SEPARATION AGREEMENT AND RELEASE

This Separation Agreement and Release (this “ Agreement ”) is made by and between Targeted Genetics Corporation, a Washington corporation (the “ Company ”), and H. Stewart Parker (“ Ms. Parker ” or “ Employee ”) on November 14, 2008 (the “ Agreement Date ”), effective as of the Separation Date (as defined below).

WHEREAS, Ms. Parker is the Chief Executive Officer and President of the Company up to the Separation Date.

WHEREAS, the Company and Ms. Parker wish to terminate their working relationship as of the Separation Date (defined below), and as such Ms. Parker’s employment with the Company is being terminated (the “ Termination ”).

WHEREAS , in exchange for Ms. Parker’s agreement to release the Company from any and all claims arising from or related to the employment relationship, and for agreeing to continue to provide consulting services to the Company for a period of six (6) months following the Separation Date, the Company shall provide the benefits as set forth herein.

NOW , THEREFORE , in consideration of the mutual promises made herein, the Company and Ms. Parker (individually referred to as a “ Party ,” collectively referred to as the “ Parties ”) hereby agree as follows:

1.   Termination of Employment . Ms. Parker and the Company acknowledge and agree that Ms. Parker’s employment with the Company shall terminate, as of the close of business, on November 6, 2008 (the “ Separation Date ”).

2.   Separation Benefits . In consideration for the release of claims set forth below and other obligations under this Agreement and in full satisfaction of its obligations to Ms. Parker under the terms of any agreements Ms. Parker may have with the Company, and provided that this Agreement is executed and delivered by Ms. Parker and not revoked under Section 6 herein, the Company agrees to provide Ms. Parker with the benefits described in Section 3 below.

3.   Separation Consideration .

In exchange for Ms. Parker’s agreement to the release of claims set forth in Section 5, below, the Company agrees to provide Ms. Parker with the following benefits (the “ Separation Benefits ”):

(a)  Restricted Stock Units . Ms. Parker holds a total of One Hundred Thousand (100,000) restricted stock units (the “ RSUs ”) issued pursuant to the terms of the Company’s Stock Incentive Plan (the “ Plan ”) and related restricted stock unit agreement. As of the Separation Date, Sixteen Thousand Six Hundred Sixty-Six (16,666) of such RSUs have vested and have been paid out pursuant to the terms of the Plan and the related restricted stock unit agreement and the remaining Eighty Three Thousand Three Hundred Thirty-Four (83,334) of the RSUs are unvested. Ms. Parker agrees that under the terms of the Plan and related restricted stock unit agreement the unvested RSUs are to be immediately forfeited without consideration. Notwithstanding the foregoing, in exchange for Ms. Parker’s release of claims and her agreement to provide consulting services as described in Section 7, the Company shall fully accelerate the vesting of such unvested RSUs such that the remaining Eighty Three Thousand Three Hundred Thirty-Four (83,334) RSUs shall become fully vested. Such accelerated RSUs shall be settled not later then December 31, 2008, provided that this Agreement is effective.

(b) Stock Grant . In exchange for Ms. Parker’s release of claims and agreement to perform consulting services as described in Section 7, pursuant to the Plan, the Company has made a Stock Grant (as defined in the Plan) to Ms. Parker in the amount of One Hundred Fifty Thousand (150,000) Shares (as defined in the Plan), subject to the execution and effectiveness of this Agreement. The Parties shall execute a Stock Grant Agreement (as defined in the Plan).

(c)  Payment of COBRA Continuation Coverage Premiums . If Ms. Parker timely elects continuation coverage under COBRA, the Company will pay, on Ms. Parker’s behalf, the applicable COBRA premiums to continue her group health insurance coverage through COBRA at the level in effect as of the Separation Date (including dependent coverage, if applicable) through May 31, 2009, to the extent such coverage remains available. Notwithstanding the foregoing, the Company’s obligation to pay Ms. Parker’s COBRA premiums will cease immediately in the event that she becomes covered under the group health insurance plan of a new employer at any time during such period, and such coverage is substantially equivalent to or superior than such coverage provided by the Company, and Ms. Parker agrees to provide prompt written notice to the Company (or its successor) if she becomes eligible for such group health insurance coverage during such period.

(d) Cell Phone . Ms. Parker shall be permitted to keep the cell phone she currently uses and the Company shall continue pay the expenses for such cell phone for a period of thirty (30) days commencing on the Separation Date. Ms. Parker shall personally assume the contract for such cell phone and become personally liable for any expenses related to such cell phone upon the expiration of such thirty-day period.

(e) Payment of Attorney’s Fees . The Company shall pay Ms. Parker’s documented attorneys' fees and expenses incurred as a result of negotiating this Agreement, in an amount not to exceed Three Thousand Dollars ($3,000).

4.   No Other Payments Due . Ms. Parker acknowledges that, on the Agreement Date, the Company provided her a final paycheck for all accrued salary, any commissions or bonuses that may have accrued or may accrue, unused accrued vacation and other sums that were due to Ms. Parker through the Separation Date. Except as specifically provided in Sections 3 and 8 hereof, Ms. Parker acknowledges and agrees that she shall not be entitled to earn or receive payment of any commission or other incentive compensation from the Company.

5.   Release of Claims. In consideration for the benefits set forth in this Agreement, the Company and Ms. Parker, on behalf of themselves and each of their respective heirs, executors, administrators, predecessor and successor corporations and assigns, each hereby fully and forever releases Ms. Parker and the Company and its affiliates and subsidiaries, and each of their respective heirs, executors, officers, directors, employees, investors, stockholders, administrators, predecessor and successor corporations and assigns, respectively (collectively, the “ Released Parties ”), of and from any claim, duty, obligation or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that any of them may possess arising from any omissions, acts or facts that have occurred up until and including the Separation Date including, without limitation:

(a)   any and all claims relating to or arising from Ms. Parker’s employment relationship with the Company and the Termination;

(b)   except for the rights granted in Section 3(a) - (b) hereof (and the rights appurtenant thereto), any and all claims relating to or arising from the RSUs or any other right to purchase shares of the Company’s stock;

(c)   any and all claims for sales commissions, performance bonuses or similar payments;

(d)   any and all claims for wrongful discharge of employment; breach of contract, both express and implied; breach of a covenant of good faith and fair dealing, both express and implied, negligent or intentional infliction of emotional distress; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; negligence; and defamation;

(e)   any and all claims for violation of any federal, state or