2>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=48.6 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Amount</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Amount</B></P>
</TD></TR>
<TR><TD valign=bottom width=241.533>&nbsp;</TD><TD valign=bottom width=10.667><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=bottom width=15><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.867>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=41.733><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=10.667><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=10.667><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=14.533><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance at December&nbsp;31, 2003</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>12,015</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>6,620,623</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>66,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>249,995,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>(216,582,000</P>
</TD><TD valign=bottom width=10.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>33,479,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Net loss and comprehensive loss &#151; 2004</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>(14,257,000</P>
</TD><TD valign=bottom width=10.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>(14,257,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Conversion of Series B convertible preferred stock</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>(12,015</P>
</TD><TD valign=bottom width=15><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>433,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>5,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>(5,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Issuance of shares for cash, net of issue costs of&nbsp;$1,742,000</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,085,426</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>11,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>23,755,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>23,766,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Issuance of shares for cash, net of issue costs of&nbsp;$28,000</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>395,413</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>4,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>5,968,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>5,972,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Issuance of shares to acquire minority interest in&nbsp;majority-owned subsidiary</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>15,877</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>750,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>750,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Exercise of stock options</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>12,294</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.667><P style="margin:0pt" align=right>52,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.733><P style="margin:0pt" align=right>52,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance at December&nbsp;31, 2004</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin-top:5pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=41.733><P style="margin-top:5pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:5pt; margin-bottom:0pt" align=right>8,562,633</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin-top:5pt; margin-bottom:0pt" align=right>86,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=74.667><P style="margin-top:5pt; margin-bottom:0pt" align=right>280,515,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=71.133><P style="margin-top:5pt; margin-bottom:0pt" align=right>(230,839,000</P>
</TD><TD valign=bottom width=10.667><P style="margin-top:5pt; margin-bottom:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=74.667><P style="margin-top:5pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=66.733><P style="margin-top:5pt; margin-bottom:0pt" align=right>49,762,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Net loss &#151; 2005</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>(19,198,000</P>
</TD><TD valign=bottom width=10.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>(19,198,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Unrealized loss on available-for-sale securities</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>(21,000</P>
</TD><TD valign=bottom width=14.533><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.733><P style="margin:0pt" align=right>(21,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Comprehensive net loss &#151; 2005</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733>&nbsp;</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667>&nbsp;</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>(19,219,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Exercise of stock options</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>6,791</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.667><P style="margin:0pt" align=right>28,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.733><P style="margin:0pt" align=right>28,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance at December&nbsp;31, 2005</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin-top:5pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=41.733><P style="margin-top:5pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin-top:5pt; margin-bottom:0pt" align=right>8,569,424</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin-top:5pt; margin-bottom:0pt" align=right>86,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=74.667><P style="margin-top:5pt; margin-bottom:0pt" align=right>280,543,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=71.133><P style="margin-top:5pt; margin-bottom:0pt" align=right>(250,037,000</P>
</TD><TD valign=bottom width=10.667><P style="margin-top:5pt; margin-bottom:0pt">)</P>
</TD><TD valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=74.667><P style="margin-top:5pt; margin-bottom:0pt" align=right>(21,000</P>
</TD><TD valign=bottom width=14.533><P style="margin-top:5pt; margin-bottom:0pt">)</P>
</TD><TD valign=bottom width=6.733><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=66.733><P style="margin-top:5pt; margin-bottom:0pt" align=right>30,571,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Net loss &#151; 2006</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>(33, 990,000</P>
</TD><TD valign=bottom width=10.667><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>(33,990,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Unrealized loss on available-for-sale securities</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8>&nbsp;</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733>&nbsp;</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133>&nbsp;</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>(18,000</P>
</TD><TD valign=bottom width=14.533><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.733><P style="margin:0pt" align=right>(18,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Comprehensive net loss &#151; 2006</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>(34,008,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Stock-based compensation</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>861,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>861,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Issuance of shares for cash, net of issue costs of&nbsp;$162,000</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,279,124</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>13,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>4,813,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>4,826,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Issuance of shares to vendors</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>45,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>141,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>141,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Issuance of shares in debt restructuring</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,000,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>10,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>2,890,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=66.733><P style="margin:0pt" align=right>2,900,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Exercise of stock options</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=42.8><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=41.733><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>28,188</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=43.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.667><P style="margin:0pt" align=right>76,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=74.667><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.533>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.733><P style="margin:0pt" align=right>76,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=241.533><P style="line-height:10.35pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance at December&nbsp;31, 2006</P>
</TD><TD valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=42.8><P style="margin-top:5pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=15>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.867><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=41.733><P style="margin-top:5pt; margin-bottom:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=10.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin-top:5pt; margin-bottom:0pt" align=right>10,921,736</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=43.333><P style="margin-top:5pt; margin-bottom:0pt" align=right>109,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=74.667><P style="margin-top:5pt; margin-bottom:0pt" align=right>289,324,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=71.133><P style="margin-top:5pt; margin-bottom:0pt" align=right>(284,027,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=10.667><P style="margin-top:5pt; margin-bottom:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=74.667><P style="margin-top:5pt; margin-bottom:0pt" align=right>(39,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=14.533><P style="margin-top:5pt; margin-bottom:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin-top:5pt; margin-bottom:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=66.733><P style="margin-top:5pt; margin-bottom:0pt" align=right>5,367,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center>See accompanying notes to consolidated financial statements</P>
<P style="margin:0pt" align=center>43</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:0pt; margin-bottom:10pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:10pt" align=center><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=272.9></TD><TD width=10></TD><TD width=5></TD><TD width=48.35></TD><TD width=10.85></TD><TD width=5></TD><TD width=48.35></TD><TD width=10.85></TD><TD width=5></TD><TD width=48.35></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=363.867>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=242.333 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended December&nbsp;31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Operating activities:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Net loss</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(33,990,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(19,198,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(14,257,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Adjustments to reconcile net loss to net cash used in operating&nbsp;activities:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Depreciation and amortization</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>720,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>1,319,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>1,289,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Non cash interest expense</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>27,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>63,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Loss (gain) on sale/disposal of fixed assets</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>8,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>98,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(51,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Stock-based compensation expense</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>861,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Stock issued to outside vendors</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>141,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Goodwill impairment charge</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>23,723,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Gain on debt restructure</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(2,583,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Gain on investments</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(8,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(1,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Gain on sale of majority-owned subsidiary</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(1,006,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:30pt; text-indent:-6pt">Changes in assets and liabilities:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt">Decrease (increase) in accounts receivable</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(1,118,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>24,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(155,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt">Decrease (increase) in prepaid expenses and other</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>93,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(107,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>104,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt">Decrease in other assets</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>11,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>451,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>341,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt">Increase (decrease) in current liabilities</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>405,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(109,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(193,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt">Increase (decrease) in deferred revenue</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(27,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>278,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(1,180,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:42pt; text-indent:-6pt">Increase (decrease) in accrued restructure charges and&nbsp;deferred rent</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>128,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>827,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(478,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash used in operating activities</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(11,636,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(16,391,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(15,523,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Investing activities:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Purchases of property and equipment</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(81,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(669,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(408,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Proceeds from sales of investments</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>49,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>57,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash used in investing activities</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(32,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(612,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(408,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Financing activities:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Net proceeds from sales of capital stock</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>4,826,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>29,738,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Proceeds from the exercise of stock options</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>76,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>28,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>52,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Repayment of debt</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(995,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(2,500,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Proceeds from equipment financing arrangements</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>46,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Payments under equipment financing arrangements</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(155,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(499,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(866,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net cash provided by (used in) financing activities</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>3,752,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(2,971,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>28,970,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net increase (decrease) in cash and cash equivalents</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(7,916,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(19,974,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>13,039,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and cash equivalents, beginning of year</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>14,122,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>34,096,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>21,057,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Cash and cash equivalents, end of year</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>6,206,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>14,122,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>34,096,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Supplemental information:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cash paid for interest</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>550,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>441,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>413,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=363.867><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Non-cash exchange of common stock issued in debt restructure</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>2,900,000</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin-top:0pt; margin-bottom:5pt" align=center>See accompanying notes to consolidated financial statements</P>
<P style="margin:0pt" align=center>44</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Description of Business and Summary of Significant Accounting Policies</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Description of Business</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Targeted Genetics was incorporated in the state of Washington in March&nbsp;1989. We conduct research and development of gene therapy products and technologies for treating both acquired and inherited diseases. We develop these programs on our own and under various collaborative agreements with others.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Basis of Presentation</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our consolidated financial statements include the accounts of Targeted Genetics, our wholly owned subsidiaries Genovo, Inc. <I>(inactive)</I> and TGCF Manufacturing Corporation <I>(inactive)</I>, and until its sale in July&nbsp;2004, our majority-owned subsidiary, CellExSys, Inc., or CellExSys. All significant intercompany transactions have been eliminated in consolidation.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Reverse Stock Split</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In May&nbsp;2006, our Board of Directors approved a 1-for-10 reverse stock split, which became effective on May&nbsp;11, 2006. All references to common stock, common shares outstanding, average number of common shares outstanding, per share amounts and options in these financial statements and notes to financial statements have been restated to reflect the 1-for-10 common stock reverse split on a retroactive basis.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Reclassifications</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Certain reclassifications have been made to conform prior year classifications to the current year presentation.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Use of Estimates</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our actual results may differ from those estimates.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Cash Equivalents</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Cash equivalents include short-term investments that have a maturity at the time of purchase of three months or&nbsp;less, are readily convertible into cash and we believe have an insignificant level of valuation risk attributable to potential changes in interest rates. We record our cash equivalents at cost, which approximates fair market value, and consist primarily of money market accounts and shares in a limited-term bond fund.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Fair Value of Financial Instruments</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt; font-family:Times New (W1)"><FONT FACE="Times New (W1)">We believe that the carrying amounts of financial instruments such as cash and cash equivalents, available-for-sale securities, accounts receivable and accounts payable approximate fair value because of the short-term nature of these items. We believe that the carrying amounts of the notes payable and equipment financing obligations approximate fair value because the interest rates on these instruments change with, or approximate, market interest rates.</FONT></P>
<P style="margin-top:10pt; margin-bottom:0pt"><FONT FACE="Times New Roman"><B><I>Property and Equipment</I></B></FONT></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Property and equipment is stated at cost less accumulated depreciation. We compute depreciation of property and equipment using the straight-line method over the asset&#146;s estimated useful life. The useful lives of our furniture and equipment ranges from three to seven years, and our leasehold improvements are amortized over the shorter of the asset&#146;s estimated useful life or the remainder of the lease term. Our leasehold improvements are currently being amortized over useful lives which range from four to ten years. Depreciation and amortization expense was $720,000 in 2006 and $1.3&nbsp;million in 2005 and 2004. Depreciation expense includes depreciation of property and equipment acquired under capital leases.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>45</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Description of Business and Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Prepaid Expenses and Other</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Other assets consists primarily of the Chromos Inc., or Chromos, securities that we received as payment on the debenture was and as consideration for the sale of CellExSys in July&nbsp;2004. In accordance with Statement of Financial Accounting Standard, or SFAS, No. 115, <I>&#147;Accounting for Certain Investments in Debt and Equity Securities,&#148;</I> these investment securities are classified as available-for-sale and reported at fair value, with unrealized gains and losses excluded from earnings and reported as accumulated other comprehensive loss within shareholders&#146; equity. Upon the sales of Chromos securities, realized gains and losses are computed using the difference between the sales price and the book value which is determined on a specific identification basis. We periodically evaluate the investment securities for other-than-temporary declines in value and record any losses through an adjustment to earnings.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Goodwill and Purchased Intangibles</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">When we purchased Genovo in 2000, we recorded intangible assets of $39.5&nbsp;million on our financial statements, which represented know-how, an assembled workforce and goodwill. Between 2000 and 2002 we recognized $8.1&nbsp;million of amortization of the goodwill and intangible assets and in 2002 we implemented SFAS No. 142, <I>&#147;Goodwill and Other Intangible Assets.&#148;</I> SFAS No. 142 discontinued amortization of goodwill and requires us to perform goodwill impairment tests annually or more frequently if events and changes in business conditions indicate that the carrying amount of our goodwill may not be recoverable. We assess any potential impairment using a two-step process. Since we have only one reporting unit for purposes of applying SFAS No.&nbsp;142, the first step requires us to compare the fair value of our total company, as measured by market capitalization to our net book value. If our fair value is greater, then
no impairment is indicated. If our fair value is less then the net carrying value of its assets, then we are required to perform the second step to determine the amount, if any, of goodwill impairment. In step two, the implied fair value of goodwill is calculated and compared to its carrying amount. If the goodwill carrying amount exceeds the implied fair value, an impairment loss must be recognized equal to that excess. The implied goodwill amount is determined by allocating our fair value to all of our assets and liabilities including intangible assets such as in process research and development and developed technology as if we had been acquired in a hypothetical business combination as of the date of the impairment test. We engaged an independent valuation firm to assist with the evaluation, including the assessment of our estimated fair value and the hypothetical purchase price allocations.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As a result of an interim goodwill impairment test performed in the second quarter of 2006, we recognized a $23.7&nbsp;million non-cash loss for the impairment of goodwill based on an assessment that the implied value of goodwill was $7.9&nbsp;million.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Other Assets</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In accordance with SFAS No. 144, <I>&#147;Accounting for the Impairment or Disposal of Long-Lived Assets,&#148;</I> we review the carrying value and fair value of long-lived assets whenever events or changes in circumstances indicate that there may be impairment in value. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Accrued Restructure Charges</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We apply the provisions of SFAS No. 146, <I>&#147;Accounting for Costs Associated with Exit or Disposal Activities,&#148;</I> as it relates to our facilities in Bothell, Washington, our former facility in Sharon Hill, Pennsylvania, employee termination benefits and lease termination fees for facilities related to our administrative office space in Seattle. As a&nbsp;result, we have recorded restructuring charges on the operating leases for these facilities. Accrued restructuring charges, and in particular, those charges associated with exiting a facility, are subject to many assumptions and </P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>46</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Description of Business and Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">estimates. Under SFAS No. 146, an accrued liability for lease termination costs is initially measured at fair value, based on the remaining lease payments due under the lease and other costs, reduced by sublease rental income that could be reasonably obtained from the property, and discounted using a credit-adjusted risk-free interest rate. We use a risk-free annual interest rate of 10%. The assumptions as to estimated sublease rental income, the period of time to execute a sublease and the costs and concessions necessary to enter into a sublease significantly impact the accrual and may differ from what actually occurs. We review these estimates periodically and adjust the accrual when necessary.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Stock Compensation</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Effective January&nbsp;1, 2006, we adopted SFAS, No. 123R, <I>&#147;Share-Based Payment,&#148;</I> and elected to adopt the modified prospective application method. Accordingly, stock-based compensation cost is measured at the grant date, based on the fair value of the award and is recognized as an expense over the requisite service period. For stock awards granted in 2006, stock-based compensation expenses are recognized over the option vesting period under the straight-line attribution method. For stock awards granted prior to 2006, stock-based compensation expenses are recognized under the multiple option method prescribed by Financial Accounting Standards Board, or FASB, Interpretation No. 28. Previously reported amounts have not been restated.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Prior to January&nbsp;1, 2006, we presented pro forma disclosure of stock-based compensation expense under SFAS No. 123, <I>&#147;Accounting for Stock-Based Compensation,&#148;</I> and accounted for stock options under Accounting Principles Board Opinion No. 25, <I>&#147;Accounting for Stock Issued to Employees,&#148;</I> which uses the intrinsic value method and generally results in the recognition of no compensation cost for employee stock option grants when priced at the fair value per share on the date of grant. We do not recognize any compensation expense for options granted to employees or directors because we grant all options at fair market value on the date of grant. If we had elected to recognize compensation expense based on the fair market value at the grant dates for the stock options granted, the pro forma net loss and net loss per common share would have been as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=286.05></TD><TD width=10.1></TD><TD width=5.05></TD><TD width=52.4></TD><TD width=10.1></TD><TD width=5.05></TD><TD width=49.1></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=381.4>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=162.267 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended December&nbsp;31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=381.4>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=69.867><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.467><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=381.4><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.467><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=69.867>&nbsp;</TD><TD valign=bottom width=13.467><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=65.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=381.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net loss:</P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=69.867>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=65.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=381.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">As reported</P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=69.867><P style="margin:0pt" align=right>(19,198,000</P>
</TD><TD valign=bottom width=13.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=65.467><P style="margin:0pt" align=right>(14,257,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=381.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Add: Stock-based compensation under SFAS 123</P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=69.867><P style="margin:0pt" align=right>(1,372,000</P>
</TD><TD valign=bottom width=13.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.467><P style="margin:0pt" align=right>(1,564,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=381.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Pro forma</P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=69.867><P style="margin:0pt" align=right>(20,570,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=65.467><P style="margin:0pt" align=right>(15,821,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=381.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Basic net loss per share:</P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=69.867>&nbsp;</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=65.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=381.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">As reported</P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=69.867><P style="margin:0pt" align=right>(2.24</P>
</TD><TD valign=bottom width=13.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=65.467><P style="margin:0pt" align=right>(1.79</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=381.4><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Pro forma</P>
</TD><TD valign=bottom width=13.467>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=69.867><P style="margin:0pt" align=right>(2.40</P>
</TD><TD valign=bottom width=13.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=65.467><P style="margin:0pt" align=right>(1.99</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Revenue Recognition under Collaborative Agreements</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We generate revenue from technology licenses, collaborative research arrangements and agreements to provide research, development and manufacturing services. Revenue under technology licenses and collaborative agreements typically consists of nonrefundable, up-front license fees, collaborative research funding, technology access fees and various other payments.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We initially defer revenue from nonrefundable, up-front license fees and technology access payments and then recognize it systematically over the service period of the collaborative agreement, which is often the development period. We recognize revenue associated with performance milestones as earned, typically based upon the achievement of the specific milestones defined in the applicable agreements or ratably amortized over the remaining contract period. We recognize revenue under research and development contracts as the related costs are incurred. When contracts include multiple elements we follow the Emerging Issues Task Force, or EITF, Issue No. 00-21, <I>&#147;Revenue Arrangements with Multiple Deliverables&#148;</I> which requires us to satisfy the following before revenue can be recognized: 1)&nbsp;the delivered items have value to the customer on a stand-alone basis, 2)&nbsp;any undelivered items to </P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>47</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Description of Business and Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt">have objective and reliable evidence of fair value of the undelivered items, and 3)&nbsp;delivery or performance to be probable and within our control for any delivered items that have a right of return. We have determined that for these contracts the manufacturing and the research and development activities can be accounted for as separate units of accounting and we allocate the revenue to each unit based on relative fair value. We classify advance payments received in excess of amounts earned as deferred revenue.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Significant Revenue Relationships and Concentration of Risk</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our primary source of revenue is from our collaborative agreements. In 2006, revenues under our collaboration with Celladon Corporation, or Celladon, accounted for the most significant portion of our revenue, followed by revenues from our collaboration with the International AIDS Vaccine Initiative, or IAVI, and our subcontract with the National Institute of Allergy and Infections Diseases, or NIAID. During 2005 and 2004, revenues under our collaboration with IAVI, accounted for a substantial portion of our revenue. During 2005, we were named as a subcontractor to receive up to $18.2&nbsp;million of a five year, $22&nbsp;million NIAID contract awarded to the Columbus Children&#146;s Research Institute, or CCRI, in collaboration with The Children&#146;s Hospital of Philadelphia, or CHOP, and us, to develop AAV-based HIV/AIDS vaccine for use in the developed world. For 2007, we expect to earn significant revenues from these three primary
collaborators: the NIAID-funded HIV/AIDS vaccine collaboration, the Celladon congestive heart failure collaboration and the IAVI HIV/AIDS vaccine collaboration. A significant change in the level of work or timing of work activities and the funding received from any of these collaborations could disrupt our business and adversely affect our cash flow and results of operations.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Research and Development Costs</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Research and development costs include salaries, costs of outside collaborators and outside services, clinical trial expenses, royalty and license costs and allocated facility, occupancy and utility expenses. We expense research and development costs as incurred. Costs and expenses related to programs conducted under collaborative agreements that result in collaborative revenue totaled approximately $5.6&nbsp;million in 2006, $8.2&nbsp;million in 2005 and $7.1&nbsp;million in 2004.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Operating Leases</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have operating leases for our laboratory, manufacturing and office space in facilities located in Seattle and Bothell, Washington. These lease agreements contain rent escalation clauses and rent holidays. For scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy, we record minimum rental expenses on a straight-line basis over the terms of the leases in the consolidated statement of operations. When we make leasehold improvements to our facilities, we amortize them over the shorter of the useful life of the asset or the remaining term of the lease. We currently have $409,000 of leasehold improvements related to our Seattle facilities that we are amortizing over the shorter of the useful life of the asset or the remainder of the current lease terms, which expire near the end of the first quarter of 2009 for our main laboratory, manufacturing and
office facility and at the end of the first quarter of 2014 for our administrative office space.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Net Loss per Common Share</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Net loss per common share is based on net loss divided by the weighted average number of common shares outstanding during the period. For each fiscal year reported our diluted net loss per share is the same as our basic net loss per share because all stock options, warrants and other potentially dilutive securities are antidilutive with respect to computing our net loss per share and therefore we exclude them from our calculation of diluted net loss per share. The total number of shares that we excluded from the calculations of net loss per share were 1,035,085 shares in 2006, 904,087 shares in 2005 and 809,305 shares in 2004.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>48</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Description of Business and Summary of Significant Accounting Policies &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In the fourth quarter of 2006, we had net income. To calculate diluted net income per share we computed the weighted average number shares outstanding including common shares and potentially dilutive shares outstanding during the quarter. Potentially dilutive shares consist of common shares issuable upon conversion of the exercise of stock options using the treasury stock method.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Recently Issued Accounting Standards</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In July&nbsp;2006, the FASB issued FASB Interpretation No. 48, <I>&#147;Accounting for Uncertainty in Income Taxes,&#148;</I> or FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise&#146;s financial statements in accordance with FASB Statement No. 109, <I>&#147;Accounting for Income Taxes.&#148;</I> FIN 48 prescribes a recognition threshold and measurement factors for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard is effective for fiscal years beginning after December&nbsp;15, 2006 and provides guidance on classification, disclosure, and transition. We are in the process of evaluating the impact of this standard on our financial statements.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September&nbsp;2006, the FASB issued SFAS No. 157, <I>&#147;Fair Value Measurements,&#148;</I> or SFAS No. 157. SFAS No. 157 provides guidance for using fair value to measure assets and liabilities and requires expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for fiscal years beginning after November&nbsp;15, 2007. We are in the process of evaluating the adoption of SFAS No. 157.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In September&nbsp;2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, <I>&#147;Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements,&#148;</I> or SAB 108. SAB 108 provides guidance on how prior year misstatements should be taken into consideration when quantifying misstatements in current year financial statements for the purposes of determining whether the current years financial statements are materially misstated. SAB 108 became effective for accounting years ending after November&nbsp;15, 2006. The adoption of this SAB did not have any impact on our financial statements.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>2. Liquidity and Management&#146;s Plans </B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have prepared the accompanying financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business. However, we have incurred recurring net losses and negative operating cash flows since our inception. For the year ended December 31, 2006 our loss from operations, before a non-cash goodwill impairment charge, was $13.0 million and the net cash used in operating activities was $11.6 million. Our cash balance as of December 31, 2006 was $6.2 million and our accounts receivable balance was $1.5 million, while our current liabilities aggregated $5.2 million. As described in Note 14 of the notes to our consolidated financial statements, on January 11, 2007 we raised $8.1 million through the sale of shares of our common stock. However, these conditions still raise substantial doubt about our ability to continue as a going concern. The accompanying
financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We project 2007 net operating cash flow deficits of approximately $13 million to $16 million. This projection assumes that we complete all of the planned development activities for each of our funded projects, resulting in approximately $10 million of 2007 funding from our collaborative partners, and assumes that we achieve our current operating plan, which includes measured spending to support our self-funded inflammatory arthritis clinical trials and increases in staffing and compensation in support of partnered programs. </P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>49</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>2. Liquidity and Management&#146;s Plans &#150; (continued)</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We believe that our current resources, including the capital raised in January 2007 and the cash received from our collaborative partners, are sufficient to fund our planned operations, including our clinical trials, into the fourth quarter of 2007. We intend to seek additional financing in order to fund our operations further into or through 2008; however, we can not provide assurances that we will be successful in obtaining additional financing when and as needed in the future. If we do not raise additional funds, we may be forced to preserve our cash position through a combination of cost reduction measures, sales of assets likely at values significantly below their potential worth, or the pursuit of alternative financing transactions that may likely be on terms disadvantageous to us and dilutive to our shareholders. </P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>3. Property and Equipment</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Property and equipment consisted of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=244.35></TD><TD width=10></TD><TD width=5></TD><TD width=48.35></TD><TD width=10></TD><TD width=5></TD><TD width=48.35></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=325.8>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=155.6 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=325.8>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=325.8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=325.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Furniture and equipment</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>6,862,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>6,783,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=325.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Leasehold improvements</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>9,256,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>9,756,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=325.8>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>16,118,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>16,539,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=325.8><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less accumulated depreciation and amortization</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(15,018,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(14,792,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=325.8>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>1,100,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>1,747,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We finance a portion of our equipment through equipment financing arrangements, which include extensions and purchase options and require us to pledge the financed equipment as security for the financing. The cost of equipment that has been pledged under financing arrangements totaled $335,000 at December&nbsp;31, 2006 and $1.0&nbsp;million at December&nbsp;31, 2005.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>4. Restructure Charges</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2002, we began to pursue options to sublease, or terminate, our lease on the Bothell facility and in 2003 we closed the facility in Sharon Hill, Pennsylvania that we acquired when we acquired Genovo. We record accrued restructure charges as they relate to the leases on these facilities. Accrued restructure charges represent our best estimate of the fair value of the liability remaining under the lease and are computed as the present value of the difference between the remaining lease payments due less the net of sublease income and expense. These assumptions are periodically reviewed and adjustments are made to the accrued restructure charge when necessary. We record accretion expense based upon changes in the accrued restructure liability that result from the passage of time and the assumed discount rate of 10%. Accretion expense is recorded on an ongoing basis through the end of the lease term in
September&nbsp;2015 and is reflected as a restructuring charge in the accompanying consolidated statements of operations.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The tables below present our total estimated restructure charges and a reconciliation of the associated liability:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=197.6></TD><TD width=10></TD><TD width=5.75></TD><TD width=37.4></TD><TD width=10></TD><TD width=5></TD><TD width=45></TD><TD width=10></TD><TD width=5.6></TD><TD width=30.85></TD><TD width=10></TD><TD width=5></TD><TD width=45></TD><TD width=4></TD></TR>
<TR><TD valign=bottom width=263.467>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=57.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Employee<BR>
Termination<BR>
Benefits</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Contract<BR>
Termination<BR>
Costs</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=48.6 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Other<BR>
Associated</B></P>
<P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Costs</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Total</B></P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.467><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=7.667>&nbsp;</TD><TD valign=bottom width=49.867>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.133>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=5.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=263.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Incurred in 2002</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=49.867><P style="margin:0pt" align=right>725,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,602,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.467><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=41.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>2,327,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Incurred in 2003</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.667>&nbsp;</TD><TD valign=bottom width=49.867><P style="margin:0pt" align=right>5,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>5,153,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.133><P style="margin:0pt" align=right>32,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>5,190,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Incurred in 2004</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.667>&nbsp;</TD><TD valign=bottom width=49.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>884,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>884,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Incurred in 2005</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.667>&nbsp;</TD><TD valign=bottom width=49.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,709,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,709,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Incurred in 2006</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.867><P style="margin:0pt" align=right>221,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>1,785,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=41.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>2,006,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.467><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Cumulative incurred to date</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.667>&nbsp;</TD><TD valign=bottom width=49.867><P style="margin:0pt" align=right>951,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>11,133,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=7.467>&nbsp;</TD><TD valign=bottom width=41.133><P style="margin:0pt" align=right>32,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>12,116,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.467><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Estimated future charges</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>2,992,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=7.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=41.133><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="margin:0pt" align=right>2,992,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=263.467><P style="line-height:10pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Total expected to be incurred</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=49.867><P style="margin:0pt" align=right>951,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>14,125,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.467><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=41.133><P style="margin:0pt" align=right>32,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="margin:0pt" align=right>15,108,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=5.333>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>50</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>4. Restructure Charges &#150; (continued)</B></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=360></TD><TD width=10></TD><TD width=5></TD><TD width=48></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=480>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=70.667 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Restructuring<BR>
Costs</B></P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=480><P style="margin:0pt; font-size:8pt"
align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp
;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64>&nbsp;</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=480><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">December&nbsp;31, 2005 accrued liability</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64><P style="margin:0pt" align=right>7,149,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=480><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Charges related to changes in lease assumptions</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64><P style="margin:0pt" align=right>860,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=480><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Charges related to lease amendment</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64><P style="margin:0pt" align=right>174,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=480><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Charges related to employee termination benefits</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64><P style="margin:0pt" align=right>221,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=480><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Accretion expense</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64><P style="margin:0pt" align=right>751,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=480><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Amount paid in 2006</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64><P style="margin:0pt" align=right>(1,778,000</P>
</TD><TD valign=top width=4.467><P style="margin:0pt" align=right>)</P>
</TD></TR>
<TR><TD valign=bottom width=480><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">December&nbsp;31, 2006 accrued liability</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64><P style="margin:0pt" align=right>7,377,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=top width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">During the first quarter of 2006, we recorded additional restructure charges of $639,000 as a result of updating our estimates of costs and sublease income associated with exiting the Bothell facility. As part of this assessment we extended our estimate for additional time that may be required to find a sublease tenant and adjusted downward our assumptions with respect to escalation in sublease rental income. In the third quarter of 2006 we recorded additional restructure charges of $221,000 as a result of further extending the anticipated lead time for subleasing the facility. In addition to these adjustments to the accrued restructure liability, which totaled $860,000 and decreased basic and diluted earnings per share by $0.09, we incurred $751,000 of accretion expense in 2006. The total of these charges and adjustments to the liability are reflected as restructure charges in the accompanying consolidated statement
of operations.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Restructuring charges also include $221,000 of employee termination benefits recognized during the first quarter of 2006 related to the restructuring announced in January&nbsp;2006 in order to reduce expenses and realign resources to advance our inflammatory arthritis product through clinical trials. This restructuring resulted in a workforce reduction of 26 employees, primarily in early-stage research and development groups and in operational and general and administrative functions.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In May&nbsp;2006, we amended the lease for our administrative office space in Seattle to reduce our square footage three years before the end of the original lease term. We entered into this modification to reduce operating costs. Expenses related to the termination of the lease totaling $174,000 are included in restructuring charges in 2006.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Through December&nbsp;31, 2006, we have recorded contract termination costs totaling $10.0&nbsp;million for our Bothell facility. We expect to incur an additional $3.0&nbsp;million in accretion expense and pay $10.4&nbsp;million in rent through the expiration of the Bothell lease in September&nbsp;2015. We periodically evaluate our restructuring estimates and assumptions and record additional restructure charges as necessary. Because restructure charges are estimates based upon assumptions regarding the timing and amounts of future events, significant adjustments to the accrual may be necessary in the future based on the actual outcome of events and as we become aware of new facts and circumstances. If we decide to resume use of the Bothell facility, any remaining accrued restructure charges related to the facility will be reversed. This reversal would be reflected as a reduction of restructuring expenses and reflected
in the period in which use is resumed. We are unable to determine the likelihood of any future adjustments to our accrued restructuring charges. We have a $200,000 certificate of deposit recorded within other assets that is pledged as collateral for the Bothell facility lease.</P>
<P style="margin-top:10pt; margin-bottom:6.65pt"><B>5. Long-Term Obligations</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Long-term obligations consisted of the following:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=252.6></TD><TD width=10.05></TD><TD width=5></TD><TD width=48.35></TD><TD width=10.05></TD><TD width=5></TD><TD width=40></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=336.8>&nbsp;</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=144.533 colspan=5><P style="line-height:8.65pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=336.8>&nbsp;</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:8.65pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:8.65pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=336.8><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.4><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=13.4><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=336.8><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Loans payable to Biogen Idec</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="line-height:10.3pt; margin:0pt" align=right>1,672,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="line-height:10.3pt; margin:0pt" align=right>8,150,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=336.8><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Equipment financing obligations</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10.3pt; margin:0pt" align=right>27,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="line-height:10.3pt; margin:0pt" align=right>182,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=336.8>&nbsp;</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="line-height:10.3pt; margin:0pt" align=right>1,699,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="line-height:10.3pt; margin:0pt" align=right>8,332,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=336.8><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Less current portion</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="line-height:10.3pt; margin:0pt" align=right>(1,129,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=13.4><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="line-height:10.3pt; margin:0pt" align=right>(155,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467><P style="line-height:10.3pt; margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=336.8>&nbsp;</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="line-height:10.3pt; margin:0pt" align=right>570,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="line-height:10.3pt; margin:0pt" align=right>8,177,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>51</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>5. Long-Term Obligations &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Future aggregate principal payments related to long-term obligations are $1.0&nbsp;million in 2007, $525,000 in 2008 and zero in 2009, 2010 and 2011.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">As of December&nbsp;31, 2006, we have a $1.7&nbsp;million loan payable to Biogen Idec, a beneficial owner of approximately 19.9% of our outstanding common shares. Outstanding borrowings under this unsecured loan agreement bear interest at the one-year London Interbank Offered Rate, or LIBOR, plus 1%, which is reset quarterly. The loan contains financial covenants establishing limits on our ability to declare or pay cash dividends and it was originally scheduled to mature in August&nbsp;2006. During 2001, we borrowed $10.0&nbsp;million from Biogen Idec to fund our general operations under the terms of an unsecured loan agreement. We also assumed a promissory note payable to Biogen Idec in 2000 as part of our acquisition of Genovo. This promissory note had an outstanding principal amount of $650,000, bore no interest and was originally scheduled to mature in 2005.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2005, we modified the terms of our loans payable to Biogen Idec. In connection with these modifications, we made a $2.5&nbsp;million cash payment to Biogen on September&nbsp;1, 2005 to reduce the outstanding principal on the $10.0&nbsp;million loan to $7.5&nbsp;million and agreed to make scheduled payments of $2.5&nbsp;million of principal plus accrued interest on each of August&nbsp;1, 2007, 2008 and 2009. In addition, we agreed to apply one-third of certain up-front payments received from potential future corporate collaborations to the outstanding balance on this loan payable, first to repayment of any accrued and unpaid interest on the principal being repaid, and second to the repayment of outstanding principal in reverse order of maturity. In addition, the maturity date of the $650,000 promissory note to Biogen was extended until August&nbsp;1, 2007.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In November&nbsp;2006, we signed an agreement to further restructure the remaining $8.15&nbsp;million of debt payable to Biogen Idec. Under the agreement, Biogen Idec agreed to exchange $5.65&nbsp;million of debt for one million shares of our common stock with a fair value of $2.9&nbsp;million and we agreed to immediately pay $500,000 of the remaining debt. The remaining $2.0&nbsp;million principal balance continues to bear interest at the rate of LIBOR plus 1% and we agreed to repay the remaining balance in two equal installments of $1.0&nbsp;million each on August&nbsp;1, 2007 and 2008 and to accelerate repayment of the full outstanding balance within thirty days of a change in control of the Company. Several of the provisions of the modified loan agreement entered into in 2005 continue to apply including the requirement to apply one-third of certain up-front payments received from potential future corporate collaborations to the
outstanding balance on this loan payable. According to SFAS No. 15, <I>&#147;Accounting by Debtors and Creditors of Troubled Debt Restructurings,&#148;</I> we accounted for this transaction as a troubled debt restructuring which resulted in a gain on debt restructuring of $2.6&nbsp;million. We calculated the gain as the difference between the original principal and interest payments due on the Biogen Idec debt as compared to the cash payments made, the fair value of the common stock issued in the debt restructuring and the remaining principal and interest payments due. We recorded the loan as the $2.0&nbsp;million principal amount plus the total estimated future interest payments of $167,000.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In December&nbsp;2006, we made a $583,000 advance payment to Biogen Idec in accordance with the terms of the note which requires one-third of certain up-front payments received from potential future collaborators to be applied toward the outstanding loan balance. The receipt of a $1.75&nbsp;million license fee from Amsterdam Molecular Therapeutics B.V., or AMT, triggered this payment which, according to the agreement, was applied first to interest owed through the payment date and then to the long term portion of the note. The potential gain from the reduction of future interest payments resulting from the acceleration of this principal payment will be deferred until it is realized.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Equipment financing obligations relate to secured financing for the purchase of capital equipment and leasehold improvements. These obligations bear interest at rates ranging from 8.13% to 8.98% and mature from March&nbsp;2007 to February&nbsp;2008.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>52</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>6. Commitments</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">We lease our laboratory, manufacturing and office facilities in Seattle, Washington under two non-cancelable operating leases. The lease on our primary laboratory, manufacturing and office space expires in April&nbsp;2009 and contains an option to renew the lease for a five-year period. In May&nbsp;2006, we amended the lease on our administrative office space to reduce our square footage three years before the end of the original lease term. The amendment also extended the lease term for five additional years beginning April&nbsp;2009 with an option to extend for an additional five years. We lease a facility in Bothell, Washington under a non-cancelable operating lease that expires in September&nbsp;2015, which was intended to accommodate future manufacturing of our product candidates. We have applied SFAS No. 146 as it relates to our Bothell facility lease and have recorded an accrued restructure liability of
$7.4&nbsp;million as of December&nbsp;31, 2006. This accrual represents the estimated fair value of this liability based on the present value of future lease payments, net of assumed sublease payments. Future lease payments on our facility in Bothell will reduce the amount of the accrued restructure liability and are included in future minimum lease payments under non- cancelable operating leases which are as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=237.9></TD><TD width=10></TD><TD width=5></TD><TD width=45></TD><TD width=10></TD><TD width=5></TD><TD width=44.3></TD><TD width=10></TD><TD width=5></TD><TD width=45></TD><TD width=4></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=317.2><P style="line-height:8.65pt; margin:0pt; font-size:8pt"><B>Year Ending December&nbsp;31,</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:8.65pt; margin:0pt; font-size:8pt" align=center><B>Bothell<BR>
Facility</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.733 colspan=2><P style="line-height:8.65pt; margin:0pt; font-size:8pt" align=center><B>Research&nbsp;and<BR>
Office&nbsp;Facility</B></P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.667 colspan=2><P style="line-height:8.65pt; margin:0pt; font-size:8pt" align=center><B>Total</B></P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=317.2><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=59.067>&nbsp;</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=5.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=317.2><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">2007</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>1,362,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=59.067><P style="line-height:10.3pt; margin:0pt" align=right>754,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>2,116,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=317.2><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">2008</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>1,362,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=59.067><P style="line-height:10.3pt; margin:0pt" align=right>758,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>2,120,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=317.2><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">2009</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>1,362,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=59.067><P style="line-height:10.3pt; margin:0pt" align=right>276,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>1,638,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=317.2><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">2010</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>1,431,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=59.067><P style="line-height:10.3pt; margin:0pt" align=right>115,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>1,546,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=317.2><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">2011</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>1,636,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=59.067><P style="line-height:10.3pt; margin:0pt" align=right>115,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>1,751,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=317.2><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Thereafter</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>6,134,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=59.067><P style="line-height:10.3pt; margin:0pt" align=right>258,000</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>6,392,000</P>
</TD><TD valign=bottom width=5.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=317.2><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Total minimum lease payments</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>13,287,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=59.067><P style="line-height:10.3pt; margin:0pt" align=right>2,276,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=60><P style="line-height:10.3pt; margin:0pt" align=right>15,563,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=5.333>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We recognized rent expense under operating leases of $869,000 in 2006, $1.4&nbsp;million in 2005 and $1.6&nbsp;million in 2004.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>7. Investment in Chromos Molecular Systems, Inc.</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2004, our majority-owned subsidiary, CellExSys Inc., was acquired by and merged into Chromos. Chromos is a publicly traded company whose common stock is traded on the Toronto Stock Exchange. At the time of the sale, we owned approximately 79% of CellExSys. As a result of the sale of CellExSys, we received consideration of approximately 1.2&nbsp;million shares of Chromos common stock and a 79% share of any payments made by Chromos under an interest bearing debenture issued by Chromos. As a result of the sale of our share of CellExSys, we recorded a gain in 2004 of $1.0&nbsp;million.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">At December&nbsp;31, 2004, we valued our Chromos securities and interest in the debenture at $453,000. Based upon our first quarter 2005 assessment of Chromos&#146; financial condition, we recorded a $63,000 charge to investment income to reduce the carrying value of the debenture to zero. In the second quarter of 2005, Chromos&#146; stock price declined and we recorded an $181,000 other-than-temporary impairment charge relating to the decline in value of the Chromos securities. During the second half of the year, Chromos issued us approximately 1.0&nbsp;million shares of its common stock in connection with the scheduled debt and interest payment under the debenture and also later in 2005, Chromos issued us an additional 894,000&nbsp;million shares of its common stock as an early payment of the debenture. As the carrying value of the debenture was zero at the time of the payment, we recorded the market value of the
shares received as investment income. During 2005, we sold 370,000 shares of Chromos and recognized net losses of $32,000. These securities are sold on a specific identification method based on when we received the shares. The net impact of these charges and the conversion of the debenture was a $1,000 gain.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:5pt; text-indent:18pt">During 2006, we sold 280,000 shares of Chromos stock, which resulted in remaining holdings of 2.5&nbsp;million shares of Chromos stock at December&nbsp;31, 2006.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=225.7></TD><TD width=10></TD><TD width=5></TD><TD width=32.5></TD><TD width=10></TD><TD width=5></TD><TD width=32.45></TD><TD width=10></TD><TD width=6.25></TD><TD width=39.6></TD><TD width=10></TD><TD width=6.05></TD><TD width=28.65></TD></TR>
<TR><TD valign=bottom width=300.933>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Fair Value</B></P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=49.933 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Unrealized</B></P>
<P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Losses</B></P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=61.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Proceeds<BR>
from&nbsp;the&nbsp;Sale<BR>
of&nbsp;Securities</B></P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=46.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Realized<BR>
Gain/Loss</B></P>
</TD></TR>
<TR><TD valign=bottom width=300.933><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.333>&nbsp;</TD><TD valign=top width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=43.267>&nbsp;</TD><TD valign=top width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=52.8>&nbsp;</TD><TD valign=top width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=8.067>&nbsp;</TD><TD valign=bottom width=38.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=300.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Marketable equity securities</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.333><P style="margin:0pt" align=right>317,000</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=43.267><P style="margin:0pt" align=right>(39,000</P>
</TD><TD valign=top width=13.333><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=8.333><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=52.8><P style="margin:0pt" align=right>49,000</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=8.067><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=38.2><P style="margin:0pt" align=right>8,000</P>
</TD></TR>
</TABLE>
<P style="line-height:11pt; margin-top:5.35pt; margin-bottom:4pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>53</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:5pt; page-break-before:always"><BR>
<BR></P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=225.7></TD><TD width=10></TD><TD width=5></TD><TD width=32.5></TD><TD width=10></TD><TD width=5></TD><TD width=32.45></TD><TD width=10></TD><TD width=6.25></TD><TD width=39.6></TD><TD width=10></TD><TD width=6.05></TD><TD width=28.65></TD></TR>
</TABLE>
<P style="margin:0pt" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>7. Investment in Chromos Molecular Systems, Inc. &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We will continue to record our common stock investment in Chromos at fair market value and record changes in the fair market value of this stock in accumulated other comprehensive loss. We periodically evaluate our Chromos stock for signs of impairment that may be other-than-temporary which would necessitate a reduction in the carrying value of the investment and charge to expense. Based on our evaluation and our ability and intent to hold those investments for a reasonable period of time sufficient for a recovery of fair value, we do not consider those investments to be other-than-temporarily impaired at December&nbsp;31, 2006.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>8. Goodwill</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The table below reflects changes in the balance related to goodwill for the year ended December&nbsp;31, 2006:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=210></TD><TD width=12.5></TD><TD width=5></TD><TD width=49.95></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=280><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">December&nbsp;31, 2005 goodwill balance</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=66.6><P style="margin:0pt" align=right>31,649,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=280><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Impairment charge</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.6><P style="margin:0pt" align=right>(23,723,000</P>
</TD><TD valign=top width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=280><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">December&nbsp;31, 2006 goodwill balance</P>
</TD><TD valign=top width=16.667>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=66.6><P style="margin:0pt" align=right>7,926,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=top width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We perform goodwill impairment tests in accordance with SFAS No. 142, <I>&#147;Goodwill and Other Intangible Assets&#148;</I> on an annual basis or more frequently if events and changes in business conditions indicate that the carrying amount of our goodwill may not be recoverable. Normally, we perform our annual impairment test as of October 1st. However, as a result of a decline in market price of our common stock in June&nbsp;2006, to a level that reduced our market capitalization to an amount less than the fair value of our net assets, we concluded that this was an indicator of impairment of our goodwill and therefore we were required to perform an interim goodwill impairment test. In the first step of this testing, since we are comprised of only one reporting unit, we compared our fair value, as measured by market capitalization and discounted cash flow analysis, to the net carrying value of our assets. Since our indicated fair
value was less than the net carrying value of our assets, we were then required to perform the second step of the evaluation and measure the amount of the impairment loss. This analysis requires us to determine the implied value of goodwill by allocating our estimated fair value to its assets and liabilities including intangible assets such as in-process research and development, completed technology, and trademarks and trade names using a hypothetical purchase price allocation as if we had been acquired in a business combination as of the date of the impairment test. This evaluation resulted in an implied goodwill balance of $7.9&nbsp;million and a second quarter 2006 non-cash goodwill impairment charge of $23.7&nbsp;million. We performed an annual impairment test as of October&nbsp;2006 and concluded that no further impairment in the value of our goodwill has occurred.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>9. Other Comprehensive Loss</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Comprehensive loss is the total of net loss and all other non-owner changes in equity. Comprehensive loss includes unrealized gains and losses from investments and foreign currency translations on our common stock investment in Chromos, as presented in the following table:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=226></TD><TD width=10></TD><TD width=5></TD><TD width=48.35></TD><TD width=10.85></TD><TD width=5></TD><TD width=48.35></TD><TD width=10.85></TD><TD width=5></TD><TD width=48.45></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=301.333>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=242.467 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=301.333>&nbsp;</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=301.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=301.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net loss as reported</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(33,990,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(19,198,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>(14,257,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=301.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other comprehensive loss:</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=bottom width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=301.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Unrealized loss on available-for-sale securities</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(16,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>(37,000</P>
</TD><TD valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=301.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Foreign currency translation adjustment</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(2,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>16,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=301.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Other comprehensive loss</P>
</TD><TD valign=bottom width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(34,008,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(19,219,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=14.467><P style="margin:0pt">)</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.6><P style="margin:0pt" align=right>(14,257,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
</TABLE>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>54</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>10. Shareholders&#146; Equity</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Stock Purchase Warrants</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 1999, in connection with a technology license agreement, we issued to Alkermes, Inc. a warrant to purchase 100,000 shares of our common stock at an exercise price of $25.00 per share, expiring in June&nbsp;2007, and a warrant to purchase 100,000 shares of our common stock at an exercise price of $41.60 per share, expiring in June&nbsp;2009. Both of these warrants were outstanding at December&nbsp;31, 2006. We issued additional warrants in connection with the public offering in January&nbsp;2007, see Note 14 of the notes to our consolidated financial statements for further details.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Shareholder Rights Plan</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 1996, our Board of Directors adopted a shareholder rights plan. Under our rights plan, each holder of a share of outstanding common stock was also entitled to one preferred stock purchase right. The shareholder rights plan expired by its terms in October&nbsp;2006. We did not renew the shareholder rights plan upon its expiration.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Stock Options</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have various stock option plans, or Option Plans, that provide for the issuance of nonqualified and incentive stock options to acquire up to 1,297,944 shares of our common stock. These stock options may be granted by our Board of Directors to our employees, directors and officers and to consultants, agents, advisors and independent contractors who provide services to us. The exercise price for incentive stock options shall not be less than the fair market value of the shares on the date of grant. Options granted under our Option Plans expire no later than ten years from the date of grant and generally vest and become exercisable over a four-year period following the date of grant. However in 2003, we granted options to purchase 65,500 shares of our common stock with vesting periods which ranged from twelve to eighteen months. In May and June of 2006, as part of an employee retention plan, we granted options to purchase an aggregate
of 306,500 shares of our common stock with an accelerated twelve month vesting period. We granted a total of 198,000 of these options to purchase shares of our common stock with exercise prices of $3.80, exceeding the $2.46 fair value of the common stock on the grant date. Every non-employee member of our Board of Directors receives an annual nonqualified stock option grant and these options vest over a twelve month period provided they continue service to us. Upon the exercise of stock options, we issue new shares from shares reserved for issuance under our Option Plans.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Effective January&nbsp;1, 2006, we adopted SFAS No. 123R, <I>&#147;Share-Based Payment&#148;</I> which requires us to expense the fair value of stock options granted over the vesting period. We adopted SFAS No. 123R using the modified prospective application method and recognized $861,000 of stock-based compensation expense in the year ending December&nbsp;31, 2006 which reduced our basic and diluted earnings per share by $0.09. This compensation expense includes: (a)&nbsp;compensation cost for all share-based stock options granted prior to, but not yet vested as of January&nbsp;1, 2006, based on the grant-date fair value used for prior pro forma disclosures adjusted for forfeitures and (b)&nbsp;compensation cost for all share-based payments granted subsequent to January&nbsp;1, 2006, based on the grant-date fair value estimate in accordance with the provisions of SFAS No. 123R. For the year ending December&nbsp;31, 2006, we classified
$465,000 of the stock-based compensation expense as research and development expense and $396,000 as general and administrative expense. As of December&nbsp;31, 2006, total unrecognized compensation cost related to unvested options was approximately $581,000, net of estimated forfeitures, which we expect to recognize over a weighted average period of approximately 8 months.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>55</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>10. Shareholders&#146; Equity &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:3.35pt; text-indent:18pt">The following table summarizes activity related to our Option Plans:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=266.15></TD><TD width=10.65></TD><TD width=38.2></TD><TD width=10.65></TD><TD width=6.35></TD><TD width=28.65></TD><TD width=10.65></TD><TD width=44></TD><TD width=10.65></TD><TD width=5.35></TD><TD width=34.65></TD><TD width=2.05></TD></TR>
<TR><TD valign=bottom width=354.867>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.933><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=46.667 colspan=2><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=58.667><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Remaining<BR>
Average<BR>
Contractual<BR>
Term</B></P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333 colspan=2><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Intrinsic<BR>
Value</B></P>
</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=14.2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=50.933>&nbsp;</TD><TD valign=bottom width=14.2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2>&nbsp;</TD><TD valign=bottom width=14.2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733><P style="line-height:8pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance, December&nbsp;31, 2003</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>409,768</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=8.467><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>30.70</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Granted</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>251,795</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>13.50</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Exercised</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>(12,294</P>
</TD><TD valign=bottom width=14.2><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>4.30</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Expired</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>(9,767</P>
</TD><TD valign=bottom width=14.2><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>48.10</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Forfeited</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>(30,197</P>
</TD><TD valign=bottom width=14.2><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>35.20</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Balance, December&nbsp;31, 2004</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>609,305</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>23.60</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Granted</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>152,820</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>8.80</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Exercised</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>(6,791</P>
</TD><TD valign=bottom width=14.2><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>4.10</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Expired</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>(8,450</P>
</TD><TD valign=bottom width=14.2><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>39.10</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Forfeited</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>(42,796</P>
</TD><TD valign=bottom width=14.2><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>16.10</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Outstanding, December&nbsp;31, 2005</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>704,088</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>20.90</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Granted</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>349,800</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>3.28</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Exercised</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>(28,188</P>
</TD><TD valign=bottom width=14.2><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>2.70</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Expired</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>(7,963</P>
</TD><TD valign=bottom width=14.2><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>43.83</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Forfeited</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>(182,652</P>
</TD><TD valign=bottom width=14.2><P style="line-height:10.3pt; margin:0pt">)</P>
</TD><TD valign=bottom width=8.467>&nbsp;</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>13.94</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133>&nbsp;</TD><TD valign=bottom width=46.2>&nbsp;</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Outstanding, December&nbsp;31, 2006</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=50.933><P style="line-height:10.3pt; margin:0pt" align=right>835,085</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=8.467><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin:0pt" align=right>15.39</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667><P style="line-height:10.3pt; margin:0pt" align=right>7.15</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=7.133><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=46.2><P style="line-height:10.3pt; margin:0pt" align=right>669,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=2.733>&nbsp;</TD></TR>
<TR><TD valign=bottom width=354.867><P style="line-height:10.3pt; margin-top:2.5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Exercisable at December&nbsp;31, 2006</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=50.933><P style="line-height:10.3pt; margin-top:2.5pt; margin-bottom:0pt" align=right>556,629</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=8.467><P style="line-height:10.3pt; margin-top:2.5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=38.2><P style="line-height:10.3pt; margin-top:2.5pt; margin-bottom:0pt" align=right>19.85</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=58.667><P style="line-height:10.3pt; margin-top:2.5pt; margin-bottom:0pt" align=right>4.20</P>
</TD><TD valign=bottom width=14.2>&nbsp;</TD><TD valign=bottom width=7.133><P style="line-height:10.3pt; margin-top:2.5pt; margin-bottom:0pt">$</P>
</TD><TD valign=bottom width=46.2><P style="line-height:10.3pt; margin-top:2.5pt; margin-bottom:0pt" align=right>324,000</P>
</TD><TD valign=bottom width=2.733>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The aggregate intrinsic value is determined using the closing price of our common stock of $5.37 on December&nbsp;31, 2006. The intrinsic value of stock options exercised was $94,000 in 2006, $16,000 in 2005 and $132,000 in 2004. We received $76,000 from the exercise of stock options for the year ended December&nbsp;31, 2006.</P>
<P style="margin-top:6.65pt; margin-bottom:4.15pt; text-indent:18pt">The following table summarizes information regarding our outstanding and exercisable options at December&nbsp;31, 2006:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=23.55></TD><TD width=10.5></TD><TD width=5.25></TD><TD width=28.85></TD><TD width=138.9></TD><TD width=10.5></TD><TD width=38.95></TD><TD width=10.5></TD><TD width=6.25></TD><TD width=28.15></TD><TD width=10.5></TD><TD width=45.2></TD><TD width=21.25></TD><TD width=10.5></TD><TD width=34.25></TD><TD width=10.5></TD><TD width=6.25></TD><TD width=28.15></TD></TR>
<TR><TD valign=bottom width=276.067 colspan=5>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=214.4 colspan=7><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Outstanding</B></P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=105.533 colspan=4><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Exercisable</B></P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=276.067 colspan=5><P style="line-height:9pt; margin:0pt; font-size:8pt"><B>Range of Exercise Prices</B></P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.933><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Number&nbsp;of<BR>
Option<BR>
Shares</B></P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=45.867 colspan=2><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=88.6 colspan=2><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Weighted&nbsp;Average<BR>
Remaining<BR>
Contractual<BR>
Life<BR>
(Years)</B></P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=45.667><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Number<BR>
of&nbsp;Option</B></P>
<P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Shares</B></P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=45.867 colspan=2><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></P>
</TD></TR>
<TR><TD valign=bottom width=31.4>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=223.667 colspan=2><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=14><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=51.933>&nbsp;</TD><TD valign=bottom width=14><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533>&nbsp;</TD><TD valign=bottom width=14><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=88.6 colspan=2>&nbsp;</TD><TD valign=bottom width=14><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=45.667>&nbsp;</TD><TD valign=bottom width=14><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533>&nbsp;</TD></TR>
<TR><TD valign=bottom width=31.4><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=right>$1.80 </P>
</TD><TD valign=bottom width=14><P style="line-height:10.3pt; margin:0pt">&nbsp;&#150;&nbsp;</P>
</TD><TD valign=bottom width=7><P style="line-height:10.3pt; margin:0pt" align=right>$</P>
</TD><TD valign=bottom width=38.467><P style="line-height:10.3pt; margin:0pt">2.90</P>
</TD><TD valign=bottom width=185.2>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=51.933><P style="line-height:10.3pt; margin:0pt" align=right>111,900</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>2.45</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=60.267><P style="line-height:10.3pt; margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.10</P>
</TD><TD valign=bottom width=28.333><P style="margin:0pt" align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=45.667><P style="line-height:10.3pt; margin:0pt" align=right>50,471</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333><P style="line-height:10.3pt; margin:0pt">$</P>
</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>2.59</P>
</TD></TR>
<TR><TD valign=bottom width=31.4><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=right>3.80 &nbsp;</P>
</TD><TD valign=bottom width=14><P style="line-height:10.3pt; margin:0pt">&nbsp;&#150;&nbsp;</P>
</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=38.467><P style="line-height:10.3pt; margin:0pt">3.80</P>
</TD><TD valign=bottom width=185.2>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=51.933><P style="line-height:10.3pt; margin:0pt" align=right>197,416</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>3.80</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=60.267><P style="line-height:10.3pt; margin:0pt" align=right>9.44</P>
</TD><TD valign=bottom width=28.333>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=45.667><P style="line-height:10.3pt; margin:0pt" align=right>96,916</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>3.80</P>
</TD></TR>
<TR><TD valign=bottom width=31.4><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=right>4.30 </P>
</TD><TD valign=bottom width=14><P style="line-height:10.3pt; margin:0pt">&nbsp;&#150;&nbsp;</P>
</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=38.467><P style="line-height:10.3pt; margin:0pt">12.20</P>
</TD><TD valign=bottom width=185.2>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=51.933><P style="line-height:10.3pt; margin:0pt" align=right>175,380</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>7.88</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=60.267><P style="line-height:10.3pt; margin:0pt" align=right>7.24</P>
</TD><TD valign=bottom width=28.333>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=45.667><P style="line-height:10.3pt; margin:0pt" align=right>115,180</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>7.61</P>
</TD></TR>
<TR><TD valign=bottom width=31.4><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=right>12.60 </P>
</TD><TD valign=bottom width=14><P style="line-height:10.3pt; margin:0pt">&nbsp;&#150;&nbsp;</P>
</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=38.467><P style="line-height:10.3pt; margin:0pt">15.60</P>
</TD><TD valign=bottom width=185.2>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=51.933><P style="line-height:10.3pt; margin:0pt" align=right>169,574</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>13.29</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=60.267><P style="line-height:10.3pt; margin:0pt" align=right>7.10</P>
</TD><TD valign=bottom width=28.333>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=45.667><P style="line-height:10.3pt; margin:0pt" align=right>115,959</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>13.36</P>
</TD></TR>
<TR><TD valign=bottom width=31.4><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt" align=right>15.90 </P>
</TD><TD valign=bottom width=14><P style="line-height:10.3pt; margin:0pt">&nbsp;&#150;&nbsp;</P>
</TD><TD valign=bottom width=7>&nbsp;</TD><TD valign=bottom width=38.467><P style="line-height:10.3pt; margin:0pt">148.80</P>
</TD><TD valign=bottom width=185.2><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.933><P style="line-height:10.3pt; margin:0pt" align=right>180,815</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>45.30</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=60.267><P style="line-height:10.3pt; margin:0pt" align=right>3.39</P>
</TD><TD valign=bottom width=28.333>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=45.667><P style="line-height:10.3pt; margin:0pt" align=right>178,103</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>45.63</P>
</TD></TR>
<TR><TD valign=bottom width=276.067 colspan=5><P style="line-height:10.3pt; margin:0pt">Balance, December&nbsp;31, 2006&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:2pt double #000000" valign=bottom width=51.933><P style="line-height:10.3pt; margin:0pt" align=right>835,085</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>15.39</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=60.267><P style="line-height:10.3pt; margin:0pt" align=right>7.15</P>
</TD><TD valign=bottom width=28.333>&nbsp;</TD><TD valign=bottom width=14>&nbsp;</TD><TD style="border-bottom:2pt double #000000" valign=bottom width=45.667><P style="line-height:10.3pt; margin:0pt" align=right>556,629</P>
</TD><TD valign=bottom width=14>&nbsp;</TD><TD valign=bottom width=8.333>&nbsp;</TD><TD valign=bottom width=37.533><P style="line-height:10.3pt; margin:0pt" align=right>19.85</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes-Merton option pricing model. The weighted average fair value of options granted was $1.84 per share in 2006, $7.50 per share in 2005 and $12.70 per share in 2004. The following are the assumptions for the periods noted:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=278.75></TD><TD width=10.3></TD><TD width=46.05></TD><TD width=16.2></TD><TD width=46.05></TD><TD width=16.2></TD><TD width=46.05></TD><TD width=8.4></TD></TR>
<TR><TD valign=bottom width=371.667>&nbsp;</TD><TD valign=bottom width=13.733><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=61.4><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=21.6><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=61.4><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=21.6><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=61.4><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=11.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.667><P style="line-height:9pt; margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=61.4>&nbsp;</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=61.4>&nbsp;</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=61.4>&nbsp;</TD><TD valign=bottom width=11.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.667><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Expected dividend rate</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>Nil</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>Nil</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>Nil</P>
</TD><TD valign=bottom width=11.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.667><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Expected stock price volatility range</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>1.05 &#150; 1.11</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>1.09 &#150; 1.12</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>1.12 &#150; 1.47</P>
</TD><TD valign=bottom width=11.2>&nbsp;</TD></TR>
<TR><TD valign=bottom width=371.667><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Risk-free interest rate range</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>4.25&nbsp;&#150;&nbsp;4.85</P>
</TD><TD valign=bottom width=21.6><P style="line-height:10.3pt; margin:0pt">%&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>3.63&nbsp;&#150;&nbsp;4.36</P>
</TD><TD valign=bottom width=21.6><P style="line-height:10.3pt; margin:0pt">%&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>2.71&nbsp;&#150;&nbsp;4.47</P>
</TD><TD valign=bottom width=11.2><P style="line-height:10.3pt; margin:0pt" align=center>%</P>
</TD></TR>
<TR><TD valign=bottom width=371.667><P style="line-height:10.3pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Expected life of options range</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>4 &#150; 5 years</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>4 &#150; 5 years</P>
</TD><TD valign=bottom width=21.6>&nbsp;</TD><TD valign=bottom width=61.4><P style="line-height:10.3pt; margin:0pt" align=center>4 years</P>
</TD><TD valign=bottom width=11.2>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>56</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>10. Shareholders&#146; Equity &#150; (continued)</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Expected Dividend:</I> We do not anticipate any dividends based on our current dividend restrictions related to our Biogen Idec note.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Expected Life: </I>Our expected term represents the period that our stock-based awards are expected to be outstanding. We determine expected life based on historical experience and vesting schedules of similar awards.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Expected Volatility:</I> Our expected volatility represents the weighted average historical volatility of the shares of our common stock for the most recent four-year and five-year periods.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Risk-Free Interest Rate:</I> We base the risk-free interest rate used on the implied yield currently available on U.S.&nbsp;Treasury zero-coupon issues with an equivalent remaining term. Where the expected term of our stock-based awards do not correspond with the terms for which interest rates are quoted, we perform a straight-line interpolation to determine the rate from the available term maturities.</P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Forfeiture Rate:</I> We apply an estimated forfeiture rate that we derived from historical employee termination behavior. If the actual number of forfeitures differs from our estimates, we may record additional adjustments to compensation expense in future periods.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Reserved Shares</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">As of December&nbsp;31, 2006, we had reserved shares of our common stock for future issuance as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=306.7></TD><TD width=16.1></TD><TD width=51.6></TD></TR>
<TR><TD valign=bottom width=408.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Stock options outstanding</P>
</TD><TD valign=top width=21.467><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=68.8><P style="margin:0pt" align=right>835,085</P>
</TD></TR>
<TR><TD valign=bottom width=408.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Available for future stock option grants under Option Plans</P>
</TD><TD valign=top width=21.467>&nbsp;</TD><TD valign=bottom width=68.8><P style="margin:0pt" align=right>128,924</P>
</TD></TR>
<TR><TD valign=bottom width=408.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Stock purchase warrants</P>
</TD><TD valign=top width=21.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=68.8><P style="margin:0pt" align=right>200,000</P>
</TD></TR>
<TR><TD valign=bottom width=408.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Total shares reserved</P>
</TD><TD valign=top width=21.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=68.8><P style="margin:0pt" align=right>1,164,009</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>11. Collaborative and Other Agreements</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:5pt; text-indent:18pt">We have entered into various product development relationships and license arrangements with pharmaceutical and biotechnology companies and non-profit organizations. Under these partnerships, we typically are reimbursed for research and development activities we perform and in certain cases, we have received milestone and upfront payments. Revenues earned under our research and development collaborations and license agreements are as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=209.25></TD><TD width=10.05></TD><TD width=5></TD><TD width=40></TD><TD width=10.05></TD><TD width=5></TD><TD width=40></TD><TD width=10.05></TD><TD width=5></TD><TD width=40></TD></TR>
<TR><TD valign=bottom width=279>&nbsp;</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=206.8 colspan=8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Year Ended December&nbsp;31,</B></P>
</TD></TR>
<TR><TD valign=bottom width=279>&nbsp;</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=60 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2004</B></P>
</TD></TR>
<TR><TD valign=bottom width=279><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.4><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=13.4><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD><TD valign=bottom width=13.4><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333>&nbsp;</TD></TR>
<TR><TD valign=bottom width=279><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">IAVI</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>2,262,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>5,588,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>8,340,000</P>
</TD></TR>
<TR><TD valign=bottom width=279><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Celladon</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>4,220,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>777,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=279><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">NIAID</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>1,548,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=279><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">AMT license</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>1,750,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>&#151;</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=53.333><P style="margin:0pt" align=right>&#151;</P>
</TD></TR>
<TR><TD valign=bottom width=279><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Sirna and other</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>84,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>509,000</P>
</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>1,312,000</P>
</TD></TR>
<TR><TD valign=bottom width=279>&nbsp;</TD><TD valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>9,864,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>6,874,000</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=bottom width=13.4>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=53.333><P style="margin:0pt" align=right>9,652,000</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>International AIDS Vaccine Initiative Agreement</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2000, we entered into a three-year development collaboration with IAVI and Columbus Children&#146;s Research Institute at Children&#146;s Hospital in Columbus, Ohio to develop a vaccine to protect against the progression of HIV infection to AIDS. The collaboration originally had a three-year term yet the work plan was established and funded on an annual basis. In 2004, we and IAVI agreed to extend the underlying program through the end of 2006 and in 2006 the program was further extended until the expiration of the term of the last patent within the patent rights controlled by us and utilized in the IAVI vaccine. Under the terms of the collaboration, IAVI provides funding to us to support development, preclinical studies and manufacturing of product for clinical trials on a cost reimbursement basis. IAVI independently monitors and funds clinical development costs under the collaboration.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>57</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>11. Collaborative and Other Agreements &#150; (continued)</B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We expect to receive funding from IAVI for the development of HIV/AIDS vaccines for the developing world. We also received the rights to utilize the findings from the IAVI funded program to develop and commercialize HIV/AIDS vaccines for both the developed world and for any additional vaccine candidates. Among other rights granted under this agreement, IAVI retains the exclusive rights for commercialization in the developing world of any HIV/AIDS vaccine that is developed under the collaboration, and will receive a royalty on income received by us from the development and commercialization of certain vaccines. We granted IAVI the rights to technology and intellectual property utilized in the programs. We also issued IAVI a small number of shares of our common stock.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Celladon Collaboration</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2004, we formed a collaboration with Celladon focused on the development of AAV-based drugs for the treatment of congestive heart failure. In connection with the formation of this collaboration, certain of Celladon&#146;s investors purchased 395,413 shares of our common stock at $15.20 per share resulting in net proceeds to us of $6.0&nbsp;million. We recorded the proceeds as equity at the fair value of the common stock, which approximated market value. During 2006, we earned $4.2&nbsp;million from our development activities under the Celladon collaboration, which consisted primarily of internal development and manufacturing efforts. At the inception of the agreement we agreed to contribute up to $2.0&nbsp;million to support these development activities and then to be reimbursed for efforts over that amount. We met this limit during 2005. We are also entitled to receive milestone payments during the development of
product candidates under the collaboration as well as royalties and manufacturing profits from the commercialization of product candidates developed under the collaboration.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>National Institute of Allergy and Infectious Diseases</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2005, we extended the scope of our HIV/AIDS vaccine program to the developed world via a contract awarded by the National Institute of Allergy and Infectious Diseases, or NIAID, to CCRI in collaboration with CHOP and us. Under this program, we may receive up to $18.2&nbsp;million over five years for the development, manufacture and preclinical testing of vaccine candidates. Investigators at CHOP and CCRI will design the vaccine candidates and we will manufacture the vectors for the clinical testing that will be conducted in the U.S. The direct costs of any clinical trials will be borne directly by the NIAID and are not part of the contract. This NIAID-funded vaccine program will complement work performed under the IAVI vaccine program but will be focused on candidate HIV/AIDS vaccines for the developed world. Consequently, the vaccine candidates that we will be evaluating in this program will contain certain HIV
genes of types that are common in the western world. We began work on our portion of the collaboration in the first quarter of 2006. The funding is awarded to us in annual installments. The total funding amount awarded under our subcontract for the second project year, covering the time period from August&nbsp;31, 2006 to August&nbsp;30, 2007, was $5.7&nbsp;million, of which revenue of $743,000 had been recognized as of December&nbsp;31, 2006.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Amsterdam Molecular Therapeutics B.V.</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In December&nbsp;2006, we granted a non-exclusive perpetual license for the patent rights related to an AAV1 vector gene delivery system to AMT. Under the agreement, we sublicensed certain patent rights under the Penn agreement and AMT paid us an upfront payment of $1.75&nbsp;million, and we may receive milestone payments based on the progress of the licensed products from clinical trial phases to regulatory approvals and royalties based on a percentage of net sales of the licensed products.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Sirna Therapeutics Collaboration</I></B></P>
<P style="line-height:11pt; margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2005, we established a collaboration with Sirna to develop AAV-based approaches to treating Huntington&#146;s disease. Sirna, now a wholly-owned subsidiary of Merck &amp; Co., Inc., is a leader in the effort to create RNAi-based therapies and leverage the vast potential of this technology to ultimately treat patients in need. We, and Sirna, have agreed to co-develop product candidates under the collaboration, whereby we share the costs of development and any potential future revenues that result from the collaboration. We split the development costs evenly with Sirna. We record revenue and Sirna reimburses us for our program costs that exceed more than half of the total collaboration costs.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>58</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>11. Collaborative and Other Agreements &#150; (continued)</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B><I>Former Biogen Collaboration</I></B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In 2000, we established a three-year multiple-product development and commercialization collaboration with Biogen (now Biogen Idec) that ended in 2003. As part of this collaboration, Biogen Idec agreed to provide us with loans of up to $10.0&nbsp;million and committed to purchase, at our discretion, up to $10.0&nbsp;million shares of our common stock. In 2001, we borrowed $10.0&nbsp;million under the loan commitment. In 2002, we issued 580,467 shares of our common stock to Biogen Idec at a price of approximately $6.90 per share and received proceeds of $4.0&nbsp;million and in 2003 we issued 251,484 shares of our common stock to Biogen Idec at a price of $19.10 per share and received proceeds of $4.8&nbsp;million. In 2006, Biogen Idec agreed to exchange $5.65&nbsp;million of debt for one million shares of our common stock. As of December&nbsp;31, 2006, we owed Biogen Idec $1.7&nbsp;million remaining on a note payable and Biogen Idec
owned approximately 2.17&nbsp;million shares of our common stock representing approximately 19.9% of our total common shares outstanding.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>12. Employee Retirement Plan</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We sponsor an employee retirement plan under Section 401(k) of the Internal Revenue Code. All of our employees who meet the minimum eligibility requirements are eligible to participate in the plan. Our matching contributions to the 401(k) plan are made at the discretion of our Board of Directors and were $17,000 in 2006, $165,000 in 2005 and $133,000 in 2004. We suspended matching contributions effective February&nbsp;1, 2006 and reinstated matching contributions effective January&nbsp;1, 2007.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>13. Income Taxes</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">At December&nbsp;31, 2006, we had net operating loss carry-forwards of approximately $178.7&nbsp;million and research tax credit carry-forwards of $8.0&nbsp;million. The carry-forwards will begin to expire in 2007 if not utilized, and may be further subject to the application of Section 382 of the Internal Revenue Code of 1986, as amended, as discussed further below. We have provided a valuation allowance to offset the deferred tax assets, due to the uncertainty of realizing the benefits of the net deferred tax asset.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Significant components of our deferred tax assets and liabilities were as follows:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=290></TD><TD width=10></TD><TD width=5></TD><TD width=48.35></TD><TD width=10.85></TD><TD width=5></TD><TD width=48.65></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=386.667>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=157.133 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,</B></P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=71.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2006</B></P>
</TD><TD valign=top width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=71.533 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>2005</B></P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=64.467>&nbsp;</TD><TD valign=top width=14.467><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Deferred tax assets</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467>&nbsp;</TD><TD valign=top width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.867>&nbsp;</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Net operating loss carry-forwards</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>60,770,000</P>
</TD><TD valign=top width=14.467>&nbsp;</TD><TD valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>57,190,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Capital loss carry-forwards</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>2,000,000</P>
</TD><TD valign=top width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>1,910,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Research and orphan drug credit carry-forwards</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>8,010,000</P>
</TD><TD valign=top width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>7,460,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Depreciation and amortization</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>2,410,000</P>
</TD><TD valign=top width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>3,340,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:18pt; text-indent:-6pt">Restructure and other</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>3,520,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=top width=14.467>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>2,810,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Gross deferred tax assets</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.467><P style="margin:0pt" align=right>76,710,000</P>
</TD><TD valign=top width=14.467>&nbsp;</TD><TD valign=bottom width=6.667>&nbsp;</TD><TD valign=bottom width=64.867><P style="margin:0pt" align=right>72,710,000</P>
</TD><TD valign=top width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=386.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Valuation allowance for deferred tax assets</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>(76,710,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=top width=14.467><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=6.667>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>(72,710,000</P>
</TD><TD style="border-bottom:0.5pt solid #FFFFFF" valign=top width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=386.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net deferred tax asset</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.467><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=top width=14.467>&nbsp;</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=6.667><P style="margin:0pt">$</P>
</TD><TD style="border-bottom:3pt double #000000" valign=bottom width=64.867><P style="margin:0pt" align=right>&#151;</P>
</TD><TD style="border-bottom:3pt double #FFFFFF" valign=top width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The change in the valuation allowance was $4.0&nbsp;million for 2006 and $6.7&nbsp;million for 2005. The capital losses generated by the sale of CellExSys and Chromos shares may only be carried forward to offset future capital gains and will begin to expire after 2009 if not utilized. Our valuation allowances as of December&nbsp;31, 2006 and December&nbsp;31, 2005 include an allowance for the capital loss carry-forward.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The effect tax effect of adopting FAS 123R for recording stock compensation expense resulted in an insignificant increase in the deferred tax asset and is included with restructure and other.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>59</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>TARGETED GENETICS CORPORATION</B></P>
<P style="margin-top:10pt; margin-bottom:6.65pt" align=center><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>13. Income Taxes &#150; (continued)</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Our past sales and issuances of stock have likely resulted in ownership changes as defined by Section 382 of the Internal Revenue Code of 1986, as amended. A study has not been done at this time because of the full valuation allowance eliminating potential profit &amp; loss adjustments due to changes in the gross amount of the NOL&#146;s and credits would be offset by a change in the valuation allowance. It appears likely that a future analysis may result in the conclusion that a substantial portion or perhaps essentially all of the NOL&#146;s and credits will expire due to the limitations of Sections 382 and 383. As a result, the utilization of our net operating losses and tax credits will be limited and a portion of the carry-forwards may expire unused.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>14. Subsequent Events</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">In January&nbsp;2007, we sold 2.2&nbsp;million shares of our common stock in a private placement at a price of $4.00 per share and received net proceeds of approximately $8.1&nbsp;million. In addition, in connection with the financing we issued warrants to purchase up to 763,000 shares of our common stock. These warrants expire in January&nbsp;2012 and are exercisable at $5.41 per share beginning July&nbsp;19, 2007.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>15. Condensed Quarterly Financial Information (unaudited)</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following tables present our unaudited quarterly results for 2006 and 2005. The net loss in the second quarter of 2006 reflects a $23.7&nbsp;million goodwill impairment charge and the net income in the fourth quarter of 2006 includes a $2.6&nbsp;million gain on the restructure of Biogen Idec debt. We believe that the following information reflects all normal recurring adjustments for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=220></TD><TD width=10.15></TD><TD width=5.1></TD><TD width=43.9></TD><TD width=10.95></TD><TD width=5.05></TD><TD width=48.95></TD><TD width=10.95></TD><TD width=5.15></TD><TD width=44.45></TD><TD width=10.95></TD><TD width=5.05></TD><TD width=44></TD><TD width=3.35></TD></TR>
<TR><TD valign=bottom width=293.333>&nbsp;</TD><TD valign=bottom width=13.533>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=312.667 colspan=11><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Quarter Ended</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293.333>&nbsp;</TD><TD valign=bottom width=13.533>&nbsp;</TD><TD valign=bottom width=65.333 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>March&nbsp;31,<BR>
2006</B></P>
</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=72 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June&nbsp;30,<BR>
2006</B></P>
</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=66.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September&nbsp;30,<BR>
2006</B></P>
</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=65.4 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,<BR>
2006</B></P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.533><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.8>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=58.533>&nbsp;</TD><TD valign=bottom width=14.6><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.733>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=65.267>&nbsp;</TD><TD valign=bottom width=14.6><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.867>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=59.267>&nbsp;</TD><TD valign=bottom width=14.6><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.667>&nbsp;</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenue</P>
</TD><TD valign=bottom width=13.533>&nbsp;</TD><TD valign=bottom width=6.8><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=58.533><P style="margin:0pt" align=right>2,430,000</P>
</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>1,414,000</P>
</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=6.867><P style="margin:0pt" align=right>$</P>
</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>2,012,000</P>
</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=6.733><P style="margin:0pt" align=right>$</P>
</TD><TD valign=bottom width=58.667><P style="margin:0pt" align=right>4,008,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Restructure charges</P>
</TD><TD valign=bottom width=13.533>&nbsp;</TD><TD valign=bottom width=6.8>&nbsp;</TD><TD valign=bottom width=58.533><P style="margin:0pt" align=right>1,042,000</P>
</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>363,000</P>
</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>413,000</P>
</TD><TD valign=bottom width=14.6>&nbsp;</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.667><P style="margin:0pt" align=right>188,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Loss from operations</P>
</TD><TD valign=bottom width=13.533>&nbsp;</TD><TD valign=bottom width=6.8>&nbsp;</TD><TD valign=bottom width=58.533><P style="margin:0pt" align=right>(3,770,000</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>(27,923,000</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>(3,211,000</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.667><P style="margin:0pt" align=right>(1,825,000</P>
</TD><TD valign=bottom width=4.467><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=293.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net income (loss)</P>
</TD><TD valign=bottom width=13.533>&nbsp;</TD><TD valign=bottom width=6.8>&nbsp;</TD><TD valign=bottom width=58.533><P style="margin:0pt" align=right>(3,732,000</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>(27,876,000</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>(3,190,000</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.667><P style="margin:0pt" align=right>808,000</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
<TR><TD valign=bottom width=293.333><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Basic and diluted net income (loss) per common share</P>
</TD><TD valign=bottom width=13.533>&nbsp;</TD><TD valign=bottom width=6.8>&nbsp;</TD><TD valign=bottom width=58.533><P style="margin:0pt" align=right>(0.42</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=65.267><P style="margin:0pt" align=right>(2.83</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>(0.32</P>
</TD><TD valign=bottom width=14.6><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.733>&nbsp;</TD><TD valign=bottom width=58.667><P style="margin:0pt" align=right>0.08</P>
</TD><TD valign=bottom width=4.467>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=221.75></TD><TD width=10.3></TD><TD width=5.15></TD><TD width=44.45></TD><TD width=11.15></TD><TD width=5.15></TD><TD width=44.45></TD><TD width=11.15></TD><TD width=5.15></TD><TD width=45></TD><TD width=11.15></TD><TD width=5.15></TD><TD width=44.55></TD><TD width=3.45></TD></TR>
<TR><TD valign=bottom width=295.667>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=310 colspan=11><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Quarter Ended</B></P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.667>&nbsp;</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=66.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>March&nbsp;31,<BR>
2005</B></P>
</TD><TD valign=bottom width=14.867>&nbsp;</TD><TD valign=bottom width=66.133 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>June&nbsp;30,<BR>
2005</B></P>
</TD><TD valign=bottom width=14.867>&nbsp;</TD><TD valign=bottom width=66.867 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>September&nbsp;30,<BR>
2005</B></P>
</TD><TD valign=bottom width=14.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=66.267 colspan=2><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>December&nbsp;31,<BR>
2005</B></P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.667><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=13.733><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.867>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=59.267>&nbsp;</TD><TD valign=bottom width=14.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.867>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=59.267>&nbsp;</TD><TD valign=bottom width=14.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=6.867>&nbsp;</TD><TD style="border-top:0.5pt solid #000000" valign=bottom width=60>&nbsp;</TD><TD valign=bottom width=14.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.4>&nbsp;</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Revenue</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=6.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>2,000,000</P>
</TD><TD valign=bottom width=14.867>&nbsp;</TD><TD valign=bottom width=6.867><P style="margin:0pt">$</P>
</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>1,462,000</P>
</TD><TD valign=bottom width=14.867>&nbsp;</TD><TD valign=bottom width=6.867><P style="margin:0pt" align=right>$</P>
</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,468,000</P>
</TD><TD valign=bottom width=14.867>&nbsp;</TD><TD valign=bottom width=6.867><P style="margin:0pt" align=right>$</P>
</TD><TD valign=bottom width=59.4><P style="margin:0pt" align=right>1,944,000</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Restructure charges</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>219,000</P>
</TD><TD valign=bottom width=14.867>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>119,000</P>
</TD><TD valign=bottom width=14.867>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>1,188,000</P>
</TD><TD valign=bottom width=14.867>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.4><P style="margin:0pt" align=right>183,000</P>
</TD><TD valign=bottom width=4.6>&nbsp;</TD></TR>
<TR><TD valign=bottom width=295.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Loss from operations</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>(4,643,000</P>
</TD><TD valign=bottom width=14.867><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>(5,125,000</P>
</TD><TD valign=bottom width=14.867><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>(5,863,000</P>
</TD><TD valign=bottom width=14.867><P style="margin:0pt">)&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.4><P style="margin:0pt" align=right>(3,716,000</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=295.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Net loss</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>(4,672,000</P>
</TD><TD valign=bottom width=14.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>(5,294,000</P>
</TD><TD valign=bottom width=14.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>(5,683,000</P>
</TD><TD valign=bottom width=14.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.4><P style="margin:0pt" align=right>(3,549,000</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
<TR><TD valign=bottom width=295.667><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Basic and diluted net loss per common share</P>
</TD><TD valign=bottom width=13.733>&nbsp;</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>(0.55</P>
</TD><TD valign=bottom width=14.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.267><P style="margin:0pt" align=right>(0.62</P>
</TD><TD valign=bottom width=14.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=60><P style="margin:0pt" align=right>(0.66</P>
</TD><TD valign=bottom width=14.867><P style="margin:0pt">)</P>
</TD><TD valign=bottom width=6.867>&nbsp;</TD><TD valign=bottom width=59.4><P style="margin:0pt" align=right>(0.41</P>
</TD><TD valign=bottom width=4.6><P style="margin:0pt">)</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>60</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always"><B>Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">None.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 9A. Controls and Procedures.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Evaluation of disclosure controls and procedures.</I> Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt"><I>Changes in internal control over financial reporting.</I> There was no change in our internal control over financial reporting that occurred during the period covered by this annual report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>PART III</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 10. Directors and Executive Officers of Registrant.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The information required by this Item is incorporated by reference to the sections captioned &#147;Proposal One &#151; Election of Directors,&#148; &#147;Executive Officers&#148; and &#147;Section 16(a) Beneficial Ownership Reporting Compliance&#148; in the proxy statement for our annual meeting of shareholders to be held on May&nbsp;17, 2007.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Code of Ethics</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">We have a Code of Conduct, which applies to all employees, officers and directors of Targeted Genetics. Our Code of Conduct meets the requirements of a &#147;code of ethics&#148; as defined by Item 406 of Regulation S-K, and applies to our Chief Executive Officer, Chief Financial Officer (who is both our principal financial and principal accounting officer), as well as all other employees. Our Code of Conduct also meets the requirements of a code of conduct under Marketplace Rule 4350(n) of the National Association of Securities Dealers, Inc. Our Code of Conduct is posted on our website at http://www.targetedgenetics.com in the &#147;Corporate Governance&#148; section of our Investor Relations home page.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 11. Executive Compensation.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The information required by this Item with respect to executive compensation is incorporated by reference to the section captioned &#147;Executive Compensation&#148; in the proxy statement for our annual meeting of shareholders to be held on May&nbsp;17, 2007.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The information required by this Item is incorporated by reference to the section captioned &#147;Security Ownership&#148; and &#147;Executive Compensation &#151; Equity Compensation Plan Information&#148; in the proxy statement for our annual meeting of shareholders to be held on May&nbsp;17, 2007.</P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 13. Certain Relationships and Related Transactions.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The information required by this Item with respect to certain relationships and related-party transactions is incorporated by reference to the sections captioned &#147;Executive Compensation &#151; Post-Employment Compensation&#148; in the proxy statement for our annual meeting of shareholders to be held on May&nbsp;17, 2007.</P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>61</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin-top:10pt; margin-bottom:0pt; page-break-before:always"><B>Item 14. Principal Accountant Fees and Services.</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">The information required by this Item with respect to principal accountant fees and services is incorporated by reference to the section captioned &#147;Proposal Four &#151; Ratification of Independent Registered Public Accounting Firm&#148; in the proxy statement for our annual meeting of shareholders to be held on May&nbsp;17, 2007.</P>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>PART IV</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.</B></P>
<P style="margin-top:10pt; margin-bottom:0pt"><B>1. Financial Statements</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">The following consolidated financial statements are submitted in Part II, Item 8 of this annual report:</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=435.7></TD><TD width=12.25></TD><TD width=20.05></TD></TR>
<TR><TD valign=bottom width=580.933>&nbsp;</TD><TD valign=bottom width=16.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=26.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Page</B></P>
</TD></TR>
<TR><TD valign=bottom width=580.933>&nbsp;</TD><TD valign=bottom width=16.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=26.733><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD></TR>
<TR><TD valign=bottom width=580.933><P style="line-height:10.35pt; margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Report of Independent Registered Public Accounting Firm</P>
</TD><TD valign=bottom width=16.333>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin:0pt" align=center>40</P>
</TD></TR>
<TR><TD valign=bottom width=580.933><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Balance Sheets as of December&nbsp;31, 2006 and 2005</P>
</TD><TD valign=bottom width=16.333>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>41</P>
</TD></TR>
<TR><TD valign=bottom width=580.933><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Operations for the years ended December&nbsp;31, 2006 2005 and 2004</P>
</TD><TD valign=bottom width=16.333>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>42</P>
</TD></TR>
<TR><TD valign=bottom width=580.933><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Preferred Stock and Shareholders&#146; Equity for the years ended December&nbsp;31, 2006, 2005 and 2004</P>
</TD><TD valign=bottom width=16.333>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>43</P>
</TD></TR>
<TR><TD valign=bottom width=580.933><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Consolidated Statements of Cash Flows for the years ended December&nbsp;31, 2006, 2005 and 2004</P>
</TD><TD valign=bottom width=16.333>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>44</P>
</TD></TR>
<TR><TD valign=bottom width=580.933><P style="line-height:10.35pt; margin-top:3.35pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">Notes to Consolidated Financial Statements</P>
</TD><TD valign=bottom width=16.333>&nbsp;</TD><TD valign=bottom width=26.733><P style="margin-top:3.35pt; margin-bottom:0pt" align=center>45</P>
</TD></TR>
</TABLE>
<P style="margin-top:10pt; margin-bottom:0pt"><B>2. Financial Statement Schedules</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">All financial statement schedules have been omitted because the required information is either included in the consolidated financial statements or the notes thereto or is not applicable.</P>
<P style="margin:0pt" align=center><BR>
<BR></P>
<P style="margin:0pt" align=center>62</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always" align=center><B>SIGNATURES</B></P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the city of Seattle, state of Washington, on March&nbsp;29, 2007.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=222.5></TD><TD width=16.95></TD><TD width=228.55></TD></TR>
<TR><TD valign=bottom width=296.667>&nbsp;</TD><TD valign=bottom width=327.333 colspan=2><P style="margin:0pt">TARGETED GENETICS CORPORATION</P>
</TD></TR>
<TR><TD valign=bottom width=296.667><P style="margin-top:1.65pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD><TD valign=bottom width=22.6>&nbsp;</TD><TD valign=bottom width=304.733><P style="margin:0pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
</TD></TR>
<TR><TD valign=bottom width=296.667>&nbsp;</TD><TD valign=top width=22.6><P style="margin:0pt">By:&nbsp;</P>
</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=304.733><P style="margin:0pt">/s/ H. Stewart Parker</P>
</TD></TR>
<TR><TD valign=bottom width=296.667>&nbsp;</TD><TD valign=top width=22.6>&nbsp;</TD><TD valign=top width=304.733><P style="margin:0pt">H. Stewart Parker<BR>
President and Chief Executive Officer</P>
</TD></TR>
</TABLE>
<P style="margin-top:13.35pt; margin-bottom:0pt" align=center><B>POWER OF ATTORNEY</B></P>
<P style="margin-top:6.65pt; margin-bottom:0pt; text-indent:18pt">Each person whose individual signature appears below hereby authorizes and appoints H. Stewart Parker and David J. Poston, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his or her substitute or substitutes may lawfully do or cause to be done by virtue
thereof.</P>
<P style="margin-top:6.65pt; margin-bottom:6.65pt; text-indent:18pt">Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=132.95></TD><TD width=10></TD><TD width=239.05></TD><TD width=10></TD><TD width=76></TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=177.267><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Signature</B></P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=318.733><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Title</B></P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=top width=101.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Date</B></P>
</TD></TR>
<TR><TD valign=top width=177.267>&nbsp;</TD><TD valign=top width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=101.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">/s/ H. Stewart Parker</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; font-size:9pt">President, Chief Executive Officer and</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=center>March&nbsp;29, 2007</P>
</TD></TR>
<TR><TD valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">H. Stewart Parker</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; font-size:9pt">Director (Principal Executive Officer)</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD valign=top width=177.267>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">/s/ David J. Poston</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; font-size:9pt">Vice President, Finance, Chief Financial Officer and Treasurer</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=center>March&nbsp;29, 2007</P>
</TD></TR>
<TR><TD valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">David J. Poston</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; font-size:9pt">(Principal Financial and Principal Accounting Officer)</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD valign=top width=177.267>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">/s/ Jeremy L. Curnock Cook</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; font-size:9pt">Chairman of the Board</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=center>March&nbsp;29, 2007</P>
</TD></TR>
<TR><TD valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Jeremy L. Curnock Cook</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD valign=top width=177.267>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">/s/ Jack L. Bowman</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; font-size:9pt">Director</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=center>March&nbsp;29, 2007</P>
</TD></TR>
<TR><TD valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Jack L. Bowman</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD valign=top width=177.267>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">/s/ Joseph M. Davie, Ph.D., M.D.</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; font-size:9pt">Director</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=center>March&nbsp;29, 2007</P>
</TD></TR>
<TR><TD valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Joseph M. Davie, Ph.D., M.D.</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD valign=top width=177.267>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">/s/ Roger L. Hawley</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Director</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt" align=center>March&nbsp;29, 2007</P>
</TD></TR>
<TR><TD valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Roger L. Hawley</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD valign=top width=177.267>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">/s/ Nelson L. Levy, Ph.D., M.D.</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; font-size:9pt">Director</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=center>March&nbsp;29, 2007</P>
</TD></TR>
<TR><TD valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Nelson L. Levy, Ph.D., M.D.</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD valign=top width=177.267>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">/s/ Michael S. Perry, D.V.M., Ph.D.</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733><P style="line-height:11pt; margin:0pt; font-size:9pt">Director</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333><P style="line-height:11pt; margin:0pt; font-size:9pt" align=center>March&nbsp;29, 2007</P>
</TD></TR>
<TR><TD valign=top width=177.267><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt; font-size:9pt">Michael S. Perry, D.V.M., Ph.D.</P>
</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=318.733>&nbsp;</TD><TD valign=top width=13.333>&nbsp;</TD><TD valign=top width=101.333>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>63</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=38.6></TD><TD width=11.9></TD><TD width=221.35></TD><TD width=11.9></TD><TD width=28></TD><TD width=11.9></TD><TD width=42.2></TD><TD width=12></TD><TD width=37.8></TD><TD width=12></TD><TD width=40.35></TD></TR>
<TR><TD valign=bottom width=51.467>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=bottom width=295.133>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=175.867 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Incorporated by Reference</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=bottom width=53.8>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.467><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Exhibit<BR>
Number</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=295.133><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit Description</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=37.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Form</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Date&nbsp;of<BR>
First&nbsp;Filing</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit Number</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Filed<BR>
Herewith</B></P>
</TD></TR>
<TR><TD valign=bottom width=51.467>&nbsp;</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=295.133>&nbsp;</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=37.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=56.267>&nbsp;</TD><TD valign=top width=16><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=50.4>&nbsp;</TD><TD valign=top width=16><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin:0pt; padding-left:6pt; text-indent:-6pt">3.1</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin:0pt">Amended and Restated Articles of Incorporation</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin:0pt" align=center>5/12/06</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin:0pt" align=right>3.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">3.2</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Amended and Restated Bylaws</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/17/97</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>3.2</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">4.1</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Registration Rights Agreement among Targeted Genetics Corporation and certain investors dated as of January&nbsp;8, 2007</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>1/8/07</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.2</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.1</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Form of Indemnification Agreement between Targeted Genetics and its officers and directors</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/23/00</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.2</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Form of Senior Management Employment Agreement between Targeted Genetics and certain executive officers</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/17/97</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.2</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.3</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Change in Control Agreement, dated as of September&nbsp;14, 2006, between Targeted Genetics Corporation and David J. Poston</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>9/20/06</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.4</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Gene Transfer Technology License Agreement, dated as of February&nbsp;18, 1992, between Immunex Corporation and Targeted Genetics Corporation*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/23/00</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.3</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.5</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Exclusive Sublicense Agreement, dated June&nbsp;9, 1999, between Targeted Genetics and Alkermes, Inc.*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-Q</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8/5/99</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.36</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.5(a)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Amendment Agreement to Exclusive Sublicense Agreement, dated as of March&nbsp;12, 2002, between Targeted Genetics and Alkermes, Inc.*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/12/04</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.52</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.5(b)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Amendment No. 2 to Exclusive Sublicense Agreement, dated as of May&nbsp;29, 2003, between Targeted Genetics and Alkermes, Inc.*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>7/22/03</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.01</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.5(c)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Amendment No. 3 to Exclusive Sublicense Agreement, dated as of March&nbsp;9, 2007, between Targeted Genetics and Alkermes, Inc.*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.6</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Termination Agreement, dated March&nbsp;31, 2004, among Targeted Genetics, Elan Corporation PLC, Elan Pharma International Limited, Elan International Services, Ltd. and Emerald Gene Systems, Ltd.*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>4/06/04</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>99.2</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.7</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Funding Agreement dated as of August&nbsp;8, 2000, between Targeted Genetics and Biogen, Inc.</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>9/13/00</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.2</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.7(a)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Amendment to Funding Agreement, dated as of July&nbsp;14, 2003, between Targeted Genetics and Biogen, Inc.</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>7/22/03</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.03</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.7(b)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Amendment No. 2 to Funding Agreement, dated September&nbsp;1, 2005, between Targeted Genetics and Biogen Idec</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>9/1/05</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.7(c)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Amendment No. 3 to Funding Agreement, dated November&nbsp;7, 2006, between Targeted Genetics Corporation and Biogen Idec MA Inc.</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>11/7/06</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.8</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Amended and Restated Promissory Note issued by Targeted Genetics Corporation to Biogen Idec MA Inc. dated November&nbsp;7, 2006</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>11/7/06</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.2</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>64</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=38.6></TD><TD width=11.9></TD><TD width=221.35></TD><TD width=11.9></TD><TD width=28></TD><TD width=11.9></TD><TD width=42.2></TD><TD width=12></TD><TD width=37.8></TD><TD width=12></TD><TD width=40.35></TD></TR>
<TR><TD valign=bottom width=51.467>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=bottom width=295.133>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=175.867 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Incorporated by Reference</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=bottom width=53.8>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.467><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Exhibit<BR>
Number</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=295.133><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit Description</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=37.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Form</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Date&nbsp;of<BR>
First&nbsp;Filing</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit Number</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Filed<BR>
Herewith</B></P>
</TD></TR>
<TR><TD valign=bottom width=51.467>&nbsp;</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=295.133>&nbsp;</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=37.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=56.267>&nbsp;</TD><TD valign=top width=16><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=50.4>&nbsp;</TD><TD valign=top width=16><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.9</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Collaboration Agreement, dated December&nbsp;31, 2004, between Targeted Genetics and Celladon Corporation.*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/4/05</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.56</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.10</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Manufacturing Agreement, dated December&nbsp;31, 2004, between Targeted Genetics and Celladon Corporation.*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/4/05</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.57</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.11</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Common Stock Purchase Agreement, dated December&nbsp;31, 2004, by and among Targeted Genetics, Enterprise Partners and Venrock Partners.</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/4/05</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.58</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.12</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Agreement Under an NIH Prime Award, dated February&nbsp;8, 2006, between The Children&#146;s Hospital of Philadelphia and Targeted Genetics Corporation*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/16/06</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.36</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.12(a)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Modification of Agreement, dated October&nbsp;27, 2006, between The Children&#146;s Hospital of Philadelphia and Targeted Genetics Corporation</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>11/1/06</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.13</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Collaboration and License Agreement, dated as of January&nbsp;1, 2005, by and among Targeted Genetics Corporation, the International AIDS Vaccine Initiative, Columbus Children&#146;s Research Institute and The Children&#146;s Hospital of Philadelphia*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-Q</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8/9/06</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.3</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.14</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Securities Purchase Agreement among Targeted Genetics Corporation and certain investors dated January&nbsp;8, 2007</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>1/8/07</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.15</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Form of Warrant to Purchase Shares of Common Stock of Targeted Genetics Corporation dated January&nbsp;11, 2007</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>1/8/07</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.3</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.16</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">License Agreement, effective June&nbsp;1, 2002, by and between The Trustees of the University of Pennyslvania and Targeted Genetics Corporation*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.17</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">License Agreement, effective December&nbsp;5, 2006, by and between Amsterdam Molecular Therapeutics B.V. and Targeted Genetics Corporation*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.18</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Patent License Agreement &#150; Exclusive, dated April&nbsp;29, 2004, between the National Institutes for Health and Targeted Genetics Corporation*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.18(a)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Amendment No. 1 to OTT License Agreement Number L-086-2000/0, dated August&nbsp;14, 2006, between the National Institutes for Health and Targeted Genetics Corporation*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.19</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Office Lease, dated as of October&nbsp;7, 1996, between Benaroya Capital Company, LLC and Targeted Genetics</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/17/97</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.26</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.19(a)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">First Lease Amendment, dated May&nbsp;12, 1997, between Targeted Genetics and Benaroya Capital Company, LLC</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-Q</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8/14/01</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
</TABLE>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>65</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=38.6></TD><TD width=11.9></TD><TD width=221.35></TD><TD width=11.9></TD><TD width=28></TD><TD width=11.9></TD><TD width=42.2></TD><TD width=12></TD><TD width=37.8></TD><TD width=12></TD><TD width=40.35></TD></TR>
<TR><TD valign=bottom width=51.467>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=bottom width=295.133>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=175.867 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Incorporated by Reference</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=bottom width=53.8>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.467><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Exhibit<BR>
Number</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=295.133><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit Description</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=37.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Form</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Date&nbsp;of<BR>
First&nbsp;Filing</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit Number</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Filed<BR>
Herewith</B></P>
</TD></TR>
<TR><TD valign=bottom width=51.467>&nbsp;</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=295.133>&nbsp;</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=37.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=56.267>&nbsp;</TD><TD valign=top width=16><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=50.4>&nbsp;</TD><TD valign=top width=16><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.19(b)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Second Lease Amendment, dated February&nbsp;25, 2000, between Targeted Genetics and Benaroya Capital Company, LLC</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-Q</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8/14/01</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.2</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.19(c)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Third Lease Amendment, dated April&nbsp;19, 2000, between Targeted Genetics and Benaroya Capital Company, LLC</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-Q</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8/14/01</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.3</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.19(d)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Fourth Lease Amendment, dated March&nbsp;28, 2001, between Targeted Genetics and Benaroya Capital Company, LLC</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-Q</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8/14/01</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.4</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.19(e)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Fifth Lease Amendment, dated January&nbsp;2, 2004, between Targeted Genetics and Benaroya Capital Company, LLC*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>1/13/04</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.03</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.19(f)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Sixth Lease Amendment, dated as of April&nbsp;1, 2006, &nbsp;between Met Park West IV, LLC (successor in interest to Benaroya Capital Company, LLC) and Targeted Genetics Corporation</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-Q</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>5/4/06</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.4</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.19(g)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Seventh Lease Amendment, dated as of June&nbsp;7, 2006, between Met Park West IV, LLC (successor in interest to Benaroya Capital Company, LLC) and Targeted Genetics Corporation</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>6/21/06</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.20</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Canyon Park Building Lease, dated as of June&nbsp;30, 2000, between Targeted Genetics and CarrAmerica Corporation</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-Q</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8/11/00</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.21</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Olive Way Building Lease, dated as of November&nbsp;20, 1993, as amended, between Targeted Genetics and Ironwood Apartments, Inc. (successor in interest to Metropolitan Federal Savings and Loan Association)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/23/00</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.29</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.21(a)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Fifth Amendment to Lease Agreement, dated as of June&nbsp;20, 2003, between Targeted Genetics and Ironwood Apartments, Inc.</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>7/22/03</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.02</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.21(b)</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Sixth Amendment to Lease Agreement, dated as of November&nbsp;1, 2003, between Targeted Genetics and Ironwood Apartments, Inc.*</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>8-K</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>1/13/04</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.01</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.22</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">1992 Restated Stock Option Plan</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>S-8</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>7/10/98</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>99.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.23</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Stock Option Plan for Nonemployee Directors</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10-Q</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>3/31/98</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.34</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.24</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">1999 Stock Option Plan, as amended and restated March&nbsp;22, 2004</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>S-8</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>6/17/04</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>10.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">10.25</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">2000 Genovo Inc. Roll-Over Stock Option Plan</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>S-8</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>10/19/00</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=right>99.1</P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">21.1</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Subsidiaries of Targeted Genetics</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">23.1</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Consent of Independent Registered Public Accounting Firm</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">31.1</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Certification of Chief Executive Officer pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
</TABLE>
<P style="margin:0pt"><BR></P>
<P style="margin:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>66</P>
<P style="margin:0pt"><BR></P>
<HR style="padding-top:7.2pt; padding-bottom:7.2pt" noshade size=1.333>
<P style="margin:0pt; page-break-before:always">&nbsp;</P>
<TABLE style="font-size:10pt" cellspacing=0 align=center><TR><TD width=38.6></TD><TD width=11.9></TD><TD width=221.35></TD><TD width=11.9></TD><TD width=28></TD><TD width=11.9></TD><TD width=42.2></TD><TD width=12></TD><TD width=37.8></TD><TD width=12></TD><TD width=40.35></TD></TR>
<TR><TD valign=bottom width=51.467>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=bottom width=295.133>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=175.867 colspan=5><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Incorporated by Reference</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD valign=bottom width=53.8>&nbsp;</TD></TR>
<TR><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=51.467><P style="line-height:10pt; margin:0pt; font-size:8pt"><B>Exhibit<BR>
Number</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=295.133><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit Description</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=37.333><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Form</B></P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=56.267><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Date&nbsp;of<BR>
First&nbsp;Filing</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=50.4><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Exhibit Number</B></P>
</TD><TD valign=top width=16>&nbsp;</TD><TD style="border-bottom:0.5pt solid #000000" valign=bottom width=53.8><P style="line-height:10pt; margin:0pt; font-size:8pt" align=center><B>Filed<BR>
Herewith</B></P>
</TD></TR>
<TR><TD valign=bottom width=51.467>&nbsp;</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=295.133>&nbsp;</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=37.333><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=top width=15.867><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=56.267>&nbsp;</TD><TD valign=top width=16><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=50.4>&nbsp;</TD><TD valign=top width=16><P style="margin:0pt; font-size:8pt" align=center><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
</TD><TD valign=bottom width=53.8>&nbsp;</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">31.2</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Certification of Chief Financial Officer pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">32.1</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
<TR><TD valign=top width=51.467><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt; padding-left:6pt; text-indent:-6pt">32.2</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=295.133><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt">Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</P>
</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=37.333>&nbsp;</TD><TD valign=top width=15.867>&nbsp;</TD><TD valign=top width=56.267>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=50.4>&nbsp;</TD><TD valign=top width=16>&nbsp;</TD><TD valign=top width=53.8><P style="line-height:11pt; margin-top:5pt; margin-bottom:0pt" align=center>X</P>
</TD></TR>
</TABLE>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR></P>
<P style="margin-top:6.65pt; margin-bottom:0pt"><BR>
<BR></P>
<P style="margin:0pt" align=center>67</P>
<P style="margin:0pt"><BR></P>
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<DOCUMENT>
<TYPE>EX-10.5(C)
<SEQUENCE>2
<FILENAME>v069612_ex10-5c.htm
<TEXT>
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    <div>&#160;</div>
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                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
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      AMENDMENT NO. 3 to the exclusive sublicense agreement (the &#8220;Amendment&#8221;) is made
      and entered into as of March 9, 2007 by and between Alkermes, Inc., a
      Pennsylvania corporation with its principal offices at 88 Sidney Street,
      Cambridge, MA 02139 (hereinafter referred to as &#8220;Alkermes&#8221;), and Targeted
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&#8220;Targeted&#8221;).</font></div>
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      the parties desire to amend the diligence requirements of the Agreement in
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      THEREFORE, in consideration of the foregoing premises, the parties hereto agree
      as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
      otherwise provided herein, all defined terms utilized in this Amendment shall
      have the same meanings as set forth in the Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Section
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
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      anniversary of the Effective Date, Targeted shall, upon receipt of notice from
      Alkermes to such effect, enter into good faith negotiations to enter into a
      sublicense agreement with a proposed sublicensee designated by Alkermes in
      such
      notice, with respect to any of the Additional Fields of Use for which Targeted,
      its Affiliates or Sublicensee(s) have not initiated Phase I Clinical Trials;
      provided that entering into such negotiations is not inconsistent with
      obligations of Targeted to any Sublicensee. Targeted shall consider a request
      from Alkermes to conduct good faith negotiations to enter into a sublicense
      agreement with a proposed sublicensee, prior to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary, in fields in which Targeted does not have any ongoing research
      efforts, but shall have no obligation to enter into such sublicense agreement.
      Any sublicense agreement described in this Section 2.6, if entered into, shall
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      force and effect. No oral promise, covenant or representation of any character
      or nature has been made to induce any party to enter into this Amendment. No
      provision of this Amendment may be modified or amended except expressly in
      a
      writing signed by all parties nor shall any term be waived except expressly
      in a
      writing signed by the party charged therewith. </font></div>
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      deemed an original but all of which taken together constitute one and the same
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IN
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      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="50%">&#160;</td>
            <td align="left" valign="top" width="50%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Alkermes,
                Inc.</font></div>
            </td>
            <td align="left" valign="top" width="50%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
                Genetics Corporation</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
                /s/ Michael Landine</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Print
                Name: Michael Landine</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Its:
                Vice President</font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:
                /s/ B.G. Susan Robinson</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Print
                Name: B.G. Susan Robinson</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Its:
                Vice President, Business
                Development</font></div>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>3
<FILENAME>v069612_ex10-16.htm
<TEXT>
<html>
  <head>
    <title>
</title>
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  <body bgcolor="#ffffff">
    <div>&#160;</div>
    <div align="center">
      <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td width="50%">&#160;</td>
            <td width="50%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*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.</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LICENSE
      AGREEMENT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      License Agreement (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      is
      made by and between The Trustees of the University of Pennsylvania, a
      Pennsylvania nonprofit corporation, with offices located at 3160 Chestnut
      Street, Suite 200, Philadelphia, Pennsylvania 19104-6283 (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Penn</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      and
      Targeted Genetics Corporation, a corporation organized and existing under the
      laws of Washington (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Targeted</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      having a place of business at 1100 Olive Way, Suite 100, Seattle, Washington
      98101. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subject
      to Section 12.11, this Agreement is effective as of the 1st day of June, 2002
      (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Effective
      Date</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RECITALS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Genovo, Inc., a corporation organized and existing under the laws of Delaware
      (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Genovo</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      having a place of business at 512 Elmwood Avenue, Sharon Hill, PA 19079 and
      Penn
      are parties to the following three agreements, each dated as of June 30, 1995,
      and each as amended through the Effective Date (collectively sometimes called
      the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Existing
      Agreements</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;):
      that
      certain Sponsored Research Agreement, pursuant to which Genovo funded certain
      research at Penn relating to new strategies for gene therapy (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Sponsored
      Research Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;);
      that
      certain License Agreement Lung and Liver Fields pursuant to which Penn has
      granted certain licenses and other rights to Genovo relating to certain liver
      and lung fields (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Liver/Lung
      License</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;);
      and
      that certain License Agreement Additional Fields pursuant to which Penn has
      granted certain licenses and other rights to Genovo relating to certain other
      fields (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Additional
      Fields License</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;);
      and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      the Sponsored Research Agreement has now been terminated in accordance with
      that
      certain letter agreement between the parties dated February 27, 2001;
      and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Penn owns and is a proprietor of certain intellectual property, including items
      developed under the Sponsored Research Agreement and items discovered or
      developed prior thereto and agreed to be subject to one or more of the Existing
      Agreements; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Genovo has become an Affiliate of Targeted in a transaction in which former
      shareholders of Genovo have become shareholders of Targeted; and </font></div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Genovo and Targeted intend to pursue further research directed toward the
      development and improvement of gene therapy products and potential
      commercialization thereof in one or more applications, and Penn desires that
      they do so; and </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Penn has determined that the exploitation of such intellectual property and
      improvements thereto as described herein is in the best interests of Penn,
      is
      consistent with its educational and research missions and goals, and is likely
      to facilitate the accomplishment of the goals that originally supported the
      Existing Agreements; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      The Wistar Institute of Anatomy and Biology (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Wistar</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      is the
      joint owner with Penn of the United States patents and related pending
      applications and foreign counterparts thereof listed in Attachment 1
      (specifically, Penn docket H1255, hereafter the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Penn/Wistar
      Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;);
      and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      Penn may, with Wistar&#8217;s written approval, enter into binding agreements for the
      granting of licenses with respect to the Penn/Wistar Patent Application;
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NOW,
      THEREFORE, in consideration of the premises and of the promises and covenants
      contained herein and intending to be legally bound hereby, the parties agree
      as
      follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      1 - DEFINITIONS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      the
      purposes of this Agreement, in addition to the other terms defined above or
      elsewhere in this Agreement, the following words and phrases shall have the
      meanings set forth herein. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,&#8221;
as
      to
      a product (and as to the point in time when this definition is referenced in
      this Agreement as to such product), means that such product </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      achieved
      the milestone in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and has
      since the achievement of such milestone progressed as applicable </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      set
      forth below: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)
                </font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                on
                such product with the appropriate health regulatory authority(ies)
                in at
                least one Major Nation, and Targeted, a Covered Affiliate, or their
                collaborators or sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)
                </font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                clinical trials of such product have been </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                within </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                year </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for such product </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                and Targeted, a Covered Affiliate, or their collaborators or sublicensees
                exert commercially reasonable efforts to conduct and complete </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)
                  </font></div>
              </div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">where
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                trials were </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for such product, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                clinical trials of such product have been </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                within </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                years after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                clinical trials, and Targeted, a Covered Affiliate, or their collaborators
                or sublicensees exert commercially reasonable efforts to conduct
                and
                complete such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                trials of such product, including the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-2-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)
                </font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                clinical trials of such product have been </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                within </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                years after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                (or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                years after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                where </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                trials were </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for such product) clinical trials for such product, and Targeted,
                a
                Covered Affiliate, or their collaborators or sublicensees exert
                commercially reasonable efforts to conduct and complete such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                clinical trials of such product, including the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                ;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for such product has been </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                with the appropriate health regulatory authority(ies) in at least
                one
                Major Nation within </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                years after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for such product, and Targeted, a Covered Affiliate, or their
                collaborators or sublicensees exert commercially reasonable efforts
                to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                until at least one such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                until all </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                (it being understood that the product will no longer be in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                if
                all such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                all Major Nations have been </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                and </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(f)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">such
                product </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                at least one Major Nation within </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                such product by the appropriate health regulatory authority(ies)
                in that
                Major Nation (including </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                such Major Nation);</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">provided,
      however, that (1) if Targeted </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (even
      if, in Targeted&#8217;s </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      it is
      prudent for Targeted to do so), Targeted will not be considered to be exerting
      commercially reasonable efforts as to the conduct of such clinical trial; (2)
      the time periods specified in this Section as applied to a product shall be
      tolled during any period or periods in which Targeted is, beyond its reasonable
      control, prevented from developing such product by government-imposed
      moratoriums, laws or rulings that prevent others generally from developing
      similar products, it being understood that if a clinical trial is halted or
      suspended because of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to
      Targeted&#8217;s conduct of the trial, such action will not toll the time periods
      specified in this Section as applied to the product involved in such
      trial</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
      and (3)
      if at any time or times Targeted believes that it may not be able to advance
      a
      particular product through one or more of the above stages of development within
      any of the specific time periods specified in this Section (whether or not
      due
      to factors described in clause (2) above), it may so notify Penn, together
      with
      a reasonably detailed description of the factors or reasons why Targeted
      believes it should nevertheless continue to be considered to have such product
      under </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">whereupon
      Penn and Targeted will over a period of at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to reach
      agreement on extension(s) to such time period(s) as shall be reasonable in
      the
      circumstances</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Affiliate</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
of
      an
      entity means and includes the entities that, directly or indirectly, own or
      control more than 50% of the voting interests (or equivalent control) of such
      entity (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Parent</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      or
      more than 50% of the voting interests (or equivalent control) of which is,
      directly or indirectly, owned or controlled by such entity or its Parent.
&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Affiliated</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
refers
      to Affiliates. &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Covered
      Affiliate</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
refers
      to an affiliate of Targeted that has agreed in writing to be bound by Targeted&#8217;s
      rights and obligations under this Agreement; Penn acknowledges that Genovo,
      by
      its signature agreeing to be bound by all the terms and obligations of Targeted
      below, is a Covered Affiliate.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
          Treatment Requested.</strong></font></div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-3-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Bankruptcy
      Event</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      voluntary or involuntary proceedings by or against Targeted are instituted
      in
      bankruptcy or under any insolvency law, or a receiver or custodian is appointed
      for Targeted, or proceedings are instituted by or against Targeted for corporate
      reorganization or the dissolution of Targeted, which proceedings, if
      involuntary, shall not have been dismissed within sixty (60) days after the
      date
      of filing, or Targeted makes an assignment for the benefit of creditors, or
      substantially all of the assets of Targeted are seized or attached and not
      released within sixty (60) days thereafter.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
      includes </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Calendar
      Quarter</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      each three-month period, or any portion thereof, beginning on January 1, April
      1, July 1 and October 1.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Calendar
      Year</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      a
      period of twelve (12) months beginning on January&#160;1 and ending on December
      31.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      the prevention, treatment or cure of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      whether
      by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>in
      vivo</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      or
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>ex
      vivo</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      means
      (together with preparation, research, development, and attempts to do the
      foregoing).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.8</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Confidential
      Information</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      and includes all technical information, inventions, developments, discoveries,
      software, know-how, methods, techniques, formulae, data, processes and other
      proprietary ideas, whether or not patentable or copyrightable, that Penn
      identifies as confidential or proprietary at the time it is delivered or
      communicated to Targeted.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.9</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">"</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">"
      means,
      with respect to a Penn Licensed Product: (a) the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (or its
      equivalent) filed on such Penn Licensed Product in any Major Nation; and (b)
      up
      to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      additional </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      each of
      which is </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      and for
      which </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
      the next </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      years
      for a Penn Licensed Product incorporating the same </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      as such
      Penn Licensed Product and/or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      of up to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      additional </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in such
      Penn Licensed Product. Targeted shall designate the additional </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      additional </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      referred
      to in clause (b) within </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      following the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      on such
      Penn Licensed Product in any Major Nation; provided, however, that as to Penn
      Licensed Products covered by Group 2 Patents, Targeted may designate such
      additional </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      additional </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at an
      earlier time as described in Section 4.2.3. If, within such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      following the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      or
      equivalent referred to in clause (a), none of Targeted or its Affiliates or
      licensees has actually </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      or
      equivalent in at least one Major Nation for a Penn Licensed Product directed
      to
      a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      that was
      so designated, then that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall
      from that time forward no longer be among the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      with
      respect to the Penn Licensed Product that was the subject </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      referred
      to in clause (a). </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-4-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.10
      </font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Fair
      Market Value</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means:
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.10.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      the
      case of a Sale, the cash consideration which Targeted or its Covered Affiliate
      or sublicensee would realize from an unaffiliated, unrelated buyer under no
      obligation to buy in an arm&#8217;s length sale of an identical item sold in the same
      quantity and at the same time and place of the transaction; or </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.10.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      the
      case of a transaction other than a Sale, the cash consideration which a willing
      party would realize from an unaffiliated, unrelated third party under no
      obligation to transact in an arm&#8217;s length transaction of the same type and at
      the same time and place of transaction; provided, however, that where Sales
      or
      other transactions are made in connection with patient assistance programs
      or
      other charitable purposes or to physicians or hospitals for promotional
      purposes, &#8220;Fair Market Value&#8221; for purposes hereof shall mean the actual
      consideration received, if any. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.11
      </font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Federal
      Government Interest</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      the rights of the United States Government under Public Laws 96-517, 97-256
      and
      98-620, codified at 35 U.S.C. 200-212, and any regulations issued thereunder,
      as
      such statute or regulations may be amended from time to time
      hereafter.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.12</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.13
      </font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Letter Agreement</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      that certain letter agreement among </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      dated as
      of August 27, 1999, as amended through the Effective Date.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.14</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      the prevention, treatment, or cure of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      whether
      by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>in
      vivo </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>ex
      vivo</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      means
      (together with preparation, research, development, and attempts to do the
      foregoing).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.15</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Major
      Nation(s)&#8221;</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      means
      any one or more of Canada, France, Germany, Japan, the United Kingdom, or the
      United States. It is agreed for the avoidance of doubt that any filings or
      other
      actions or proceedings with or in the European Agency for the Evaluation of
      Medicinal Products or its successor will be considered to be with or in the
      health regulatory agency in at least one Major Nation.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.16</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Net
      Sales</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      the gross sales amounts or, if such consideration is in a form other than cash
      or cash equivalents, the Fair Market Value, received by Targeted or its Covered
      Affiliates or their sublicensees from the Sale of any Penn Licensed Product(s),
      less qualifying costs directly attributable to such Sale borne by Targeted,
      its
      Covered Affiliate or their sublicensees. Such qualifying costs shall be limited
      to the following:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.16.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Discounts,
      in amounts customary in the trade, for quantity purchases, prompt payments
      and
      for wholesalers and distributors;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><br><br></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
          Treatment Requested.</strong></font></div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-5-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.16.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Credits
      or refunds, not exceeding the original invoice amount, for claims or
      returns;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.16.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prepaid
      outbound packing, transportation expenses and transportation insurance
      premiums;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.16.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Sales
      and
      use taxes and other fees imposed by a governmental agency; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.16.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Retroactive
      price reductions or rebates as required by law, </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">all
      in
      accordance with U.S. generally accepted accounting principles consistently
      applied. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.17</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Non-Targeted
      Party</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      any person or entity that is not Penn, Targeted, an Affiliate of Penn, a Covered
      Affiliate, a sublicensee of Targeted or of a Covered Affiliate (which term
      refers to persons or entities to the extent acting under an express sublicense
      of rights of Targeted or a Covered Affiliate under this Agreement), or another
      collaborator or distributor of Targeted, a Covered Affiliate, or their
      sublicensees.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.18</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Penn
      Licensed Product(s)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.18.1
      </font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">products
      that in the absence of this Agreement would, where and when made, used, sold,
      or
      imported, infringe at least one issued claim or pending claim of Penn Patent
      Rights; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.18.2
      </font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">products
      that are made using a process or machine that in the absence of this Agreement
      would, where and when used, infringe at least one issued claim or pending claim
      of Penn Patent Rights. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      Penn
      Licensed Products intended to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall be
      considered </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Penn
      Licensed Product for purposes of Sections 4.1 and 4.3.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.19</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.20</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Penn
        Patent Rights</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
        those patents and patent applications listed in Attachment 1 to this Agreement
        and all foreign counterparts thereof, as well as continuation,
        continuation-in-part, provided that such continuation-in-part relates directly
        to existing patents or patent applications and not to any new matter, divisional
        and re-issue applications thereof, together with any and all patents issuing
        thereupon or upon any foreign counterparts thereof; provided, however, that
        Targeted and Genovo acknowledge that the invention relating to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        was
        made at Penn following </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
        Targeted and Genovo hereby acknowledge that they have no rights in this
        invention relating to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
        as
        defined in these applications and divisionals, continuations, re-examinations,
        re-issues, and any foreign counterparts thereof, and any patents issuing
        therefrom. Targeted and Genovo agree that they will not make or pursue any
        claims that this invention as so defined is or should have been part of the
        Penn
        Patent Rights.</font></div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-6-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.20.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      1 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      those Penn Patent Rights that are so designated in Attachment 1.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.20.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      2 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      those Penn Patent Rights that are so designated in Attachment 1.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.20.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      3 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      those Penn Patent Rights that are so Designated in Attachment 1.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.20.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      4 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      those Penn Patent Rights that are so designated in Attachment 1.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.20.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      5 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      those Penn Patent Rights that are so designated in Attachment 1. </font></div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.21</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Penn
      Technical Information</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      research and development information, unpatented inventions, know-how, and
      technical data developed by Dr. James Wilson, or other employees of Penn with
      a
      duty to assign their rights to Penn, under the Sponsored Research Agreement
      designated in Attachment 2 or described in the Penn Patent Rights, and not
      otherwise covered by Penn Patent Rights.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.22</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Phase
      I Trials</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
      &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Phase
      II Trials</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
and
      &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Phase
      III Trials</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
mean,
      respectively, human clinical trials designated by the U.S. Food and Drug
      Administration (FDA) as Phase I, Phase II (or Phase I/II), or Phase III
      trials.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.23</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Sale</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      any bona fide transaction for which consideration is received or expected for
      the sale, use, lease, transfer, or other disposition of Penn Licensed
      Product(s); provided, however, that the sale, lease, transfer, or other
      disposition of any Penn Licensed Product between Targeted, its Covered
      Affiliates, or their sublicensees, and another entity in such group, other
      than
      to a non-Covered-Affiliate distributor or to an end user, shall not be
      considered a Sale. In such cases, &#8220;Net Sales&#8221; hereunder shall be determined
      using the invoiced or otherwise recognized sales price by the transferee party,
      Covered Affiliate, or sublicensee to the non-Covered-Affiliate distributor
      or
      the end user, less the qualifying costs allowed under Section 1.16. A Sale
      of
      Penn Licensed Product(s) shall be deemed completed at the time Targeted, its
      Covered Affiliate or their sublicensee invoices, ships, or receives payment
      for
      such Penn Licensed Product(s), whichever occurs first. Sale shall not include
      any use of Penn Licensed Products in preclinical work, clinical trials, or
      internal research by Targeted, its Covered Affiliates, or their sublicensees
      or
      other collaborators, distributors, or contractors, or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-7-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.24</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Senior
      Officer(s)</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means,
      as to Targeted at any relevant time, the then-incumbent Chief Executive Officer
      of Targeted, and as to Penn at any relevant time, the Managing Director, Center
      for Technology Transfer. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.25</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
means
      the prevention, treatment, or cure of any disease or diseases in whole or in
      part through </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      whether
      by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>in
      vivo </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>ex
      vivo</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      means
      (together with preparation, research, development, and attempts to do the
      foregoing). For purposes hereof, the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      are more
      fully described in Attachment 3.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      2 - LICENSE GRANT</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>S
      AND DILIGENCE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      1 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      1 License Grant</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      hereby grants to Targeted and the Covered Affiliates for the term of this
      Agreement the worldwide right and license, with the right to grant sublicenses,
      to develop, have developed, make, have made, use, have used, import, have
      imported, sell, offer for sale and have sold Penn Licensed Products under the
      Group 1 Patents </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to
      Targeted.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      1 Diligence Outside the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field
      and the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.1 from </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      outside
      of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      and also outside of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      if Targeted </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      of the
      following conditions, provided that, except as to the condition stated in clause
      (e) below, Penn exercises such right by written notice to Targeted within
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      after
      Penn's receipt of Targeted's Development Plan for the period in which such
      condition was due, or receipt of explicit written notice from Targeted, in
      response to Penn's written inquiry, that such condition has not been satisfied,
      whichever occurs first, and that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 54pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
                and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                covered by the Group 1 Patents prior to the end of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
                and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                any time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                trials utilizing and exercising commercially reasonable progress
                toward
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                without </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                for at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under the Group 1 Patents for use outside of both the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Field and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Field; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
                and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                any time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                trials utilizing and exercising commercially reasonable progress
                toward
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                without </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                for at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under the Group 1 Patents for use outside of both the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Field and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Field; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-8-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(d)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
                and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at any time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                trials utilizing and exercising commercially reasonable progress
                toward
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                without </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                for at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under the Group 1 Patents for use outside of both the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Field and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Field; or</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(e)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted,
                its Affiliates, and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at any time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under the Group 1 Patents for use outside of both the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Field and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Field.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      1 Specific-</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Sublicenses after Year </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      Targeted shall make non-exclusive, commercial-use </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 1 Patents available to third parties on commercially reasonable terms,
      provided that (unless Targeted </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in its
      discretion): (a) each such sublicense is restricted to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
      (b)
      such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is(are)
      not the subject of any sublicense previously granted by Targeted or its
      Affiliates on an exclusive basis, nor is any such exclusive sublicense with
      respect to such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      then in
      active negotiation; (c) such sublicense does not permit use in or application
      to
      the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field or
      in or to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field or
      in or to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field;
      and (d) such sublicense does not permit use or application to any product in
      an
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      applicable to any Penn Licensed Product that is then in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by
      Targeted, its Affiliates or their licensees. Where Targeted has </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for such
      a sublicense and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      thereafter, Targeted shall either inform Penn </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      together with a statement of the terms on which </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      or else
      Targeted shall </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      then
      Penn shall have the right to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      provided that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      clauses (a) - (d) above (reading references to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to refer
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      and
      recognizing that Penn will </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      criteria
      under clauses (b) and (d) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      with
      relevant information with respect thereto), and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      1 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.1 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 1 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      1 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.1 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 1 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      2 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      2 License Grant</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      hereby grants to Targeted and the Covered Affiliates for the term of this
      Agreement the worldwide right and license, with the right to grant sublicenses,
      to develop, have developed, make, have made, use, have used, import, have
      imported, sell, offer for sale and have sold Penn Licensed Products under the
      Group 2 Patents </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-9-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      2 Licenses to </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      retains the right to license </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      non-exclusively to develop, have developed, make, have made, use, have used,
      import, have imported, sell, offer for sale and have sold Penn Licensed Products
      under the Group 2 Patents solely </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      and solely in conjunction with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8217;s
      proprietary </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      technology that exists as of the Effective Date, including any improvements
      and
      modifications thereof, (currently referred to as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8217;s
      &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
and
      &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
      technologies, including any modifications and improvements of the foregoing,
      and
      inclusive of subsequent improvements thereto, provided that the technology
      remains a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      operably
      linked to some </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      proprietary </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      technology) and that is substantial and necessary to be used for such
      development, making, use, importation or sale of such Penn Licensed Products;
      provided, however, that:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may be permitted to grant sublicenses under such license, provided
                that
                the sublicensee is similarly bound to use such Penn Licensed Patents
                solely in conjunction with such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                proprietary </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                technology; and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
                the foregoing in any transaction or transactions between </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                its sublicensees on the one hand and either Targeted or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                on
                the other, in any such transaction(s), rights to the Group 2 Patents
                will
                be obtained from Targeted based upon its rights under this Agreement
                and/or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                based upon its sublicense from
                Targeted.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      2 Specified </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Sublicenses in Years </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      Targeted shall make non-exclusive, commercial-use </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 2 Patents available to third parties on commercially reasonable terms,
      provided that (unless Targeted </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in its
      discretion): (a) each such sublicense is restricted to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
      (b)
      neither such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      nor the
      delivery thereof, are at the time such sublicense is sought or under negotiation
      the subject of any on-going research, development, regulatory or commercial
      project at Targeted or its Affiliates in which at least one of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      has been
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
      (c)
      such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is(are)
      not the subject of any sublicense previously granted by Targeted or its
      Affiliates on an exclusive basis, nor is any such exclusive sublicense with
      respect to such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      then in
      active negotiation; (d) such third party or its Affiliate is then actively
      funding substantial and on-going research at Penn in the Institute for Human
      Gene Therapy; (e) such sublicense does not permit use in or application to
      the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field or
      in or to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field or
      in or to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field;
      and (f) such sublicense does not permit use or application to an </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      applicable to any Penn Licensed Product that is then either in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by
      Targeted or its Affiliates or that is otherwise then the subject of any on-going
      research, development, regulatory or commercial project at Targeted, its
      Affiliates or their licensees in which at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and as
      to which the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      have
      been determined pursuant to Section 1.9 or Section 4.2.3. Where Targeted has
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for such
      a sublicense and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      thereafter, Targeted shall either inform Penn of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">[*]</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      together with a statement of the terms on which </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      or else
      Targeted shall </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      then
      Penn shall have the right to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      provided that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      clauses (a) - (f) above (reading references to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to refer
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      and
      recognizing that Penn will </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
          Treatment Requested.</strong></font></div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-10-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      2 Specified </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Sublicenses after </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      Targeted shall make non-exclusive, commercial-use </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 2 Patents available to third parties on commercially reasonable terms,
      provided that (unless Targeted </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in its
      discretion): (a) each such sublicense is restricted to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      identified in such sublicense; (b) such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is(are)
      not the subject of any sublicense previously granted by Targeted or its
      Affiliates on an exclusive basis, nor is any such exclusive sublicense with
      respect to such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      then in
      active negotiation; (c) such sublicense does not permit use in or application
      to
      the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field or
      in or to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field or
      in or to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field;
      and (d) such sublicense does not permit use or application to an </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      applicable to any Penn Licensed Product that is then in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by
      Targeted, its Affiliates or their licensees. Where Targeted has </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      thereafter, Targeted shall either inform Penn </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      together with a statement of the terms on which </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      or else
      Targeted shall </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      then
      Penn shall have the right to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      provided that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      clauses (a) - (d) above (reading references to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to refer
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      recognizing that Penn will </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      2 Diligence outside the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field
      and the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.2 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      outside
      of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      and also outside of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      if Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 2 Patents for use outside of both the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.2 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 2) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      outside
      the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      2 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.2 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 2 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.2 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 2) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.2.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      2 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.2 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 2 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.2 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 2) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-11-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      3 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.3.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      3 License Grant</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      hereby grants to Targeted and the Covered Affiliates for the term of this
      Agreement the worldwide right and license, with the right to grant sublicenses,
      to develop, have developed, make, have made, use, have used, import, have
      imported, sell, offer for sale and have sold Penn Licensed Products under the
      Group 3 Patents in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.3.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      3 Specified </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Sublicenses after Year </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      Targeted shall make non-exclusive, commercial-use </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 3 Patents available to third parties on commercially reasonable terms,
      provided that (unless Targeted </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
      its
      discretion): (a) each such sublicense is restricted to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      identified in such sublicense; (b) such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is(are)
      not the subject of any sublicense previously granted by Targeted or its
      Affiliates on an exclusive basis, nor is any such exclusive sublicense with
      respect to such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      then in
      active negotiation; (c) such sublicense does not permit use in or application
      to
      the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field or
      in or to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field or
      in or to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field;
      and (d) such sublicense does not permit use or application to any product in
      an
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      applicable to any Penn Licensed Product that is then in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by
      Targeted, its Affiliates or their licensees. Where Targeted has </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      thereafter, Targeted shall either inform Penn </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      together with a statement of the terms on which </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      or else
      Targeted shall </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 3 Patents, provided that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      clauses (a) - (d) above (reading references therein to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to refer
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      recognizing that Penn will </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.3.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      3 Diligence outside the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field
      and the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.3 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      outside
      of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      and also outside of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      if Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 3 Patents for use outside of both the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.3 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 3) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      outside
      the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.3.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      3 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.3 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 3 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.3 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 3) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-12-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.3.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      3 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.3 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 3 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.3 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 3) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      4 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.4.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      4 License Grant</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      hereby grants to Targeted and the Covered Affiliates for the term of this
      Agreement the worldwide right and license, with the right to grant sublicenses,
      to develop, have developed, make, have made, use, have used, import, have
      imported, sell, offer for sale and have sold Penn Licensed Products under the
      Group 4 Patents </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.4.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      4 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.4 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 4 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.4 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 4) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.4.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      4 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.4 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 4 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.4 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 4) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      5 Patents</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.5.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      5 License Grant</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      hereby grants to Targeted and the Covered Affiliates for the term of this
      Agreement the worldwide right and license, with the right to grant sublicenses,
      to develop, have developed, make, have made, use, have used, import, have
      imported, sell, offer for sale and have sold Penn Licensed Products under the
      Group 5 Patents </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-13-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.5.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      5 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.5 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 5 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.5 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 5) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.5.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Group
      5 Diligence in the </u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>[*]</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      Field</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn
      shall have the right, at its option, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.5 </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field if
      Targeted and its Affiliates and sublicensees </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      at any
      time after the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      at least
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the Group 5 Patents for use in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field,
      provided that Penn gives Targeted at least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      prior
      notice of Penn&#8217;s intention to exercise such right. Targeted shall have the
      right, at its option and by notice to Penn given at any time on or before the
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right and license under this Section 2.5 (or with respect to one or more of
      the
      Penn Patent Rights included in Group 5) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Field
      from the date of such notice forward.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>No
      Implied Diligence</u>.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Targeted&#8217;s diligence obligations with respect to this Agreement and the licenses
      granted hereunder are as explicitly stated in this Article 2, and no other
      or
      additional diligence or efforts obligations are implied, nor shall any be
      inferred.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Retained
      Research Rights</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      For all
      exclusive licenses granted under this Article 2: (i) Penn retains the reserved
      right to use, and to permit other for-profit or nonprofit organizations to
      use,
      the Penn Patent Rights strictly for educational and for research purposes and
      to
      use or commercialize the results thereof, provided that any and all such
      commercialization of results, if not otherwise sublicensed by Targeted in its
      sole discretion and without obligation to do so, may be done, and is done,
      without any further use of or commercialization of any of the Penn Patent Rights
      within the scope of any exclusive rights of Targeted or the Covered Affiliates
      hereunder, and that such restriction is incorporated into a written agreement
      with such organization; and (ii) Wistar retains the reserved right to use and
      permit other for-profit or nonprofit organizations to use the Penn/Wistar Patent
      strictly for educational and research purposes and to use or commercialize
      the
      results thereof, provided that any and all such commercialization of results,
      if
      not otherwise sublicensed by Targeted in its sole discretion and without
      obligation to do so, may be done, and is done, without any further use of or
      commercialization of any of the Penn Patent Rights within the scope of any
      exclusive rights of Targeted or the Covered Affiliates hereunder, and that
      such
      restriction is incorporated into a written agreement with such organization.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
          Treatment Requested.</strong></font></div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
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          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
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          </div>
        </div>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.8</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Government
      Interest</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Targeted acknowledges that in accordance with the Federal Government Interest,
      the United States government retains certain rights in intellectual property
      funded in whole or part under any contract, grant or similar agreement with
      a
      Federal agency, including but not limited to the requirement that Penn Licensed
      Products subject to Sale in the United States must be substantially manufactured
      in the United States. The license grant of this Article 2 is expressly subject
      to all of such rights. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.9</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Penn
      Technical Information</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Penn,
      to the extent it has rights in the Penn Technical Information, hereby
      irrevocably grants Targeted and the Covered Affiliates a non-exclusive,
      royalty-free, paid-up right and license, without right to sublicense, to make,
      use, sell, import, reproduce, disclose and otherwise exploit the same during
      and
      after the term of this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.10</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>No
      Implied Licenses</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      No
      other rights or licenses are granted by implication hereunder. Targeted
      acknowledges that Penn shall have the right, in its sole discretion and without
      obligation to Targeted, to grant other parties licenses under the Penn Patent
      Rights so long as the same do not conflict with, and are not within the scope
      of, any of the exclusive rights or licenses granted hereunder to Targeted and
      the Covered Affiliates. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      3 - SUBLICENSES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      right
      to sublicense conferred upon Targeted and the Covered Affiliates under this
      Agreement shall be subject to the following conditions:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      sublicenses shall be subject to the terms and conditions granted to Targeted
      and
      the Covered Affiliates under this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
      sublicensee (excluding, for this purpose, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      that certain </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      among
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      as
      amended, and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Letter
      Agreement, but including, for this purpose, any sub-sublicensee of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      such agreement(s)) shall have the power to grant further sublicenses without
      the
      express approval of Penn, which approval shall not be unreasonably
      withheld.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall forward to Penn, within thirty (30) days of execution, a complete and
      accurate copy written in the English language of each sublicense granted
      hereunder for which Targeted has exclusive rights. Penn&#8217;s receipt of such
      sublicense shall not constitute an approval of such sublicense or a waiver
      of
      any of Penn&#8217;s rights or Targeted&#8217;s obligations hereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 22.5pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall not grant any sublicense under any Penn Patent Rights in fields where
      Targeted has non-exclusive license rights hereunder unless: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-15-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)
                </font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">such
                license to Targeted hereunder was initially non-exclusive or became
                non-exclusive due to an election by Targeted as provided herein (rather
                than due to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                and such sublicense is not a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                or </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)
                </font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
                conditions in provision (a) apply except that the sublicense is a
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and Targeted has obtained Penn&#8217;s prior written approval of such
                sublicense, which approval shall not be reasonably withheld or delayed;
                or</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">if
                the license to Targeted </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                Targeted has obtained Penn&#8217;s prior written approval of such
                sublicense.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      Targeted becomes subject to a Bankruptcy Event, all payments then or thereafter
      due and owing to Targeted from its sublicensees shall upon notice from Penn
      to
      any such sublicensee become payable directly to Penn for the account of
      Targeted; provided however, that Penn shall remit to Targeted the amount by
      which such payments exceed the amounts owed by Targeted to Penn.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      any such sublicense, Targeted shall remain primarily liable to Penn for all
      of
      Targeted&#8217;s duties and obligations contained in this Agreement, and any act or
      omission of a Covered Affiliate or sublicensee of Targeted which would be a
      breach of this Agreement if performed by Targeted shall be deemed to be a breach
      by Targeted of this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      and Penn acknowledge that (i) for purposes of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Letter
      Agreement, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by this
      Agreement, but, rather, shall only have been amended hereby, and (ii)
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall
      not be bound by any amendment or alteration of the Existing Agreements, or
      any
      of them, to the extent the same may bear on the rights or obligations of
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Letter
      Agreement. Accordingly, Targeted and Penn agree that this Agreement is intended
      to be, and shall be construed to be, consistent with the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Letter
      Agreement, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Letter
      Agreement shall remain in full force and effect. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      4 - ROYALTIES</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>
      AND MILESTONES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Royalties</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      further consideration of the licenses granted pursuant to Article 2, but subject
      to Section 4.1.4, Targeted shall pay to Penn a royalty in accordance with the
      following table for the Net Sales received by Targeted, the Covered Affiliates,
      or their sublicensees with respect to each particular Penn Licensed Product
      that
      has been, or that later is, in whole or in part developed by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under a
      right or sublicense granted by Targeted or a Covered Affiliate or otherwise
      collaboratively by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      on the
      one hand and by Targeted and/or Covered Affiliates on the other:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
      Treatment
      Requested.</font></strong></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-16-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div align="right">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="92%">

          <tr>
            <td valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>For
                the portion of Net Sales of such Penn Licensed Product in a Calendar
                Year:</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
                royalty rate for such Net Sales will be:</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="middle" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less
                than or equal to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="right" valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Greater
                than </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and less than or equal to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="right" valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Greater
                than </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and less than or equal to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="right" valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Greater
                than </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="right" valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      further consideration of the licenses granted pursuant to Article 2, but subject
      to Section 4.1.4, Targeted shall pay to Penn a royalty in accordance with the
      following table for the Net Sales received by Targeted, the Covered Affiliates,
      or their sublicensees with respect to each particular Penn Licensed Product
      to
      which Section 4.1.1 above is not applicable:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="right">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="92%">

          <tr>
            <td valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>For
                the portion of Net Sales of such Penn Licensed Product in a Calendar
                Year:</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
                royalty rate for such Net Sales will be:</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Less
                than or equal to $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="right" valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Greater
                than $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and less than or equal to $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="right" valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Greater
                than $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and less than or equal to $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="right" valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Greater
                than $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="right" valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-17-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      purposes of each of Section 4.1.1 and Section 4.1.2: (i) no additional or
      multiple royalties shall be payable with respect to the Net Sales of any Penn
      Licensed Product, regardless of the number of Penn Patent Rights, or claims
      of
      Penn Patent Rights, that would in the absence of this Agreement be infringed
      by
      such Penn Licensed Product or processes or machines used to make it, even if
      such Penn Patent Rights include those from more than one of the patent groups
      defined in Section 1.20; (ii) the Net Sales thresholds in such sections will
      be
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      but
      where the same Penn Licensed Product is </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      or
      otherwise to accommodate the same to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      the Net
      Sales thereof in all such nations, markets and indications shall be </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for
      purposes of Section 4.1.2; and (iii) all Net Sales of any particular Penn
      Licensed Product received by any of Targeted, Covered Affiliates, or their
      sublicensees will be </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for
      purposes of Section 4.1.2.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      royalties otherwise payable under Section 4.1.1 or 4.1.2 shall be </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      with
      respect to the Net Sales of any Penn Licensed Product that, at the time of
      its
      Sale and in the patent jurisdiction of its Sale, has a competing product also
      licensed under the Penn Patent Rights on sale. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 126pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall promptly pay to Penn the scheduled percentage, as set forth below, of
      any
      sublicense initiation fee, or other such consideration not associated with
      Sales, paid to Targeted or a Covered Affiliate by each sublicensee that is
      not
      Targeted or a Covered Affiliate. All such considerations </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall be
      exempt. In addition, Targeted shall not be required to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Penn a
      percentage of i) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
      ii)
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      or iii)
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Any
      non-cash consideration received by Targeted or a Covered Affiliate from such
      sublicensees shall be valued at its Fair Market Value as of the date of receipt.
      Where any rights under this Agreement to Penn Patent Rights are sublicensed
      by
      Targeted or a Covered Affiliate in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      the
      aggregate of any sublicense initiation fees or other such consideration not
      associated with Sales received by Targeted or the Covered Affiliate shall for
      purposes of this Section be </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      this Agreement, on the one hand, and such other rights or interests, on the
      other, in a manner that consistently and equitably reflects the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      that
      have been so sublicensed toward Targeted&#8217;s or the Covered Affiliate&#8217;s having
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      If and
      to the extent that any such fees or other such consideration is received due
      to
      the occurrence of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      that is
      described in Section 4.3 or due to the occurrence of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      with
      respect to the same Penn Licensed Product that occurred after a Section 4.3
      milestone, the amount paid or payable to Penn under Section 4.3 with respect
      to
      such Penn Licensed Product </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      but
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      scheduled percentages shall be:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%
      of such
      sublicensing fees for any sublicense executed prior to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      such
      Penn Licensed Product.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%
      of such
      sublicensing fees for any sublicense executed after </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      such
      Penn Licensed Product.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%
      of such
      sublicensing fees for any sublicense executed following the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      such
      Penn Licensed Product.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-18-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      example, if entry into </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for a
      Penn Licensed Product provides to Penn a $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      milestone payment from Targeted pursuant to Section 4.3.2, and a sublicensing
      deal </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      after
      completion of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      to the
      extent applicable to the Penn Patent Rights, provides for a $ </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      milestone payment to Targeted for entry into </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for such
      Penn Licensed Product, then Targeted would owe Penn </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      milestone payment (i.e., $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      ),
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      right
      of Penn or a third party to practice the Penn Patent Rights for educational
      or
      research purposes under Section 2.7 shall be royalty-free. </font></div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.1.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      further consideration for agreeing to this Agreement, Targeted shall issue
      to
      Penn within two business days following the effectiveness of this Agreement
      sixty-five thousand (65,000) shares of voting Common Stock of Targeted. Penn
      will in connection with such issuance execute and deliver a stock subscription
      agreement containing standard investor representations with respect to such
      shares.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2
          </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Development
          Plan, Progress Reports, Financial Reports; Maintenance Fees</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      will provide Penn with a written plan (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Development
      Plan</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      within
      thirty (30) days after the of signing this Agreement by both parties. The
      Development Plan will </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Development Plan will separately address activities applicable to Group 1
      Patents, Group 2 Patents, Group 3 Patents, Group 4 Patents, and Group 5 Patents,
      respectively. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      or
      within thirty (30) days following each anniversary of the Effective Date,
      Targeted will provide Penn with a written progress report that describes the
      progress made against the Development Plan (as supplemented by progress reports,
      where applicable), including the progress made by any Targeted Covered
      Affiliates or sublicensees, submitted a year earlier and plans for development
      in the coming year. Each such annual progress report will be deemed to update
      and supplement the then-current Development Plan. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      or
      within thirty (30) days after the time Targeted, or any Targeted Covered
      Affiliates or sublicensees files an IND with respect to a particular Penn
      Licensed Product, Targeted will provide Penn with a written development plan
      for
      that Penn Licensed Product (the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Product-Specific
      Plan</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;).
      Each
      Product-Specific Plan will outline </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Penn
      shall keep all such reports referred to in Sections 4.2.1 through 4.2.3
      confidential under Section 5.2 for five (5) years or until the time, if any,
      of
      the first commercial Sale of any Penn Licensed Product(s) as provided below,
      whichever comes first. Targeted shall also notify Penn within thirty (30) days
      of the first commercial Sale of any Penn Licensed Product.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall provide Penn with the following financial statements and information
      (which may be consolidated with one or more of Targeted&#8217;s Affiliates, if
      Targeted regularly so consolidates its financial statements) prepared according
      to U.S. generally accepted accounting principles consistently applied, where
      applicable:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-19-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 162pt; TEXT-INDENT: -72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unaudited
                financial statements forty-five (45) days following the end of each
                Calendar Quarter. The format and detail of such statements shall
                be agreed
                upon in advance by Penn and
                Targeted.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Audited
                financial statements, produced by a certified public accounting firm,
                ninety (90) days following the end of each of Targeted&#8217;s fiscal years, as
                well as a copy of any management letter recommendations submitted
                by the
                auditors.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Copies
                of all reports made available to shareholders, including 10K and
                10Q
                filings made to the United States Securities and Exchange
                Commission.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall pay to Penn the following license maintenance fees until the first
      commercial Sale of a Penn Licensed Product (after which time no further
      maintenance fees will be payable under this Section 4.2.6): </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      on the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      on the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      on the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      on the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      on the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date, and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      on the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      anniversary of the Effective Date.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.2.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Following
      the first commercial Sale of a Penn Licensed Product, Targeted shall pay to
      Penn
      a maintenance fee of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      on each
      anniversary of the Effective Date during the term of this Agreement which shall
      be </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.3; MARGIN-RIGHT: 0pt" align="left">
        <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3
          </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Milestone
          Fees</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subject
      to Sections 4.3.3 and 4.3.4, Targeted shall pay to Penn a non-refundable
      milestone fee as listed below for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      reaches
      each of the following milestones, where such Penn Licensed Product has been
      or
      is in whole or in part developed by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under a
      right or sublicense granted by Targeted or a Covered Affiliate or otherwise
      collaboratively by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      on the
      one hand and by Targeted and/or Covered Affiliates on the other:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="right">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="92%">

          <tr>
            <td valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Milestone</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Fee
                Due</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-20-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Subject
      to Sections 4.3.3 and 4.3.4, Targeted shall pay to Penn a non-refundable
      milestone fee as listed below for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      reaches
      each of the following milestones, where Section 4.3.1 is not applicable to
      such
      Penn Licensed Product:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="right">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="92%">

          <tr>
            <td valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Milestone</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Fee
                Due</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="60%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">$</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      and to
      the extent that any fees or other such consideration is paid to Penn by Targeted
      pursuant to Section 4.1.5 due to the occurrence of a milestone that is described
      in Section 4.3.1 or Section 4.3.2, or due to the occurrence of any other
      developmental milestone with respect to the same Penn Licensed Product that
      occurred prior to the milestone described in Section 4.3.1 or Section 4.3.2,
      the
      amount so paid to Penn under Section 4.1.5 with respect to such occurrence
      shall
      be </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      with
      respect to such milestone, but such </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      For
      example, if a sublicensing deal entered by Targeted prior to completion of
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for a
      Penn Licensed Product to which Section 4.3.1 is not applicable, to the extent
      applicable to the Penn Patent Rights, provides for a $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      milestone payment to Targeted for entry into </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for such
      Penn Licensed Product, Targeted would have paid Penn </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%
      of such
      milestone payment pursuant to Section 4.1.5 (i.e., $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">).
      When
      such Penn Licensed Product enters </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      Targeted would owe Penn a $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      milestone payment pursuant to Section 4.3.2, but </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      milestone fees otherwise payable under Section 4.3.1 or 4.3.2 shall be
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      with
      respect to any Penn Licensed Product that, at the time a milestone was achieved,

      had a competing product licensed under the Penn Patent Rights on sale.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Royalty
      Reports and Records</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall deliver to Penn within sixty (60) days after the end of each Calendar
      Quarter a report, certified by the chief financial officer of Targeted setting
      forth in reasonable detail the calculation of the royalties due to Penn for
      such
      Calendar Quarter, including, without limitation:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 144pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(i)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Number
                of Penn Licensed Products involved in Sales, listed by country if
                readily
                available;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(ii)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gross
                consideration for Sales of Penn Licensed Products, including all
                amounts
                invoiced, billed, or received;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iii)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Qualifying
                costs, as defined in Section 1.16, listed by category of
                cost;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div>&#160;</div>
    <div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-21-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div>
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
      <div>&#160;</div>
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="line-height: 1.25;">
              <td style="width: 36pt;">
              </td>
              <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(iv)</font></td>
              <td align="left">
                <div><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
                  Sales of Penn Licensed Products listed by country if readily available;
                  and</font></div>
              </td>
            </tr>

        </table>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 54pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(v)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Royalties
                owed to Penn, listed by category, including without limitation earned
                and
                sublicensee-derived categories.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Royalties
      payable under Section 4.1 hereof shall be paid within sixty (60) days following
      the last day of the Calendar Quarter in which the royalties accrue and shall
      accompany the report of Section 4.4.1.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      must maintain and cause its Covered Affiliates, sublicensees, and
      sub-sublicensees, to maintain, complete and accurate books and records which
      enable the royalties, fees, and payments payable under this Agreement to be
      verified. The records for each Calendar Quarter must be maintained for three
      years after the submission of each report under Article 4. Upon reasonable
      prior
      notice to Targeted, Targeted must provide Penn with access to all books and
      records relating to the Sales of Penn Licensed Products by Targeted and its
      Covered Affiliates, and sublicensees to conduct a review or audit of those
      books
      and records. Access to these books and records pertaining to Net Sales must
      be
      made available no more than once each Calendar Year for each Penn Licensed
      Product, during normal business hours, and once each year for each Penn Licensed
      Product during each of the three years after expiration or termination of this
      Agreement. If a review or audit of the books of Targeted determines that any
      of
      Targeted, its Covered Affiliates, or sublicensees has underpaid royalties on
      a
      Penn Licensed Product by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      or more,
      Targeted must pay the costs and expenses of Penn and its accountants in
      connection with such review or audit. Notwithstanding the foregoing, Targeted
      agrees to conduct, at its expense, an independent audit of Sales and royalties
      with respect to a Penn Licensed Product at least every two (2) years once annual
      Sales of such Penn Licensed Product are greater than five million dollars
      ($5,000,000) per annum. The audit shall address, at a minimum, the amount of
      gross sales by or on behalf of Targeted, its Covered Affiliates, or sublicensees
      during the audit period, the amount of funds owed to Penn under this Agreement,
      and whether the amount owed has been paid to Penn and is reflected in the
      records of the Targeted. A report by the auditors shall be submitted promptly
      to
      Penn upon completion.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Currency,
      Place of Payment, Interest</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      dollar amounts referred to in this Agreement are expressed in United States
      dollars. All payments to Penn under this Agreement shall be made in United
      States dollars by check payable to &#8220;The Trustees of the University of
      Pennsylvania.&#8221;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      Targeted, a Covered Affiliate, or their sublicensee receives revenues from
      Sales
      of Penn Licensed Products in currency other than United States dollars, revenues
      shall be converted into United States dollars at the conversion rate for the
      foreign currency as published in the eastern edition of The Wall Street Journal
      as of the last business day of the applicable Calendar Quarter.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-22-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Amounts
      that are not paid when due shall accrue interest from the due date until paid,
      at a rate equal to one and one quarter percent (1.25%) per month (or the maximum
      allowed by law, if less).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      5 - CONFIDENTIALITY</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall use best efforts to maintain in confidence and not to disclose to any
      third party other than Covered Affiliates any Confidential Information of Penn
      received pursuant to this Agreement or the Existing Agreements. Targeted agrees
      to ensure that its and its Covered Affiliates&#8217; employees have access to
      Confidential Information only on a need-to-know basis and are obligated in
      writing to abide by Targeted&#8217;s obligations hereunder. The foregoing obligation
      shall not apply to:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">information
      that is or was known to Targeted or its Covered Affiliates prior to the time
      of
      disclosure or that is or was at any time independently developed by Targeted
      or
      its Covered Affiliates without use of Confidential Information of Penn, in
      each
      case to the extent evidenced by written records;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">information
      disclosed to Targeted or its Covered Affiliates by a third party that has a
      right to make such disclosure;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">information
      that becomes patented, published or otherwise part of the public domain
      otherwise than due to a breach of this Agreement by Targeted or its Covered
      Affiliates;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">information
      that is required to be disclosed by any statute, law, rule, regulation or order
      of any governmental authority or a court of competent jurisdiction; provided
      that Targeted shall use its best efforts to obtain confidential treatment of
      such information by the agency or court; or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">information,
      to the extent it is disclosed pursuant to a confidentiality agreement binding
      the recipient to confidentiality obligations at least as strict as those binding
      Targeted under this Section.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Penn
      shall not be obligated to accept any confidential information from Targeted
      except for the reports required in Sections 4.2 and 4.4 and the results of
      any
      audit or review under Section 4.4.3. Penn shall use best efforts to maintain
      in
      confidence and not to disclose to any third party (subject to the same
      exceptions accorded Targeted under Section 5.1) such reports or results
      received, except that Penn may disclose to Wistar information from such reports
      or results. Wistar shall use best efforts to maintain in confidence and not
      to
      disclose to any third party (subject to the same exceptions accorded Targeted
      under Section 5.1) information received from Penn under this section. Penn
      bears
      no institutional responsibility for maintaining the confidentiality of any
      other
      confidential information of Targeted disclosed to Penn under this Agreement
      or
      the Existing Agreements.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-23-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      placement of a copyright notice on any Confidential Information shall not be
      construed to mean that such information has been published and will not release
      Targeted from its obligation of confidence hereunder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      6 - TERM AND TERMINATION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Agreement, unless sooner terminated as provided herein, shall terminate upon
      the
      expiration of the last to expire or become abandoned of the Penn Patent
      Rights.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      may, at its option, terminate this Agreement at any time by doing all of the
      following:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By
      ceasing to make, have made, use and sell all Penn Licensed Products;
      and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By
      terminating all sublicenses, and causing all sublicensees to cease making,
      having made, using and selling all Penn Licensed Products and terminate any
      sub-sublicensees; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.2.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By
      giving
      sixty (60) days notice to Penn of such cessation and of Targeted&#8217;s intent to
      terminate; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.2.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By
      tendering payment of all accrued royalties.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Penn
      may
      terminate this Agreement if any of the following occur:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.3.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      becomes more than sixty (60) days in arrears in payment of royalties,
      maintenance fees, patent expenses or any other expenses due pursuant to this
      Agreement and Targeted does not provide full payment within thirty (30) days
      of
      written demand; provided, however, that if Targeted disputes in good faith
      the
      existence of an arrearage in payment, </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
                shall, within thirty (30) days after the demand for payment under
                this
                Section, remedy any such arrearage to the extent its existence is
                not the
                subject of such good faith dispute;
                and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">if
                either of the parties has, within thirty (30) days after the demand
                for
                payment under this Section, initiated the dispute resolution procedures
                of
                Article 11 in order to attempt to resolve such good faith dispute,
                Penn
                shall wait for the additional time designated therein before taking
                action
                to terminate this Agreement; or</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-24-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.3.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      becomes subject to a Bankruptcy Event; or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.3.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      materially breaches this Agreement and does not cure such material breach within
      one hundred eighty (180) days after written notice thereof.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      Targeted becomes subject to a Bankruptcy Event, all duties of Penn and all
      rights (but not financial and indemnification obligations accrued prior to
      termination) of Targeted under this Agreement shall immediately terminate
      without the necessity of any action being taken either by Penn or by Targeted,
      and, to the extent allowed by law, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall
      become a direct licensee of Penn to the extent of any sublicense existing
      between </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      Targeted immediately preceding the Bankruptcy Event, without further action
      by
      Targeted, Penn or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted&#8217;s
      obligation to pay royalties and all other obligations accrued under Articles
      4
      and 7 hereof and other considerations owed under this Agreement that have
      matured as of the date of termination shall survive termination of this
      Agreement. In addition, the provisions of Section 2.9, Article&#160;3, and (for
      a period of five (5) years following such termination) Article 5, and the
      provisions of Articles 6, 9, 10, 11 and 12 shall survive such
      termination.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      7 - PATENT MAINTENANCE AND REIMBURSEMENT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Penn
      shall control and diligently prosecute and maintain Penn Patent Rights. Penn
      and
      Targeted shall decide upon a mutually agreeable choice of patent counsel and
      a
      mutually agreeable budget for and course of prosecution, and Targeted shall
      be
      copied on all substantive correspondence regarding such Penn Patent Rights.
      The
      parties acknowledge that neither of them currently has an intention to terminate
      or substantially reduce the scope of the engagement of the patent counsel used
      for such purposes by Penn prior to and as of the Effective Date. Subject to
      Sections 7.2 and 7.3, Targeted shall pay, or shall reimburse Penn within sixty
      (60) days of receipt of invoice for, all documented third party attorneys&#8217; fees,
      expenses, official fees and other charges incident to the preparation,
      prosecution, licensing and maintenance of Penn Patent Rights, including
      interferences, oppositions, etc. brought or defended in accordance with the
      mutually agreed budget for and course of prosecution. Penn shall provide
      Targeted with itemized statements reflecting these expenses quarterly. In the
      event that Penn should decide not to file, prosecute or maintain applications
      and patents for such Penn Patent Rights, Targeted shall have the opportunity
      to
      do so at Targeted&#8217;s sole expense. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
      with respect to licenses granted by Penn to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      pursuant
      to Section 2.2.2, if Penn at any time prior to or after the Effective Date
      grants or has granted any rights or licenses to or for the benefit of any
      Non-Targeted Party under any of the Penn Patent Rights, i.e., where it may
      do so
      outside the scope of the exclusive rights of Targeted or the Covered Affiliates
      hereunder, Penn shall </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
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    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-25-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      Targeted elects to discontinue payment for the filing, prosecution, and/or
      maintenance of any patent application and/or patent contained in the Penn Patent
      Rights (or with respect to any particular claims therein), it shall so notify
      Penn, and any such patent application or patent (or such claims, as applicable)
      shall thereupon be excluded from the definition of Penn Patent Rights and from
      the scope of the licenses granted under this Agreement, and all rights relating
      thereto shall revert to Penn and may be freely used or licensed by Penn.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted,
      the Covered Affiliates, and their sublicensees shall comply with all United
      States and foreign laws with respect to patent marking of Penn Licensed
      Products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      8 - INFRINGEMENT AND LITIGATION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Penn
      and
      Targeted are responsible for notifying each other promptly of any infringement
      of Penn Patent Rights which may come to their attention, including notice to
      the
      other of any certification filed under the United States &#8220;Drug Price Competition
      and Patent Term Restoration Act of 1984&#8221;. Penn and Targeted shall consult one
      another in a timely manner concerning any appropriate response
      thereto.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall have the right, but not the obligation, to prosecute such infringement
      at
      its own expense. Targeted shall not settle or compromise any such suit in a
      manner that imposes any obligations or restrictions on Penn or grants any rights
      the Penn Patent Rights (other than to the extent Targeted has the right to
      grant
      such rights under this Agreement), without Penn&#8217;s written permission. Financial
      recoveries from any such litigation will first be applied to reimburse each
      party for its litigation expenditures with additional recoveries being paid
      to
      Targeted, subject to a royalty due Penn based on the provisions of Article
      4
      hereof.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Such
      rights under Section 8.2 shall be subject to the continuing right of Penn to
      intervene at Penn&#8217;s own expense and join Targeted or its Covered Affiliates, who
      shall still prosecute, in any claim or suit for infringement of the Penn Patent
      Rights. Any consideration received by Targeted or its Covered Affiliates in
      settlement of any claim or suit shall be shared between Penn and Targeted (or
      such Covered Affiliate) in proportion with the share of litigation expenses
      incurred by each in such infringement action provided that Penn has paid at
      least </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      percent
      (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%)
      of the
      aggregate amount of such litigation expenses. In the event that Penn does not
      satisfy the foregoing requirement, financial recoveries from any such litigation
      will first be applied to reimburse both parties for their litigation
      expenditures with additional recoveries being paid to Targeted, subject to
      a
      royalty due Penn based upon the provisions of Article 4 hereof. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      Targeted and the Covered Affiliates fail to prosecute such infringement, Penn
      shall have the right, but not the obligation, to prosecute such infringement
      at
      its own expense. In such event, financial recoveries will first be applied
      to
      reimburse each party for its litigation expenditures with additional recoveries
      being retained by Penn; provided however, that Penn shall not settle such
      infringement if such settlement affects Penn Patent Rights other than those
      specifically at issue in such infringement action without Targeted&#8217;s written
      permission, which shall not be unreasonably withheld.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-26-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      any
      action to enforce any of the Penn Patent Rights, either party, at the request
      and expense of the other party, shall cooperate to the fullest extent reasonably
      possible. This provision shall not be construed to require either party to
      undertake any activities, including legal discovery, at the request of any
      third
      party except as may be required by lawful process of a court of competent
      jurisdiction.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      9 - DISCLAIMER OF WARRANTY; INDEMNIFICATION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EXCEPT
      AS
      SET FORTH IN SECTION 9.5, THE PENN PATENT RIGHTS, PENN TECHNICAL INFORMATION,
      PENN LICENSED PRODUCTS AND ALL OTHER TECHNOLOGY LICENSED UNDER THIS AGREEMENT
      ARE PROVIDED ON AN &#8220;AS IS&#8221; BASIS AND PENN AND WISTAR MAKE NO REPRESENTATIONS OR
      WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT THERETO. BY WAY OF EXAMPLE BUT
      NOT
      OF LIMITATION, PENN AND WISTAR MAKE NO REPRESENTATIONS OR WARRANTIES (i) OF
      COMMERCIAL UTILITY; (ii) OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE;
      OR (iii) THAT THE USE OF THE PENN PATENT RIGHTS, PENN TECHNICAL INFORMATION,
      PENN LICENSED PRODUCTS AND ALL TECHNOLOGY LICENSED UNDER THIS AGREEMENT WILL
      NOT
      INFRINGE ANY PATENT, COPYRIGHT OR TRADEMARK OR OTHER PROPRIETARY OR PROPERTY
      RIGHTS OF OTHERS. PENN AND WISTAR SHALL NOT BE LIABLE TO TARGETED, TARGETED&#8217;S
      SUCCESSORS OR ASSIGNS OR ANY THIRD PARTY WITH RESPECT TO: ANY CLAIM ARISING
      FROM
      THE USE OF THE PENN PATENT RIGHTS, PENN TECHNICAL INFORMATION, PENN LICENSED
      PRODUCTS AND ALL TECHNOLOGY LICENSED UNDER THIS AGREEMENT OR FROM THE
      MANUFACTURE, USE OR SALE OF PENN LICENSED PRODUCTS; OR ANY CLAIM FOR LOSS OF
      PROFITS, LOSS OR INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL OR
      CONSEQUENTIAL DAMAGES OF ANY KIND.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      will defend, indemnify and hold harmless Penn and Wistar and their trustees,
      officers, agents and employees (individually, an &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Indemnified
      Party</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;,
      and
      collectively, the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Indemnified
      Parties</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      from
      and against any and all liability, loss, damage, action, claim or expense
      suffered or incurred by the Indemnified Parties (including attorney&#8217;s fees)
      (individually, a &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Liability</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;,
      and
      collectively, the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Liabilities</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      that
      results from or arises out of: (a) the development, use, manufacture, promotion,
      sale or other disposition of any Penn Technical Information, Penn Patent Rights
      or Penn Licensed Products by Targeted, Covered Affiliates, their sublicensees,
      or their other collaborators or distributors; (b) breach by Targeted of any
      covenant or agreement contained in this Agreement; and (c) the enforcement
      by an
      Indemnified Party of its rights under this Section. Without limiting the
      foregoing, Targeted will defend, indemnify and hold harmless the Indemnified
      Parties from and against any Liabilities resulting from:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-27-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
      product liability or other claim of any kind related to the use by a third
      party
      of a Penn Licensed Product that was manufactured, sold or otherwise disposed
      by
      Targeted, Covered Affiliates, or their sublicensees, or their other
      collaborators or distributors, pursuant to and within the scope of such
      relationships;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a
      claim
      by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      or any
      other party which Targeted has granted or promised to grant a license or option
      to license that this Agreement violates the terms of any agreement to which
      any
      of them is a party;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.2.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a
      claim
      by a third party that the use by Targeted, Covered Affiliates, their
      sublicensees, or their other collaborators or distributors, pursuant to and
      within the scope of such relationships, of Penn Technical Information or Penn
      Patent Rights or the design, composition, manufacture, use, sale or other
      disposition of any Penn Licensed Product by them infringes or violates any
      patent, copyright, trademark or other intellectual property rights of such
      third
      party; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.2.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">clinical
      trials or studies conducted by or on behalf of Targeted, Covered Affiliates,
      their sublicensees, or their other collaborators or distributors, pursuant
      to
      and within the scope of such relationships, relating to the Penn Technical
      Information, Penn Patent Rights or Penn Licensed Products, including, without
      limitation, any claim by or on behalf of a human subject of any such clinical
      trial or study, any claim arising from the procedures specified in any protocol
      used in any such clinical trial or study, any claim of deviation, authorized
      or
      unauthorized, from the protocols of any such clinical trial or study, and any
      claim resulting from or arising out of the manufacture or quality control by
      a
      third party of any substance administered in any clinical trial or
      study.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, however, the Liabilities shall not include, and in no instance
      shall Targeted be required to indemnify any Indemnified Party with respect
      to,
      any liability, claims, lawsuits, losses, damages, costs or expenses to the
      extent the same are determined to be the result of any Indemnified Party&#8217;s gross
      negligence or willful misconduct. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Indemnified Party shall promptly notify Targeted of any claim or action giving
      rise to Liabilities subject to the provisions of the foregoing Section. Targeted
      shall have the right to defend or to cause to be defended any such claim or
      action, at its cost and expense. Targeted shall not settle or compromise any
      such claim or action in a manner that imposes any restrictions or obligations
      on
      Penn or Wistar or grants any rights to Penn Patent Rights or Penn Licensed
      Products (other than to the extent Targeted has the right to grant such rights
      under this Agreement) without Penn&#8217;s prior written consent. If Targeted or a
      Covered Affiliate or their sublicensee fails or declines to assume the defense
      of any such claim or action within thirty (30) days after notice thereof, Penn
      may assume the defense of such claim or action for the account and at the risk
      of Targeted, and any Liabilities related thereto shall be conclusively deemed
      a
      liability of Targeted; provided however, that Penn shall not settle such claim
      or action if such settlement affects Penn Patent Rights other than those
      specifically at issue in such claim or action without Targeted&#8217;s written
      permission, which shall not be unreasonably withheld. Targeted shall pay
      promptly to the Indemnified Party any Liabilities to which the foregoing
      indemnity relates, as incurred. The indemnification rights of Penn and Wistar
      or
      other Indemnified Party contained herein are in addition to all other rights
      which such Indemnified Party may have at law or in equity or
      otherwise.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Insurance</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 90pt; TEXT-INDENT: -54pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.4.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall procure and maintain a policy or policies of commercial general liability
      insurance, including broad form and contractual liability, in a minimum amount
      of $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      combined
      single limit per occurrence and in the aggregate as respects personal injury,
      bodily injury and property damage arising out of Targeted&#8217;s performance of this
      Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.4.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall, upon commencement of clinical trials involving Penn Licensed Products,
      procure and maintain a policy or policies of product liability insurance in
      a
      minimum amount of $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      combined
      single limit per occurrence and in the aggregate as respects bodily injury
      and
      property damage arising out of Targeted&#8217;s performance of this
      Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.4.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      policy or policies of insurance specified herein shall be issued by an insurance
      carrier with an A.M. Best rating of A or better and shall name Penn and Wistar
      as an additional insured with respect to Targeted&#8217;s performance of this
      Agreement. Targeted shall provide Penn with certificates evidencing the
      insurance coverage required herein and all subsequent renewals thereof. Such
      certificates shall provide that Targeted&#8217;s insurance carrier(s) notify Penn in
      writing at least 30 days prior to cancellation or material change in coverage.
      Penn will retain such certificates and notices from Targeted&#8217;s insurance carrier
      and provide copies of the same to Wistar upon written request.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.4.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Penn
      shall periodically review the adequacy of the minimum limits of liability
      specified herein. Further, Penn reserves the right to require Targeted to adjust
      such coverage limits in accordance with prevailing industry norms. The specified
      minimum insurance amounts shall not constitute a limitation on Targeted&#8217;s
      obligation to indemnify Penn or Wistar under this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Penn
      hereby represents that (i) to its knowledge it has the lawful right to grant
      the
      licenses granted herein, and (ii) all actions necessary with respect to due
      authorization, execution and performance of this Agreement to make it legal,
      valid, binding and enforceable with regard to Penn have been taken.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
          Treatment
          Requested.</font></strong></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-29-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
      as
      provided in Section 12.11, Targeted hereby represents that (i) to its knowledge
      it has the lawful right to enter into and to perform its obligations under
      this
      Agreement, and (ii) except for board approval of the issuance of the shares
      referred to in Section 4.1.7 (which approval Targeted will attempt to obtain
      as
      soon as practicable following the signature of this Agreement), all actions
      necessary with respect to due authorization, execution and performance of this
      Agreement to make it legal, valid, binding and enforceable with regard to
      Targeted have been taken.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      10 - USE OF PENN&#8217;S NAME; INDEPENDENT CONTRACTOR</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted,
      the Covered Affiliates, and their employees and agents shall not use, and shall
      not permit their sublicensees or their other collaborators or distributors,
      within the scope of such relationships, to use, Penn&#8217;s or Wistar&#8217;s name, any
      adaptation thereof, any Penn or Wistar logotype, trademark, service mark or
      slogan or the name, mark or logotype of any Penn or Wistar representative or
      organization in any way without the prior, written consent of Penn or Wistar.
      Notwithstanding the foregoing, Targeted, the Covered Affiliates, their
      sublicensees or their other collaborators or distributors may use Penn&#8217;s or
      Wistar&#8217;s name as required to comply with any federal or state securities
      law.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Nothing
      herein shall be deemed to establish a relationship of principal and agent
      between Penn and Targeted, nor any of their agents or employees for any purpose
      whatsoever. This Agreement shall not be construed as constituting Penn and
      Targeted as partners, or as creating any other form of legal association or
      arrangement which would impose liability upon one party for the act or failure
      to act of the other party.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      11 - DISPUTE RESOLUTION </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      unresolved dispute or difference between the parties arising out of or in
      connection with this Agreement shall at the option of either party be referred
      for review by the parties&#8217; respective Senior Officers prior to either party&#8217;s
      taking any formal legal enforcement action with respect thereto. The Senior
      Officers shall discuss the dispute or difference, and shall meet with respect
      thereto if either of them believes a meeting or meetings to be useful. The
      Senior Officers have thirty (30) days (or such lesser or longer period as they
      may agree is a useful period for their discussions) to try to resolve the
      dispute or difference, after which time each party may take such other action
      as
      it deems appropriate.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ARTICLE
      12 - ADDITIONAL PROVISIONS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      shall comply with all prevailing laws, rules and regulations pertaining to
      the
      development, testing, manufacture, marketing, sale, use, import or export of
      products. Without limiting the foregoing, it is understood that this Agreement
      may be subject to United States laws and regulations controlling the export
      of
      technical data, computer software, laboratory prototypes and other commodities,
      articles and information, including the Arms Export Control Act as amended
      in
      the Export Administration Act of 1979, and that the parties&#8217; obligations
      hereunder are contingent upon compliance with applicable United States export
      laws and regulations. The transfer of certain technical data and commodities
      may
      require a license from the cognizant agency of the United States Government
      and/or written assurances by Targeted that Targeted shall not export data or
      commodities to certain foreign countries without prior approval of such agency.
      Penn neither represents that a license is not required nor that, if required,
      it
      will issue.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-30-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Agreement and the rights and duties appertaining thereto may not be assigned
      by
      Targeted without first obtaining the express written consent of Penn, except
      that Targeted may assign its rights hereunder to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      upon
      reasonable notice and an agreement by such Covered Affiliate or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      as the
      case may be, to be bound by the rights and obligations of Targeted under this
      Agreement, without further consent. Any other such purported assignment, without
      the written consent of Penn, shall be null and of no effect. Penn shall not
      unreasonably withhold consent for Targeted to assign this Agreement to a Covered
      Affiliate or to a purchaser of all or substantially all of Targeted&#8217;s business,
      or to the owner of all or substantially all of Targeted&#8217;s business pursuant to a
      merger or consolidation plan.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notices,
      payments, statements, reports and other communications under this Agreement
      shall be in writing and shall be deemed to have been received as of the date
      dispatched if sent by personal delivery, public overnight courier (e.g. Federal
      Express), certified mail, return receipt requested as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      for
      Penn:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">University
      of Pennsylvania</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Center
      for Technology Transfer</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3160
      Chestnut Street, Suite 200</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Philadelphia,
      PA 19104-6283</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:
      Managing Director</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">with
      a
      copy to:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Office
      of
      General Counsel</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">University
      of Pennsylvania</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">133
      South
      36</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Street,
      Suite 300</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Philadelphia,
      PA 19104-3246</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:
      General Counsel</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
          Treatment
          Requested.</font></strong></div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-31-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      for
      Targeted:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
      Genetics Corporation</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1100
      Olive Way, Suite 100</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seattle,
      Washington 98101</font></div>
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      Chief Executive Officer</font></div>
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      a
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    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Orrick,
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      Commonwealth of Pennsylvania, without giving effect to conflict of law
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      License and the Additional Fields License. The parties acknowledge that the
      Sponsored Research Agreement was previously terminated and that this is the
      entire agreement between the parties with respect to the subject matter hereof.
      Any modification of this Agreement shall be in writing and signed by an
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      unenforceable in any jurisdiction shall be ineffective to the extent of such
      invalidity or unenforceability in such jurisdiction, without rendering invalid
      or unenforceable the remaining provisions hereof or affecting the validity
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      other than the parties hereto, the Covered Affiliates, or their permitted
      assigns, any benefits, rights or remedies.</font></div>
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      of the fifteenth (15th) day after the date this Agreement is signed by both
      Targeted and Penn and the fifth (5th) day after Penn notifies Targeted that
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      Directors of Targeted, and shall not become effective unless and until such
      approval is obtained; provided, however, that if such approval is not obtained
      on or before the later of the fifteenth (15th) day after the date this Agreement
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>THE
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            <td width="2%">&#160;</td>
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            <td width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
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              <td width="2%">&#160;</td>
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              <td width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
              <td width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
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              <td width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></td>
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              <td width="2%">&#160;</td>
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              </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 18pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-34-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
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        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ATTACHMENT
      1</strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PENN
      PATENT RIGHTS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THE
      PENN
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    <div align="left">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="bottom" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Penn
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                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Targeted
                </strong></font></div>
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                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Attorney
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            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Brief
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patent
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            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
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            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
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            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
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      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-35-</font></div>
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        </div>
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        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">II.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THE
      PENN
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    <div align="left">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="bottom" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Penn</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Docket</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Targeted</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Docket</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Attorney</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>File</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Brief
                Title</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patent
                Numbers and</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Dates</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-36-</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">III.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THE
      PENN
      LICENSED PATENTS IN THE FOLLOWING TABLE ARE THE GROUP 3 PATENTS:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div align="left">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="bottom" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Penn</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Docket
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Targeted
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Docket
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Attorney
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>File
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Brief
                Title</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patent
                Numbers and </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Dates</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
          Treatment
          Requested.</font></strong></div>
      </div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-37-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">IV.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THE
      PENN
      LICENSED PATENTS IN THE FOLLOWING TABLE ARE THE GROUP 4 PATENTS:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="left">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="bottom" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Penn
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Docket
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Targeted
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Docket
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Attorney</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>File
                </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Brief
                Title</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patent
                Numbers and </strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Dates</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-38-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GROUP
      4
      PATENTS (CONTINUED):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="left">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-39-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">V.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THE
      PENN
      LICENSED PATENTS IN THE FOLLOWING TABLE ARE THE GROUP 5
      PATENTS:</font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table border="1" bordercolor="black" cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="bottom" width="8%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Penn
                Docket Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="9%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Targeted
                Docket Number</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Attorney
                File Number</strong></font></div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Brief
                Title</strong></font></div>
            </td>
            <td align="left" valign="bottom" width="19%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patent
                Numbers and Dates</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="9%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="26%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="19%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="9%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="26%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="19%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
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            <td align="left" valign="top" width="8%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="9%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="26%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="19%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="8%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="9%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="26%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="19%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right">&#160;</div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-40-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">GROUP
      5
      PATENTS (CONTINUED):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div align="left">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
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            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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            <td align="left" valign="top" width="12%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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            <td align="left" valign="top" width="32%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
      <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
        <div id="FTR">
          <div id="GLFTR" style="WIDTH: 100%" align="left">
          </div>
        </div>
        <div id="PN" style="PAGE-BREAK-AFTER: always">
          <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-41-</font></div>
          <div style="WIDTH: 100%; TEXT-ALIGN: center">
            <hr style="COLOR: black" noshade size="2">
          </div>
        </div>
        <div id="HDR">
          <div id="GLHDR" style="WIDTH: 100%" align="right">
          </div>
        </div>
      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><br></font>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>ATTACHMENT
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
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    <div align="left">
      <table cellpadding="2" cellspacing="0" width="100%">

          <tr>
            <td valign="bottom" width="30%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Vector</strong></font></div>
            </td>
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            <td valign="bottom" width="30%" style="border-bottom: black thin solid;">
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            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td valign="bottom" width="20%" style="border-bottom: black thin solid;">
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Particular
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Samples</strong></font></div>
            </td>
            <td width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td valign="bottom" width="20%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Vial
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Samples</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="30%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="30%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" valign="top" width="20%">&#160;</td>
            <td width="1%">&#160;</td>
            <td valign="top" width="20%">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="30%">&#160;</td>
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<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>4
<FILENAME>v069612_ex10-17.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff">
    <div>&#160;</div>
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            <td width="50%">&#160;</td>
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                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.</strong></font></div>
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          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LICENSE
      AGREEMENT</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THIS
      AGREEMENT (the &#8220;Agreement&#8221;) is made and is effective December 5, 2006, (the
&#8220;Effective Date&#8221;) by and between Targeted Genetics Corporation, a corporation
      having a principal place of business at 1100 Olive Way, Suite 100, Seattle,
      Washington 98101 (&#8220;TGC&#8221;), and Amsterdam Molecular Therapeutics B.V. (&#8220;AMT&#8221;), a
      corporation having a principal place of business at Meibergdreef 61, 1100 DA
      Amsterdam, The Netherlands. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>RECITALS</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      TGC has exclusively licensed the Licensed Patent Rights (relating to an AAV1
      Vector gene delivery system) from the University of Pennsylvania as part of
      a
      license agreement entered into between TGC and the University of Pennsylvania
      (&#8220;UPenn&#8221;) with the effective date of June 1, 2002 (&#8220;UPenn Agreement&#8221;).
</font></div>
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      AMT is developing an AAV1 product to treat LPL type 1 and LPL type 5 deficiency
      that requires a license to the Licensed Patent Rights and therefore seeks a
      license to the Licensed Patent Rights in the Field, as such terms are defined
      herein; and</font></div>
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      TGC is willing to grant such a license on the terms set forth herein and the
      University of Pennsylvania is willing to acknowledge such grant of a sublicense.
      </font></div>
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      THEREFORE, the parties agree as follows:</font></div>
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      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>DEFINITIONS
      </u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;AAV1
      Vector&#8221; means the adeno-associated virus serotype 1 vector technology which
      includes without limitation the AAV serotype 1 rep, cap, and ITR sequences
      and
      proteins whether utilized in whole or in part to deliver therapeutic genes
      into
      cells, and which is the subject of the Licensed Patent Rights </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;Affiliate&#8221;
      means any company or other legal entity other than AMT in whatever country
      organized, controlling, controlled by or under common control with AMT. The
      term
&#8220;control&#8221; means possession, direct or indirect, of the powers to direct, cause
      or significantly influence the direction of the management and policies of
      the
      company or entity in question, whether through the ownership of voting
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      extent that such continuation-in- part (or any continuation or divisional
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                  claim of an issued and unexpired patent included within Licensed
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                  Rights, which has not been held permanently revoked, unenforceable
                  or
                  invalid by a decision of a court or other governmental agency of
                  competent
                  jurisdiction, unappealable or un-appealed within the time allowed
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                claim of a pending patent application included within Licensed Patent
                Rights which claim was filed and is being prosecuted in good faith
                and has
                not been abandoned or finally disallowed without the possibility
                of appeal
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      Patent Rights in each country of the world where there are Valid Claims of
      Licensed Patent Rights, to make, have made, develop, use, sell, offer to sell
      and import Licensed Products (the &#8220;License&#8221;). </font></div>
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      States government retains certain rights in intellectual property funded in
      whole or part under any contract, grant or similar agreement with a Federal
      agency, including but not limited to the requirement that Licensed Products
      subject to sale in the United States must be substantially manufactured in
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      organizations to use, the Licensed Patent Rights strictly for educational and
      for research purposes. Any such rights of U Penn or a third party to practice
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</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
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      percent
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      to different markets or indications, the Net Sales thereof in all such nations,
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      human clinical trial designations of phase I, phase II, phase III, and Biologic
      License Application, or BLA, while referring to United States Food and Drug
      Administration shall also be construed to mean any such jurisdiction the
      equivalent designation applied to clinical trial and drug development of similar
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</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
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            </td>
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            <td valign="top" width="60%">
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            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td valign="top" width="18%">
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                Payments</strong></font></div>
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            <td align="left" valign="top" width="60%">
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            </td>
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            <td valign="top" width="18%">
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            </td>
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            <td align="left" valign="top" width="18%">
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            <td align="left" valign="top" width="60%">
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            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td valign="top" width="18%">
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            </td>
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            </td>
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            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="60%">
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            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td valign="top" width="18%">
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            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Royalties
      accruing to TGC shall be paid to TGC on a quarterly basis. Each such payment
      will be for royalties which accrued within the most recently completed calendar
      quarter and payment shall be made by AMT within thirty (30) days of the end
      of
      such calendar quarter.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Milestone
      Payments shall be paid to TGC within thirty (30) days of
      achievement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Royalty
      or Milestone Amounts that are not paid when due shall accrue interest from
      the
      due date until paid, at a rate equal to one and one quarter percent (1.25%)
      per
      month (or the maximum allowed by law, if less).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.6</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      must
      maintain complete and accurate books and records which enable the Royalties,
      fees, and payments payable under this Agreement to be verified. The records
      for
      each calendar quarter must be maintained for three (3) years after the
      submission of each report under Article 4. Upon reasonable prior written notice
      to AMT from TGC, AMT shall permit a certified public accountant or a person
      possessing similar professional status and associated with an independent
      accounting firm reasonably acceptable to AMT to inspect all books and records
      relating to the sales of Licensed Products by AMT as necessary to verify the
      same. Access to these books and records pertaining to Net Sales must be made
      available no more than once each calendar year for each Licensed Product, during
      normal business hours, and once each year for each Licensed Product during
      each
      of the three (3) years after expiration or termination of this Agreement. The
      accounting firm shall enter into appropriate obligations with AMT to treat
      all
      information it receives during its inspection in confidence. The accounting
      firm
      shall disclose to the parties only whether such books and records are correct
      and details concerning any discrepancies, but no other information shall be
      disclosed to TGC. The charges of the accounting firm shall be paid by TCG,
      except if a review or audit of such books and records of AMT determines that
      AMT
      has underpaid royalties on Licensed Products by five percent (5%) or more then
      AMT must pay the charges of the accounting firm in connection with such review
      or audit. Notwithstanding the foregoing, AMT agrees to conduct, at its expense,
      an independent audit of sales and Royalties with respect to a Licensed Product
      at least every two (2) years once annual sales of such Licensed Product are
      greater than five million dollars ($5,000,000) per annum. The audit shall
      address, at a minimum, the amount of gross sales by or on behalf of AMT during
      the audit period, the amount of funds owed to TGC under this Agreement, and
      whether the amount owed has been paid to TGC and is reflected in the records
      of
      the AMT. A report by the auditors shall be submitted promptly to TGC upon
      completion. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested</strong></font></div>
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        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.7</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event that any patent or any claim thereof included within the Licensed Patent
      Rights shall be held invalid or unenforceable in a final decision by a court
      of
      competent jurisdiction from which no appeal has or can be taken, any and all
      obligation to pay Royalties based solely on such patent or claim shall cease
      as
      of the date of such final decision.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.8</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      component of Net Sales denominated in currencies other than U.S. Dollars shall
      be converted into U.S. Dollars in accordance with the provisions of this
      paragraph, and reported in U.S. Dollars. All payments required under this
      Agreement from time to time shall be made in U.S. Dollars. Any currency
      conversions shall be made using the average quarterly exchange rates published
      regularly by Citibank, New York, or its successor. The average will be
      calculated by summing the exchange rates for the final business day of each
      of
      the three (3) months in the applicable calendar quarter and dividing by three
      (3). All currency conversions will be calculated to an accuracy of three (3)
      digits after the decimal point.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>5.
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      FILING, PROSECUTION AND MAINTENANCE</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      between the parties, TGC shall have the responsibility for the preparation,
      filing, prosecution and maintenance of the Licensed Patent Rights in the United
      States and foreign countries for which patent protection has been sought. TGC
      shall maintain the Licensed Patent Rights in all territories for the maximum
      time period permitted by applicable law, including by timely paying all
      applicable maintenance fees and diligently prosecuting any patent applications
      and diligently defending any Third Party challenges to validity or
      enforceability. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
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        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>6.
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      learns of the infringement of any Licensed Patent Rights by the manufacture,
      use
      or sale of a product in the Field, AMT shall so inform TGC in writing and shall
      provide TGC with reasonable evidence of such infringement. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      between the parties, TGC shall have the first right but not the obligation
      to
      prosecute such infringement of the Licensed Patent Rights. In the event such
      infringement relates specifically to the manufacture, use or sale of a product
      in the Field, AMT shall have the right but not the obligation to participate
      in
      such infringement litigation and be represented by counsel of its choice at
      its
      own expense. In the event TGC notifies AMT that it will not bring such action
      as
      it relates specifically to the manufacture, use or sale of a product in the
      Field, AMT at it is own expense shall have the right to bring such action and
      shall cause TGC to be joined in such action in jurisdictions where it is
      necessary for TGC to be named in order for AMT to have standing in such
      infringement litigations; provided, however, that AMT shall allow TGC to
      participate and be represented by counsel of its own choice at AMT&#8217;s sole
      expense. AMT shall not nor shall AMT cause TGC to settle or compromise any
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
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      cooperate in all respects, including being joined as a named party, and, to
      the
      extent possible, have its employees testify when requested and make available
      relevant records, papers, information, samples, specimens, and the like. No
      such
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      of
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      both parties. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      legal
      action against a third party under this Section 6 shall be at the expense of
      the
      party on account of whom suit is brought and recoveries recovered thereby shall
      first be allocated to reimburse the expenses of the parties on a pro rata basis,
      after which, when the infringement relates to the manufacture, use or sale
      of a
      product in the Field,, any remaining recoveries shall belong to AMT and AMT
      shall pay TGC royalty amounts set forth in Section 4 on such remaining
      recoveries as if such recoveries were Net Sales. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>7.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>REPORTING</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      will
      make quarterly royalty reports to TGC on or before each January 30, April 30,
      July 30 and October 30 of each year (i.e., within thirty (30) days from the
      end
      of each calendar quarter) and certified by the chief financial officer of AMT.
      Each such royalty report will cover AMT&#8217;s most recently completed calendar
      quarter and will show: (a) the gross sales and Net Sales of Licensed Products
      sold by AMT during the most recently completed calendar quarter, including
      (i)
      all amounts invoiced, billed, or received; and (ii) the number of units and
      the
      country of sale; and (b) the Royalties payable hereunder with respect to such.
      If no sales of Licensed Products have been made during any reporting period,
      a
      statement to this effect shall be provided by AMT to TGC.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Progress
      Reports.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      will
      provide TGC with a written plan relating to AMT&#8217;s development in the Field (the
&#8220;Development Plan&#8221;) within thirty (30) days after the signing of this Agreement
      by both parties. The Development Plan will outline the disease indications,
      patient populations to be addressed, publicly available information on
      competition and estimates of development timelines for AMT&#8217;s products in the
      Field. The Development Plan will separately address activities applicable to
      each Licensed Product. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
      or
      within thirty (30) days following each anniversary of the Effective Date, AMT
      will provide TGC with a written progress report that describes any progress
      made
      against the Development Plan (as supplemented by progress reports, where
      applicable) submitted a year earlier and plans for development in the coming
      year. AMT shall also notify TGC within thirty (30) days of the first commercial
      sale of any Licensed Product. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.2.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      will
      provide TGC with audited financial statements, produced by a certified public
      accounting firm, ninety (90) days following the end of each of AMT&#8217;s fiscal
      years, as well as a copy of any management letter recommendations submitted
      by
      the auditors.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.2.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Where
      applicable AMT will provide TGC with copies of reports such as Form 10-K and
      Form 10-Q filings made to the United States Securities and Exchange Commission
      or other similar regulatory agency outside of the United States. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.2.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">TGC
      shall
      keep the Development Plan, all such progress reports, financial statements
      and
      any other information AMT provided to TCG under this Section 7 confidential,
      other than the provision of such reports to the University of Pennsylvania
      as
      required under the UPenn Agreement, for five (5) years or until the time, if
      any, of the first commercial sale of any Licensed Product(s). </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>8.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>TERM
      OF THE AGREEMENT</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
      otherwise terminated in accordance with the terms of this Agreement, this
      Agreement shall be in force from the Effective Date until the last to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">expire
      Valid Claim of Licensed Patent Rights (the &#8220;Term&#8221;).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      termination of this Agreement shall not affect the rights and obligations set
      forth in the following Articles:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
      6.4 Allocation of Patent Infringement Recovery</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
      11.2 Disposition of Licensed Products on Hand upon Termination</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
      13 Use of Names and Trademarks </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
      15 Indemnification</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
      20 Failure to Perform</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
      21 Governing Law</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>9.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>TERMINATION
      BY TGC</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      violates or fails to pay Royalties, Milestone Payments or fees under Articles
      3
      or 4, or (ii) breaches or fails to perform, or has any other default, under
      any
      contractual obligation of AMT to TGC and fails to repair any default in Sections
      9.1(i) or 9.1(ii) within thirty (30) days after receipt of such notice of
      breach, TGC shall have the right to terminate this Agreement by a second written
      notice (&#8220;Notice of Termination&#8221;) to AMT. If a Notice of Termination is sent to
      AMT, this Agreement shall terminate fifteen (15) days after receipt of such
      notice unless other terms are mutually agreed upon. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
      AMT
      shall cease its operations other than in connection with a reorganization of
      its
      business in connection with a redomociliation or other corporate event unrelated
      to the solvency of AMT, become bankrupt or insolvent, apply for or consent
      to
      the appointment of a trustee, receiver or liquidator of its assets or seek
      relief under any law for the aid of debtors then TGC shall have the right to
      terminate the License. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>10.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>TERMINATION
      BY AMT</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      shall
      have the right to terminate this Agreement at any time, effective sixty (60)
      days after receipt by TGC of a written notice of termination delivered pursuant
      to this section.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      may
      terminate this Agreement with immediate effect by giving written notice to
      TGC,
      if TGC ceases its operations, becomes insolvent, applies for or consents to
      the
      appointment of a trustee, receiver or liquidator of its assets, or seeks relief
      under any law for the aid of debtors. If TGC violates or fails to perform any
      material term or covenant of this Agreement, then AMT may give written notice
      of
      such default (&#8220;Notice of Default&#8221;) to TGC. If TGC fails to repair such default
      within thirty (30) days after receipt of such Notice of Default, AMT shall
      have
      the right to terminate this Agreement by a Notice of Termination to TGC,
      effective immediately.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>11.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>EFFECT
      OF TERMINATION, DISPOSITION OF LICENSED PRODUCTS UPON
      TERMINATION</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Effect
      of Termination</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Upon
      the termination of this Agreement, except pursuant to Paragraph 10.2, the
      License granted by TGC to AMT hereunder shall revert to TGC. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
      termination of this Agreement for any reason, except pursuant to Paragraph
      10.2,
      AMT shall have the right to dispose of all previously made or partially made
      Licensed Products, within a period of three (3) months; provided, however,
      that
      the sale of such Licensed Products shall be subject to the terms of this
      Agreement including, but not limited to, the payment of Royalties at the rate
      and at the time provided herein and the rendering of reports. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
      termination of this Agreement for any reason, except pursuant to Paragraph
      10.2,
      AMT shall pay, within thirty (30) days to TGC, pursuant to Section 3 and 4,
      any
      and all amounts due within sixty (60) days of receipt by TGC of a notice of
      termination from AMT.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
      the
      termination of this Agreement pursuant to Paragraph 10.2 or the termination
      of
      the UPenn Agreement, TGC&#8217;s rights hereunder shall be assigned directly to the
      UPenn and shall remain in full force and effect under the terms hereof; and,
      provided that AMT is not in material breach of this Agreement, the rights and
      obligations of AMT herein (including but not limited to the License) shall
      continue in full force and effect without expansion, restriction, inhibition
      or
      diminution; provided that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.5</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Nothing
      herein shall constitute a waiver of either party's right to seek damages in
      the
      event of a material breach of this Agreement by the other party.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>12.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>PATENT
      MARKING</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      agrees to mark all Licensed Products made, used or sold under the terms of
      this
      Agreement, or their containers, in accordance with the applicable patent marking
      laws.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>13.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>USE
      OF NAMES AND TRADEMARKS</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
      required by law, nothing contained in this Agreement shall be construed as
      conferring any right to use in advertising, publicity, or other promotional
      activities any name, trade name, trademark, or other designation of either
      party
      hereto or the UPenn (including any contraction or abbreviation of the
      foregoing).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unless
      required by law, neither party shall disclose, at any time, the financial terms
      or events upon which financial obligations are triggered in the License, save
      that TGC and AMT shall have the right to do so (i) to the extent such disclosure
      is required in publicly filed financial statements or other public statements
      under rules governing a stock exchange (e.g., the rules of the United States
      Securities and Exchange Commission, NASDAQ, NYSE, Amsterdam, UKLA or any other
      stock exchange on which securities issued by either Party may be listed); and
      (ii) to its actual or potential investment bankers; (iii)&#160;to existing and
      potential investors in connection with an offering or placement of securities
      for purposes of obtaining financing for its business and to actual and
      prospective lenders for the purpose of obtaining financing for its business;
      and
      (iv) to a bona fide potential acquiror or merger partner for the purposes of
      evaluating entering into a merger or acquisition, provided, however, any such
      persons must be obligated to hold in confidence and not make use of such
      confidential information for any purpose. A press release acknowledging the
      grant of the License by TGC to AMT shall be publicly disclosed by either or
      both
      parties, only upon mutual agreement of the text of such release by both parties.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>14.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>REPRESENTATIONS,
      WARRANTIES AND COVENANTS</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
      party hereby represents, warrants, and covenants to the other party as of the
      Effective Date as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">i)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">such
      party (i) has the power and authority and the legal right to enter into this
      Agreement and perform its obligations hereunder, and (ii) has taken all
      necessary action on its part required to authorize the execution and delivery
      of
      this Agreement and the performance of its obligations hereunder. This Agreement
      has been duly executed and delivered on behalf of such party and constitutes
      a
      legal, valid, binding obligation of such party and is enforceable against it
      in
      accordance with its terms;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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      <div id="HDR">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">ii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">such
      party is not aware of any pending or threatened litigation (and has not received
      any communication) that alleges that such party&#8217;s activities related to this
      Agreement have violated, or that by conducting the activities as contemplated
      herein such party would violate, any of the intellectual property rights of
      any
      other Person;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">iii)</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">all
      necessary consents, approvals and authorizations of all governmental authorities
      and other Persons or entities required to be obtained by such party in
      connection with this Agreement have been obtained; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">TGC
      hereby represents, warrants, and covenants to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      as of
      the Effective Date that TGC is the exclusive licensee of the Licensed Patent
      Rights. During the term of this Agreement, TGC shall use its best efforts not
      to
      encumber or diminish the rights granted to AMT hereunder, including, without
      limitation, by not committing any acts or permitting the occurrence of any
      omissions that would cause the breach or termination of the UPenn Agreement.
      TGC
      shall promptly provide AMT with notice of any alleged breach or termination
      of
      the UPenn Agreement. As of the date hereof, TGC is not in breach of the UPenn
      Agreement, and it is in full force and effect.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>15.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>DISCLAIMER
      OF WARRANTY; INDEMNIFICATION</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">THE
      LICENSED PATENT RIGHTS AND LICENSED PRODUCTS ARE PROVIDED ON AN &#8220;AS IS&#8221; BASIS
      AND TGC MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT
      THERETO. BY WAY OF EXAMPLE BUT NOT OF LIMITATION, TGC MAKES NO REPRESENTATION
      OR
      WARRANTY: (i) OF COMMERCIAL UTILITY; (ii) OF MERCHANTABILITY OR FITNESS FOR
      A
      PARTICULAR PURPOSE; OR (iii) THAT THE USE OF THE LICENSED PATENT RIGHTS AND
      LICENSED PRODUCTS UNDER THIS AGREEMENT WILL NOT INFRINGE ANY PATENT, COPYRIGHT
      OR TRADEMARK OR OTHER PROPRIETARY OR PROPERTY RIGHTS OF OTHERS. TGC SHALL NOT
      BE
      LIABLE TO AMT OR ANY THIRD PARTY WITH RESPECT TO: ANY CLAIM ARISING FROM THE
      USE
      OF THE LICENSED PATENT RIGHTS AND LICENSED PRODUCTS LICENSED UNDER THIS
      AGREEMENT OR FROM THE MANUFACTURE, USE OR SALE OF LICENSED PRODUCTS; OR ANY
      CLAIM FOR LOSS OF PROFITS, LOSS OR INTERRUPTION OF BUSINESS, OR FOR INDIRECT,
      SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      will
      defend, indemnify and hold harmless TGC and its trustees, officers, agents
      and
      employees and UPenn and its trustees, officers, agents and employees both
      collectively and severally (individually, an &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Indemnified
      Party</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;,
      and
      collectively, the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Indemnified
      Parties</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;),
      from
      and against any and all liability, loss, damage, action, claim or expense
      suffered or incurred by the Indemnified Parties (including attorney&#8217;s fees)
      (individually, a &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Liability</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;,
      and
      collectively, the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Liabilities</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
      that
      results from or arises out of (a) the development, use, manufacture, promotion,
      sale or other disposition of any Licensed Product by AMT or its collaborators
      or
      distributors; and (b) any breach by AMT of any covenant or agreement contained
      in this Agreement; and (c) the enforcement by an Indemnified Party of its rights
      under this Section. . Without limiting the foregoing, AMT will defend, indemnify
      and hold harmless the Indemnified Parties from and against any Liabilities
      resulting from: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15.2.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">any
      product liability or other claim of any kind related to the use by a third
      party
      of a Licensed Product that was manufactured, sold or otherwise disposed
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">of
      by
      AMT, or its collaborators or distributors, pursuant to and within the scope
      of
      such relationships;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15.2.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a
      claim
      by a third party that the use by AMT or its collaborators or distributors,
      pursuant to and within the scope of such relationships, of Licensed Patent
      Rights or the design, composition, manufacture, use, sale or other disposition
      of any Licensed Product by AMT infringes or violates any patent, copyright,
      trademark or other intellectual property rights of such third party;
      and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 72pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15.2.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      clinical
      trials or studies conducted by or on behalf of AMT, or its collaborators or
      distributors, pursuant to and within the scope of such relationships, relating
      to the Licensed Products and Licensed Patent Rights, including, without
      limitation, any claim by or on behalf of a human subject of any such clinical
      trial or study, any claim arising from the procedures specified in any protocol
      used in any such clinical trial or study, any claim of deviation, authorized
      or
      unauthorized, from the protocols of any such clinical trial or study, and any
      claim resulting from or arising out of the manufacture or quality control by
      a
      third party of any substance administered in any clinical trial or
      study.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, however, the Liabilities shall not include, and in no instance
      shall AMT be required to indemnify any Indemnified Party with respect to, any
      liability, claims, lawsuits, losses, damages, costs or expenses to the extent
      the same are determined to be the result of any Indemnified Party&#8217;s gross
      negligence or willful misconduct.</font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Indemnified Party shall promptly notify AMT of any claim or action giving rise
      to Liabilities subject to the provisions of the foregoing Section. AMT shall
      have the right to defend or to cause to be defended any such claim or action,
      at
      its cost and expense. AMT shall not settle or compromise any such claim or
      action in a manner that imposes any restrictions or obligations on TGC or grants
      any rights to Licensed Patent Rights or Licensed Products (other than to the
      extent AMT has the right to grant such rights under this Agreement) without
      TGC&#8217;s prior written consent. If AMT fails or declines to assume the defense of
      any such claim or action within thirty (30) days after notice thereof, TGC
      may
      assume the defense of such claim or action for the account and at the risk
      of
      AMT, and any Liabilities related thereto shall be conclusively deemed a
      liability of AMT; provided however, that TGC shall not settle such claim or
      action if such settlement affects Licensed Patent Rights other than those
      specifically at issue in such claim or action without AMT&#8217;s written permission,
      which shall not be unreasonably withheld. AMT shall pay promptly to the
      Indemnified Party any Liabilities to which the foregoing indemnity relates,
      as
      incurred. The indemnification rights of TGC or other Indemnified Party contained
      herein are in addition to all other rights which such Indemnified Party may
      have
      at law or in equity or otherwise.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>16.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>INSURANCE</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      shall
      procure and maintain a policy or policies of commercial general liability
      insurance, including broad form and contractual liability, in a minimum amount
      of $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      combined
      single limit per occurrence and in the aggregate as respects personal injury,
      bodily injury and property damage arising out of AMT&#8217;s performance of this
      Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      shall, upon commencement of clinical trials involving Licensed Products, procure
      and maintain a policy or policies of product liability insurance in a minimum
      amount of $</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      combined
      single limit per occurrence and in the aggregate as respects bodily injury
      and
      property damage arising out of AMT&#8217;s performance of this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16.3</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">AMT
      shall
      provide TGC with certificates evidencing the insurance coverage required herein
      and all subsequent renewals thereof. Such certificates shall provide that AMT&#8217;s
      insurance carrier(s) notify TGC in writing at least 30 days prior to
      cancellation or material change in coverage. TGC will retain such certificates
      and notices from AMT&#8217;s insurance carrier.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16.4</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">TGC
      shall
      periodically review the adequacy of the minimum limits of liability specified
      herein. Further, TGC reserves the right to require AMT to adjust such coverage
      limits in accordance with prevailing industry norms, to the extent TGC is
      required to do the same by UPenn pursuant to the UPenn Agreement. The specified
      minimum insurance amounts shall not constitute a limitation on AMT&#8217;s obligation
      to indemnify TGC under this Agreement.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>17.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>NOTICES</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">17.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      notice or payment required to be given to either party shall be deemed to have
      been properly given and to be effective (a) on the date of delivery if delivered
      in person or (b) five (5) days after mailing if mailed by a nationally
      recognized courier or by first-class certified mail, postage paid, to the
      respective addresses given below, or to such other address designated by written
      notice, or sent via facsimile transmission to the number specified
      below.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">
            </td>
            <td align="left" style="width: 153pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
              AMT:</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Meibergdreef
                61</font></div>
              <div align="left">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">P.O.
                  Box 22506</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1100
                  DA Amsterdam</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                  Netherlands</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Fax:
                  31 (0) 20 566 92 72</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:
                  CFO</font></div>
              </div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div>
        <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

            <tr valign="top" style="line-height: 1.25;">
              <td style="width: 72pt;">
              </td>
              <td align="left" style="width: 153pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                TGC:</font></td>
              <td align="left">
                <div align="left">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1100
                    Olive Way, Suite 100</font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seattle,
                    Washington 98101</font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Fax:
                    +1 206 223-0288</font></div>
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Attention:
                    Chief Executive Officer</font></div>
                </div>
              </td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>18.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>ASSIGNABILITY</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">18.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Agreement is binding upon and shall inure to the benefit of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">the
      parties and their successors and assigns. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">18.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Agreement may not be assigned by AMT without first obtaining the express written
      consent of TGC. TGC shall not unreasonably withhold consent for AMT to assign
      this Agreement to a Third Party in the event that AMT transfers all or
      substantially all of the business of AMT to which the License relates to a
      Third
      Party. Such Third Party shall assume all royalty obligations to TGC hereunder.
      TGC further acknowledges that it shall not be entitled to any Royalty or other
      compensation from the transaction pursuant to which the transfer to a Third
      Party of all or substantially all of the business of AMT to which the License
      relates took place.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
      Treatment
      Requested</font></strong></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>19.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>WAIVER</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">19.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">It
      is
      agreed that no waiver by either party hereto of any breach or default of any
      of
      the covenants or agreements herein set forth shall be deemed a waiver as to
      any
      subsequent and/or similar breach or default.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">19.2</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">UPenn,
      by
      its signature on this Agreement, expressly acknowledges and agrees (1) to the
      terms of this sublicense; (2) to the extent that any term of this sublicense
      is
      in conflict with the UPenn Agreement, the terms of this Agreement shall govern
      as to the rights and obligations of AMT to TGC and AMT to UPenn pursuant to
      this
      Agreement; and (3) to the extent any term of this sublicense is in conflict
      with
      the UPenn Agreement, other than the UPenn Agreement terms of Section 4.1.2
      and
      4.1.5, 4.3.2 and 4.3.3, the terms of this Agreement shall govern as to the
      obligation of TGC to UPenn as they relate to this specific Agreement. TGC shall
      be obligated to comply with Sections 4.1.2, 4.1.5, 4.3.2 and 4.3.3 of the UPenn
      Agreement as they relate to the financial obligations of TGC to UPenn arising
      from the grant of this sublicense to AMT, unless mutually agreed otherwise
      between TGC and UPenn.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>20.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>FAILURE
      TO PERFORM</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">20.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event of a failure of performance due under the terms of this Agreement and
      if
      it becomes necessary for either party to undertake legal action against the
      other on account thereof, then the prevailing party shall be entitled to
      reasonable attorney&#8217;s fees in addition to costs and necessary
      disbursements.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>21.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>GOVERNING
      LAW</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">21.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Agreement shall be interpreted and construed in accordance with the laws of
      the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Commonwealth
      of Pennsylvania without regard to the principles of conflicts of laws, but
      the
      scope and validity of any patent or patent application shall be governed by
      the
      applicable laws of the country of such patent or patent application. Each party
      hereby submits itself to the non-exclusive jurisdiction of the federal or state
      courts located in the Commonwealth of Pennsylvania, and any courts of appeal
      therefrom, and waives any objection (on grounds of lack of jurisdiction, or
      forum non conveniens or otherwise) to the exercise of such jurisdiction over
      it
      by any such courts, in connection with any action that may be brought in such
      courts. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>22.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>FORCE
      MAJEURE</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">22.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      a
      period of ninety (90) days, the parties to this Agreement shall be excused
      from
      any performance required hereunder if such performance is rendered impossible
      or
      unfeasible due to any catastrophe or other major event beyond their reasonable
      control, including, without limitation, war, riot, and insurrection; laws,
      proclamations, edicts, ordinances or regulations; strikes, lockouts or other
      serious labor disputes; and floods, fires, explosions, or other natural
      disasters. When such events have abated, the parties&#8217; respective obligations
      hereunder shall resume.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>23.
      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>RIGHTS
      IN BANKRUPTCY</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: -1.8pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      rights and licenses </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(including
      but not limited to the License) granted under or pursuant to this Agreement
      by
      TGC to AMT are, and shall otherwise be deemed to be, for purposes of Section
      365(n) of the U.S. Bankruptcy Code, licenses of right to &#8220;intellectual property&#8221;
as defined under Section 101 of the U.S. Banckruptcy Code. The parties agree
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      and to the fullest extent permitted by law. </font></div>
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      materially affected. It is further the intention of the parties that in lieu
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      similar as possible in economic and business objectives as intended by the
      parties to such invalid, illegal or unenforceable, provision, but shall be
      valid, legal and enforceable.</font></div>
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                <hr style="COLOR: black" align="left" noshade size="2" width="90%">
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                H. Stewart Parker</font></div>
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            <td width="1%">&#160;</td>
            <td align="left" valign="top" width="49%" style="border-bottom: medium none;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: medium none;">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By&#160;&#160;
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.5-
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      authorization, execution and performance of this Agreement to make it legal,
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.1</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Targeted
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      and/or written assurances by Targeted that Targeted shall not export data or
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<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>5
<FILENAME>v069612_ex10-18.htm
<TEXT>
<html>
  <head>
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</title>
</head>
  <body bgcolor="#ffffff">
    <div>&#160;</div>
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            <td width="50%">&#160;</td>
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                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.</strong></font></div>
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          </tr>

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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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            <td width="5%">&#160;</td>
            <td width="75%">&#160;</td>
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            <td width="75%">&#160;</td>
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                to License L-059-93/0</font></div>
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            <td width="5%">&#160;</td>
            <td width="75%">&#160;</td>
            <td width="20%">&#160;</td>
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            <td width="75%" style="border-bottom: black thin solid;">&#160;</td>
            <td width="20%" style="border-bottom: #ffffff solid;">&#160;</td>
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          <tr bgcolor="white">
            <td width="5%">&#160;</td>
            <td width="75%">&#160;</td>
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      (Royalties), Appendix&#160;D (Modifications), Appendix&#160;E (Benchmarks), and
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          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                National Institutes of Health ("NIH"), the Centers for Disease Control
                and
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                hereinafter singly or collectively referred to as "</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">",
                agencies of the United States Public Health Service within the Department
                of Health and Human Services ("</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DHHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">");
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          <tr valign="top" style="line-height: 1.25;">
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                person, corporation, or institution identified above and/or on the
                Signature Page, having offices at the address indicated on the Signature
                Page, and its Affiliates as defined in Appendix D, Paragraph 2.14,
                hereinafter referred to as "</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">".</font></div>
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        </div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agree as
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    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>BACKGROUND</u></font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.01</font></div>
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                investigators made inventions that may have commercial
                applicability.</font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

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                employees and other inventors, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DHHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
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                also owns any tangible embodiments of these inventions actually reduced
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                the authority to enter into this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for the licensing of rights to these
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                desires to transfer these inventions to the private sector through
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                benefit.</font></div>
            </td>
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          <tr valign="top" style="line-height: 1.25;">
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                desires to acquire commercialization rights to certain of these inventions
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            </td>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr valign="top" style="line-height: 1.25;">
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          <tr valign="top" style="line-height: 1.25;">
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          <tr valign="top" style="line-height: 1.25;">
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                means the initial transfer by or on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
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                Products </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or
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                by
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                </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">or
                its sublicensees in exchange for cash or some equivalent to which
                value
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    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.04</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Government"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                means the Government of the United States of
                America.</font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.05</font></div>
            </td>
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                means the fields of use identified in
                Appendix&#160;B.</font></div>
            </td>
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      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.06</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Licensed&#160;Patent&#160;Rights"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall mean:</font></div>
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    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Patent
                applications (including provisional patent applications and PCT patent
                applications) and/or patents listed in Appendix A, all divisions
                and
                continuations of these applications, all patents issuing from such
                applications, divisions, and continuations, and any reissues,
                reexaminations, and extensions of all such
                patents;</font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
                the extent that the following contain one or more claims directed
                to the
                invention or inventions disclosed in a) above: i) continuations-in-part
                of
                a) above; ii) all divisions and continuations of these
                continuations-in-part; iii) all patents issuing from such
                continuations-in-part, divisions, and continuations; iv) priority
                patent
                application(s) of a) above; and v) any reissues, reexaminations,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>and
                extensions of all such patents</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;</font></div>
            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c)</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
                the extent that the following contain one or more claims directed
                to the
                invention or inventions disclosed in a) above: all counterpart foreign
                and
                U.S. patent applications and patents to a) and b) above, including
                those
                listed in Appendix A.</font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>not</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      include
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      to
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.07</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Licensed
                Process(es)"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                means processes which, in the course of being practiced would be
                within
                the scope of one or more claims of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                that have not been held unpatentable, invalid or unenforceable by
                an
                unappealed or unappealable judgment of a court of competent
                jurisdiction.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.08</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Licensed
                Product(s)"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                means tangible materials which, in the course of manufacture, use,
                sale,
                or importation would be within the scope of one or more claims of
                the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                that have not been held unpatentable, invalid or unenforceable by
                an
                unappealed or unappealable judgment of a court of competent
                jurisdiction.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.09</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Licensed&#160;Territory"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                means the geographical area identified in
                Appendix&#160;B.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.10</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Net
                Sales"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                means the total gross receipts for sales of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                practice of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                by
                or on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                its sublicensees, and from leasing, renting, or otherwise making
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                available to others without sale or other dispositions, whether invoiced
                or not, less returns and allowances, packing costs, insurance costs,
                freight out, taxes or excise duties imposed on the transaction (if
                separately invoiced), and wholesaler and cash discounts in amounts
                customary in the trade to the extent actually granted. No deductions
                shall
                be made for commissions paid to individuals, whether they be with
                independent sales agencies or regularly employed by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                or sublicensees, and on its payroll, or for the cost of
                collections.</font></div>
            </td>
          </tr>

      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.11</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Practical
                Application"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                means to manufacture in the case of a composition or product, to
                practice
                in the case of a process or method, or to operate in the case of
                a machine
                or system; and in each case, under such conditions as to establish
                that
                the invention is being utilized and that its benefits are to the
                extent
                permitted by law or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                regulations available to the public on reasonable
                terms.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.12</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>"Research
                License"</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                means a nontransferable, nonexclusive license to make and to use
                the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
                defined by the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for purposes of research and not for purposes of commercial manufacture
                or
                distribution or in lieu of
                purchase.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
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      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>GRANT
                OF RIGHTS</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                hereby grants and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                accepts, subject to the terms and conditions of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                an exclusive license under the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
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                to
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                to offer
                to sell, and to import any </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Fields&#160;of&#160;Use</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and to practice and have practiced any </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Fields&#160;of&#160;Use</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
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            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                confers no license or rights by implication, estoppel, or otherwise
                under
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                other than </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                regardless of whether such patents are dominant or subordinate to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>SUBLICENSING</u></font></div>
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            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.01</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
                written approval by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                which approval will not be unreasonably withheld, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may enter into sublicensing agreements under the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees that any sublicenses granted by it shall provide that the
                obligations to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                Paragraphs 5.01-5.04, 8.01, 10.01, 10.02, 12.05, and 13.07-13.09
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                shall be binding upon the sublicensee as if it were a party to this
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                further agrees to attach copies of these Paragraphs to all sublicense
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
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                shall provide for the termination of the sublicense, or the conversion
                to
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                at the option of the sublicensee, upon termination of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under Article 13. Such conversion is subject to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                approval and contingent upon acceptance by the sublicensee of the
                remaining provisions of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
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            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.04</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to forward to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a
                copy of each fully executed sublicense agreement postmarked within
                thirty
                (30) days of the execution of such agreement. To the extent permitted
                by
                law, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to maintain each such sublicense agreement in
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>STATUTORY
                AND PHS REQUIREMENTS AND RESERVED GOVERNMENT
                RIGHTS</u></font></div>
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            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.01</font></div>
            </td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reserves on behalf of the Government an irrevocable, nonexclusive,
                nontransferable, royalty-free license for the practice of all inventions
                licensed under the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                throughout the world by or on behalf of the Government and on behalf
                of
                any foreign government or international organization pursuant to
                any
                existing or future treaty or agreement to which the <strong>Government
                </strong>is a signatory. Prior to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
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                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to provide </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reasonable quantities of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                materials made through the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
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                for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                research use.</font></div>
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            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
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                are Subject Inventions made under a Cooperative Research and Development
                Agreement (CRADA), </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                grants to the Government, pursuant to 15&#160;U.S.C.&#160;&#167;3710a(b)(1)(A),
                a nonexclusive, nontransferable, irrevocable, paid-up license to
                practice
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                have </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                practiced throughout the world by or on behalf of the
                <strong>Government</strong>. In the exercise of such license, the
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                commercial or financial information that is privileged or confidential
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                considered as such if it had been obtained from a non-Federal party.
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                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to provide </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reasonable quantities of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
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                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                research use.</font></div>
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            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees that products used or sold in the United States embodying
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                or
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                shall be manufactured substantially in the United States, unless
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            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                acknowledges that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may enter into future Cooperative Research and Development Agreements
                (CRADAs) under the Federal Technology Transfer Act of 1986 that relate
                to
                the subject matter of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees not to unreasonably deny requests for a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Research
                License</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                from such future collaborators with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                when acquiring such rights is necessary in order to make a Cooperative
                Research and Development Agreement (CRADA) project feasible. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may request an opportunity to join as a party to the proposed Cooperative
                Research and Development Agreement
                (CRADA).</font></div>
            </td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.04</font></div>
            </td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                addition to the reserved license of Paragraph 5.01 above, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reserves the right to grant nonexclusive <strong>Research
                Licenses</strong> directly or to require </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                grant nonexclusive <strong>Research Licenses</strong> on reasonable terms.
                The purpose of this <strong>Research License</strong> is to encourage
                basic research, whether conducted at an academic or corporate facility.
                In
                order to safeguard the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                however, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall consult with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                before granting to commercial entities a Research License or providing
                to
                them research samples of materials made through the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                exceptional circumstances, and in the event that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                are Subject Inventions made under a Cooperative Research and Development
                Agreement (CRADA), the Government, pursuant to
                15&#160;U.S.C.&#160;&#167;3710a(b)(1)(B), retains the right to require the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                grant to a responsible applicant a nonexclusive, partially exclusive,
                or
                exclusive sublicense to use </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                field of use on terms that are reasonable under the circumstances;
                or if
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                fails to grant such a license, the <strong>Government</strong> retains the
                right to grant the license itself. The exercise of such rights by
                the
                <strong>Governmen</strong>t shall only be in exceptional circumstances and
                only if the <strong>Government</strong> determines (i) the action is
                necessary to meet health or safety needs that are not reasonably
                satisfied
                by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                (ii) the action is necessary to meet requirements for public use
                specified
                by Federal regulations, and such requirements are not reasonably
                satisfied
                by the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                or (iii) the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                has failed to comply with an agreement containing provisions described
                in
                15&#160;U.S.C.&#160;&#167;3710a(c)(4)(B). The determination made by the
                <strong>Government </strong>under this Article is subject to
                administrative appeal and judicial review under
                35&#160;U.S.C.&#160;&#167;203(2).</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>ROYALTIES
                AND REIMBURSEMENT</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a
                noncreditable, nonrefundable license issue royalty as set forth in
                Appendix C within thirty (30) days from the date that this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                becomes effective.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a
                nonrefundable minimum annual royalty as set forth in Appendix C.
                The
                minimum annual royalty is due and payable on January 1 of each calendar
                year and may be credited against any earned royalties due for sales
                made
                in that year. The minimum annual royalty due for the first calendar
                year
                of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may be prorated according to the fraction of the calendar year remaining
                between the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and the next subsequent January 1.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                earned royalties as set forth in Appendix
                C.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                benchmark royalties as set forth in Appendix
                C.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.05</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                sublicensing royalties as set forth in Appendix
                C.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          5 of
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        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.06</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
                patent or patent application licensed under this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall cease to fall within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for the purpose of computing earned royalty payments in any given
                country
                on the earliest of the dates that a) the application has been abandoned
                and not continued, b) the patent expires or irrevocably lapses, or
                c) the
                claim has been held to be invalid or unenforceable by an unappealed
                or
                unappealable decision of a court of competent jurisdiction or
                administrative agency.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.07</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
                multiple royalties shall be payable because any </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                are covered by more than one of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.08</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
                sales of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                by
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                sublicensees or on sales made in other than an arm's-length transaction,
                the value of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                attributed under this Article 6 to such a transaction shall be that
                which
                would have been received in an arm's-length transaction, based on
                sales of
                like quantity and quality products on or about the time of such
                transaction.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.09</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
                regard to expenses associated with the preparation, filing, prosecution,
                and maintenance of all patent applications and patents included within
                the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                incurred by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                prior to the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                as an additional royalty, within sixty (60) days of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                submission of a statement and request for payment to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                an amount equivalent to such patent expenses previously incurred
                by
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.10</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
                regard to expenses associated with the preparation, filing, prosecution,
                and maintenance of all patent applications and patents included within
                the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                incurred by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                on
                or after the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at its sole option, may require </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)
      to
      pay </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      on an
      annual basis, within sixty (60) days of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
      submission of a statement and request for payment, a royalty amount equivalent
      to all such patent expenses incurred during the previous calendar year(s);
      or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)
      to
      pay such expenses directly to the law firm employed by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to
      handle such functions. However, in such event, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and not
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall be
      the client of such law firm.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      limited circumstances, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      may be
      given the right to assume responsibility for the preparation, filing,
      prosecution, or maintenance of any patent application or patent included with
      the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      In that
      event, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall
      directly pay the attorneys or agents engaged to prepare, file, prosecute, or
      maintain such patent applications or patents and shall provide to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      copies
      of each invoice associated with such services as well as documentation that
      such
      invoices have been paid.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.11</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may elect to surrender its rights in any country of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Territory</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under any </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                upon ninety (90) days written notice to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and owe no payment obligation under Article 6.10 for patent-related
                expenses incurred in that country after ninety (90) days of the effective
                date of such written notice.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>PATENT
                FILING, PROSECUTION, AND
                MAINTENANCE</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Except
                as otherwise provided in this Article 7, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to take responsibility for, but to consult with, the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                the preparation, filing, prosecution, and maintenance of any and
                all
                patent applications or patents included in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and shall furnish copies of relevant patent-related documents to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          6 of
          30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                written request, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall assume the responsibility for the preparation, filing, prosecution,
                and maintenance of any and all patent applications or patents included
                in
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and shall on an ongoing basis promptly furnish copies of all
                patent-related documents to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                In such event, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall, subject to the prior approval of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                select registered patent attorneys or patent agents to provide such
                services on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall provide appropriate powers of attorney and other documents
                necessary
                to undertake such actions to the patent attorneys or patent agents
                providing such services. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and its attorneys or agents shall consult with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                all aspects of the preparation, filing, prosecution and maintenance
                of
                patent applications and patents included within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and shall provide </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                sufficient opportunity to comment on any document that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                intends to file or to cause to be filed with the relevant intellectual
                property or patent office.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">At
                any time, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may provide </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                with written notice that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                wishes to assume control of the preparation, filing, prosecution,
                and
                maintenance of any and all patent applications or patents included
                in the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                If </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                elects to assume such responsibilities, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to cooperate fully with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                its attorneys, and agents in the preparation, filing, prosecution,
                and
                maintenance of any and all patent applications or patents included
                in the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and to provide </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                with complete copies of any and all documents or other materials
                that
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                deems necessary to undertake such responsibilities. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall be responsible for all costs associated with transferring patent
                prosecution responsibilities to an attorney or agent of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                choice.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
                party shall promptly inform the other as to all matters that come
                to its
                attention that may affect the preparation, filing, prosecution, or
                maintenance of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and permit each other to provide comments and suggestions with respect
                to
                the preparation, filing, prosecution, and maintenance of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                which comments and suggestions shall be considered by the other
                party.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>RECORD
                KEEPING</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to keep accurate and correct records of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                made, used, sold, or imported and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                practiced under this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                appropriate to determine the amount of royalties due </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                Such records shall be retained for at least five (5) years following
                a
                given reporting period and shall be available during normal business
                hours
                for inspection at the expense of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                by
                an accountant or other designated auditor selected by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for the sole purpose of verifying reports and payments hereunder.
                The
                accountant or auditor shall only disclose to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                information relating to the accuracy of reports and payments made
                under
                this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                If an inspection shows an underreporting or underpayment in excess
                of five
                percent (5%) for any twelve (12) month period, then </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall reimburse </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for the cost of the inspection at the time </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pays the unreported royalties, including any late charges as required
                by
                Paragraph 9.08 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                All payments required under this Paragraph shall be due within thirty
                (30)
                days of the date </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                provides </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                notice of the payment due.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to have an audit of sales and royalties conducted by an independent
                auditor at least every two (2) years if annual sales of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Product</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                are over two (2) million dollars. The audit shall address, at a minimum,
                the amount of gross sales by or on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                during the audit period, terms of the license as to percentage or
                fixed
                royalty to be remitted to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                the amount of royalty funds owed to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                and whether the royalty amount owed has been paid to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and is reflected in the records of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                The audit shall also indicate the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                license number, product, and the time period being audited. A report
                certified by the auditor shall be submitted promptly by the auditor
                directly to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                on
                completion. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall pay for the entire cost of the
                audit.</font></div>
            </td>
          </tr>

      </table>
    </div>
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        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          7 of
          30</font></div>
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      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>REPORTS
                ON PROGRESS, BENCHMARKS, SALES, AND
                PAYMENTS</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

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            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
                to signing this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                has provided to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                Appendix F, under which </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                intends to bring the subject matter of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                the point of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Practical
                Application</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                is
                hereby incorporated by reference into this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                Based on this plan, performance </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmarks</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                are determined as specified in Appendix
                E.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall provide written annual reports on its product development progress
                or efforts to commercialize under the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for each of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Fields&#160;of&#160;Use</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                within sixty (60) days after December 31 of each calendar year. These
                progress reports shall include, but not be limited to: progress on
                research and development, status of applications for regulatory approvals,
                manufacturing, sublicensing, marketing, importing, and sales during
                the
                preceding calendar year, as well as plans for the present calendar
                year.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                also encourages these reports to include information on any of
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                public service activities that relate to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                If reported progress differs from that projected in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmarks</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall explain the reasons for such differences. In any such annual
                report,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may propose amendments to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                acceptance of which by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may not be denied unreasonably. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to provide any additional information reasonably required
                by
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                evaluate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                performance under this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may amend the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmarks</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                any time upon written consent by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall not unreasonably withhold approval of any request of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                extend the time periods of this schedule if such request is supported
                by a
                reasonable showing by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                diligence in its performance under the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and toward bringing the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                the point of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Practical
                Application</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
                defined in 37&#160;CFR&#160;&#167;404.3(d). </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall amend the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmarks</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                the request of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                address any </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Fields&#160;of&#160;Use</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                not specifically addressed in the plan originally
                submitted.</font></div>
            </td>
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      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall report to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                the dates for achieving </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmarks</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                specified in Appendix E and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
                Commercial Sale</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                each country in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Territory</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                within thirty (30) days of such
                occurrences.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall submit to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                within sixty (60) days after each calendar half-year ending June
                30 and
                December 31 a royalty report setting forth for the preceding half-year
                period the amount of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                sold or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                practiced by or on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                each country within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Territory</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                and the amount of royalty accordingly due. With each such royalty
                report,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall submit payment of the earned royalties due. If no earned royalties
                are due to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for any reporting period, the written report shall so state. The
                royalty
                report shall be certified as correct by an authorized officer of
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and shall include a detailed listing of all deductions made under
                Paragraph 2.10 to determine </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                made under Article 6 to determine royalties
                due.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.05</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to forward semi-annually to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a
                copy of such reports received by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                from its sublicensees during the preceding half-year period as shall
                be
                pertinent to a royalty accounting to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                by
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for activities under the
                sublicense.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          8 of
          30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.06</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Royalties
                due under Article 6 shall be paid in U.S. dollars. For conversion
                of
                foreign currency to U.S. dollars, the conversion rate shall be the
                New
                York foreign exchange rate quoted in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
                Wall Street Journal</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                on
                the day that the payment is due. All checks and bank drafts shall
                be drawn
                on United States banks and shall be payable, as appropriate, to
                "NIH/Patent Licensing." All such payments shall be sent to the following
                address: NIH, P.O.&#160;Box&#160;360120, Pittsburgh, PA 15251-6120. Any
                loss of exchange, value, taxes, or other expenses incurred in the
                transfer
                or conversion to U.S. dollars shall be paid entirely by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                The royalty report required by Paragraph 9.04 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall accompany each such payment, and a copy of such report shall
                also be
                mailed to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                its address for notices indicated on the Signature Page of this
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.07</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall be solely responsible for determining if any tax on royalty
                income
                is owed outside the United States and shall pay any such tax and
                be
                responsible for all filings with appropriate agencies of foreign
                governments.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.08</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
                and penalties may be assessed by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                on
                any overdue payments in accordance with the Federal Debt Collection
                Act.
                The payment of such late charges shall not prevent </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                from exercising any other rights it may have as a consequence of
                the
                lateness of any payment.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.09</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
                plans and reports required by this Article 9 and marked "confidential"
                by
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall, to the extent permitted by law, be treated by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
                commercial and financial information obtained from a person and as
                privileged and confidential, and any proposed disclosure of such
                records
                by the PHS under the Freedom of Information Act (FOIA),
                5&#160;U.S.C.&#160;&#167;552 shall be subject to the predisclosure notification
                requirements of
                45&#160;CFR&#160;&#167;5.65(d).</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>PERFORMANCE</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall use its reasonable best efforts to bring the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Practical
                Application</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                "Reasonable best efforts" for the purposes of this provision shall
                include
                adherence to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                Appendix F and performance of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmarks</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                Appendix E. The efforts of a sublicensee shall be considered the
                efforts
                of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
                Commercial Sale</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                until the expiration of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall use its reasonable best efforts to make </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reasonably accessible to the United States
                public.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>INFRINGEMENT
                AND PATENT ENFORCEMENT</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agree to notify each other promptly of each infringement or possible
                infringement of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                as well as any facts which may affect the validity, scope, or
                enforceability of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                which either Party becomes aware.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          9 of
          30</font></div>
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        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
                to this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and the provisions of Chapter 29 of title 35, United States Code,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may: a) bring suit in its own name, at its own expense, and on its
                own
                behalf for infringement of presumably valid claims in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                b) in any such suit, enjoin infringement and collect for its use,
                damages,
                profits, and awards of whatever nature recoverable for such infringement;
                and c) settle any claim or suit for infringement of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                provided, however, that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities shall have the first right to take such actions. If
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                desires to initiate a suit for patent infringement, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall notify </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                writing. If </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                does not notify </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                its intent to pursue legal action within ninety (90) days, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                will be free to initiate suit. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall have a continuing right to intervene in such suit. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall take no action to compel the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                either to initiate or to join in any such suit for patent infringement.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may request the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                initiate or join in any such suit if necessary to avoid dismissal
                of the
                suit. Should the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                be
                made a party to any such suit, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall reimburse the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for any costs, expenses, or fees which the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                incurs as a result of such motion or other action, including any
                and all
                costs incurred by the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                opposing any such motion or other action. In all cases, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to keep </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reasonably apprised of the status and progress of any litigation.
                Before
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                commences an infringement action, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall notify </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and give careful consideration to the views of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and to any potential effects of the litigation on the public health
                in
                deciding whether to bring suit.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                the event that a declaratory judgment action alleging invalidity
                or
                non-infringement of any of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall be brought against </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                raised by way of counterclaim or affirmative defense in an infringement
                suit brought by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under Paragraph 11.02, pursuant to this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and the provisions of Chapter 29 of Title 35, United States Code
                or other
                statutes, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may: a) defend the suit in its own name, at its own expense, and
                on its
                own behalf for presumably valid claims in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                b) in any such suit, ultimately to enjoin infringement and to collect
                for
                its use, damages, profits, and awards of whatever nature recoverable
                for
                such infringement; and c)&#160;settle any claim or suit for declaratory
                judgment involving the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-provided,
                however, that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities shall have the first right to take such actions and shall
                have
                a continuing right to intervene in such suit. If </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                does not notify </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                its intent to respond to the legal action within a reasonable time,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                will be free to do so. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall take no action to compel the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                either to initiate or to join in any such declaratory judgment action.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may request the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                initiate or to join any such suit if necessary to avoid dismissal
                of the
                suit. Should the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                be
                made a party to any such suit by motion or any other action of
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall reimburse the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for any costs, expenses, or fees which the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                incurs as a result of such motion or other action. If </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                elects not to defend against such declaratory judgment action,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at its option, may do so at its own expense. In all cases, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to keep </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reasonably apprised of the status and progress of any litigation.
                Before
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                commences an infringement action, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall notify </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and give careful consideration to the views of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and to any potential effects of the litigation on the public health
                in
                deciding whether to bring suit.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                any action under Paragraphs 11.02 or 11.03, the expenses including
                costs,
                fees, attorney fees, and disbursements, shall be paid by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                The value of any recovery made by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                through court judgment or settlement shall be treated as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and subject to earned royalties.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.05</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall cooperate fully with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                connection with any action under Paragraphs 11.02 or 11.03. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees promptly to provide access to all necessary documents and
                to render
                reasonable assistance in response to a request by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>NEGATION
                OF WARRANTIES AND
                INDEMNIFICATION</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                offers no warranties other than those specified in Article
                1.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          10
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                does not warrant the validity of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and makes no representations whatsoever with regard to the scope
                of the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                or that the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may be exploited without infringing other patents or other intellectual
                property rights of third parties.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR
                FITNESS
                FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER DEFINED BY THE CLAIMS
                OF
                THE </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>LICENSED&#160;PATENT&#160;RIGHTS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                OR
                TANGIBLE MATERIALS RELATED THERETO.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                does not represent that it will commence legal actions against third
                parties infringing the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.05</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall indemnify and hold </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                its employees, students, fellows, agents, and consultants harmless
                from
                and against all liability, demands, damages, expenses, and losses,
                including but not limited to death, personal injury, illness, or
                property
                damage in connection with or arising out of: a) the use by or on
                behalf of
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                its sublicensees, directors, employees, or third parties of any
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                or b) the design, manufacture, distribution, or use of any </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                materials by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                or other products or processes developed in connection with or arising
                out
                of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to maintain a liability insurance program consistent with
                sound
                business practice.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>TERM,
                TERMINATION, AND MODIFICATION OF
                RIGHTS</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                is
                effective when signed by all parties and shall extend to the expiration
                of
                the last to expire of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                unless sooner terminated as provided in this Article
                13.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                the event that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                is
                in default in the performance of any material obligations under this
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                including but not limited to the obligations listed in Article 13.05,
                and
                if the default has not been remedied within ninety (90) days after
                the
                date of notice in writing of such default, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may terminate this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                by
                written notice and pursue outstanding amounts owed through procedures
                provided by the Federal Debt Collection
                Act.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                the event that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                becomes insolvent, files a petition in bankruptcy, has such a petition
                filed against it, determines to file a petition in bankruptcy, or
                receives
                notice of a third party's intention to file an involuntary petition
                in
                bankruptcy, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall immediately notify </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                writing. Furthermore, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall have the right to terminate this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                immediately upon </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                receipt of written notice.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall have a unilateral right to terminate this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and/or any licenses in any country or territory by giving </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                sixty (60) days written notice to that
                effect.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          11
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.05</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall specifically have the right to terminate or modify, at its
                option,
                this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                if </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                determines that the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:
                1) is not executing the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                submitted with its request for a license and the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                cannot otherwise demonstrate to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                satisfaction that the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                has taken, or can be expected to take within a reasonable time, effective
                steps to achieve </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Practical
                Application</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                2) has not achieved the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmarks</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
                may be modified under Paragraph 9.02; 3) has willfully made a false
                statement of, or willfully omitted, a material fact in the license
                application or in any report required by the license </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;
                4) has committed a material breach of a covenant or agreement contained
                in
                the license; 5) is not keeping </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reasonably available to the public after commercial use commences;
                6)
                cannot reasonably satisfy unmet health and safety needs; or 7) cannot
                reasonably justify a failure to comply with the domestic production
                requirement of Paragraph 5.02 unless waived. In making this determination,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                will take into account the normal course of such commercial development
                programs conducted with sound and reasonable business practices and
                judgment and the annual reports submitted by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under Paragraph 9.02. Prior to invoking this right, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall give written notice to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                providing </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                specific notice of, and a ninety (90) day opportunity to respond
                to,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                concerns as to the previous items 1) to 7). If </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                fails to alleviate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                concerns as to the previous items 1) to 7) or fails to initiate corrective
                action to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                satisfaction, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may terminate this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.06</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">When
                the public health and safety so require, and after written notice
                to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                providing </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a
                sixty (60) day opportunity to respond, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall have the right to require </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                grant sublicenses to responsible applicants, on reasonable terms,
                in any
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Fields&#160;of&#160;Use</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                unless </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                can reasonably demonstrate that the granting of the sublicense would
                not
                materially increase the availability to the public of the subject
                matter
                of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                will not require the granting of a sublicense unless the responsible
                applicant has first negotiated in good faith with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
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    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.07</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reserves the right according to 35&#160;U.S.C.&#160;&#167;209(f)(4) to
                terminate or modify this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                if
                it is determined that such action is necessary to meet requirements
                for
                public use specified by federal regulations issued after the date
                of the
                license and such requirements are not reasonably satisfied by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.08</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Within
                thirty (30) days of receipt of written notice of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                unilateral decision to modify or terminate this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may, consistent with the provisions of 37&#160;CFR&#160;&#167;404.11, appeal
                the decision by written submission to the designated </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                official. The decision of the designated </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                official shall be the final agency decision. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                may thereafter exercise any and all administrative or judicial remedies
                that may be available.</font></div>
            </td>
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    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">13.09</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Within
                ninety (90) days of expiration or termination of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under this Article 13, a final report shall be submitted by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                Any royalty payments, including those incurred but not yet paid (such
                as
                the full minimum annual royalty), and those related to patent expense,
                due
                to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall become immediately due and payable upon termination or expiration.
                If terminated under this Article 13, sublicensees may elect to convert
                their sublicenses to direct licenses with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pursuant to Paragraph 4.03. Unless otherwise specifically provided
                for
                under this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                upon termination or expiration of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall return all </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                other materials included within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                provide </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                with certification of the destruction
                thereof.</font></div>
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    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>GENERAL
                PROVISIONS</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Neither
                Party may waive or release any of its rights or interests in this
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                except in writing. The failure of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                assert a right hereunder or to insist upon compliance with any term
                or
                condition of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall not constitute a waiver of that right by the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                excuse a similar subsequent failure to perform any such term or condition
                by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
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      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          12
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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        <div id="GLHDR" style="WIDTH: 100%" align="right">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                constitutes the entire agreement between the Parties relating to
                the
                subject matter of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                and all prior negotiations, representations, agreements, and
                understandings are merged into, extinguished by, and completely expressed
                by this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                provisions of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                are severable, and in the event that any provision of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall be determined to be invalid or unenforceable under any controlling
                body of law, such determination shall not in any way affect the validity
                or enforceability of the remaining provisions of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
                either Party desires a modification to this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                the Parties shall, upon reasonable notice of the proposed modification
                by
                the Party desiring the change, confer in good faith to determine
                the
                desirability of such modification. No modification will be effective
                until
                a written amendment is signed by the signatories to this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                their designees.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.05</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                construction, validity, performance, and effect of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall be governed by Federal law as applied by the Federal courts
                in the
                District of Columbia.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.06</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
                notices required or permitted by this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall be given by prepaid, first class, registered or certified mail
                or by
                an express/overnight delivery service provided by a commercial carrier,
                properly addressed to the other Party at the address designated on
                the
                following Signature Page, or to such other address as may be designated
                in
                writing by such other Party. Notices shall be considered timely if
                such
                notices are received on or before the established deadline date or
                sent on
                or before the deadline date as verifiable by U.S. Postal Service
                postmark
                or dated receipt from a commercial carrier. Parties should request
                a
                legibly dated U.S. Postal Service postmark or obtain a dated receipt
                from
                a commercial carrier or the U.S. Postal Service. Private metered
                postmarks
                shall not be acceptable as proof of timely
                mailing.</font></div>
            </td>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.07</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall not be assigned by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                except: a) with the prior written consent of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                such consent not to be withheld unreasonably; or b) as part of a
                sale or
                transfer of substantially the entire business of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                relating to operations which concern this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.08</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.09</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.10</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.11</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.12</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.13</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.14</font></div>
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              <td width="70%" style="border-bottom: black thin solid;"><font size="2">/s/
                Steven M. Ferguson</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 279pt">&#160;</font></td>
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              <td width="25%" style="border-bottom: black thin solid;"><font size="2">5/7/04</font></td>
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            </tr>
            <tr bgcolor="white">
              <td width="70%">&#160;</td>
              <td width="5%">&#160;</td>
              <td width="25%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="70%">
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                  Address for Notices:</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Office
                  of Technology Transfer</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">National
                  Institutes of Health</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6011
                  Executive Boulevard, Suite 325</font></div>
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Rockville,
                  Maryland 20852-3804 U.S.A.</font></div>
              </td>
              <td width="5%">&#160;</td>
              <td width="25%">&#160;</td>
            </tr>

        </table>
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font size="2">For
<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        (Upon,
        information and belief, the undersigned expressly certifies or affirms that
        the
        contents of any statements of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
        made or
        referred to in this document are truthful and accurate.):</font></font></div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      </div>
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
        <div align="center">
          <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

              <tr bgcolor="white">
                <td width="70%" style="border-bottom: black thin solid;">
                  <div><font size="2">by:</font></div>
                  <div><font size="2">Targeted Genetics Corporation</font></div>
                </td>
                <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
                <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%"><font size="2">Licensee</font></td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%">&#160;</td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%" style="border-bottom: black thin solid;">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
                    H. Stewart Parker</font></div>
                </td>
                <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
                <td width="25%" style="border-bottom: black thin solid;">
                  <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5/21/04</font></div>
                </td>
              </tr>
              <tr bgcolor="white">
                <td width="70%">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Signature
                    of Authorized Official<font size="3"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 279pt">&#160;</font></font></font></div>
                </td>
                <td width="5%">&#160;</td>
                <td valign="top" width="25%"><font size="2">Date</font></td>
              </tr>
              <tr bgcolor="white">
                <td width="70%">&#160;</td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%" style="border-bottom: black thin solid;">
                  <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">H.
                    Stewart Parker&#160;</font></div>
                </td>
                <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
                <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%"><font size="2">Printed Name</font></td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%">&#160;</td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%" style="border-bottom: black thin solid;"><font size="2">Pres
                  &amp; CEO</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 225pt" size="3">&#160;</font></td>
                <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
                <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%"><font size="2">Title</font></td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%">&#160;</td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%"><font size="2">Official and Mailing Address for
                  Notices:</font></td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%">&#160;</td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%" style="border-bottom: black thin solid;"><font size="2">Targeted
                  Genetics Corporation</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 225pt">&#160;</font></td>
                <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
                <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%">&#160;</td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%" style="border-bottom: black thin solid;"><font size="2">1100
                  Olive Way, Suite 100</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 225pt">&#160;</font></td>
                <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
                <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%">&#160;</td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%" style="border-bottom: black thin solid;"><font size="2">Seattle,
                  WA 98101</font></td>
                <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
                <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%">&#160;</td>
                <td width="5%">&#160;</td>
                <td width="25%">&#160;</td>
              </tr>
              <tr bgcolor="white">
                <td width="70%" style="border-bottom: black thin solid;"><font size="2">Attention:&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 225pt">&#160;</font></td>
                <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
                <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
              </tr>

          </table>
        </div>
        <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      false
      or misleading statements made, presented, or submitted to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      including any relevant omissions, under this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      during the course of negotiation of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      are
      subject to all applicable civil and criminal statutes including Federal statutes
      31&#160;U.S.C.&#160;&#167;&#167;3801-3812 (civil liability) and 18&#160;U.S.C.&#160;&#167;1001
      (criminal liability including fine(s) and/or imprisonment).</font></div>
    <div>&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          15
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>APPENDIX
      A--PATENT(S) OR PATENT APPLICATION(S)</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Patent(s)
      or Patent Application(s):</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">U.S.
      Patents:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,587,308
                issued December 24, 1996 entitled &#8220;Modified Adeno-Associated Virus Vector
                Capable of Expression from a Novel Promoter&#8221; (NIH Ref:
                E-148-1992/0-US-01);</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,989,540
                issued November 23, 1999 entitled &#8220;Modified Adeno-Associated Virus Vector
                Capable of Expression from a Novel Promoter&#8221; (NIH Ref:
                E-148-1992/0-US-08);</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5,866,696
                issued February 2, 1999 entitled &#8220;Modified Adeno-Associated Virus Vector
                Capable of Expression from a Novel Promoter&#8221; (NIH Ref:
                E-148-1992/0-US-10); and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6,165,781
                issued December 26, 2000 entitled &#8220;Modified Adeno-Associated Virus Vector
                Capable of Expression from a Novel Promoter&#8221; (NIH Ref:
                E-148-1992/0-US-11).</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PCT
      Patent Application and related Foreign Patents and Patent
      Applications:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">PCT/US93/05310
                filed June 2, 1993 and published as WO 93/24641 December&#160;9,&#160;1993
                which claims priority to U.S. Patent Application 07/891,962 filed
                June 2,
                1992, now U.S. Patent 5,587,308 issued December 24, 1996 (NIH Ref:
                E-148-1992/0-PCT-02);</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Australian
                Patent 673367 issued November 7, 1996 from Australian Patent Application
                45981/93 having an international filing date of June 2, 1993 (NIH
                Ref:
                E-1481992/0-AU-03);</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Canadian
                Patent Application 2,136,441 having an international filing date
                of
                June&#160;2,&#160;1993 (NIH Ref:
                E-148-1992/0-CA-04);</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">European
                Patent 0644944 issued November 21, 2001 from European Application
                EP&#160;93 916425.7 having an international filing date of June 2, 1993
                including all designated countries where the patent grant was registered
                (NIH Ref: E-148-1992/0-EP-06); </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Hong
                Kong Patent 1014549 issued June 7, 2002 from Hong Kong Application
                KH
                9811581435 having an international filing date of June 3, 1993 (NIH
                Ref:
                E-148-1992/0-HK-07); and</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">European
                Patent Application EP 01 107900.0, a divisional application of
                EP&#160;93&#160;916425.7 having an international filing date of June 2,
                1993 (NIH Ref: E-148-1992/0-EP-05).</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          16
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>APPENDIX
      B--LICENSED&#160;FIELDS&#160;OF&#160;USE AND TERRITORY</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 135pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
              Fields of Use:</strong></font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                development of compositions and methods utilizing Adeno-Associated
                Viral
                Vectors embodied in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                which are useful in the treatment and prophylaxis of human and animal
                diseases. This field of use is separate and distinct form that of
                the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                between </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                having </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reference number L-059-1993/0 effective March 18, 1994 and does not
                include compositions and methods for the treatment and prophylaxis
                of
                cystic fibrosis.</font></div>
            </td>
          </tr>

      </table>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 135pt;">&#160;</td>
            <td align="left">&#160;</td>
          </tr>

      </table>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 135pt;"><strong><font size="2">Licensed&#160;Territory:</font></strong><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></td>
            <td align="left"><font size="2">Worldwide</font></td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt"></font>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      remainder of this page intentionally left blank</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          17
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>APPENDIX
      C--ROYALTIES</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Royalties:</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>License&#160;Issue&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pursuant to Paragraph 6.01 as amended and set forth in Appendix D
                of this
                Agreement:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agrees
      to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      a
      non-refundable, non-creditable </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>License&#160;Issue&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
      amount of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">).
      The
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>License&#160;Issue&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      as set
      forth herein is due as of the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and is
      payable to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
      thirty (30) days thereof.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">B.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Minimum&#160;Annual&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pursuant to Paragraph 6.02 as amended and set forth in Appendix D
                of this
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agrees
      to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      a
      non-refundable, non-creditable </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Minimum&#160;Annual&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
      amount of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">).
      The
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Minimum&#160;Annual&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for the
      first calendar year of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is due
      as of the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and is
      payable to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
      thirty (30) days thereof and of the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and will
      be prorated according to the fraction of the calendar year remaining between
      the
      effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and the
      next subsequent January 1. Beginning on the first January 1 after the effective
      date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and for
      each subsequent calendar year of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Minimum&#160;Annual&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is due
      on January 1 and is payable to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
      thirty (30) days thereof.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Earned&#160;Royalty(ies)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pursuant to Paragraph 6.03, as amended and set forth in Appendix
                D, of
                this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agrees
      to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      according to schedule as set forth in Paragraph 9.04 of this Agreement, an
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Earned&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      amount
      calculated on the basis of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net&#160;Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      according to percentage set forth below:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Percent (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%)
                of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net&#160;Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and its sublicensees of all </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                manufactured and sold in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Territory</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall be
      entitled to a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Percent
      (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%)
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      against
      the earned royalty rate set forth in Paragraph C.1. above for each percent
      of
      royalty in excess of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Percent
      (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%)
      Licensee must pay to other unaffiliated licensors for the manufacture and sale
      of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Said
      reduction, however, shall not reduce the earned royalty rate for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      below
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      of the
      rate provided for in Paragraph C.1. above.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>The
      remainder of this page intentionally left blank</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
      Treatment
      Requested.</font></strong></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          18
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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        </div>
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    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 36pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">D.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalty(ies)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pursuant to Paragraph 6.04 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agrees
      to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalties</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
      amounts set forth herein:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="center">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="90%">

          <tr>
            <td valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark</strong></font></div>
            </td>
            <td valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalty</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                each </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                up
                to a total of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at the time of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                equivalent clinical trial for a particular </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                each </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                up to a total of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at the time of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                enrollment in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                equivalent clinical trial for a particular </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                each </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                up to a total of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at the time of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                approval or equivalent for a particular </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      payment
      as set forth herein is due to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      upon
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      its
      sublicensees, or other </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Person</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      as set
      forth in Appendix D, Paragraph 2.14 of this Agreement, acting by or on behalf
      of
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      achieving the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and is
      payable to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
      thirty&#160;(30) days thereof or in the event that a sublicense achieves the
      benchmark and sublicensee is responsible for making a benchmark/milestone
      payment to Licensee upon achieving the benchmark/milestone the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark
      Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is
      payable to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
      thirty (30) days of receipt by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      from
      sublicense of the benchmark/milestone payment due from sublicense.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">E.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Sublicensing&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pursuant to Paragraph 6.05, as amended and set forth in Appendix
                D, of
                this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)
      In
      addition to any royalties paid to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      on
      behalf of sublicensees as provided for in Section C above, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agrees
      to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      upon
      granting of a sublicense as provided for in Article 4 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      either
      (i) in the case that such sublicense includes other assets owned or licensed
      by
      Licensee, an </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      of the
      fair market value of any consideration received for granting each sublicense,
      or
      (ii) if Licensee grants a sublicense as provided for in Article 4 of this
      Agreement and that sublicense consists only of the grant of rights as provided
      in Article 3 of his Agreement and no other assets owned or licensed by Licensee,
      then Licensee shall pay to PHS an additional royalty in the amount of
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      percent
      (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%)
      of the
      RMCV received for granting such sublicense. The </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Sublicensing&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      as set
      forth herein is due to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      upon the
      effective date of the sublicense and is payable to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
      thirty (30) days of receipt of the payment by Licensee from sublicense of the
      FMCV. Furthermore, within thirty (30) days of the effective date of the
      sublicense Licensee will contact PHS and arrange to meet with PHS to discuss
      and
      agree to the FMCV received for the granting of each sublicense.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">F.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Assignment&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pursuant to Paragraph 14.07, as amended and set forth in Appendix
                D, of
                this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
      assignment of this Agreement by Licensee, in accordance with Paragraph 14.07
      of
      this Agreement, the Benchmark Royalty, due with respect to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      as set
      forth in Section D above, will be amended to increase from the current amount
      of
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      for
      each </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      up to
      and including </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Dollars
      ($</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">)
      for
      each </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      up to
      and including </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Payment
      will be due in accordance with the terms and conditions set forth in Section
      D
      above.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*Confidential
        Treatment Requested.</strong></font></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          19
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>APPENDIX
      D<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman">&#8212;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>MODIFICATIONS</strong></font></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agree to
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
      2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>DEFINITIONS</u></font></div>
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          <tr valign="top" style="line-height: 1.25;">
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            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.06</font></div>
            </td>
            <td>
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                shall mean:</font></div>
            </td>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Patent
                applications (including PCT patent applications) and/or patents listed
                in
                Appendix A, all divisions and continuations of these applications,
                all
                patents issuing from such applications, divisions, and continuations,
                and
                any reissues, reexaminations, substitutions, renewals, confirmations,
                supplementary protection certificates, registrations, revalidations,
                additions of or to and extensions of all such
                patents;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
                the extent that the following contain one or more claims directed
                to the
                invention or inventions disclosed in a) above: i) continuations-in-part
                of
                a) above; ii) all divisions and continuations of these
                continuations-in-part; iii) all patents issuing from such
                continuations-in-part, divisions, and continuations; iv) priority
                patent
                application(s) of a) above; and v) any reissues, reexaminations,
                substitutions, renewals, confirmations, supplementary protection
                certificates, registrations, revalidations, additions of or to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>and
                extensions of all such patents</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">;</font></div>
            </td>
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    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c)</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">to
                the extent that the following contain one or more claims directed
                to the
                invention or inventions disclosed in a) above: all counterpart foreign
                and
                U.S. patent applications and patents to a) and b) above, including
                those
                listed in Appendix A.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>not</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
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      shall
      not include U.S. Patent 5,590,279 issued November 23, 1999 except to the extent
      that the application from which this patent issued, U.S. Patent Application
      Serial Number 08/455,552 filed May 31, 1995 (NIH Ref: E-148-1992/0-US-09),
      is
      necessary to establish a claim of priority under the provisions of Title 35
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      within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      as set
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.07</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Process(es)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
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                that have not been held unpatentable, invalid or unenforceable by
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                means processes which, in the course of being practiced would be
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                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
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                that has not been held unpatentable, invalid or unenforceable by
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.08</font></div>
            </td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Product(s)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
                means tangible materials which, in the course of manufacture, use,
                sale,
                or importation would be within the scope of one or more claims of
                the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                that have not been held unpatentable, invalid or unenforceable by
                an
                unappealed or unappealable judgment of a court of competent jurisdiction.
                Notwithstanding the foregoing, for purposes of calculating </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
                set forth in Paragraph 2.10 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
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                means products which, in the course of being practiced would be within
                the
                scope of one or more claims of an issued patent within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
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                that has not been held unpatentable, invalid or unenforceable by
                an
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          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.10</font></div>
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                or
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                sublicensees, and from leasing, renting, or otherwise making </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
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                available to others without sale or other dispositions, whether invoiced
                or not, less returns and allowances, packing costs, insurance costs,
                freight out, taxes or excise duties imposed on the transaction (if
                separately invoiced), and wholesaler and cash discounts in amounts
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                independent sales agencies or regularly employed by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                or sublicensees, and on its payroll, or for cost of collections.
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                sublicensees, partners, or contractors for research purposes, including
                clinical trials, and including transfers at Licensee&#8217;s fully-allocated
                manufacturing cost, shall not be considered a part of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">New
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      and read
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.13</font></div>
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            <td>
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                means an individual, corporation, partnership, trust, business trust,
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                or any
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      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
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            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.14</font></div>
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                shall mean, with respect to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                any other </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Person</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                which during the term of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                controls, is controlled by or is under common control with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
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                more of the stock entitled to vote, and for non-stock organizations,
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                exists, the maximum permitted in such a
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        </div>
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    </div><br>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.15</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Indication(s)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
                means a disease or other physiologic condition, for example hemophilia
                or
                heart failure, to be treated with a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Product</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                wherein the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Product</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                contains a separate and distinct therapeutic gene of interest, for
                exampled a Factor VII gene, a Factor IX gene or the adenylate cyclase
                IV
                gene.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.16</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cystic&#160;Fibrosis&#160;License</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
                means the license, having </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Reference Number L-059-93/0, between </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                effective March&#160;18,&#160;1994, which includes the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
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      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.17</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Fair
                Market Value of Consideration (FMCV)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
                means cash received by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                without obligation for use by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                funding research and development or manufacturing efforts of a product
                candidate. Payments intended to be considered include, but are not
                limited
                to, upfront payments for access to technology and for acknowledgement
                of
                investment in the development of the technology, and any premium
                paid over
                market price if equity is a component of the consideration received
                by
                Licensee upon sublicensing and there is no obligation to use that
                premium
                to fund R&amp;D efforts. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>FMCV</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                does not include clinical development and commercialization milestones
                paid by sublicensees since milestones are governed by Appendix C,
                Section
                D, and it does not include monies received from a sublicense for
                funding
                R&amp;D efforts or equity purchased at market value by the
                sublicense.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
              5.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">STATUTORY
                AND PHS REQUIREMENTS AND RESERVED GOVERNMENT
                RIGHTS</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paragraphs
      5.01 and 5.04 are amended to read as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reserves on behalf of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                an
                irrevocable, nonexclusive, nontransferable, royalty-free license
                for the
                practice of all inventions licensed under the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                throughout the world by or on behalf of the <strong>Government</strong>
                and on behalf of any foreign government or international organization
                pursuant to ay existing or future treaty or agreement to which the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                is
                a signatory. Prior to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
                Commercial Sale</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to provide PHS reasonable quantities of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                materials made through the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                research use, but not human clinical use. Notwithstanding the foregoing,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees, if a written request is made by PHS, to negotiate in good
                faith
                with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a
                separate agreement or an amendment to this Agreement regarding the
                supply
                of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                materials made through </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                use in human clinical trials.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
                addition to the reserved license in Paragraph 5.01 above, PHS reserves
                the
                right to grant nonexclusive </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Research
                Licenses</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                directly or to require </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                grant nonexclusive </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Research
                Licenses</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                on
                reasonable terms. The purpose of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Research
                License</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                is
                to encourage basic research, whether conducted at an academic or
                corporate
                facility. In order to safeguard the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                however, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall consult with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                before granting to commercial entities a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Research
                License</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                providing to them research samples of materials made through the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
              6.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>ROYALTIES
                AND REIMBURSEMENT</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paragraphs
      6.01 through 6.05 and 6.09 through 6.10 are amended to read as
      follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a
                noncreditable, nonrefundable </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>License&#160;Issue&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
                set forth in Appendix C, Section A.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a
                nonrefundable </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Minimum&#160;Annual&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
                set forth in Appendix C, Section B.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.03</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                earned royalties as set forth in Appendix C, Section
                C.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                benchmark royalties as set forth in Appendix C, Section
                D.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          22
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.05</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to pay </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                sublicensing royalties as set forth in Appendix C, Section
                E.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.09</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
                regard to expenses associated with the preparation, filing, prosecution,
                and maintenance of all patent applications and patents included within
                the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                incurred by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                prior to the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                as an additional royalty, within sixty (60) days of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
                submission of a statement and request for payment to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                an amount equivalent to such patent expenses previously incurred
                by
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                Notwithstanding the foregoing, if </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                has previously paid to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                said expenses under Paragraph 6.08 of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cystic&#160;Fibrosis&#160;License</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                no
                additional payment of said expenses by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                will be required.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.10</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">With
                regard to expenses associated with the preparation, filing, prosecution,
                and maintenance of all patent applications and patents included within
                the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Patent&#160;Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                incurred by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                on
                or after the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at its sole option, may require </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)
      to
      pay </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      on an
      annual basis, within sixty (60) days of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">'s
      submission of a statement and request for payment, a royalty amount equivalent
      to all such patent expenses incurred during the previous calendar year(s);
      or</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)
      to
      pay such expenses directly to the law firm employed by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to
      handle such functions. However, in such event, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and not
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall be
      the client of such law firm.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      has
      given </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      the
      right to assume responsibility for the preparation, filing, prosecution, or
      maintenance of any patent application or patent included within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
      Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      under
      the provisions of Paragraph 7.01 of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cystic
      Fibrosis License</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      In the
      event that the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cystic
      Fibrosis License</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is
      terminated or expired prior to the expiration of this Agreement </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      will
      continue to have, unless this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      has been
      terminated or expired, or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      has
      agreed to resume responsibility for the preparation, filing, prosecution or
      maintenance of any patent application or patent included in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
      Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in
      writing, the right to assume responsibility for the preparation, filing,
      prosecution or maintenance of any patent application or patent included in
      the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
      Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      As long
      as </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      has
      responsibility for the preparation, filing, prosecution or maintenance of any
      patent application or patent included in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
      Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall
      directly pay the attorneys or agents engaged to prepare, file, prosecute, or
      maintain such patent applications or patents and shall provide to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      if
      requested, copies of each invoice associated with such services as well as
      documentation that such invoices have been paid. Notwithstanding the foregoing,
      if </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      has
      previously paid, to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      or
      directly to the attorneys or agents engaged to prepare, file, prosecute or
      maintain the patents and patent applications included in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
      Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      said
      expenses under Paragraph 6.08 of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cystic
      Fibrosis License</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      no
      additional payment of said expenses by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      will be
      required.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          23
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
              7.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>PATENT
                FILING, PROSECUTION, AND
                MAINTENANCE</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paragraph
      7.01 is deleted in its entirety.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paragraph
      7.02 is amended to read as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                in accordance with the provisions of Paragraph 7.01 of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Cystic
                Fibrosis License</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                has assumed the responsibility for the preparation, filing, prosecution,
                and maintenance of any and all patent applications or patents included
                in
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and shall on an ongoing basis promptly furnish copies of all
                patent-related documents to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                has, subject to the pror approval of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                select registered patent attorneys or patent agents to provide such
                services on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                has provided appropriate powers of attorney and other documents necessary
                to undertake such actions to the patent attorneys or patent agents
                providing such services. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and its attorneys or agents shall consult with </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                all aspects of the preparation, filing, prosecution and maintenance
                of
                patent applications and patents included within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Patent Rights </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">and
                hall provide </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                sufficient opportunity to comment on any document that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                intends to file or to cause to be filed with the relevant intellectual
                property or patent office.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
              8.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>RECORD
                KEEPING</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paragraph
      8.02 is amended to read as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to have an audit on sales and royalties conducted by an independent
                auditor at lease every two (2) years, but not more than once per
                year, if
                annual sales of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Product</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                are over two (2) million dollars. The audit shall address, at a minimum,
                the amount of gross sales by or on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                during the audit period, terms of the license as to percentage or
                fixed
                royalty to be remitted to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                the amount of royalty funds owed to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                under this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                and whether the royalty amount owed has been paid to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and is reflected in the records of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                The audit shall also indicate the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                license number, product, and the time period being audited. A report
                certified by the auditor shall be submitted promptly by the auditor
                directly to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                on
                completion. </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall pay for the entire cost of the
                audit.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
              9.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>REPORTS
                ON PROGRESS, BENCHMARKS, SALES, AND
                PAYMENTS</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paragraphs
      9.04, 9.05 and 9.06 are amended to read as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Prior
                to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
                Commercial Sale, Licensee&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shall
                submit to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                within sixty (60) days after each calendar year ending December 31
                a
                royalty report setting forth for the preceding year period the amount
                of
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                sold or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                practiced by or on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                each country within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Territory</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                and the amount of royalty accordingly due. With each such royalty
                report,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall submit payment of the earned royalties due. If no earned royalties
                are due to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for any reporting period the written report shall so state. After
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
                Commercial Sale</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall submit to PHS within sixty (60) days after each calendar half-year
                ending June 30 and December 31 a royalty report setting forth the
                preceding half-year period the amount of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                sold or </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                practiced by or on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                each country within the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Territory</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                and the amount of royalty accordingly due. With each such royalty
                report,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall submit payment of the earned royalties due. If no earned royalties
                are due to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for any reporting period the written report shall so state. Any royalty
                report submitted pursuant to this paragraph shall be certified as
                correct
                by an authorized officer of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and shall include a detailed listing of all deductions made under
                Paragraph 2.10 to determine </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net
                Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                made under Article 6 to determine royalties
                due.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.05</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                agrees to forward, on an annual basis prior to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
                Commercial Sale</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and semi-annually after </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
                Commercial Sale</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a
                copy of such reports received by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                from its sublicensees during the preceding year or half-year period
                respectively, as shall be pertinent to a royalty accounting to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                by
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for activities under the
                sublicense.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          24
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.06</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Royalties
                due under Article 6 shall be paid in U.S. dollars. For conversion
                of
                foreign currency to U.S. dollars, the conversion rate shall be the
                average
                New York foreign exchange rate quoted in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
                Wall Street Journal</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for the previous thirty (30) trading days prior to the date the payment
                is
                due. All checks and bank drafts shall be drawn on United States banks
                and
                shall be payable, as appropriate, to "NIH/Patent Licensing." All
                such
                payments shall be sent to the following address: NIH,
                P.O.&#160;Box&#160;360120, Pittsburgh, PA 15251-6120. Any loss of
                exchange, value, taxes, or other expenses incurred in the transfer
                or
                conversion to U.S. dollars shall be paid entirely by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                The royalty report required by Paragraph 9.04 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall accompany each such payment, and a copy of such report shall
                also be
                mailed to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                its address for notices indicated on the Signature Page of this
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
              10.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>PERFORMANCE</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paragraphs
      10.01 and 10.02 are amended to read as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.01</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall use its commercially reasonable best efforts to bring the
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Practical
                Application</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                &#8220;Commercially reasonable best efforts&#8221; for the purposes of this provision
                shall include adherence to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Commercial
                Development Plan</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                Appendix F and performance of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmarks</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                Appendix E. The efforts of a sublicense shall be considered the efforts
                of
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.02</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Upon
                the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
                Commercial Sale</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                until the expiration of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall use its commercially reasonable best efforts to make </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Processes</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                reasonably accessible to the United States
                public.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
              11.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>INFRINGEMENT
                AND PATENT ENFORCEMENT</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">New
      Paragraph 11.06 is added to read as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">11.06</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
                the provisions of Paragraphs 11.02, 11.03 and 11.04 of this Agreement
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and/or the appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities may undertake an action under Paragraph 11.02 or Paragraph
                11.03 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                without the consent of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                In the event that </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and/or appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities undertake an action under Paragraph 11.02 or Paragraph
                11.03
                of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                without the consent of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall not be required to reimburse </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and/or appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities for the expenses associated with said action. However,
                if PHS
                and/or appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities undertake an action under Paragraphs 11.02 or 11.03 of
                this
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                without the consent of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and/or appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities will retain any and all proceeds that may be obtained
                if PHS
                and/or appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities are awarded judgment in any such action. Furthermore,
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and/or appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities may settle any litigation undertaken by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and/or appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities without the consent of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                a)
                by requiring </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                grant a sublicense, negotiated by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and/or appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities, to all parties adverse to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and/or appropriate </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                authorities entering into the settlement or b) </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                must agree to convert this agreement to a non-exclusive
                license.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
              12.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>NEGATION
                OF WARRANTIES AND
                INDEMNIFICATION</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paragraph
      12.04 is amended to read as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">12.04</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                do
                not represent that either party will commence legal actions against
                third
                parties infringing the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed
                Patent Rights</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          25
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Article
              14.</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>GENERAL
                PROVISIONS</u></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Paragraph
      14.07 is amended to read as follows:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.07</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall not be assigned by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                to a third party other than an Affiliate as set forth in Paragraph
                2.14 if
                this Agreement except: a) with the prior written consent of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                such consent not to be withheld unreasonably; or b) as part of a
                sale or
                transfer of substantially the entire business of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                relating to operations which concern this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                <strong>Licensee&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">shall
                notify </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                within ten (10) days of any assignment of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                by
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                and </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall pay </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                as an additional royalty, an </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Assignment&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
                set forth in Appendix C, Section F. Notwithstanding the foregoing,
                no
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Assignment
                Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                as set forth in Appendix C, Section F, would be due and payable to
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                upon assignment of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                to
                an </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Affiliate</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
                set forth in Paragraph 2.14 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          26
          of 30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>APPENDIX
      E--BENCHMARKS AND PERFORMANCE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agrees
      to the following </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmarks</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      for its
      performance under this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and,
      within thirty (30) days of achieving a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      shall
      notify </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      that the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      has been
      achieved.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="center">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="100%">

          <tr>
            <td valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark</strong></font></div>
            </td>
            <td valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Projected
                Date for Achieving Benchmark</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Select
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for further clinical development</font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Begin
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                equivalent clinical trials for the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
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                with a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
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            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
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                has been selected to date, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for further clinical development</font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Within
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                the effective date of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                equivalent clinical trials for the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and provide </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                with a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">If
                less than </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                have been selected to date, select a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for further clinical development</font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
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            </td>
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            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
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                or
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                and provide </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                with a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>APPENDIX
      F<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman">&#8212;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>COMMERCIAL
      DEVELOPMENT PLAN</strong></font></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div><br></div>
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          28
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<DOCUMENT>
<TYPE>EX-10.18(A)
<SEQUENCE>6
<FILENAME>v069612_ex10-18a.htm
<TEXT>
<html>
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</title>
</head>
  <body bgcolor="#ffffff">
    <div>&#160;</div>
    <div align="center">
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            <td width="50%">&#160;</td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>*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.</strong></font></div>
            </td>
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      </table>
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    <div>&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Amendment
      No. 1</u></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>
      to
      OTT License Agreement Number L-086-2000/0</u></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      is
      the First Amendment to the OTT License Agreement Number L-086-2000/0 dated
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      21, 2004 by and between the United States Public Health Service as represented
      by the Office of Technology Transfer, National Institutes of Health having
      offices at 6011 Executive Boulevard, Suite 325, Rockville, MD 20852-3804
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      a
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      Way, Suite 100, Seattle, WA 98101(hereinafter, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First&#160;Amendment</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">).
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      the parties would like to amend the License Agreement having OTT License
      Agreement Number L-086-2000/0 (hereinafter, &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>License&#160;Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;)
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</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by the
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">WHEREAS,
      the parties are also amending the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>License&#160;Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      consideration of the value of the availability of vaccines in the Developing
      World to accomplishing the public health mission of the National Institutes
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      Health the parties agree to amend the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>License&#160;Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      as
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                Recitations on the Cover Page of the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;
                are amended to add a Reference to Appendix&#160;G - Royalty Payment
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Patent License Agreement, hereinafter referred to as the &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;,
      consists of this Cover&#160;Page, an attached </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
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      Application(s)), Appendix&#160;B&#160;(Fields&#160;of&#160;Use and Territory),
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      are:</font></div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1)</font></div>
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                National Institutes of Health (&#8220;NIH&#8221;), the Centers for Disease Control and
                Prevention (&#8220;CDC&#8221;), or the Food and Drug Administration (&#8220;FDA&#8221;),
                hereinafter singly or collectively referred to as &#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS&#8221;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                agencies of the United&#160;States Public Health Service within the
                Department of Health and Human Services (&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>DHHS&#8221;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">);
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          <tr valign="top" style="line-height: 1.25;">
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            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2)</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                person, corporation, or institution identified above and/or on the
                Signature&#160;Page, having offices at the address indicated on the
                Signature&#160;Page, and its </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Affiliates</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                as
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          1 of
          8</font></div>
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          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Appendix&#160;C,
                Section&#160;C </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Earned&#160;Royalties</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                is
                amended to read as follows:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">C.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Earned&#160;Royalty(ies)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pursuant to Paragraph&#160;6.03, as amended and set forth in
                Appendix&#160;D, of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agrees
      to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      according to schedule as set forth in Paragraph&#160;9.04 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      an
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Earned&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      amount
      calculated on the basis of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net&#160;Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      according to percentage set forth below:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 72pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Percent&#160;(</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%)
                of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Net&#160;Sales</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                and its sublicensees of all </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                manufactured and sold in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Territory</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall be
      entitled to a One&#160;Percent&#160;(1.0%) credit against the earned royalty
      rate set forth in Paragraph&#160;C.1.&#160;above for each percent of royalty in
      excess of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Percent&#160;(</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">%)
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      must pay
      to other unaffiliated licensors for the manufacture and sale of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Said
      reduction, however, shall not reduce the earned royalty rate for </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      below
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      provided
      for in Paragraph&#160;C.1. above.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Earned
      Royalty(ies)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      will be
      waived by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      related
      to sales of any HIV vaccine </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Developing&#160;World</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      for use
      in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Developing&#160;World</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      which
      have been specifically developed through a collaboration between the
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and the
      International AIDS Vaccine Initiative (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>IAVI</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">),
      an IRS
      certified 501(c)3 tax exempt organization, with principal offices at 110 William
      Street, Floor 27, New York, NY 10038-3001. Should </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      receive
      any sales royalty from sales of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Products</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>IAVI</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      or its
      designee in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Developing&#160;World</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>TGC</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      shall
      mutually agree on compensation from </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      to
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      other
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Product</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      which is
      not the direct result of the above-mentioned collaboration and is not intended
      solely for use and sale in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Developing&#160;World</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      will be
      subject to all applicable Earned Royalty obligations.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
      Amendment Continues on Next Page</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
      Treatment
      Requested.</font></strong></div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          2 of
          8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
      <div>&#160;</div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Appendix&#160;C,
                Section&#160;D shall be amended to read as
                follows.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>D.</strong></font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalty(ies)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                pursuant to Paragraph&#160;6.04, as amended and set forth in
                Appendix&#160;D, of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      agrees
      to pay to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalties</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      in the
      amounts set forth herein:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="center">
      <table border="1" bordercolor="#000000" cellpadding="7" cellspacing="0" width="90%">

          <tr>
            <td valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark</strong></font></div>
            </td>
            <td valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalty</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                each </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                up
                to a total of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at the time of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                equivalent clinical trial for a particular </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                each </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                up to a total of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at the time of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                of
                a </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                or
                equivalent clinical trial for a particular </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                each </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                up to a total of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
                at the time of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for a particular </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
            <td align="left" valign="top" width="50%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 36pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      payment
      as set forth herein is due to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      upon
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      its
      sublicensees, or other </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Person</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      as set
      forth in Appendix&#160;D,&#160;Paragraph&#160;2.14 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      acting
      by or on behalf of </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      achieving the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and is
      payable to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
      thirty&#160;(30)&#160;days thereof or in the event that a sublicensee achieves
      the benchmark and sublicensee is responsible for making a benchmark/milestone
      payment to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      upon
      achieving the benchmark/milestone the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalty</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is
      payable to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      by
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      within
      thirty&#160;(30)&#160;days of receipt by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      from
      sublicensee of the benchmark/milestone payment due from
      sublicensee.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalty(ies)</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      will be
      waived by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      as set
      forth in Appendix&#160;D, Paragraph&#160;2.14 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      if and
      only if the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      is
      achieved during the course of development of an HIV vaccine </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Product</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      which is
      specific for use and sale in the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Developing&#160;World</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and is
      the direct result of a collaboration between the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>IAVI</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      other
</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensed&#160;Product</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      which is
      not the direct result of the above-mentioned collaboration and is not intended
      solely for use and sale in the developing world will be subject to all
      applicable </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Benchmark&#160;Royalties</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Appendix
                D - Modifications is amended to add the following Paragraph&#160;2.18 to
                Article&#160;2&#160;-&#160;Definitions:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.18.</font></div>
              </div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8220;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Developing&#160;World</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8221;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                means those countries defined from time to time by the World Bank
                as
                having &#8220;low-income economies&#8221; or &#8220;middle-income economies&#8221; (whether
                lower-middle or upper-middle).</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><strong><font size="2">*Confidential
        Treatment
        Requested.</font></strong></div>
    </div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          3 of
          8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
      <div>&#160;</div>
    </div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Appendix
                D - Modifications is changed to amend Paragraph&#160;9.06 to reflect that
                Appendix&#160;G has been added to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                Paragraph&#160;9.06 as amended reads as
                follows:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.06</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Royalties
                due under Article&#160;6 shall be paid in U.S.&#160;dollars and payment
                options are listed in Appendix&#160;G. For conversion of foreign currency
                to U.S.&#160;dollars, the conversion rate shall be the average New York
                foreign exchange rate quoted in </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
                Wall Street Journal</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                for the previous thirty&#160;(30)&#160;trading days prior to the date the
                payment is due. All checks and bank drafts shall be drawn on
                United&#160;States banks and shall be payable, as appropriate, to
                &#8220;NIH/Patent Licensing&#8221;. Any loss of exchange, value, taxes, or other
                expenses incurred in the transfer or conversion to U.S.&#160;dollars shall
                be paid entirely by </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                The royalty report required by Paragraph&#160;9.04 of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                shall accompany each such payment, and a copy of such report shall
                also be
                mailed to </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>PHS</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                at
                its address for Agreement Notices indicated on the Signature&#160;Page of
                this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First&#160;Amendment</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>First
      Amendment Continues on Next Page</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          4 of
          8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Appendix&#160;G
                - Royalty Payment Information is added to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                order to facilitate the administration of the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                in
                the future. New Appendix&#160;G reads as
                follows:</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>APPENDIX
      G - ROYALTY PAYMENT OPTIONS</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em><u>NIH/PHS
      License Agreements</u></em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em><u>*In
      order to process payment via Electronic Funds Transfer sender MUST supply the
      following information</u></em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em><u>:</u></em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em><u>Procedure
      for Transfer of Electronic Funds to NIH for Royalty
      Payments</u></em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Bank
      Name: Federal Reserve Bank</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">TREAS
      NYC</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>[*]</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">OBI=Licensee
      Name and OTT Reference Number</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Dollar
      Amount Wired=$$</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">NOTE:
      Only U.S. banks can wire directly to the Federal Reserve Bank. Foreign banks
      cannot wire directly to the Federal Reserve Bank, but must go through an
      intermediary U.S. bank. Foreign banks may send the wire transfer to the U.S.
      bank of their choice, who, in turn forwards the wire transfer to the Federal
      Reserve Bank.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em><u>Mailing
      Address for Royalty Payments:</u></em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 216pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">National
      Institutes of Health</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">P.O.
      Box
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      Institutes of Health</font></div>
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      </u></em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em><u>appear
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          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font></div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
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                is
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    <div align="center">
      <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

          <tr bgcolor="white">
            <td width="70%" style="border-bottom: black thin solid;"><font size="2">/s/
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            <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td width="25%" style="border-bottom: black thin solid;"><font size="2">8/14/06</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 99pt">&#160;</font></td>
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                Institutes of Health</font></div>
            </td>
            <td width="5%">&#160;</td>
            <td valign="top" width="25%"><font size="2">Date</font></td>
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          <tr bgcolor="white">
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                Institutes of Health</font></div>
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            </td>
            <td width="5%">&#160;</td>
            <td width="25%">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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      </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(Upon,
      information and belief, the undersigned expressly certifies or affirms that
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      made or
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
      <div align="center">
        <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="white">
              <td width="70%" style="border-bottom: black thin solid;"><font size="2">/s/
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              <td width="25%" style="border-bottom: black thin solid;"><font size="2">08-18-06</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 99pt" size="3">&#160;</font></td>
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              <td width="5%">&#160;</td>
              <td width="25%">&#160;</td>
            </tr>
            <tr bgcolor="white">
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                  Susan Robinson<font id="TAB2" style="COLOR: black; LETTER-SPACING: 279pt" size="3">&#160;</font></font></div>
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              <td width="25%">&#160;</td>
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              <td width="70%">&#160;</td>
              <td width="5%">&#160;</td>
              <td width="25%">&#160;</td>
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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
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          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 18pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">II.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Official
                and Mailing Address for Financial Notices (</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Licensee&#8217;s</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                contact person for royalty
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              <td width="60%" style="border-bottom: black thin solid;"><font size="2">Susan
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              <td width="35%">&#160;</td>
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              <td width="35%">&#160;</td>
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            <tr bgcolor="white">
              <td width="5%">&#160;</td>
              <td width="60%">&#160;</td>
              <td width="35%">&#160;</td>
            </tr>
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              <td width="5%">&#160;</td>
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              <td width="35%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="5%">&#160;</td>
              <td width="60%">&#160;</td>
              <td width="35%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
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                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1100
                  Olive Way, Suite 100</font></div>
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            </tr>
            <tr bgcolor="white">
              <td width="5%">&#160;</td>
              <td width="60%">&#160;</td>
              <td width="35%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td width="60%" style="border-bottom: black thin solid;">
                <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seattle,
                  WA 98101</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 216pt">&#160;</font></div>
              </td>
              <td width="35%" style="border-bottom: #ffffff solid;">&#160;</td>
            </tr>
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              <td width="5%">&#160;</td>
              <td width="60%">&#160;</td>
              <td width="35%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td width="60%" style="border-bottom: black thin solid;">&#160;</td>
              <td width="35%" style="border-bottom: #ffffff solid;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="5%">&#160;</td>
              <td width="60%">&#160;</td>
              <td width="35%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="5%" style="border-bottom: #ffffff solid;">&#160;</td>
              <td width="60%" style="border-bottom: black thin solid;">&#160;</td>
              <td width="35%" style="border-bottom: #ffffff solid;">&#160;</td>
            </tr>

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      <div>&#160;</div>
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        <table bgcolor="white" cellpadding="0" cellspacing="0" width="100%">

            <tr bgcolor="white">
              <td width="15%" style="border-bottom: #ffffff solid;"><font size="2">Email
                Address:</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 63pt">&#160;</font></td>
              <td width="60%" style="border-bottom: black thin solid;"><font size="2">susan.robinson@targen.com</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font></td>
              <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
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            <tr bgcolor="white">
              <td width="15%">&#160;</td>
              <td width="60%">&#160;</td>
              <td width="25%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="15%" style="border-bottom: #ffffff solid;"><font size="2">Phone:</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 99pt">&#160;</font></td>
              <td width="60%" style="border-bottom: black thin solid;"><font size="2">206-521-7330</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 180pt">&#160;</font></td>
              <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="15%">&#160;</td>
              <td width="60%">&#160;</td>
              <td width="25%">&#160;</td>
            </tr>
            <tr bgcolor="white">
              <td width="15%" style="border-bottom: #ffffff solid;"><font size="2">Fax:</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 99pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 180pt">&#160;</font></td>
              <td width="60%" style="border-bottom: black thin solid;"><font size="2">206-512-4782</font></td>
              <td width="25%" style="border-bottom: #ffffff solid;">&#160;</td>
            </tr>

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      <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Any
      false
      or misleading statements made, presented, or submitted to the </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Government</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">,
      including any relevant omissions, under this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      and
      during the course of negotiation of this </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Agreement</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      are
      subject to all applicable civil and criminal statutes including Federal statutes
      31&#160;U.S.C.&#160;&#167;&#167;3801-3812 (civil liability) and 18&#160;U.S.C.&#160;&#167;1001
      (criminal liability including fine(s) or imprisonment).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Page
          8 of
          8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
  </body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>7
<FILENAME>v069612_ex21.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vf-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
<!-- Copyright 2006 EDGARfilings, Ltd., an IEC company.-->
<!-- All rights reserved EDGARfilings.com -->
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT
      21.1</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SUBSIDIARIES
      OF TARGETED GENETICS CORPORATION</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of
      December 31, 2006, the following companies are subsidiaries of Targeted Genetics
      Corporation:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td valign="top" width="27%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name
                of Subsidiary</strong></font></div>
            </td>
            <td valign="top" width="2%"><strong>&#160;</strong></td>
            <td valign="top" width="26%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Jurisdiction
                of Incorporation</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Genovo,
                Inc.</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Delaware</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="top" width="27%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">TGCF
                Manufacturing, Inc.</font></div>
            </td>
            <td align="left" valign="top" width="2%">&#160;</td>
            <td align="left" valign="top" width="26%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Washington</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
  </body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>8
<FILENAME>v069612_ex23-1.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
</title><!-- Licensed to: vf-->
<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
<!-- Copyright 2006 EDGARfilings, Ltd., an IEC company.-->
<!-- All rights reserved EDGARfilings.com -->
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Exhibit
      23.1</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Consent
      of Independent Registered Public Accounting Firm</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">We
      consent to the incorporation by reference in the Registration Statements on
      Form
      S-3 (Nos. 333-116600, 333-74976, 333-107822 and 333-140187) of Targeted Genetics
      Corporation and the related Prospectuses and to the incorporation by reference
      in the Registration Statements on Form S-8 (Nos. 333-03889, 333-28151,
      333-58907, 333-61738, 333-78523 and 333-48220) pertaining to Targeted Genetics
      Corporation&#8217;s 1992 Restated Stock Option Plan, Stock Option Plan for Nonemployee
      Directors, 1999 Stock Option Plan and Genovo Roll-over Stock Option Plan of
      our
      report dated March 28, 2007, with respect to the consolidated financial
      statements of Targeted Genetics Corporation included in the Annual Report (Form
      10-K) for the year ended December 31, 2006.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
      Ernst
&amp; Young LLP</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seattle,
      Washington</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March
      28,
      2007</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
  </body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>9
<FILENAME>v069612_ex31-1.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT
      31.1 </strong></font><a name="fis_certification"/></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>CERTIFICATION
      </u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I,
      H.
      Stewart Parker, certify that: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.
      I have
      reviewed this quarterly report on Form 10-K of&#160;Targeted Genetics
      Corporation; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.
      Based
      on my knowledge, this report does not contain any untrue statement of a material
      fact or omit to state a material fact necessary to make the statements made,
      in
      light of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this report; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this quarterly report, fairly present in all material respects
      the
      financial condition, results of operations and cash flows of the registrant
      as
      of, and for, the periods presented in this report; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.
      The
      registrant&#8217;s other certifying officer and I are responsible for establishing and
      maintaining disclosure controls and procedures (as defined in Exchange Act
      Rules
      13a-15(e) and 15d-15(e)) for the registrant and have: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)
      designed such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure that
      material information relating to the registrant, including its consolidated
      subsidiaries, is made known to us by others within those entities, particularly
      during the period in which this report is being prepared; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)
      evaluated the effectiveness of the registrant&#8217;s disclosure controls and
      procedures and presented in this report our conclusions about the effectiveness
      of the disclosure controls and procedures, as of the end of the period covered
      by this report based on such evaluation; and </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c)
      disclosed in this report any change in the registrant&#8217;s internal control over
      financial reporting that occurred during the registrant&#8217;s most recent fiscal
      quarter that has materially affected, or is reasonably likely to materially
      affect, the registrant&#8217;s internal control over financial reporting; and
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.
      The
      registrant&#8217;s other certifying officer and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the
      registrant&#8217;s auditors and the audit committee of registrant&#8217;s board of directors
      (or persons performing the equivalent functions): </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)
      all
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the registrant&#8217;s ability to record, process, summarize and
      report financial information; and </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)
      any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the registrant&#8217;s internal control over financial
      reporting. </font><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr valign="top" bgcolor="#ffffff">
            <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
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          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">Dated:
              March 29, 2007</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">/s/&#160;H.
              Stewart Parker<font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="FONT-FAMILY: " size="1">&#160;</font></td>
            <td align="left">
              <hr style="COLOR: black" align="left" noshade size="2" width="80%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">H.
                Stewart Parker</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">President,
                Chief Executive Officer and
                Director</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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      </div>
      <div id="PN">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
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      </div>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
  </body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>10
<FILENAME>v069612_ex31-2.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff"><a name="fis_certification"/>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><a name="fis_exhibit_31_2"/><a name="wg5054ex312_htm"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT
      31.2 </strong></font></a><a name="fis_certification_2"/></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>CERTIFICATION
      </u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I,
      David
      J. Poston, certify that: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.
      I have
      reviewed this quarterly report on Form 10-K of Targeted Genetics Corporation;
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.
      Based
      on my knowledge, this report does not contain any untrue statement of a material
      fact or omit to state a material fact necessary to make the statements made,
      in
      light of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this report; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this quarterly report, fairly present in all material respects
      the
      financial condition, results of operations and cash flows of the registrant
      as
      of, and for, the periods presented in this report; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.
      The
      registrant&#8217;s other certifying officer and I are responsible for establishing and
      maintaining disclosure controls and procedures (as defined in Exchange Act
      Rules
      13a-15(e) and 15d-15(e)) for the registrant and have: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)
      designed such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure that
      material information relating to the registrant, including its consolidated
      subsidiaries, is made known to us by others within those entities, particularly
      during the period in which this report is being prepared; </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)
      evaluated the effectiveness of the registrant&#8217;s disclosure controls and
      procedures and presented in this report our conclusions about the effectiveness
      of the disclosure controls and procedures, as of the end of the period covered
      by this report based on such evaluation; and </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c)
      disclosed in this report any change in the registrant&#8217;s internal control over
      financial reporting that occurred during the registrant&#8217;s most recent fiscal
      that has materially affected, or is reasonably likely to materially affect,
      the
      registrant&#8217;s internal control over financial reporting; and </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.
      The
      registrant&#8217;s other certifying officer and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the
      registrant&#8217;s auditors and the audit committee of registrant&#8217;s board of directors
      (or persons performing the equivalent functions): </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)
      all
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the registrant&#8217;s ability to record, process, summarize and
      report financial information; and </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)
      any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the registrant&#8217;s internal control over financial
      reporting. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">
      <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr valign="top" bgcolor="#ffffff">
            <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">Dated:
              March 29, 2007</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">/s/&#160;David
              J.
              Poston</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="FONT-FAMILY: " size="1">&#160;</font></td>
            <td align="left">
              <hr style="COLOR: black" align="left" noshade size="2" width="80%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">David
                J. Poston</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vice
                President and Chief Financial
                Officer</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
  </body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>11
<FILENAME>v069612_ex32-1.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff"><a name="fis_certification_2"/>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT
      32.1 </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CERTIFICATE
      PURSUANT TO</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>18
      U.S.C. SECTION 1350,</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AS
      ADOPTED PURSUANT TO</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SECTION
      906 OF THE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SARBANES-OXLEY
      ACT OF 2002</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the Annual Report of Targeted Genetics Corporation (the
&#8220;Company&#8221;) on Form 10-K for the year ended December 31, 2006 as filed with the
      Securities &amp; Exchange Commission on the date hereof (the &#8220;Report&#8221;), I, H.
      Stewart Parker, Chief Executive Officer of the Company, certify, pursuant to
      18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002, that to the best of my knowledge: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(1)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The
      Report fully complies with the requirements of Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934; and </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(2)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The
      information contained in the Report fairly presents, in all material respects,
      the financial condition and results of operations of the Company. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;

      <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr valign="top" bgcolor="#ffffff">
            <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td>&#160;</td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">/s/&#160;H.
              Stewart Parker</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="FONT-FAMILY: " size="1">&#160;</font></td>
            <td align="left">
              <hr style="COLOR: black" align="left" noshade size="2" width="80%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">H.
                Stewart Parker</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">President,
                Chief Executive Officer and Director</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March
                29, 2007</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
      signed
      original of this written statement required by Section&#160;906 has been
      provided to the Company and will be retained by the Company and furnished to
      the
      Securities and Exchange Commission or its staff upon request. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      certification is being furnished to the Securities and Exchange Commission
      as
      Exhibit&#160;32 to the Form&#160;10-K pursuant to Section&#160;906 of the
      Sarbanes-Oxley Act of 2002 (subsections (a)&#160;and (b)&#160;of
      Section&#160;1350, Chapter 63 of Title 18, United States Code) and in accordance
      with Item 601(b)(32)(ii)&#160;of Regulation S-K. This certification is not being
&#8220;filed&#8221; for purposes of Section&#160;18 of the Securities Exchange Act of 1934,
      and is not and should not be deemed to be incorporated by reference into the
      Form&#160;10-K or any filing under the Securities Act of 1933 or the Securities
      Exchange Act of 1934.</font></div>
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<TYPE>EX-32.2
<SEQUENCE>12
<FILENAME>v069612_ex32-2.htm
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  <head>
    <title>
</title>
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  <body bgcolor="#ffffff"><a name="fis_certification_2"/>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT
      32.2 </strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CERTIFICATE
      PURSUANT TO</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>18
      U.S.C. SECTION 1350,</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>AS
      ADOPTED PURSUANT TO</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SECTION
      906 OF THE</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>SARBANES-OXLEY
      ACT OF 2002</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      connection with the Annual Report of Targeted Genetics Corporation (the
&#8220;Company&#8221;) on Form 10-K for the year ended December 31, 2006 as filed with the
      Securities &amp; Exchange Commission on the date hereof (the &#8220;Report&#8221;), I, David
      J. Poston, Chief Financial&#160;Officer of the Company, certify, pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002, that to the best of my knowledge: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(1)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The
      Report fully complies with the requirements of Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934; and </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;(2)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;The
      information contained in the Report fairly presents, in all material respects,
      the financial condition and results of operations of the Company. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;

      <table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%">

          <tr valign="top" bgcolor="#ffffff">
            <td width="50%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="1%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
            <td width="49%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">&#160;</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td>&#160;</td>
            <td>&#160;</td>
            <td><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: ">/s/&#160;David
              J.
              Poston</font></td>
          </tr>
          <tr valign="top" bgcolor="#ffffff">
            <td colspan="2"><font style="FONT-FAMILY: " size="1">&#160;</font></td>
            <td align="left">
              <hr style="COLOR: black" align="left" noshade size="2" width="80%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">David
                J. Poston</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Vice
                President and Chief Financial Officer</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">March
                29, 2007</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">A
      signed
      original of this written statement required by Section&#160;906 has been
      provided to the Company and will be retained by the Company and furnished to
      the
      Securities and Exchange Commission or its staff upon request. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      certification is being furnished to the Securities and Exchange Commission
      as
      Exhibit&#160;32 to the Form&#160;10-K pursuant to Section&#160;906 of the
      Sarbanes-Oxley Act of 2002 (subsections (a)&#160;and (b)&#160;of
      Section&#160;1350, Chapter 63 of Title 18, United States Code) and in accordance
      with Item 601(b)(32)(ii)&#160;of Regulation S-K. This certification is not being
&#8220;filed&#8221; for purposes of Section&#160;18 of the Securities Exchange Act of 1934,
      and is not and should not be deemed to be incorporated by reference into the
      Form&#160;10-K or any filing under the Securities Act of 1933 or the Securities
      Exchange Act of 1934.</font></div>
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