Exhibit 10.2
 
REGISTRATION RIGHTS AGREEMENT
 
This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of January 8,
2007, by and among (i) Targeted Genetics Corporation, a Washington corporation
(the “Company”), (ii) each person listed on Exhibit A attached hereto
(collectively, the “Initial Investors” and each individually, an “Initial
Investor”), and (iii) each person or entity that subsequently becomes a party to
this Agreement pursuant to, and in accordance with, the provisions of Section 13
hereof (collectively, the “Investor Permitted Transferees” and each individually
an “Investor Permitted Transferee”).
 
WHEREAS, the Company has agreed to issue and sell to the Initial Investors, and
the Initial Investors have agreed to purchase from the Company, an aggregate of
approximately 2,180,000 shares (the “Purchased Shares”) of the Company’s common
stock, $0.01 par value per share (the “Common Stock”), and warrants to purchase
an aggregate of approximately 763,000 shares of Common Stock (each a “Warrant”
and together the “Warrants”), all upon the terms and conditions set forth in
that certain Securities Purchase Agreement, dated of even date herewith, between
the Company and the Initial Investors (the “Securities Purchase Agreement”); and
 
WHEREAS, the terms of the Securities Purchase Agreement provide that it shall be
a condition precedent to the closing of the transactions thereunder, for the
Company and the Initial Investors to execute and deliver this Agreement.
 
NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto hereby agree as follows:
 
1.  DEFINITIONS. The following terms shall have the meanings provided therefor
below or elsewhere in this Agreement as described below:
 
“Board” shall mean the board of directors of the Company.
 
“Closing” and “Closing Date” shall have the meanings ascribed to such terms in
the Securities Purchase Agreement.
 
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
all of the rules and regulations promulgated thereunder.
 
“Investors” shall mean, collectively, the Initial Investors and the Investor
Permitted Transferees; provided, however, that the term “Investors” shall not
include any of the Initial Investors or any of the Investor Permitted
Transferees that does not own or hold any Registrable Shares.
 
“Supermajority Holders” shall mean, at the relevant time of reference thereto,
those Investors holding more than sixty-six and two-thirds percent (66 2/3%) of
the Registrable Shares held by all of the Investors.
 
“Qualifying Holder” shall have the meaning ascribed thereto in Section 12
hereof.
 
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“Registrable Shares” shall mean the Purchased Shares and the Underlying Shares,
provided, however, such term shall not, after the Mandatory Registration
Termination Date, include any of the Purchased Shares or Underlying Shares that
become or have become eligible for resale without restrictions or volume
limitations pursuant to Rule 144 or pursuant to Regulation S.
 
“Rule 144” shall mean Rule 144 promulgated under the Securities Act and any
successor or substitute rule, law or provision.
 
“SEC” shall mean the Securities and Exchange Commission.
 
“Securities Act” shall mean the Securities Act of 1933, as amended, and all of
the rules and regulations promulgated thereunder.
 
“Underlying Shares” shall mean the shares of Common Stock issuable upon exercise
of the Warrants.
 
2.  EFFECTIVENESS; TERMINATION. This Agreement shall become effective and
legally binding only if the Closing occurs. This Agreement shall terminate and
be of no further force or effect, automatically and without any action being
required of any party hereto, upon the termination of the Securities Purchase
Agreement pursuant to Section 7 thereof.
 
3.  MANDATORY REGISTRATION.
 
(a)  Within ten (10) business days after the Closing Date, the Company will
prepare and file with the SEC a registration statement on Form S-3 for the
purpose of registering under the Securities Act all of the Registrable Shares
for resale by, and for the account of, the Investors as selling shareholders
thereunder (the “Registration Statement”). The Registration Statement shall
permit the Investors to offer and sell, on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act, any or all of the Registrable
Shares. The Company agrees to use best efforts to cause the Registration
Statement to become effective as soon as practicable.
 
(b)  The Company shall be required to keep the Registration Statement effective
until such date that is the earlier of (i) the date as of which all of the
Purchasers may sell all of the Registrable Securities without restriction
pursuant to Rule 144(k) (or the successor rule thereto) promulgated under the
Securities Act (assuming net exercise of the Warrants) or (ii) the date when all
of the Registrable Shares registered thereunder shall have been sold, subject to
extension as set forth below (such date is referred to herein as the “Mandatory
Registration Termination Date”). Thereafter, the Company shall be entitled to
withdraw the Registration Statement and the Investors shall have no further
right to offer or sell any of the Registrable Shares pursuant to the
Registration Statement (or any prospectus relating thereto). In the event the
right of the selling Investors to use the Registration Statement (and the
prospectus relating thereto) is delayed or suspended pursuant to Sections 5(c)
or 11 hereof, the Company shall be required to extend the Mandatory Registration
Termination Date beyond the second anniversary of the Closing Date by the same
number of days as such delay or Suspension Period (as defined in Section 11
hereof).
 
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(c)  The offer and sale of the Registrable Shares pursuant to the Registration
Statement shall not be underwritten.
 
4.  PENALTIES/SUSPENSION OF THE REGISTRATION STATEMENT
 
(a)  If a Registration Statement covering the Registrable Shares is not filed
with the Commission on or prior to ten (10) business days after the Closing
Date, the Company will make pro rata payments to each Investor, as liquidated
damages and not as a penalty, in an amount equal to 1.5% of the aggregate amount
invested by such Investor for each 30-day period or pro rata for any portion
thereof following the date by which such Registration Statement should have been
filed for which no Registration Statement is filed with respect to the
Registrable Shares. The amounts payable as liquidated damages pursuant to this
paragraph shall be paid, in cash in lawful money of the United States, within
three (3) business days of the last day of each such 30-day period during which
the Registration Statement should have been filed for which no Registration
Statement was filed with respect to the Registrable Shares and shall not exceed
in the aggregate 15% of the aggregate amount invested under the Securities
Purchase Agreement.
 
(b)  The Company shall notify the Investors by facsimile or e-mail as promptly
as practicable, and in any event, within twenty-four (24) hours, after the
Registration Statement is declared effective and shall simultaneously provide
the Investors with copies of any related prospectus to be used in connection
with the sale or other disposition of the securities covered thereby. If (A) a
Registration Statement covering the Registrable Shares is not declared effective
by the SEC within ninety (90) days after the Closing Date (or one hundred twenty
(120) days if reviewed by the SEC), or (B) after a Registration Statement has
been declared effective by the SEC, sales cannot be made pursuant to such
Registration Statement for any reason (including without limitation by reason of
a stop order, or the Company’s failure to update the Registration Statement),
but excluding the inability of any Investor to sell the Registrable Shares
covered thereby due to market conditions and except as excused pursuant to
Section 11 below, then the Company will make pro rata payments to each Investor,
as liquidated damages and not as a penalty, in an amount equal to 1.5% of the
aggregate amount invested by such Investor for each 30-day period or pro rata
for any portion thereof following the date by which such Registration Statement
should have been effective, but was not so effective or available (the “Blackout
Period”). The amounts payable as liquidated damages pursuant to this paragraph
shall be paid, in cash in lawful money of the United States, monthly within
three (3) business days of the last day of each month following the commencement
of the Blackout Period until the termination of the Blackout Period and shall
not exceed in the aggregate 15% of the aggregate amount invested under the
Securities Purchase Agreement.
 
(c)  No Investor shall be entitled to a payment pursuant to this Section 4 if
effectiveness of a registration statement has been delayed or a prospectus has
been unavailable as a result of (i) a failure by such Investor to promptly
provide on request by the Company the information required under the Securities
Purchase Agreement or this Agreement or requested by the SEC as a condition to
effectiveness of the Registration Statement; (ii) the provision of inaccurate or
incomplete information by such Investor; or (iii) a statement or determination
of the SEC that any provision of the rights of the Investor under this Agreement
are contrary to the provisions of the Securities Act.
 
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5.  OBLIGATIONS OF THE COMPANY. In connection with the Company’s obligation
under Section 3 hereof to file the Registration Statement with the SEC and to
use best efforts to cause the Registration Statement to become effective as soon
as practicable, the Company shall, as expeditiously as reasonably possible:
 
(a)  Prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective until the Mandatory
Registration Termination Date, including without limitation such amendments and
supplements as may be necessary to include any Investor Permitted Transferees in
the Registration Statement and related prospectus;
 
(b)  Furnish to the selling Investors such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents (including, without limitation,
prospectus amendments and supplements as are prepared by the Company in
accordance with Section 5(a) above) as the selling Investors may reasonably
request in order to facilitate the disposition of such selling Investors’
Registrable Shares;
 
(c)  Notify the selling Investors, at any time when a prospectus relating to the
Registration Statement is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in or
relating to the Registration Statement contains an untrue statement of a
material fact or omits any fact necessary to make the statements therein not
misleading; and, thereafter, the Company will, subject to Section 11, promptly
prepare (and, when completed, furnish an adequate number of copies to each
selling Investor) a supplement or amendment to such prospectus so that, as
furnished to the purchasers of such Registrable Shares, such prospectus will not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading; provided that upon such
notification by the Company, the selling Investors will not offer or sell
Registrable Shares until the Company has notified the selling Investors that it
has prepared a supplement or amendment to such prospectus and delivered copies
of such supplement or amendment to the selling Investors (it being understood
and agreed by the Company that the foregoing proviso shall in no way diminish or
otherwise impair the Company’s obligation, subject to Section 11, to promptly
prepare a prospectus amendment or supplement as above provided in this
Section 5(c) and deliver copies of same as above provided in Section 5(b)
hereof); and
 
(d)  Use best efforts to register and qualify the Registrable Shares covered by
the Registration Statement under such other securities or blue sky laws of such
jurisdictions as shall be reasonably appropriate in the opinion of the Company,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, and provided further
that (notwithstanding anything in this Agreement to the contrary with respect to
the bearing of expenses) if any jurisdiction in which any of such Registrable
Shares shall be qualified shall require that expenses incurred in connection
with the qualification therein of any such Registrable Shares be borne by the
selling Investors, then the selling Investors shall, to the extent required by
such jurisdiction, pay their pro rata share of such qualification expenses.
 
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(e)  Subject to the terms and conditions of this Agreement, the Company shall
use best efforts to (i) prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Shares for sale in any jurisdiction
in the United States, and (ii) if such an order or suspension is issued, obtain
the withdrawal of such order or suspension at the earliest practicable moment
and notify each holder of Registrable Shares of the issuance of such order and
the resolution thereof or its receipt of notice of the initiation or threat of
any proceeding such purpose. In addition, the Company shall promptly notify each
holder of Registrable Shares of a pending proceeding against the Company under
Section 8A of the Securities Act in connection with the offering of the
Registrable Shares.
 
(f)  The Company shall (i) timely notify the Nasdaq Capital Market of the
issuance of the Registrable Shares and (ii) engage a transfer agent and
registrar to maintain the Company’s stock ledger for all Registrable Shares
covered by the Registration Statement not later than the effective date of the
Registration Statement.
 
(g)  The Company shall file the Registration Statement and all amendments and
supplements thereto electronically on EDGAR.
 
6.  FURNISH INFORMATION. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Agreement that the selling
Investors shall furnish to the Company such information regarding them and the
securities held by them as the Company shall reasonably request and as shall be
required in order to effect any registration by the Company pursuant to this
Agreement. Each Investor shall promptly notify the Company of any changes in the
information furnished to the Company.
 
7.  EXPENSES OF REGISTRATION. All expenses incurred in connection with the
registration of the Registrable Shares pursuant to this Agreement (excluding
underwriting, brokerage and other selling commissions and discounts), including
without limitation all registration and qualification and filing fees, printing,
and fees and disbursements of counsel for the Company, shall be borne by the
Company.
 
8.  DELAY OF REGISTRATION. The Investors shall not take any action to restrain,
enjoin or otherwise delay any registration as the result of any controversy
which might arise with respect to the interpretation or implementation of this
Agreement.
 
9.  INDEMNIFICATION.
 
(a)  To the extent permitted by law, the Company will indemnify and hold
harmless each selling Investor, any investment banking firm acting as a
placement agent for the selling Investors, any broker/dealer acting on behalf of
any selling Investors and each officer and director of such selling Investor,
such placement agent, such broker/dealer and each person, if any, who controls
such selling Investor, such placement agent or broker/dealer within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which they may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, in any
preliminary prospectus or final prospectus relating thereto or in any amendments
or supplements to the Registration Statement or any such preliminary prospectus
or final prospectus, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; and will reimburse such
selling Investor, such placement agent, broker/dealer or any such officer,
director or controlling person, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, damage, liability or action to the extent that it arises out
of or is based upon (i) an untrue statement or alleged untrue statement or
omission made in connection with the Registration Statement, any preliminary
prospectus or final prospectus relating thereto or any amendments or supplements
to the Registration Statement or any such preliminary prospectus or final
prospectus, in reliance upon and in conformity with written information
furnished expressly for use in connection with the Registration Statement or any
such preliminary prospectus or final prospectus by such Investors or (ii) an
untrue statement or alleged untrue statement or omission in the Registration
Statement or any prospectus that is corrected in any subsequent amendment or
supplement to the Registration Statement or prospectus that was delivered to the
selling Investor before the pertinent sale or sales by the selling Investor.
 
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(b)  To the extent permitted by law, each selling Investor will severally and
not jointly indemnify and hold harmless the Company, each of its directors, each
of its officers who have signed the Registration Statement, each person, if any,
who controls the Company within the meaning of the Securities Act, any
investment banking firm acting as placement agent for the Company or the selling
Investors, or any broker/dealer acting on behalf of the Company or any selling
Investors and all other selling Investors against any losses, claims, damages or
liabilities to which the Company or any such director, officer, controlling
person, underwriter, or broker/dealer or such other selling Investor may become
subject to, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise out of or
are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement or any preliminary prospectus or final
prospectus, relating thereto or in any amendments or supplements to the
Registration Statement or any such preliminary prospectus or final prospectus,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent and only to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission (i) was made in the Registration Statement, in any preliminary
prospectus or final prospectus relating thereto or in any amendments or
supplements to the Registration Statement or any such preliminary prospectus or
final prospectus, in reliance upon and in conformity with written information
furnished by such selling Investor expressly for use in connection with the
Registration Statement, or any preliminary prospectus or final prospectus or
(ii) was corrected in any subsequent amendment or supplement to the Registration
Statement or prospectus that was delivered to the selling Investor before the
pertinent sale or sales by the selling Investor and such corrected amendment or
supplement to the Registration Statement or prospectus was not delivered to the
purchaser; and such selling Investor will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, placement agent, broker/dealer or other selling Investor in connection
with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the liability of each selling Investor hereunder
shall be limited to the proceeds received by such selling Investor from the sale
of Registrable Shares covered by the Registration Statement, and
provided further, that the indemnity agreement contained in this Section 9(b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of those
selling Investor(s) against which the request for indemnity is being made (which
consent shall not be unreasonably withheld).
 
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(c)  Promptly after receipt by an indemnified party under this Section 9 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 9, notify the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to participate in and, to the
extent the indemnifying party desires, jointly with any other indemnifying party
similarly noticed, to assume at its expense the defense thereof with counsel
mutually satisfactory to the indemnifying parties. In the event that the
indemnifying party assumes any such defense, the indemnified party may
participate in such defense with its own counsel and at its own expense,
provided, however, that the counsel for the indemnifying party shall act as lead
counsel in all matters pertaining to such defense or settlement of such claim
and the indemnifying party shall only pay for such indemnified party’s expenses
for the period prior to the date of its participation on such defense. The
failure to notify an indemnifying party promptly of the commencement of any such
action, if prejudicial to his ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
9, but the omission so to notify the indemnifying party will not relieve him of
any liability which he may have to any indemnified party otherwise other than
under this Section 9.
 
(d)  Notwithstanding anything to the contrary herein, the indemnifying party
shall not be entitled to settle any claim, suit or proceeding arising out of or
based upon any untrue or alleged untrue statement of any material fact contained
in the Registration Statement or any preliminary prospectus or final prospectus,
relating thereto or in any amendments or supplements to the Registration
Statement or any such preliminary prospectus or final prospectus, or arising out
of or based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless in connection with such settlement the indemnified party
receives an unconditional release with respect to the subject matter of such
claim, suit or proceeding and such settlement does not contain any admission of
fault by the indemnified party.
 
(e)  If the indemnification provided for in this Section 9 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Investors on the other in
connection with the statements or omissions or other matters which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, in the case of an untrue
statement, whether the untrue statement relates to information supplied by the
Company on the one hand or an Investor on the other and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement. The Company and the Investors agree that it would not be
just and equitable if contribution pursuant to this subsection (e) were
determined by pro rata allocation (even if the Investors were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to above in this
subsection (e). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Investors’ obligations in this
subsection to contribute are several in proportion to their sales of Registrable
Shares to which such loss relates and not joint and the liability of each
Investor shall be limited to the proceeds received by such Investor from the
sale of Registrable Shares covered by the Registration Statement.
 
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(f)  The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 9, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement as required by the Securities Act and the Exchange Act.
 
10.  REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit the Investors to sell the Purchased Shares to the
public without registration, the Company agrees to use best efforts: (i) to make
and keep public information available as those terms are understood in Rule 144,
(ii) to file with the SEC in a timely manner all reports and other documents
required to be filed by an issuer of securities registered under the Securities
Act or the Exchange Act, (iii) as long as any Investor owns any Purchased
Shares, to furnish in writing upon such Investor’s request a written statement
by the Company that it has complied with the reporting requirements of Rule 144
and of the Securities Act and the Exchange Act, and to furnish to such Investor
a copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as may be reasonably
requested in availing such Investor of any rule or regulation of the SEC
permitting the selling of any such Purchased Shares without registration and
(iv) undertake any additional actions reasonably necessary to maintain the
availability of the Registration Statement or the use of Rule 144.
 
11.  SUSPENSION. Notwithstanding anything in this Agreement to the contrary, in
the event (i) of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to a Registration Statement or related
prospectus or for additional information; (ii) of the issuance by the SEC or any
other federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose; (iii) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Shares for sale in any jurisdiction or the initiation
of any proceeding for such purpose; (iv) of any event or circumstance which
necessitates the making of any changes in the Registration Statement or related
prospectus, or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the prospectus, it will not
contain any untrue statement of a material fact or any omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (v) that the Board has made the good faith determination (A) that
continued use by the selling Investors of the Registration Statement for
purposes of effecting offers or sales of Registrable Shares pursuant thereto
would require, under the Securities Act, premature disclosure in the
Registration Statement (or the prospectus relating thereto) of material,
nonpublic information concerning the Company, its business or prospects or any
proposed material transaction involving the Company, (B) that such premature
disclosure would be materially adverse to the Company, its business or prospects
or any such proposed material transaction or would make the successful
consummation by the Company of any such material transaction significantly less
likely and (C) that it is therefore essential to suspend the use by the
Investors of such Registration Statement (and the prospectus relating thereto)
for purposes of effecting offers or sales of Registrable Shares pursuant
thereto, then the Company shall furnish to the selling Investors a certificate
signed by the President or Chief Executive Officer of the Company setting forth
one or more of the above described circumstances, and the right of the selling
Investors to use the Registration Statement (and the prospectus relating
thereto) shall be suspended for a period (the “Suspension Period”) of not more
than thirty (30) days after delivery by the Company of the certificate referred
to above in this Section 11; provided that the Company shall be entitled to no
more than two such Suspension Periods during the twelve (12) month period
commencing on the Closing Date and during each subsequent twelve (12) month
period until the Mandatory Registration Termination Date (including any
extension thereto). During the Suspension Period, none of the Investors shall
offer or sell any Registrable Shares pursuant to or in reliance upon the
Registration Statement (or the prospectus relating thereto) and each of the
Investors shall keep the fact of the above described certificate and its
contents confidential. The Company shall use best efforts to terminate any
Suspension Period as promptly as practicable.
 
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12.  TRANSFER OF REGISTRATION RIGHTS. None of the rights of any Investor under
this Agreement shall be transferred or assigned to any person unless (i) such
person is a Qualifying Holder (as defined below), and (ii) such person agrees to
become a party to, and bound by, all of the terms and conditions of, this
Agreement by duly executing and delivering to the Company an Instrument of
Adherence in the form attached as Exhibit B hereto. For purposes of this Section
12, the term “Qualifying Holder” shall mean, with respect to any Investor, (i)
any partner or member thereof, (ii) any corporation, partnership or limited
liability company controlling, controlled by, or under common control with, such
Investor or any partner or member thereof, or (iii) any other direct transferee
from such Investor of at least 50% of those Registrable Shares held by such
Investor or issuable upon exercise of Warrants held by such Investor. None of
the rights of any Investor under this Agreement shall be transferred or assigned
to any person (including, without limitation, a Qualifying Holder) that acquires
Registrable Shares in the event that and to the extent that such person is
eligible to resell such Registrable Shares pursuant to Rule 144(k) of the
Securities Act or may otherwise resell such Registrable Shares pursuant to an
exemption from the registration provisions of the Securities Act. After any
transfer in accordance with this Section 12, the rights and obligations of an
Investor as to any transferred Registrable Shares shall be the rights and
obligations of the Investor Permitted Transferee holding such Registrable
Shares.
 
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13.  ENTIRE AGREEMENT. This Agreement, the Warrant and the Securities Purchase
Agreement constitute and contain the entire agreement and understanding of the
parties with respect to the subject matter hereof, and supersede any and all
prior negotiations, correspondence, agreements or understandings with respect to
the subject matter hereof.
 
14.  MISCELLANEOUS.
 
(a)  This Agreement may not be amended, modified or terminated, and no rights or
provisions may be waived, except with the written consent of the Supermajority
Holders and the Company.
 
(b)  This Agreement shall be governed by and construed in accordance with the
laws of the State of New York and without regard to any conflicts of laws
concepts which would apply the substantive law of some other jurisdiction, and
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors or assigns, provided that
the terms and conditions of Section 14 hereof are satisfied. This Agreement
shall also be binding upon and inure to the benefit of any transferee of any of
the Purchased Shares provided that the terms and conditions of Section 14 hereof
are satisfied. Notwithstanding anything in this Agreement to the contrary, if at
any time any Investor shall cease to own any Purchased Shares, all of such
Investor’s rights under this Agreement shall immediately terminate.
 
(c)  Any notice required or permitted by this Agreement shall be in writing and
shall be sufficient upon receipt, when delivered personally or by courier,
overnight delivery service or confirmed facsimile, or three (3) business days
after being deposited in the regular mail as certified or registered mail
(airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party’s address or facsimile
number as set forth below:
 
(i) All correspondence to the Company shall be addressed as follows:
 
1100 Olive Way, Suite 100
Seattle, WA 98101
Attention:  H. Stewart Parker
 Chief Executive Officer & President
Facsimile: (206) 623-7064
 
-10-

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with a copy to:
 
Orrick, Herrington & Sutcliffe LLP
719 Second Avenue, Suite 900
Seattle, WA 98104
Attention:  Stephen M. Graham, Esq.
Facsimile: (206) 839-4301
 
(ii) All correspondence to any Investor shall be sent to such Investor at the
address set forth in Exhibit A.
 
(iii) Any entity may change the address to which correspondence to it is to be
addressed by written notification as provided for herein.
 
(d)  The parties acknowledge and agree that in the event of any breach of this
Agreement, remedies at law may be inadequate, and each of the parties hereto
shall be entitled to seek specific performance of the obligations of the other
parties hereto and such appropriate injunctive relief as may be granted by a
court of competent jurisdiction.
 
(e)  Should any part or provision of this Agreement be held unenforceable or in
conflict with the applicable laws or regulations of any jurisdiction, the
invalid or unenforceable part or provisions shall be replaced with a provision
which accomplishes, to the extent possible, the original business purpose of
such part or provision in a valid and enforceable manner, and the remainder of
this Agreement shall remain binding upon the parties hereto.
 
(f)  This Agreement may be executed in a number of counterparts, each of which
shall be deemed an original and all of which together shall constitute one
instrument.
 
[Signature Page to Follow]
 
-11-

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IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights
Agreement as of the date and year first above written.

       
TARGETED GENETICS CORPORATION
 
   
   
  By:   /s/ H. Stewart Parker  

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Name: H. Stewart Parker
Title: Chief Executive Officer & President
 

 
THE INITIAL INVESTOR’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED OF EVEN
DATE HEREWITH SHALL CONSTITUTE THE INITIAL INVESTOR’S SIGNATURE TO THIS
REGISTRATION RIGHTS AGREEMENT.
 
-12-

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EXHIBIT A
 
Investor Names and Addresses
 
 

SRB Greenway Capital, L.P.
 
Attn: Steve Becker
 
300 Crescent Court, Suite 1111
 
Dallas, TX 75201
     
SRB Greenway Capital, Q.P., L.P.
 
Attn: Steve Becker
 
300 Crescent Court, Suite 1111
 
Dallas, TX 75201
     
SRB Greenway Capital International
 
Attn: Steve Becker
 
300 Crescent Court, Suite 1111
 
Dallas, TX 75201
     
Millennium Partners, L.P.
 
c/o Millennium Management, L.L.C.
 
666 Fifth Avenue, 8th Floor
 
New York, NY 10103
 
Attention: Terry Feeney
 
Fax: (212) 841-4141
     
Pacific Growth Equity Management, LLC
 
One Bush Street, Suite 1700
 
San Francisco, CA 94104
 
Attn: Howard Bernstein
     
Special Situations Fund III, Q.P., L.P.
 
Attn: Austin Marxe
 
527 Madison Avenue
 
Suite 2600
 
New York, NY 10022
     
Special Situations Life Sciences Fund, L.P.
 
Attn: Austin Marxe
 
527 Madison Avenue
 
Suite 2600
 
New York, NY 10022
     
Tang Capital Partners, L.P.
 
Attn: Kevin Tang
 
4401 Eastgate Mall
 
San Diego, CA 92121
 

A-1

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EXHIBIT B
 
Instrument of Adherence
 
Reference is hereby made to that certain Registration Rights Agreement, dated as
of January 8, 2007, among Targeted Genetics Corporation, a Washington
corporation (the “Company”), the Initial Investors and the Investor Permitted
Transferees, as amended and in effect from time to time (the “Registration
Rights Agreement”). Capitalized terms used herein without definition shall have
the respective meanings ascribed thereto in the Registration Rights Agreement.
 
The undersigned, in order to become the owner or holder of [___________] shares
of common stock, par value $0.01 per share (the “Common Stock”), of the Company,
hereby agrees that, from and after the date hereof, the undersigned has become a
party to the Registration Rights Agreement in the capacity of an Investor
Permitted Transferee, and is entitled to all of the benefits under, and is
subject to all of the obligations, restrictions and limitations set forth in,
the Registration Rights Agreement that are applicable to Investor Permitted
Transferees. This Instrument of Adherence shall take effect and shall become a
part of the Registration Rights Agreement immediately upon execution.
 
Executed as of the date set forth below under the laws of New York.

         
   
   
  Signature:   

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Name:
Title:
 
Accepted:
     
[                                                            ]
          By:  

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Name:
Title:
     
Date: _________, 200__
 

B-1

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