AMENDMENT NO. 3 TO FUNDING AGREEMENT
Exhibit
10.1
Execution
Copy
AMENDMENT
NO. 3 TO FUNDING AGREEMENT
This
Amendment No. 3 (this “Amendment”)
to the
Funding Agreement dated August 8, 2000, as amended July 14, 2003 and September
1, 2005 (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 November 7, 2006.
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 “Final
Maturity Date”
in
“Article One, Definitions” is hereby amended and restated as
follows:
“Final
Maturity Date”
means
August 1, 2008, 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 Final Maturity Date
shall be extended to the next succeeding business day.”
(b) The
following shall be added as a new definition in alphabetical order to “Article
One, Definitions”:
“Change
of Control”
means
either of the following events:
(a)
consummation of any merger or consolidation of Targeted in which Targeted is
a
party and in which Targeted is not the surviving entity or the shareholders
of
Targeted control less than fifty percent of the voting power of Targeted or
the
surviving entity; or (b) consummation of any sale, lease, exchange or other
transfer in one transaction or a series of related transactions of all or
substantially all of Targeted’s assets or outstanding securities, other than a
transfer of Targeted’s assets or securities to a majority-owned subsidiary of
Targeted.”
(c) 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
|
|
|
November
7, 2006
|
$500,000
|
|
|
August
1, 2007
|
$1,000,000
|
|
|
August
1, 2008
|
$1,000,000
|
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
Pre-Payment”).
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
on the above table).
Targeted
further
agrees that upon any Change of Control of Targeted, the payment of $1,000,000
of
outstanding principal under the Loan due on August 1, 2007 shall accelerate
and
become due and payable in full to Biogen no later than the 30th
business
day following such Change of Control.”
3. Additional
Agreements. The parties further agree as follows:
(a) Partial
Cancellation of Indebtedness.
Biogen
hereby agrees effective as of the date hereof to: (i) cancel in full the
outstanding principal amount of $650,000 due under the Amended and Restated
Promissory Note, dated September 1, 2005 (the “Second
Note”);
(ii)
cancel in full outstanding principal amount of $5,000,000 of the Loan maturing
on August 1, 2008 (such cancellation of an aggregate of $5,650,000 of
outstanding indebtedness being the “Forgiven
Debt”);
and
(iii) accept payment for the final $2,500,000 due under the Loan according
to
the schedule set forth in Section 2(c) hereof.
(b) Biogen
acknowledges receipt as of the date hereof of: (i) $500,000 cash from Targeted
in payment of principal under the Loan pursuant to the schedule set forth in
Section 2(c) hereof, and (ii) an Amended and Restated Promissory Note (the
“Note”)
from
Targeted further amending and restating that certain Amended and Restated
Promissory Note dated September 1, 2005 (the “September
2005 Note”)
and
evidencing Targeted’s aggregate outstanding indebtedness to Biogen, following
the repayment described in clause (i) above, of $2,000,000. Except for the
indebtedness of Targeted to Biogen evidenced by the Note, Biogen hereby
acknowledges that performance by Targeted of the actions contemplated by this
Amendment shall constitute full repayment and satisfaction of the Forgiven
Debt
and that Targeted shall have no further obligation to Biogen to repay the
Forgiven Debt.
(c) Issuance
of the Common Shares.
In
consideration of the Forgiven Debt, Targeted hereby agrees to issue 1,000,000
shares of its unregistered common stock (the “Common
Shares”)
to
Biogen within two (2) business days of the execution and delivery of this
Amendment and the delivery of the September 2005 Note and the Second Note to
Targeted for cancellation.
(d) Representations
and Warranties.
(i)
Biogen represents and warrants to Targeted, as of the date of this Amendment,
as
follows:
(1)
Access
to Information.
Biogen
has had access to Targeted’s recent public filings with the SEC which provide
all material information regarding Targeted including, in particular, the
current financial condition of Targeted and the risks associated therewith.
Biogen has been provided reasonable opportunity to ask questions of, and receive
answers from, management of Targeted concerning the terms and conditions of
the
issuance of the Common Shares and any additional information, documents, book
and records relating to the business, assets, financial condition, results
of
operations and liabilities of Targeted that it deemed necessary and to reach
an
informed and knowledgeable decision to accept the Common Shares on the terms
set
forth herein.
(2)
Restricted
Securities.
Biogen
understands that the Common Shares are characterized under the Securities Act
as
“restricted securities” and, therefore, the Common Shares cannot be sold or
transferred unless they are subsequently registered under the Securities Act
or
an exemption from such registration is available. Biogen further understands
that it must hold the Common Shares indefinitely unless a subsequent disposition
thereof is registered or qualified under the Securities Act and applicable
state
securities laws or is exempt from registration, and that Targeted is under
no
obligation to register or qualify any of the Common Shares or to take any action
to make such an exemption available. In this connection, Biogen represents
that
it is familiar with Rule 144 under the Securities Act as presently in effect,
and understands the resale limitations imposed thereby and by the Securities
Act.
(3)
Purchase
for Own Account.
Biogen
represents and warrants that the Common Shares are being purchased for its
own
account, not as a nominee or agent, for investment and not with a view to the
resale or distribution of any part thereof, and that Biogen has no present
intention of granting any participation in, or otherwise distributing the same.
Biogen further represents that it does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations to any third person with respect to any of the Common
Shares.
(4)
Accreditation.
Biogen
represents and warrants that it is an “accredited investor” within the meaning
of Regulation D promulgated under the Securities Act.
(ii)
Targeted represents and warrants to Biogen, as of the date of this Amendment,
as
follows:
(1)
Organization,
Standing and Power.
Targeted is a corporation duly organized and validly existing under the laws
of
the state of Washington. Targeted has the corporate power and authority to
own,
lease and operate its properties and carry on its business as now being
conducted. Targeted is duly qualified to transact business and is in good
standing
in each jurisdiction in which the failure to be so qualified and in good
standing would have a Material Adverse Effect on Targeted. Targeted has
previously provided to Biogen with complete and correct copies of its articles
of incorporation and bylaws as in effect on the date of this
Agreement.
(2)
Authority.
Targeted has all requisite power and authority to execute, deliver and
perform
its obligations under this Amendment and the Funding Agreement. The execution
and delivery of this Amendment and the consummation of the transactions
contemplated by this Amendment (including the issuance of Common Stock
pursuant
to Section 3(c) of this Amendment) have been duly authorized by all necessary
corporate action on the part of Targeted. This Amendment has been duly
executed
and delivered by Targeted, and this Amendment constitutes a valid and legally
binding obligation of Targeted, enforceable in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, including
concepts of materiality, reasonableness, good faith and fair dealing, regardless
of whether in a proceeding at equity or at law).
(3)
SEC
Reports; Financial Statements.
a)
Targeted has filed with the SEC all reports, forms, registration statements,
definitive proxy statements and documents required to be filed with the
SEC
since December 31, 1999, and has furnished to Biogen true and complete
copies,
in the form filed with the SEC, of (i) its Annual Report on Form 10-K
for
the
fiscal year ended December 31, 2005, (ii) the proxy statement relating
to
its
2006 annual meeting of shareholders, (iii) its annual report to shareholders
for
the fiscal year ended December 31, 2005 and (iv) its Quarterly Reports on Form
10-Q for the quarters ended March 31, 2006 and June 30, 2006 (collectively,
the
"Targeted
SEC Documents").
As of
their respective filing dates, the Targeted SEC Documents (including all
financial statements, exhibits and schedules to and documents incorporated
by
reference in the Targeted SEC Documents) (i) complied in all material respects
with the requirements of the Exchange Act and the Securities Act, and (ii)
did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated or necessary to make the statements made in the
Targeted SEC Documents, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed Targeted
SEC Document.
(b)
The
financial statements of Targeted, including the notes to the financial
statements, included or incorporated by reference in the Targeted SEC
Documents
(the "Targeted
Financial Statements")
were
complete and correct in all material
respects as of their respective filing dates, complied as to form in all
material respects with applicable accounting requirements and with the
applicable published rules and regulations of the SEC as of their respective
dates, and have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the related notes or, in the case of unaudited
statements, included in Quarterly Reports on Forms 10-Q). The Targeted Financial
Statements fairly present the consolidated financial condition and operating
results of Targeted and its subsidiaries at the dates and during the periods
indicated
in the Targeted Financial Statements (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments). There has been no change
in Targeted accounting policies except in response to SEC Staff Accounting
Bulletin No. 101 and as described in the Targeted SEC Documents.
(4)
Valid
Issuance of Stock.
The
Shares, when issued and delivered in accordance with the terms of Section 3(c)
of this Agreement and for the consideration expressed herein, will
be
duly and validly issued, fully paid and nonassessable and free of any liens
or
encumbrances other than those, if any, created by Biogen, and will be issued
in
compliance with all applicable state and federal securities
laws.
4. Demand
Registration.
(a)
On
one occasion after the date hereof, Biogen may request that all of the Common
Shares owned by Biogen as of such date be registered under the Securities Act
on
a Registration Statement on Form S-3 (or
a
successor form) (the
"S-3
Registration Statement").
Upon
the receipt of such request Targeted shall use its Reasonable Commercial Efforts
to effect the S-3 Registration Statement as soon as practicable, at Targeted's
expense, and to cause the S-3 Registration Statement to remain effective until
the earlier of 180 days from the effective date of the S-3 Registration
Statement and the date on which all the Common Shares covered by the S-3
Registration Statement have been sold; provided, however, that Targeted shall
not be required to effect the S-3 Registration Statement if (A) if Form S-3
(or
a successor form) is not available for such registration; (B) the Common Shares
to be included in the S-3 Registration Statement would have an aggregate price
to the public of less than $350,000; (C) Targeted shall furnish to Biogen a
certificate signed by the president of Targeted stating that (1) Targeted is
engaged or has bona fide plans to engage in a registered public offering or
is
engaged in any other activity that, in the good faith judgment of Targeted's
board of directors, would be adversely affected by the requested registration
or
(2) the requested registration would involve initial or continuing disclosure
obligations that are not in the best interests of Targeted's shareholders at
such time, in which event Targeted shall have the right to defer the filing
of
the S-3 Registration Statement for a period of not more than 90 days after
receipt of the request; or (D) Targeted has already effected a registration
statement on Form S-3 or Form S-1 within the 180-day period preceding the date
of such request.
(b)
In
the event Targeted effects the S-3 Registration Statement pursuant to this
Section 4, Targeted shall indemnify and hold harmless Biogen, each underwriter
of such Common Shares, if any, and each other person, if any, who controls
Biogen or such underwriter within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which Biogen or such underwriter or controlling person may become
subject under the Securities Act, the Exchange Act, state securities or blue
sky
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based on any untrue statement
or
alleged untrue statement of a material fact contained in the S-3 Registration
Statement, any preliminary prospectus or final prospectus contained in the
S-3
Registration Statement (the "S-3
Prospectus"),
or
arise out of or are based on the omission or alleged omission to state a
material fact required to be stated in the S-3 Registration Statement or
necessary to make the statements in the S-3 Registration Statement not
misleading; and Targeted will reimburse Biogen or such underwriter or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that Targeted will not
be
liable in any such case to the extent that any such loss,
claim, damages or liability arises out of or is based on an untrue statement
or
alleged untrue statement or omission or alleged omission made in the S-3
Registration Statement, the S-3 Prospectus or any amendment or supplement of
the
S-3 Registration Statement or the S-3 Prospectus in reliance on and in
conformity with written information furnished to Targeted by or on behalf of
Biogen expressly for use in the S-3 Registration Statement or the S-3 Prospectus
or any untrue statement in such prospectus or omission of a material fact
required to make a statement not misleading in the S-3 Prospectus that is
corrected in any subsequent S-3 Prospectus that was delivered to Biogen before
the pertinent sale or sales by Biogen.
5. 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.
6. 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
page follows]
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.
Xxxxxxx
Xxxxxx
Name:
H.
Xxxxxxx
Xxxxxx
Title:
President
and Chief Executive
Officer
BIOGEN
IDEC MA INC.
By:
/s/
Xxxxxxx X.
Xxxxxx
Name:
Xxxxxxx
X.
Xxxxxx
Title:
Vice
President and
Treasurer
