Exhibit 10.1
AMENDMENT NO. 2 TO FUNDING AGREEMENT
This Amendment No. 2 (this "Amendment") to the Funding Agreement dated
August 8, 2000, as amended July 14, 2003 (together, the "Funding Agreement"),
between Targeted Genetics Corporation, a Washington corporation ("Targeted"),
and Biogen Idec MA Inc., a Massachusetts corporation ("Biogen"), is made as of
September 1, 2005.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this Amendment
shall have the meanings given to them in the Funding Agreement.
2. Amendments. The Funding Agreement is hereby amended as follows:
(a) The complete text of the definition of "Maturity Date" in
"Article One, Definitions" is hereby deleted.
(b) The following shall be added as new definitions in alphabetical
order to "Article One, Definitions":
"Final Maturity Date" means August 1, 2009, the date on which the
final installment of principal and final payment of interest is due
and payable under the Note. If the Final Maturity Date falls on a
day that is not a business day, then the Maturity Date shall be
extended to the next succeeding business day."
"Milestone Payments" mean any and all payments and fees actually
received in cash, cash equivalents, marketable securities or other
liquid assets by Targeted or any of its subsidiaries from any
licensee or sublicensee or from any person with which it has a
collaborative, funding or marketing relationship for developing
and/or commercializing any product, in each case, regardless of how
such payment or fee may be characterized, other than: (i) revenue
received by Targeted or any of its subsidiaries from a person with
which it has a collaborative, funding or marketing relationship to
the extent such payment is reimbursement of development costs
actually incurred and paid by Targeted or such subsidiary in the
course of such collaboration, funding or marketing agreement; (ii)
reimbursements received by Targeted or any of its subsidiaries for
out-of-pocket costs or expenses actually incurred and paid by them;
(iii) amounts received by Targeted or any of its subsidiaries for
the manufacture or supply of products or materials by them; (iv)
reimbursements received by Targeted or any of its subsidiaries for
expenses actually incurred and paid by them in the commercial sale
of a product; and (v) the market value of equity or debt of Targeted
or any of its subsidiaries (i.e., excluding any premium paid on
equity or discount received on debt) purchased by such
collaborative, funding or marketing partner."
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(c) The last sentence of "Article Two, The Loan, Section 2.1 Terms
of the Loan, Subsection 2.1.2 Promissory Note" is hereby deleted and replaced in
its entirety to read as follows:
"The principal amount of the Note shall be due and payable in
installments in the amounts and on the dates set forth in Section
2.1.5 of this Agreement.
(d) The complete text of "Article Two, The Loan, Section 2.1 Terms
of the Loan, Subsection 2.1.5 Repayment" is hereby deleted and replaced in its
entirety to read as follows:
"Accrued and unpaid interest on the Loan shall be paid annually on
each August 31 (provided, that if such date would fall on a day that
is not a business day, then the interest payment date shall be
extended to the next succeeding business day) and on the Final
Maturity Date. All outstanding principal of the Loan shall be due
and payable in cash according to the following schedule:
Payment Date Principal Amount
------------ ----------------
September 1, 2005 $2,500,000
August 1, 2007 $2,500,000
August 1, 2008 $2,500,000
August 1, 2009 $2,500,000
In addition, Targeted agrees to pay Biogen, no later than the 10th
business day following receipt thereof, an amount equal to one-third
of any Milestone Payments received by Targeted or any of its
subsidiaries (each such payment, a "Mandatory Prepayment"). Any
Mandatory Pre-Payment shall be applied (i) first to the payment of
any accrued and unpaid interest on the principal being repaid, and
(ii) second to the payment of outstanding principal in reverse order
of maturity (i.e. starting with the outstanding principal due on the
latest payment date set forth in the above table).
(e) The complete text of "Article Two, The Loan, Section 2.1 Terms
of the Loan, Subsection 2.1.6 Prepayment" is hereby deleted and replaced in its
entirety to read as follows:
In addition to the Mandatory Prepayments, Targeted may prepay all or
any portion of the Loan at any time without premium or penalty (any
such payment, a "Voluntary Prepayment"). Any Voluntary Pre-Payment
shall be applied (i) first to the payment of any accrued and unpaid
interest on the
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principal being repaid, and (ii) second to the payment of
outstanding principal in reverse order of maturity (i.e. starting
with the outstanding principal due on the latest payment date set
forth in the table in Section 2.1.5).
3. Additional Agreements. The parties further agree as follows:
(a) Co-Sale Right. If before November 30, 2005, the Board of
Directors of Targeted resolves to offer for sale shares of its common stock
("Common Stock") in a public or private offering in which net proceeds to
Targeted is expected to equal or exceed $10,000,000 (after consideration of any
reduction resulting from any co-sale by Biogen) (a "Qualified Offering"):
(i) Targeted shall deliver notice of such proposed offering to
Biogen at least 5 business days before Targeted commences directly, or
indirectly through an underwriter, placement agent or broker-dealer, to solicit
investors for such proposed offering.
(ii) At the request of Biogen given by Biogen's written notice
to Targeted within 2 business days after receipt of notice from Targeted,
Targeted shall permit Biogen to participate in such offering by selling shares
of Common Stock held by Biogen in an amount of not less than 1,000,000 shares
(which minimum amount shall be subject to reduction if the managing underwriter
or managing placement agent of the offering in its reasonable discretion
determines that inclusion of all 1,000,000 shares held by Biogen would create a
substantial risk that Targeted will not successfully raise net proceeds of at
least $10,000,000 in the offering) and up to a maximum of 2,000,000 shares
(which maximum amount may be subject to increase, with the consent of each of
Targeted and Biogen in their respective sole discretion, if the managing
underwriter or managing placement agent of the offering determines that
inclusion of a greater amount would be compatible with the ability of Targeted
to successfully raise net proceeds of $10,000,000 or more in the offering). In
the event the managing underwriter or managing placement agent recommends a
reduction in the number of shares of Common Stock held by Biogen included in the
offering, Biogen shall be permitted to include in the offering such number of
shares of Common Stock held by it as would not, in the opinion of such
underwriter, agent or initial purchaser create a substantial risk that Targeted
will not successfully complete the offering and thereby raise net proceeds of at
least $10,000,000. Targeted agrees to use its best efforts to structure the
offering so that Biogen is able to participate in it by selling shares of Common
Stock held by Biogen in an amount of not less than 1,000,000 shares.
(iii) Except as set forth below, the participation of Biogen
in the offering as contemplated by Section 3.1(a)(ii) shall be on the specified
terms and conditions of such offering as agreed upon by and among Targeted and
the underwriters or placement agents in such offering and Biogen shall (1)
deliver or arrange for delivery of such usual and customary documents and
instruments related thereto and (2) provide any information required for
inclusion in the offering documents regarding Biogen, in each case as may be
reasonably requested by such underwriters or placement agents:
(1) Targeted shall pay all expenses and fees in
connection with the offering whether or not the offering is completed,
including, without limitation, all
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registration statement or other filing fees, the fees and expenses of counsel
and accountants to Targeted, all out-of-pocket expenses of the underwriters or
placement agents, all printing costs, the cost of any filings with the National
Association of Securities Dealers or any stock exchange or securities quotation
system, the cost of listing any securities on any stock exchange or authorizing
any securities for trading on any quotation system and all reasonable
out-of-pocket expenses incurred by Biogen in connection with the offering
(including the reasonable fees and expenses of counsel to Biogen in an amount
not to exceed $40,000), but excluding the underwriters' discounts and
commissions, brokerage fees or placement agent fees payable in respect of the
shares of Common Stock sold by Biogen in the offering, which discounts,
commissions, brokerage fees or placement agent fees shall be the responsibility
of Biogen.
(2) Targeted shall not include any information in the
documents for the offering regarding Biogen without the prior written consent of
Biogen, which shall not be unreasonably withheld or delayed.
(3) Biogen shall not be required to make any
representations or warranties to any person in connection with the offering
regarding Targeted.
(4) Biogen shall not be required to indemnify (or
provide contribution to) any person in connection with the offering, except to
indemnify Targeted, the underwriters, placement agents or initial purchasers for
any untrue (or alleged) statement of a material fact in the information
regarding Biogen that Biogen has specifically provided in writing to be included
in the Registration Statement, prospectus or offering memorandum for the
offering and for any breaches of its representations, warranties or agreements.
(5) Except as set forth in Section 3(b) hereof, Biogen
shall not be required to enter into any lock-up agreement or other restriction
with respect to its transactions in or related to securities of Targeted.
(b) Lock-up
(i) During the period from the date hereof through the earlier
of (1) November 30, 2005 and (2) the consummation of a Qualified Offering (the
"Initial Lock-up Period"), Biogen hereby agrees that, other than pursuant to
Section 3(a), it will not, directly or indirectly, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, or
otherwise dispose of or transfer any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for Common Stock, whether now
owned or hereafter acquired by Biogen or with respect to which Biogen has or
hereafter acquires the power of disposition (collectively, the "Lock-Up
Securities") or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Lock-Up Securities, whether any such
swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise. In addition, in the event Targeted consummates
a public or private offering of Common Stock (including without limitation a
Qualified Offering) prior to November 30, 2005, Biogen further agrees, at the
request of the managing underwriter or managing placement agent of such
offering, to enter into a customary form of lock-up agreement ("Biogen's Lock-up
Agreement") containing terms
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substantially similar to the terms set forth above and for a lock-up period of
not more than 90 days after the consummation of such offering (the "Offering
Lock-up Period"); provided, that in the event Biogen sells at least 1,000,000
shares of Common Stock held by it in such offering, the Offering Lock-up Period
shall be increased by an additional 45 days for each 500,000 shares of Common
Stock Biogen sells above 1,000,000. The lock-up provided for in Biogen's Lock-up
Agreement shall terminate immediately if the Qualified Offering is abandoned by
Targeted at any time.
(ii) Targeted agrees to use its best efforts to cause each
director, officer and holder of 10% or more of its Common Stock to enter into a
customary form of lock-up agreement with the managing underwriter or managing
placement agent of the Qualified Offering containing terms substantially similar
to the terms set forth in Section 3(b)(i) above. Biogen's Lock-up Agreement
shall provide that if the managing underwriters or placement agents for the
offering consent to or otherwise permit a transaction by an officer, director or
stockholder with respect to all or a portion of their shares of Common Stock,
which action would not otherwise be permitted by the lock-up agreement of such
officer, director or stockholder, Biogen shall be permitted to take a similar
action with respect to the same proportion of its shares of Common Stock.
(c) Waiver of Registration Rights. Biogen hereby waives its
registration rights set forth in Sections 3.6.2 and 3.6.3 of the Funding
Agreement with respect to any offering by Targeted consummated before November
30, 2005, including without limitation any registration effected pursuant to any
registration rights granted to purchasers in the event such offering is a
private placement.
(d) Indemnification and Contribution.
(i) Targeted agrees to indemnify and hold harmless Biogen,
each person, if any, who controls Biogen within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, each officer, director,
agent and employee of Biogen and each officer, director, agent and employee of
each such controlling person, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses incurred in connection with defending or investigating any such action
or claim) arising out of, relating to, or based upon any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement, preliminary or final prospectus, preliminary or final offering
memorandum, offering circular or other offering document used in connection with
the Qualified Offering, or any amendment or supplement thereto, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, other
than any statement or omission based on information concerning Biogen supplied
by Biogen in writing to Targeted expressly for inclusion therein.
(ii) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 3(d)(i) hereof, such person (the
"indemnified party") shall promptly notify Targeted in writing and Targeted,
upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and any
others Targeted may designate in such proceeding and shall pay the reasonable
fees and disbursements of such
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counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
Targeted and the indemnified party shall have mutually agreed to the retention
of such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Targeted and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. Targeted shall not, in
respect of the legal expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and agrees that all such fees and
expenses shall be reimbursed promptly as they are incurred. Any counsel to the
indemnified parties shall be designated in writing by Biogen. Targeted shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, Targeted agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment. Targeted
shall not, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding and does not impose any monetary
or other obligation or restriction on the indemnified party.
(iii) To the extent that the indemnification provided for in
Section 3(d)(i) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
Targeted under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of Targeted on the
one hand and the indemnified party or parties on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the indemnified parties on the one hand and the Company on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Biogen or
by Targeted, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 3(d)(iii) were determined by pro rata allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding this
Section 3(d)(iii), no indemnifying party shall be required to contribute any
amount in excess of the amount by which the net proceeds from the sale of
securities by it in the offering exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation
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(within the meaning of Section 11(f) of the Securities Act of 1933, as amended)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(iv) The remedies provided for in this Section 3(d) are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity, hereunder, under the
Funding Agreement or otherwise. The indemnity and contribution provisions
contained in this Section 3(d) shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of Biogen or any person controlling Biogen,
and (iii) the sale of any Common Stock by Biogen.
(e) Notification if Targeted Abandons Qualified Offering. If Target
determines to abandon a Qualified Offering at any time after providing the
notice to Biogen pursuant to Section 3(a)(i) hereof, Targeted shall promptly
notify Biogen.
4. Effect of Amendment. Except as provided in this Amendment, all of the
terms and conditions of the Funding Agreement shall remain in full force and
effect.
5. Counterparts. This Amendment may be executed in counterparts, each of
which when so executed shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.
[signature pages follows]
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IN WITNESS WHEREOF, Targeted and Biogen have caused this Amendment to be
duly executed as of the date first above written.
TARGETED GENETICS CORPORATION
By: /S/ H. STEWART PARKER
---------------------------------
Name: H. Stewart Parker
---------------------------------
Title: President and CEO
---------------------------------
BIOGEN IDEC MA INC.
By: /S/ MICHAEL F. PHELPS
---------------------------------
Name: Michael F. Phelps
---------------------------------
Title: Vice President & Treasurer
---------------------------------
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