PATENT ASSIGNMENT AND SECURITY AGREEMENT

Exhibit 10.13

PATENT ASSIGNMENT AND SECURITY AGREEMENT

        This Patent Assignment and Security Agreement (the "Agreement") is made effective as of December 28, 2005 (the "Effective Date") between GenVec Inc. ("GenVec"), a Delaware corporation, with an address at 65 West Watkins Mill Road, Gaithersburg, MD 20878, and Mytogen, Inc. ("Buyer"), a Delaware corporation, with an address at P.O. Box 50576, Phoenix, Arizona 85076-0576.

        WHEREAS, the parties are entering into an Asset Purchase Agreement of even date herewith (the "Asset Purchase Agreement"), pursuant to which GenVec is transferring to Buyer certain of its assets relating to Cell Therapy; and

        WHEREAS, as a condition to, and contemporaneous with, the closing of the Asset Purchase Agreement, the parties are entering into this Agreement, pursuant to which Buyer shall acquire certain patents and patent applications of GenVec and certain agreements relating thereto;

        NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement and for other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

1.     Definitions     

        1.1.  "Affiliate" means, with respect to any party, (i) any other person of which securities or other ownership interests representing more than five percent (5%) of the voting interests are, at the time such determination is being made, beneficially owned or Controlled by such Person, or (ii) any other person that, at the time such determination is being made, is directly or indirectly Controlling, Controlled by or under common Control with such Person. For the purposes hereof, (a) "Control," whether used as a noun or verb, refers to the possession, directly or indirectly, of the power to affirmatively direct, or affirmatively cause the direction of, the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and (b) a "beneficial owner" of a security is any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares (x) voting power, which includes the power to vote, or direct the voting of, such security, or (y) investment power, which includes the power to dispose, or to direct the disposition of, such security.

        1.2.  "Assigned Agreements" means the Cardion Agreement and the Terumo Agreement.

        1.3.  "Assigned Patents" means the patents and patent applications identified on Schedule 1 to Exhibit A.

        1.4.  "Cardion Agreement" means that certain Patent License Agreement between Cardion Pharmaceuticals, Inc. and Diacrin, Inc. dated as of September 30, 2002, as the same may be amended, restated, supplemented or otherwise modified prior to the date hereof or as permitted pursuant to the terms of this Agreement.

        1.5.  "Cell Therapy" means autologous and allogenic skeletal myoblasts for cardiac therapy.

        1.6.  "Gross Revenue," with respect to a product, process, or service, means:

• • (i)

    If the product, process, or service is provided to a third party other than a Special Party, Buyer or its Affiliate's or licensee's actual gross revenues, determined in accordance with generally accepted accounting principles, consistently applied, including sale proceeds, license fees, royalties, lease payments and interest income actually received from third parties;
    
    

    (ii)

    If the product, process, or service is provided is provided to a Special Party for resale, the greater of Buyer or its Affiliate's or licensee's actual gross revenues as described in clause (i) above or the Special Party's gross revenues as described in clause (i) above; or

• • (iii)

    If the product, process, or service is provided to a Special Party for use by such Special Party, the gross revenues that would have resulted from a hypothetical arm's-length sale by Buyer or its Affiliate or licensee to a third party if such third party were not a Special Party. The parties shall seek to agree to such amount based on recent sales or licenses or other relevant considerations.

        1.7.  "Net Sales Revenue" means Gross Revenue of Buyer or its Affiliates or licensees from sales or other provision of products, processes or services, where such products, processes or services are disclosed or claimed in the Patents, developed, manufactured or provided using the Related Trade Secrets, or otherwise derived from the Patents or Related Trade Secrets, less:

• • (i)

    Rebates granted and customary trade, quantity or cash discounts actually allowed and taken, except rebates or discounts granted wholly in consideration of a third party's agreement to purchase any product, process or service not resulting to payment to GenVec under Article 4, and provided that rebates or discounts granted partially in consideration of a third party's agreement to purchase any product, process or service not resulting to payment to GenVec under Article 4 shall be allocated among all the applicable products, processes and services in proportion to the fair market value of the purchases occasioning such rebates or discounts.
    
    

    (ii)

    Amounts actually repaid by reason of rejection or return of products;
    
    

    (iii)

    Actual freight and insurance costs in transporting products to third parties if separately stated on a bill or invoice and paid by the third party;
    
    

    (iv)

    Sales, value-added and other direct taxes, customs duties and other government charges incurred and paid if separately stated on a bill or invoice and paid by the third party;
    
    

    (v)

    Bad debt relating to sales of such products, process and services.; and
    
    

    (vi)

    Any Losses (as defined in Section 7.1) for which GenVec is not liable by operation of Sections 6.3, 7.1 and 7.2 that are actually paid by Buyer to a third party other than an Affiliate of Buyer and that arise from infringement by any of the Assigned Patents or Related Trade Secrets of a patent, copyright, trade secret or other proprietary right owned by such third party and in existence on or prior to the Effective Date. For the avoidance of doubt, Buyer may not so deduct amounts payable to third parties, whether under license agreements or otherwise, with respect to delivery devices and other technologies not practiced by GenVec prior to the Effective Date, and any such Losses may be deducted from Gross Revenues only prospectively, after payment by Buyer. Under no circumstances shall GenVec be liable for such Losses apart from prospective deduction as permitted by this clause (vi).

        1.8.  "Patents" means the Assigned Patents and Related Patents.

        1.9.  "Related Patents" means (i) any divisionals, continuations, continuations-in-part, and foreign counterparts of the Assigned Patents and other patents and patent applications filed by or on behalf of Buyer disclosing substantially the same subject matter or claiming priority to the Assigned Patents; (ii) any patents that issue on patent applications included among the foregoing or among the Assigned Patents; and (iii) any reissues, reexaminations, renewals, amendments and extensions of the foregoing or of the Assigned Patents.

        1.10. "Related Trade Secrets" means any trade secrets owned by GenVec that, as of the Effective Date, are primarily used by GenVec as means of practicing the Assigned Patents or otherwise primarily used by GenVec in its Cell Therapy program.

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        1.11. "Special Party" means an Affiliate of Buyer or Buyer's licensee, or any other person enjoying a special course of dealing with Buyer, an Affiliate of Buyer or Buyer's licensee. A "special course of dealing" shall include co-marketing or other arrangements with a third party wherein the third party sells a product, process or service and Buyer, an Affiliate of Buyer or Buyer's licensee receives additional compensation based on the ultimate sale of the product, process or service; arrangements under which a third party sells a product, process or service under a private labeling arrangement; and barter arrangements in which Buyer, an Affiliate of Buyer or Buyer's licensee exchanges a product, process or service with a third party for another a product, process or service in-kind.

        1.12. "Terumo Agreement" means that certain Development and License Agreement between Terumo Corporation and Diacrin, Inc. dated September 4, 2002, as amended, as transferred to GenVec pursuant to that certain Agreement and Plan of Merger, dated as of April 14, 2003, as the same may be amended, restated, supplemented or otherwise modified prior to the date hereof or as permitted pursuant to the terms of this Agreement.

        1.13 "UCC" means the Uniform Commercial Code as in effect from time to time in the State of Delaware.

2.     Assignment of Patents and Related Trade Secrets; Residual Rights     

        2.1.  Upon the execution of this Agreement, GenVec shall sign and deliver a Patent Assignment in the form of Exhibit A assigning the Assigned Patents to Buyer.

        2.2.  GenVec hereby sells, assigns, transfers and sets over to Buyer its entire right, title and interest in, to and under the Related Trade Secrets, all said rights to be held and enjoyed by Buyer for its own use and enjoyment and for the use and enjoyment of its successors and assigns as fully and entirely as the same would have been held and enjoyed by GenVec if this assignment, transfer, and sale had not been made, and further including the right to recover damages and/or profits that have arisen from misappropriation of such Related Trade Secrets.

        2.3.  Buyer, at its sole cost and expense, shall have sole control over the filing, prosecution, maintenance and enforcement of the Patents. Notwithstanding the foregoing, if Buyer decides to abandon any patent or patent application included in the Patents (including by deciding not to continue prosecution, pay issuance or maintenance fees or defend in a reexamination or opposition proceeding), then Buyer shall notify GenVec in writing at least thirty (30) days before the relevant filing deadline and promptly provide GenVec all related information reasonably requested by GenVec, and if GenVec wishes to continue to maintain the patent or prosecute the patent application, then (i) Buyer promptly shall assign its rights with respect to the patent or patent application to GenVec; (ii) GenVec, at its sole cost and expense, may maintain the patent or prosecute the patent application and maintain any patent issuing on the patent application; and (iii) Buyer shall retain a perpetual, irrevocable, non-transferable, nonexclusive license, without the right to sublicense, to practice the patent or patent application and any patents issuing thereon (including by making, having made, using, importing, offering for sale and selling embodiments of the inventions claimed therein), subject to Buyer's making the payments required by Article 4.

        2.4.  GenVec retains, and immediately upon execution and delivery of this Agreement and the Patent Assignment described in Section 2.1 Buyer shall be deemed to grant to GenVec, a perpetual, irrevocable, transferable, worldwide, fully-paid up, royalty-free nonexclusive license, with the right to grant and authorize sublicenses, to practice the Patents (including by making, having made, using, importing, offering for sale and selling embodiments of the inventions claimed therein) and Related Trade Secrets in connection with products, processes or services developed or provided by GenVec other than Cell Therapy products, processes and services and to disclose the Related Trade Secrets under an appropriate confidentiality obligation in connection with products, processes or services developed or provided by GenVec other than Cell Therapy products.

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3.     Assignment of Agreements     

        Pursuant to the Asset Purchase Agreement, GenVec is assigning and delegating to Buyer the Assigned Agreements. Without limiting any rights or remedies available under the Assigned Agreements or at law or equity, Buyer hereby confirms that it accepts, assumes, becomes responsible for and agrees to fully perform and discharge, the Assigned Agreements.

4.     Payments     

        4.1.  Without limiting the provisions of the Asset Purchase Agreement, Buyer shall pay GenVec for the Assigned Patents, Related Trade Secrets and Assigned Agreements, as well as the other assets transferred to Buyer pursuant to the Asset Purchase Agreement, as follows:

• • (i)

    Buyer shall pay GenVec one half of the first milestone payment (currently anticipated to be two million U.S. dollars ($2,000,000)) if and when actually received by Buyer or its nominee pursuant to Section 4.2(1) of the Terumo Agreement, provided that Buyer shall not amend or waive its rights under the Terumo Agreement so as to reduce the amount payable by Terumo as the first milestone payment to less than two million U.S. dollars ($2,000,000) unless Buyer pays GenVec one million U.S. dollars ($1,000,000) when Buyer or its nominee receives its first payment from Terumo or at the time the first milestone payment otherwise would have been due, whichever is earlier.
    
    

    (ii)

    Buyer shall pay GenVec four percent (4%) of Net Sales Revenue from sales or other provision of products, processes or services from the Effective Date through the expiration date of the last of the Patents to expire, or the date ten (10) years after the first commercial sale of products, processes or services on which a payment is payable hereunder, or December 31, 2025, whichever is later, except that in the case of "Licensed Products" (as defined in the Terumo Agreement) sold or otherwise disposed of under the Terumo Agreement, Buyer shall pay GenVec four percent (4%) of, and "Net Sales Revenue" shall be deemed to mean, "Net Sales" as defined in the Terumo Agreement. For the avoidance of doubt, the parties confirm that in recognition of GenVec's transfer of the Related Trade Secrets and the assets transferred under the Asset Purchase Agreement, the payment required by this paragraph (ii) intentionally and reasonably applies to activities beyond the scope of the Assigned Patents, and that it constitutes consideration for the assignment of the Assigned Patents and other assets, and not a royalty or license fee.
    
    

    (iii)

    If, during the first twenty-four (24) months following the Effective Date, Buyer or one or more shareholders of Buyer initiate a transaction or series of transactions with one or more third parties to (a) merge or consolidate Buyer with or into another entity, (b) sell or otherwise dispose of all or substantially all of Buyer's assets, including the Patents and Related Trade Secrets, (c) sell or otherwise dispose of a Controlling interest in Buyer's capital stock, or (d) grant a license with respect to the Patents or Related Trade Secrets, then subject to the remainder of this paragraph (iii), GenVec shall be entitled to receive a payment from Buyer or Buyer's successor by way of merger in an amount equal to ten percent (10%) of the net proceeds of transaction(s) as described in clause (a) through (c) above and ten percent (10%) of the net proceeds of up-front license fees, milestone payments and other payments that are not running royalties pursuant to transaction(s) as described in clause (d) above. For the purpose of the immediately preceding sentence, "net proceeds" means the gross proceeds of such transaction(s) less any commission or finders fee payable out of such proceeds. Notwithstanding the foregoing, if, in such a transaction, Buyer or its shareholders receive stock or other non-cash consideration, the parties will negotiate in good faith to determine an appropriate method for providing GenVec with the payment provided in this paragraph (iii); provided, however, that in such

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• • • instance GenVec will not be entitled to receive its ten percent (10%) share thereof in cash unless expressly agreed to buy Buyer, so long as GenVec is treated no less favorably than Buyer's investors; and provided, further, that GenVec acknowledges that any non-cash consideration received by it pursuant to this paragraph (iii) may be subject to restrictions on transferability, and GenVec agrees that it will abide by such restrictions on transferability, including by executing any reasonable agreements or other documents that may be necessary or appropriate to effectuate such restrictions.

        4.2.  Payments under Section 4.1(ii) shall be made quarterly, within thirty (30) days after the end of each calendar quarter for revenue received or recognized during the calendar quarter, or if no payment is due for a particular calendar quarter, Buyer shall notify GenVec of the same by no later than the date on which the payment otherwise would be due. Each such payment shall be accompanied by a true and accurate written report showing the following as they apply to the calendar quarter immediately preceding the date of such report:

• • (i)

    The quantities on a country-by-country basis of each product, process or service billed or invoiced during the immediately preceding calendar quarter;
    
    

    (ii)

    The computation of the Net Sales Revenue of each such product, process or service (including a detailed accounting of any allowed deductions from the billed or invoiced amounts to arrive at Net Sales Revenue), and the U.S. dollar value of such Net Sales Revenue;
    
    

    (iii)

    The U.S. dollar value of the required payment based on the Net Sales Revenue; and
    
    

    (iv)

    Certification of the correctness and completeness of the foregoing by an executive officer of Buyer.

        4.3.  In the case of payments under Section 4.1(ii):

• • (i)

    If such payments are based on payments to Buyer or its Affiliates or licensees for products, processes or services denominated in a currency other than U.S. dollars, the amount payable to GenVec shall first be determined in such currency and then be converted into its equivalent in U.S. dollars at the average of the New York foreign exchange selling rate for such currency during the last fifteen (15) business days of the calendar quarter for which payment is due, as published by The Wall Street Journal, or if such rate is not so published, at the average of the selling rate for such currency during the last fifteen (15) business days of the calendar quarter for which payment is due, as published by a bank chosen by GenVec and reasonably acceptable to Buyer.
    
    

    (ii)

    If Buyer or its Affiliate or licensee receives any fixed payment, fee or other cash or non-cash consideration from a third party in consideration of any discount, credit or allowance granted to such third party in connection with any product, process or service for which a payment is due, then Buyer shall pay to GenVec a royalty equal to the product of such consideration (or the fair market value thereof, provided that GenVec shall not unreasonably withhold its agreement to a determination of such fair market value made in good faith by Buyer's board of directors) multiplied by the royalty rate. Buyer shall report on the amount of any such consideration, and the royalty payable thereon in U.S. dollars, in the report required by Section 4.2.

        4.4.  Payments under Sections 4.1(i) and (iii) shall be made within thirty (30) days after receipt of the applicable milestone payment or proceeds. Buyer shall provide such substantiation of the calculation of such payments as GenVec may reasonably request.

        4.5.  All payments hereunder shall be paid in U.S. dollars by wire transfer, or by such other method as may be mutually agreed upon, for value no later than the due date thereof (with twenty-four

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(24) hours advance notice of each such wire transfer) to such bank account or accounts as GenVec may from time to time designate in writing. It is of the essence of this Agreement that all payments hereunder shall be made in full when due, without any right of offset against any amounts otherwise purportedly due to Buyer.

        4.6.  If Buyer fails to make any payment required under this Agreement on or before the date due, such party shall pay interest on such amount at the rate of one and a half percent (1.5%) per month (eighteen percent (18%) per annum), which interest shall accrue from the date the payment not timely made became due until the date such payment is paid in full. If such rate exceeds the highest rate allowed by applicable law, then the highest rate allowed by law shall apply.

        4.7.  If Buyer is required by law to withhold any taxes on the transfer of any payments under this Agreement, Buyer shall secure proof of any such tax payment, and send such proof to GenVec together with such other documents as GenVec may reasonably require in order to secure a refund of or credit for the amount of such payment. Except for the foregoing, each party shall be responsible for any taxes that are levied on it in connection with its obligations under this Agreement.

        4.8.  Buyer shall not, absent GenVec's written consent, amend any Assigned Agreement, sell or otherwise dispose of any Patents or Related Trade Secrets, consummate any other transaction or take any other action with the purpose or effect of materially negatively affecting the payments to GenVec contemplated hereunder or providing a financial benefit to Buyer relating to the Patents, the Related Trade Secrets or the Assigned Agreements that does not also result in an appropriate financial benefit to GenVec as contemplated hereunder.

        4.9.  Buyer shall keep full, true and accurate books of account containing all particulars and reasonable supporting documentation that may be necessary for the purpose of determining applicable Net Sales Revenue, payments hereunder, and Buyer's compliance in other respects with its obligations under this Agreement and shall require its licensees to do the same. Such records shall be kept at Buyer's principal place of business and shall be open during normal business hours for inspection no more frequently than once each calendar year for five (5) years following the end of the calendar year to which they pertain (and access shall not be denied thereafter if reasonably available) by GenVec or its representatives (at GenVec's expense) for the purpose of verifying Buyer's royalty reports and/or compliance in other respects with the terms of this Agreement. Notwithstanding the foregoing, if GenVec is acquired by, or merges with, a direct competitor of Buyer, the competitor will not have direct access to Buyer's books and records under this Section 4.9 and may exercise GenVec's rights under this Section 4.9 only through an independent third party accounting or consulting firm, except that such independent firm may report its conclusions to the competitor, and in the event of an underpayment disclose such supporting information as may be necessary for enforcement of GenVec's rights under this Agreement. Buyer shall use commercially reasonable efforts to require its licensees to agree that GenVec shall have the same rights of inspection of Buyer's licensees' records, and GenVec also shall have the right (at GenVec's expense) to participate in any inspection or audit of its licensees that Buyer may conduct. If Buyer's records are insufficient for the foregoing purposes or any such inspection or audit of Buyer's records conducted by an independent public accounting firm discloses an underpayment of five percent (5%) or more of the amount actually due for any quarterly period, then, in addition to any other rights and remedies available to GenVec under this Agreement, Buyer shall promptly pay the reasonable cost of such inspection or audit after such party's receipt of the bill or invoice for such inspection.

        4.10. Buyer shall be free to establish all prices, royalties, license fees and other amounts charged by Buyer to its licensees and other third parties. Buyer makes no representation or warranty, and gives no assurance whatsoever, as to any minimum amount of Gross Revenues to be generated or any minimum royalties to be paid to GenVec pursuant to this Agreement.

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5.     Commercialization     

        5.1.  Buyer shall, at its sole cost and expense, use commercially reasonable efforts to further and advance Cell Therapy employing the Patents and Related Trade Secrets towards various commercial applications, including the continuance of phase I clinical