SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. 1)
HYBRIDON, INC.
(NAME OF ISSUER AND PERSON FILING STATEMENT)
9% CONVERTIBLE SUBORDINATED NOTES DUE 2004
(TITLE OF EACH CLASS OF SECURITIES)
44860M-AA-6; -AB-4; -AC-2; -AD-0; -AE-8; -AF-5
(CUSIP NUMBERS OF EACH CLASS OF SECURITIES)
E. ANDREWS GRINSTEAD, III
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
620 MEMORIAL DRIVE
CAMBRIDGE, MA 02139
(617) 528-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE
PERSON FILING STATEMENT)
With Copy to:
MONICA C. LORD, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 715-9100
FEBRUARY 6, 1998
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
CALCULATION OF FILING FEE
TRANSACTION VALUATION (1) AMOUNT OF FILING FEE (2)
------------------------- ------------------------
$51,594,664 $10,319
(1) Solely for the purpose of calculating the filing fee and, as computed
pursuant to Section 13(e)(3) of the Securities Exchange Act of 1934, as amended,
and Rule 0-11(b)(1) thereunder, the transaction value equals the aggregate
principal amount of and accrued but unpaid interest on the securities proposed
to be exchanged pursuant to the Offer described in the Offer to Exchange and
Amendment thereto filed as Exhibits hereto.
(2) Represents 1/50th of 1% of the transaction value as calculated above.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: _____________ Filing Party: _______________________
Form or Registration No.: ___________ Date Filed: _________________________
<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) Incorporated herein by reference to the information appearing under
the caption "Certain Information Concerning Hybridon" in the Offer to
Exchange, dated February 6, 1998 (the "Original Offer to Exchange"),
filed as Exhibit 9(a)(1) to the Issuer Tender Offer Statement on
Schedule 13E-4, as filed on February 6, 1998 (the "Original Schedule
13E-4").
(b) Incorporated herein by reference to the information appearing on
the front cover of the Original Offer to Exchange, and to the
information appearing under the captions "Introduction," "Terms of the
Offer--Amount of Notes; Consideration; Expiration Date; Interest
Payment" and "Transactions and Agreements Concerning the Notes" in the
Original Offer to Exchange. Also incorporated herein by reference to
the information appearing under the captions "Introduction,"
"Alternative Consideration" and "Alternative Equity Offering" in the
Amendment, dated March 30, 1998 (the "Amendment to the Offer to
Exchange"), to the Original Offer to Exchange, filed as Exhibit 9(a)(6)
to this Amendment No. 1 (this "Amendment to Schedule 13E-4") to the
Original Schedule 13E-4.
(c) Incorporated herein by reference to the information appearing under
the caption "Price Range of Hybridon Common Stock; Dividends" in the
Original Offer to Exchange and under the caption "Price Range of
Hybridon Common Stock" in the Amendment to the Offer to Exchange.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) Incorporated herein by reference to the information appearing under
the caption "Source and Amount of Consideration" in each of the
Original Offer to Exchange and the Amendment to the Offer to Exchange.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Incorporated herein by reference to the information appearing under the caption
"Purpose of the Offer; Certain Effects of the Offer" in the Original Offer to
Exchange and under the captions "Introduction," "Alternative Consideration" and
"Alternative Equity Offering" in the Amendment to the Offer to Exchange.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
Incorporated herein by reference to the information appearing under the caption
"Transactions and Agreements Concerning the Notes" in the Original Offer to
Exchange.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
Incorporated herein by reference to the information appearing under the captions
"Transactions and Agreements Concerning the Notes," "Purpose of the Offer;
Certain Effects of the Offer" and "Fees and Expenses" in the Original Offer to
Exchange and under the captions "Introduction," "Alternative Consideration,"
"Alternative Equity Offering" and "Ancillary Agreements" in the Amendment to the
Offer to Exchange.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Incorporated herein by reference to the information appearing under the caption
"Fees and Expenses" in the Offer to Exchange.
ITEM 7. FINANCIAL INFORMATION.
(a) Incorporated herein by reference to the financial statements
included in the Annual Report on Form 10-K for the year ended December
31, 1996 of Hybridon, Inc. ("Hybridon"), and the Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1997 of
Hybridon, each of which was attached to the Original Schedule 13E-4 as
an Exhibit, and to the information appearing under the caption
"Selected Consolidated Financial Information" in the Original Offer to
Exchange and under the caption "Selected Consolidated Financial
Information" in the Amendment to the Offer to Exchange.
(b) Incorporated herein by reference to the information appearing under
the caption "Selected Consolidated Financial Information" in the
Original Offer to Exchange and under the caption "Selected Consolidated
Financial Information" in the Amendment to the Offer to Exchange.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
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(e) Incorporated herein by reference to the information appearing under
the captions "Certain Information Concerning Hybridon," "Purpose of the
Offer; Effects of the Offer" and "Transactions and Agreements
Concerning the Notes" in the Original Offer to Exchange, and also see
Exhibits 9(a)(1), 9(a)(2), 9(a)(5), 9(a)(6) and 9(a)(7) hereto.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT
NO. DESCRIPTION
--- -----------
9(a)(1) Offer to Exchange, dated February 6, 1998.*
9(a)(2) Form of Exchange Agreement and Letter of Transmittal.*
9(a)(3) Form of Notice of Guaranteed Delivery.*
9(a)(4) Form of press release, dated February 6, 1998, issued by Hybridon.*
9(a)(5) Press release, dated March 9, 1998, issued by Hybridon.+
9(a)(6) Amendment, dated March 30, 1998, to the Offer to Exchange.+
9(a)(7) Form of Amendment, dated March 30, 1998, to the Exchange Agreement and
Letter of Transmittal.+
9(b) Not applicable.
9(c) Not applicable.
9(d) Not applicable.
9(e) Not applicable.
9(f) Not applicable.
9(g)(1) Annual Report on Form 10-K for the fiscal year ended December 31, 1996
filed by Hybridon, incorporated by reference to Annex D attached to the
Original Offer to Exchange.*
9(g)(2) Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
1997 filed by Hybridon, incorporated by reference to Annex E
attached to the Original Offer to Exchange.*
9(g)(3) Consent of Arthur Andersen LLP.+
- ------------------
* Previously filed.
+ Filed herewith.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this Amendment to Schedule 13E-4 is true, complete and
correct.
Dated: March 30, 1998
HYBRIDON, INC.
By: /s/ E. Andrews Grinstead III
--------------------------------
Name: E. Andrews Grinstead III
Title: Chairman, President and
Chief Executive Officer
3
Exhibit 9(a)(5)
Hybridon Extends the Exchange Offer for its 9% Convertible Subordinated Notes
Due 2004
CAMBRIDGE, Mass., March 9 -- Hybridon, Inc. (OTC Bulletin Board: HYBN) (the
"Company") today announced that it will extend for an additional twenty business
days the currently pending exchange offer to the holders of its 9% Convertible
Subordinated Notes due 2004 (the "9% Notes") to exchange such 9% Notes for
Series A Preferred Stock and certain warrants of the Company (the "Exchange
Offer"). The new expiration date of the Exchange Offer, which was previously
scheduled to expire at 12:00 a.m., New York City time, March 9, 1998, will be
12:00 a.m., New York City time, April 6, 1998.
This announcement is neither an offer to purchase or exchange nor a
solicitation of an offer to sell or exchange the 9% Notes. The offers are made
solely by the Offer to Exchange, dated as of February 6, 1998, and are subject
to certain conditions specified therein.
Holders of 9% Notes who have questions or requests for assistance should
call the Company's Corporate Counsel, Cheryl M. Northrup, at 617-528-7000. The
Company has filed with the Securities and Exchange Commission (the "Commission")
a Schedule 13e-4, together with all exhibits thereto (including the Offer to
Exchange). Copies of such Schedule 13e-4 and exhibits may be obtained from the
Company or from the web site maintained on the World Wide Web by the Commission
at http://www.sec.gov.
The Company, headquartered in Cambridge, Massachusetts, is engaged in the
discovery and development of genetic medicines for the treatment of certain
diseases, based primarily on antisense technology. Antisense technology attempts
to use synthetic segments of DNA and RNA to stop the production of
disease-associated proteins by interacting at the genetic level with target
strands of messenger RNA.
SOURCE Hybridon, Inc.
CONTACT: Lynne J. Rudert, Controller of Hybridon, 617-528-7000
Web site: www.hybridon.com
Exhibit 9(a)(6)
HYBRIDON, INC.
AMENDMENT TO THE OFFER TO EXCHANGE
FOR SERIES A PREFERRED STOCK AND
WARRANTS OF HYBRIDON, INC. ("HYBRIDON")
ANY AND ALL OUTSTANDING PRINCIPAL AMOUNT OF
AND ACCRUED BUT UNPAID INTEREST ON 9% CONVERTIBLE
SUBORDINATED NOTES DUE 2004 OF HYBRIDON
THE OFFER, AS AMENDED, AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON APRIL 10, 1998, UNLESS THE OFFER IS EXTENDED.
INTRODUCTION
Hybridon, Inc., a Delaware corporation ("Hybridon"), is hereby amending
the terms of the offer to exchange (the "Offer") with respect to its 9%
Convertible Subordinated Notes due 2004 (the "Notes") set forth in its Offer to
Exchange, dated February 6, 1998 (the "Original Offer to Exchange"). Unless
otherwise provided in this Amendment (this "Amendment") to the Original Offer to
Exchange or unless the context requires otherwise, the terms of and the
conditions to the Offer contained in the Original Offer to Exchange remain
unchanged. All capitalized terms used herein but not defined herein shall have
the respective meanings ascribed thereto in the Original Offer to Exchange.
By a press release dated March 9, 1998, Hybridon announced that it
extended (the "Expiration Date Extension") the original Expiration Date of the
Offer for an additional 20 business days, or until 12:00 a.m., New York City
time, on April 6, 1998. Pursuant to Rule 13e-4(f) of the Exchange Act, this
Amendment requires a 10 business day extension to the Offer which shall be
computed concurrently with the Expiration Date Extension. Accordingly, the new
expiration date shall be 12:00 a.m., New York City time, on April 10, 1998, or
the latest time and date to which the Offer is further extended (the "Expiration
Date").
As a result of certain proposed changes to the Restructuring and the
New Offering under certain conditions (which changes and conditions are
described in more detail below), Hybridon is hereby amending the Offer to
provide for the issuance of the Alternative Consideration (as defined below) in
exchange for principal amount of and accrued interest on the Notes in the event
that the Equity Conditions (as defined and described below) are satisfied or
Waived (as hereinafter defined). If the Equity Conditions are satisfied or
Waived, all tendering Noteholders will receive the Alternative Consideration in
lieu of the Original Consideration (as defined below). On the other hand, if the
Equity Conditions are not satisfied or Waived, Hybridon shall proceed with the
Restructuring and the New Offering described in the Original Offer to Exchange,
and the consideration set forth in the Original Offer to Exchange (the "Original
Consideration") will be issued to the tendering Noteholders upon acceptance for
exchange of the tendered Notes, upon the terms and subject to the conditions set
forth in the Original Offer to Exchange and the Exchange Agreement and the
Letter of Transmittal, as amended. There can be no assurance that the
Alternative Equity Offering will be consummated or that the tendering
Noteholders will receive in the Offer the Alternative Consideration in lieu of
the Original Consideration or vice versa.
The alternative consideration (the "Alternative Consideration") being
offered per $1,000 in Exchange Value of the Notes tendered consists of (i) 10
shares of Series A Preferred Stock, with the revised terms as described below
under "Alternative Consideration--Alternative Series A Preferred Stock" (the
"Alternative Series A Preferred Stock"), and (ii) warrants ("Alternative
Exchange Warrants") to purchase such number of shares of Hybridon Common Stock
equal to 25% of the number of shares of Hybridon Common Stock into which such
Alternative Series A Preferred Stock would be convertible at the Alternative
Conversion Price (as defined below), having the terms set forth below under
"Alternative Consideration--Alternative Exchange Warrants." In evaluating the
Alternative Consideration to be issued in the event that the Equity Conditions
are satisfied or Waived, unless otherwise indicated herein or the context
indicates otherwise, the tendering Noteholders should substitute all
<PAGE>
references to and descriptions of Series A Preferred Stock and the Exchange
Warrants in the Original Offer to Exchange with the descriptions of the
Alternative Series A Preferred Stock and the Alternative Exchange Warrants,
respectively, set forth below. The descriptions and the terms of the Offer
contained in the Original Offer to Exchange continue to be applicable if the
Equity Conditions are not satisfied or Waived.
IMPORTANT: AS SET FORTH IN MORE DETAIL IN THE ACCOMPANYING AMENDMENT (THE
"AMENDMENT TO THE LETTER OF TRANSMITTAL") TO THE EXCHANGE AGREEMENT AND LETTER
OF TRANSMITTAL (THE "ORIGINAL LETTER OF TRANSMITTAL"), BY EXECUTING AND SENDING
SUCH AMENDMENT TO THE LETTER OF TRANSMITTAL, THE BENEFICIAL OWNERS OF THE NOTES
BEING SO TENDERED ARE THEREBY MAKING CERTAIN REPRESENTATIONS AND WARRANTIES
REQUIRED IN CONNECTION WITH ISSUANCE OF SECURITIES UNDER SECTION 4(2) OF THE
SECURITIES ACT. IN ADDITION, THE REGISTERED HOLDERS AND THE BENEFICIAL OWNERS OF
SUCH NOTES ARE THEREBY MAKING CERTAIN OTHER REPRESENTATIONS AND WARRANTIES AND
ARE THEREBY AGREEING TO BE BOUND BY CERTAIN COVENANTS CONTAINED THEREIN. SEE
"ANCILLARY AGREEMENTS."
IN ADDITION TO THE ORIGINAL LETTER OF TRANSMITTAL AND OTHER REQUIRED
DOCUMENTS, ALL REGISTERED HOLDERS AND BENEFICIAL OWNERS OF NOTES BEING TENDERED
MUST EXECUTE AND SEND SUCH AMENDMENT TO THE LETTER OF TRANSMITTAL TO THE
DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE, REGARDLESS OF WHETHER THEY HAVE
HERETOFORE TENDERED THEIR NOTES PURSUANT TO THE OFFER. UNLESS EACH REGISTERED
HOLDER AND BENEFICIAL OWNER (IF DIFFERENT FROM THE REGISTERED HOLDER THEREOF) OF
THE NOTES BEING TENDERED EXECUTES THE AMENDMENT TO THE LETTER OF TRANSMITTAL,
THE TENDER WILL BE DEEMED INVALID.
ANY TENDER OF NOTES NOT ACCOMPANIED BY PROPERLY EXECUTED AMENDMENT TO
THE LETTER OF TRANSMITTAL AND ORIGINAL LETTER OF TRANSMITTAL WILL BE DEEMED
INVALID. ALL REQUIRED DOCUMENTS MUST BE DELIVERED TO THE DEPOSITARY AT THE
ADDRESS OR THE FACSIMILE NUMBER SHOWN ON THE BACK COVER OF THE ORIGINAL LETTER
OF TRANSMITTAL AND IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE ORIGINAL
OFFER TO EXCHANGE, AS AMENDED HEREBY, AND IN THE ORIGINAL LETTER OF TRANSMITTAL.
AVAILABILITY OF INFORMATION
Hybridon shall provide each Noteholder the opportunity to ask questions
and receive answers concerning the terms and conditions of the Offer and to
obtain any additional information which Hybridon possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
of information furnished in connection with the Offer. The address of Hybridon's
principal executive office is 620 Memorial Drive, Cambridge, MA 02139; telephone
(617) 528-7000.
ALTERNATIVE CONSIDERATION
In the event that the Equity Conditions are satisfied or Waived, the
tendering Noteholders will receive upon acceptance for exchange of the tendered
Notes, in lieu of the Original Consideration, 10 shares of the Alternative
Series A Preferred Stock and Alternative Exchange Warrants to purchase such
number of shares of Hybridon Common Stock equal to 25% of the number of shares
of Hybridon Common Stock into which such Alternative Series A Preferred Stock
would be convertible at the Alternative Conversion Price. Any tender of Notes
which involves denominations of less than $1,000 in Exchange Value thereof will
be exchanged on a pro rata basis, except to the extent that such proration would
result in the issuance of a fractional share of Alternative Series A Preferred
Stock. In the event that such fractional share would result, Hybridon shall, at
its sole discretion, either (a) round
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such fractional share to the nearest whole number of shares (with 0.5 being
rounded up), or (b) pay in cash an amount equal to such fraction multiplied by
$100 (which is the per share stated value of the Alternative Series A Preferred
Stock). Hybridon will not issue any fractional shares of Alternative Series A
Preferred Stock in the Offer. In the event that a tendering Noteholder would
otherwise be entitled to receive a fractional Alternative Exchange Warrant,
Hybridon shall round up such fractional Alternative Exchange Warrant to the
nearest whole number of Alternative Exchange Warrants. The fair market value of
the Alternative Series A Preferred Stock and Alternative Exchange Warrants will
be allocated first to principal and then to accrued but unpaid interest on the
principal amount of the Notes.
ALTERNATIVE SERIES A PREFERRED STOCK
The following summary description of Alternative Series A Preferred
Stock of Hybridon is necessarily incomplete and is thus qualified in its
entirety by the form of Certificate of Designation of the Alternative Series A
Preferred Stock which is attached as Annex A to this Amendment and such
Certificate of Designation is incorporated herein by reference.
The Certificate of Incorporation of Hybridon permits its Board of
Directors to issue up to 5,000,000 shares of Hybridon Preferred Stock, in one or
more series, to designate the number of shares constituting such series, and fix
by resolution, the powers, privileges, preferences and relative, optional or
special rights thereof, including liquidation preferences and dividends, and
conversion and redemption rights of each such series. No shares of Hybridon
Preferred Stock are currently outstanding. In the event that the Equity
Conditions are satisfied or Waived, Hybridon will file, immediately prior to the
acceptance for exchange of the Notes tendered into the Offer, with the Secretary
of State of the State of Delaware a Certificate of Designation with respect to
the Alternative Series A Preferred Stock, with the following designations:
Dividend: 6.5% per annum, payable on the same dates interest
payments are currently to be paid with respect to the
Notes. The dividend may be paid with either cash or
additional shares of Alternative Series A Preferred
Stock, at the option of Hybridon.
Liquidation Preference: $100.00 per share plus accrued but unpaid dividends.
Ranking: The Alternative Series A Preferred Stock ranks, as to
dividends and liquidation preference, senior to the
Hybridon Common Stock. No shares of Series B
Preferred Stock described in the Original Offer to
Exchange will be issued in the event that the Equity
Conditions are satisfied or Waived.
Conversion: The Alternative Series A Preferred Stock shall not be
convertible into Hybridon Common Stock until the
expiration of 12 months after the Closing Date (as
defined under "Alternative Equity Offering" below).
The conversion price of the Alternative Series A
Preferred Stock (the "Alternative Conversion Price")
shall be 212.5% of the Common Stock Offering Price
(as defined under "Alternative Equity Offering --
Equity Condition (i) Common Stock Offering --
Offering Price" below) of the Hybridon Common Stock
sold in the Common Stock Offering (subject to
antidilution adjustments set forth in the Certificate
of Designation for the Alternative Series A Preferred
Stock). The Alternative Series A Preferred Stock has
no comparable provision to the Series A One-Year
Reset described in the Original Offer to Exchange.
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Mandatory Conversion
or Redemption: At any time after the expiration of 12 months after
the Closing Date (but only after April 1, 2000 in the
case of clause (ii) below), if the closing bid price
of the Hybridon Common Stock is at least 250% of the
then applicable conversion price of the Alternative
Series A Preferred Stock for 20 trading days in any
30 consecutive trading day period ending three days
prior to the date of notice of conversion or
redemption, as the case may be, Hybridon may (i)
cause the Alternative Series A Preferred Stock to be
converted, in whole or in part, into Hybridon Common
Stock at 200% of the Common Stock Offering Price or
(ii) redeem the Alternative Series A Preferred Stock
for cash in an amount equal to $100.00 per share
(subject to appropriate adjustment to reflect any
stock split, reclassification or reorganization of
the Alternative Series A Preferred Stock) plus any
accrued but unpaid dividends (provided that holders
will have the right to convert into Hybridon Common
Stock, at the Alternative Conversion Price, any
shares so called for mandatory conversion or
redemption).
Class Voting Rights: Hybridon shall not, without the affirmative vote or
consent of the holders of at least 50% of all
outstanding Alternative Series A Preferred Stock,
voting separately as a class, (i) amend, alter or
repeal any provision of the Certificate of
Incorporation or the By-laws of Hybridon so as
adversely to affect the relative rights, preferences,
qualifications, limitations or restrictions of the
Alternative Series A Preferred Stock (with the
issuance of securities ranking prior to, or pari
passu with, the Alternative Series A Preferred Stock
(A) upon a Liquidation Event (as defined in the
Certificate of Designation for Alternative Series A
Preferred Stock) or (B) with respect to the payment
of dividends or distributions, not being considered
to so adversely affect), or (ii) authorize or issue,
or increase the authorized amount of, the Alternative
Series A Preferred Stock, other than the Alternative
Series A Preferred Stock issuable in connection with
the transactions described under "Alternative Equity
Offering" below, issuable in the Offer or issuable as
dividends on any shares of the Alternative Series A
Preferred Stock.
HOLDERS OF ALTERNATIVE SERIES A PREFERRED STOCK TO BE ISSUED IN THE
OFFER WILL NOT BE ENTITLED TO RECEIVE ANY RESET WARRANTS DESCRIBED IN THE
ORIGINAL OFFER TO EXCHANGE. SEE "TERMS OF THE OFFER--CONSIDERATION BEING
OFFERED--RESET WARRANTS" IN THE ORIGINAL OFFER TO EXCHANGE.
Also see "Alternative Equity Offering--Preferred Stock
Offering--Indenture Change of Control Prohibition."
ALTERNATIVE EXCHANGE WARRANTS
The following summary description of the Alternative Exchange Warrants
of Hybridon which may be issued in the Offer is necessarily incomplete and thus
is qualified in its entirety by the form of Warrant Agreement (the "Alternative
Warrant Agreement") which is attached as Annex B to this Amendment and
incorporated herein by reference.
In the event that the Alternative Equity Offering is consummated, each
tendering Noteholder will receive upon acceptance for exchange by Hybridon, in
addition to shares of the Alternative Series A Preferred Stock, the Alternative
Exchange Warrants to purchase a number of shares of Hybridon Common Stock equal
to 25% of the number of shares of Hybridon Common Stock into which the
Alternative Series A Preferred Stock issued to such
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Noteholder pursuant to the Offer would be convertible at the Alternative
Conversion Price. The Alternative Exchange Warrants shall be exercisable
commencing 12 months after the Closing Date for a period of four years
thereafter, at 212.5% of the Common Stock Offering Price. The Alternative
Exchange Warrants are not subject to redemption at the option of Hybridon under
any circumstances.
Also see "Alternative Equity Offering--Preferred Stock
Offering--Indenture Change of Control Prohibition."
REGISTRATION RIGHTS
The following summary description of the registration rights to be
granted to the tendering Noteholders in connection with the Offer is necessarily
incomplete and thus is qualified in its entirety by the applicable provisions
contained in the Amendment to the Letter of Transmittal and such provisions are
incorporated herein by reference.
The registration rights to be granted to the tendering Noteholders with
respect to the Alternative Consideration is identical to those set forth under
the caption "Terms of the Offer--Consideration Being Offered -- Registration
Rights" in the Original Offer to Exchange, except that in the event that the
Alternative Consideration is issued in the Offer Hybridon will agree to use its
best efforts to file a Registration Statement no later than the earlier of (i)
60 days following the Closing Date and (ii) the date on which any registration
statement under the Securities Act is filed in respect of the resale of any
security sold in the Alternative Equity Offering.
ALTERNATIVE EQUITY OFFERING
The Alternative Equity Offering is an alternative restructuring to the
Restructuring of Hybridon's capital structure described in the Original Offer to
Exchange which is conditioned upon the satisfaction or Waiver of the Equity
Conditions set forth below (the "Alternative Equity Offering"). If successful,
the Alternative Equity Offering is expected to enable Hybridon to raise up to
$30,000,000 (less fees, commissions and expenses) in cash for use in Hybridon's
operations and to reduce its debt service obligations, and will improve the
financial position of Hybridon by reducing the indebtedness of Hybridon for
financial reporting purposes, and thereby improve the chances of Hybridon being
able to comply with the quantitative criteria for the listing of Hybridon Common
Stock on the Nasdaq Stock Market.
Hybridon will first attempt to consummate the Alternative Equity
Offering, but if the same cannot be accomplished in a timely manner, Hybridon
intends to continue to proceed with the Restructuring and the New Offering. To
date, Hybridon has raised approximately $4.8 million in gross proceeds from the
New Offering (the "New Offering Proceeds"). See "Recent Developments" below.
There are three conditions precedent to the Alternative Equity Offering
(the "Equity Conditions"), the consummation of which must take place, if at all,
no later than the date on which Hybridon accepts for exchange at least $40
million principal amount of the Notes pursuant to the Offer (the date on which
the Alternative Equity Offering is consummated being referred to herein as the
"Closing Date"). Prior to acceptance for exchange of the tendered Notes by
Hybridon, any of the Equity Conditions may be waived by the mutual consent of
Hybridon and the person selected by the tendering Noteholders to serve as the
initial Designated Director ("Waived" or "Waiver" as used herein meaning such
waiver). The Equity Conditions are as follows:
(i) Hybridon raises gross proceeds from the sale (the "Common Stock
Offering") of Qualified Securities (as hereinafter defined under
the caption "Equity Condition (i) -- Common Stock Offering") in
an amount, and sells a number of Qualified Securities, mutually
acceptable to Hybridon and the person selected by the tendering
Noteholders to serve as the initial Designated Director;
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(ii) Hybridon raises gross proceeds from the sale (the "Preferred
Stock Offering") of shares of Alternative Series A Preferred
Stock (the terms of which shall be identical to the Alternative
Series A Preferred Stock constituting a part of the Alternative
Consideration) and warrants (the terms of which shall be as set
forth below in "Equity Condition (ii) -- Preferred Stock Offering
-- Preferred Warrants") in an amount equal to or exceeding $10
million; and
(iii) Hybridon exchanges (the "Offering Notes Exchange") all of the
then outstanding principal amount of and interest on the Offering
Notes and the warrants issued therewith for shares of Hybridon
Common Stock and warrants upon the terms set forth below under
the caption "Equity Condition (iii) -- Offering Notes Exchange."
The summary terms of the transactions referred to above are as follows:
1. EQUITY CONDITION (I)--
COMMON STOCK OFFERING
SECURITIES Hybridon Common Stock, together with
applicable warrants as described below
(collectively, "Qualified Securities").
OFFERING SIZE An amount in gross proceeds, and a
number of Qualified Securities, mutually
acceptable to Hybridon and the person
selected by the tendering Noteholders to
serve as the Designated Director.
COMMON STOCK OFFERING PRICE The greater of (a) 85% of the Market Price
(as defined below) determined as of the
Closing Date, or (b) $2.00 per share (the
"Common Stock Offering Price"). As used
herein, the term "Market Price" refers to
the average reported closing bid price of
Hybridon Common Stock for the five trading
days immediately preceding the Closing Date.
COMMON WARRANTS Purchasers in the Common Stock Offering will
receive warrants to purchase additional
shares of Hybridon Common Stock equal to 25%
of the number of shares of Hybridon Common
Stock purchased in the Common Stock
Offering, exercisable at 120% of the Common
Stock Offering Price for a period of five
years commencing on the Closing Date. These
warrants are not subject to a call
provision.
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CONTRACTUAL RIGHT TO
LIQUIDATION PUT Each purchaser in the Common Stock Offering
shall have the right (the "Liquidation
Put"), pari passu with participants in the
Offering Notes Exchange, to require Hybridon
to repurchase with cash the number of shares
of Hybridon Common Stock sold to such
purchaser in the Alternative Equity Offering
at the Common Stock Offering Price. However,
each such purchaser will covenant not to
exercise the Liquidation Put unless (a)
Hybridon liquidates, dissolves or winds up
its affairs pursuant to applicable
bankruptcy law, whether voluntarily or
involuntarily, (b) all of the securities
issued under the Indenture relating to the
9% Notes have been paid in full and no
obligations remain under such Indenture, (c)
all other indebtedness and obligations of
Hybridon (including, without limitation, the
indebtedness under Hybridon's loan agreement
with Silicon Valley Bank (the "Loan
Agreement")) has been paid in full, and (d)
all rights of the holders of any series or
class of capital stock ranking prior and
senior to the Hybridon Common Stock with
respect to liquidation (including, without
limitation, the Alternative Series A
Preferred Stock) have been satisfied in
full.
CLOSING DATE The Closing Date, upon the consummation
of the closing of each other transaction
forming a part of the Alternative Equity
Offering. See above regarding the Equity
Conditions.
LOCK-UP Those Qualified Securities sold in the
Common Stock Offering pursuant to Regulation
S under the Securities Act and the Hybridon
Common Stock into which any such Qualified
Securities are exercisable (collectively,
the "Lock-up Securities") will be subject to
a "lock-up" for a period ending on the
one-year anniversary of the Closing Date,
except to the extent such securities are
sold or transferred pursuant to an effective
registration statement. In addition, for
each purchaser in the Common Stock Offering,
75% of such purchaser's Lock-up Securities
shall be subject to a "lock-up" for the
first three months following the effective
date of the applicable registration
statement (the "Common Lock-up Date").
Thereafter, 50% of such securities will be
subject to such a "lock-up" until six months
following the Common Lock-up Date and the
remaining 25% of such securities will be
"locked-up" until nine months following the
Common Lock-up Date.
-7-
<PAGE>
Furthermore, purchasers in the Common Stock
Offering (including participants in the
Offering Notes Exchange) will be prohibited,
from the date that each such purchaser was
first contacted with respect to the
potential purchase of the Qualified
Securities through the last date upon which
such purchaser holds any Lock-up Securities,
from (i) selling "short" or "shorting
against the box" (as those terms are
generally understood) any equity security of
Hybridon or (ii) otherwise engaging in any
transaction which involves hedging of such
purchaser's position in the securities of
Hybridon.
COMMON PLACEMENT AGENT
COMPENSATION The placement agent for the Common Stock
Offering (the "Common Placement Agent") will
receive fees consisting of (i) 9% of the
gross proceeds of the Common Stock Offering
(the "Common Gross Proceeds"), (ii) a
non-accountable expense allowance equal to
4% of the Common Gross Proceeds, and (iii)
warrants to purchase such number of shares
of Hybridon Common Stock equal to 10% of the
aggregate number of shares of Hybridon
Common Stock sold in the Common Stock
Offering, exercisable at 120% of the Common
Stock Offering Price for a period of five
years from the Closing Date, provided,
however, that in no event shall the
Placement Agent be permitted to receive
compensation in excess of the level which
would not result in a breach under the
Indenture.
2. EQUITY CONDITION (II)--
PREFERRED STOCK OFFERING
SECURITIES Alternative Series A Preferred Stock,
together with applicable warrants as
described below (collectively, "Preferred
Offering Securities").
OFFERING SIZE $10.0 million in gross cash proceeds
(exclusive of the reinvestment described
below under the caption "Preferred Placement
Agent Compensation").
OFFERING PRICE 70% of the stated value of the
Alternative Series A Preferred Stock, or $70
per share.
DIVIDEND 6.5% per annum, payable on the same dates
interest payments are currently paid with
respect to the Notes. The dividend may be
paid either in cash or additional shares of
the Alternative Series A Preferred Stock (at
its full stated value).
CONVERSION See "Alternative Consideration--Alternative
Series A Preferred Stock--Conversion."
-8-
<PAGE>
PREFERRED WARRANTS Purchasers of the Alternative Series A
Preferred Stock in the Preferred Stock
Offering shall receive warrants to purchase
a number of shares of Hybridon Common Stock
equal to 25% of the number of Hybridon
Common Stock into which their Alternative
Series A Preferred Stock is convertible at
the Alternative Conversion Price. Such
warrants shall be exercisable commencing 12
months after the Closing Date at 120% of the
Common Stock Offering Price and for a period
of four years thereafter. These warrants are
not subject to a call provision.
MANDATORY CONVERSION OR
REDEMPTION See "Alternative Consideration--Alternative
Series A Preferred Stock--Mandatory
Conversion or Redemption."
CLOSING DATE The Closing Date, upon the consummation of
the closing of each other transaction
forming a part of the Alternative Equity
Offering. See above regarding the Equity
Conditions.
INDENTURE CHANGE OF CONTROL
PROHIBITION The Certificate of Designation for the
Alternative Series A Preferred Stock and the
Alternative Warrant Agreement with respect
to the Offer shall contain provisions
designed to ensure that no change of control
event is triggered under the Indenture.
OTHER RESTRICTIONS Purchasers in the Preferred Stock Offering
will be prohibited, from the date that each
such purchaser was first contacted with
respect to the potential purchase of
Preferred Offering Securities through the
last date upon which such purchaser holds
such, or any underlying, securities from (i)
selling "short" or "shorting against the
box" (as those terms are generally
understood) any equity security of Hybridon
or (ii) otherwise engaging in any
transaction which involves hedging of such
purchaser's position in the securities of
Hybridon; provided, however, that such
purchaser may have an aggregate short
position covering a number of shares
of Hybridon Common Stock fewer than
the quotient of (a) the product of (x)
the number of shares of Alternative Series A
Preferred Stock owned by such purchaser
multiplied by (y) the Dividend Base Amount
(as defined in the Certificate of
Designation with respect to the Alternative
Series A Preferred Stock), divided by (b)
the Alternative Conversion Price then in
effect.
-9-
<PAGE>
PREFERRED PLACEMENT AGENT
COMPENSATION The placement agent for the Preferred Stock
Offering (the "Preferred Placement Agent")
will receive fees consisting of (i) 9% of
the gross proceeds of the Preferred Stock
Offering (the "Preferred Gross Proceeds"),
(ii) a non-accountable expense allowance
equal to 4% of the Preferred Gross Proceeds,
and (iii) warrants to purchase such number
of shares of Hybridon Common Stock equal to
10% of the number of shares of Hybridon
Common Stock into which the Alternative
Series A Preferred Stock sold in the
Preferred Stock Offering is convertible at
the Alternative Conversion Price, provided,
however, that in no event shall the
Preferred Placement Agent receive an amount
of equity securities of Hybridon which could
result in the Preferred Placement Agent
being deemed as an "affiliate" of Hybridon,
as such term is defined in the Indenture,
after taking into account all other
securities beneficially owned by the
Preferred Placement Agent. Such warrants
shall be exercisable commencing 12 months
after the Closing Date for a period of four
years thereafter, and shall have an exercise
price equal to 120% of the Common Stock
Offering Price.
The Preferred Placement Agent has agreed to
reinvest all of its fees (other than the
out-of-pocket expenses incurred by it) by
purchasing from Hybridon shares of
Alternative Series A Preferred Stock at the
offering price thereof in the Preferred
Stock Offering, and the accompanying
warrants to be sold in the Preferred Stock
Offering.
Hybridon has been informed that the
Preferred Placement Agent and its affiliates
beneficially own an aggregate of
approximately $5 million in principal amount
of the Notes.
3. EQUITY CONDITION (III)--
OFFERING NOTES EXCHANGE
HYBRIDON COMMON STOCK The principal of and accrued interest on the
Offering Notes and the warrants sold in the
New Offering shall be exchanged for (a)
Hybridon Common Stock at the Common Stock
Offering Price and (b) the applicable
warrants described below. Purchasers of
Units in the Note Offering are not obligated
to accept the Offering Notes Exchange, and
there can be no assurance that they will do
so.
-10-
<PAGE>
WARRANTS The warrants issued with the Offering Notes
in the New Offering will be exchanged for
warrants identical to the warrants to be
sold in the Common Stock Offering, except
that such warrants are exercisable for such
number of shares of Hybridon Common Stock
equal to 30% of the number of shares of
Hybridon Common Stock issued in exchange for
the Offering Notes.
CONTRACTUAL RIGHT TO
LIQUIDATION PUT The holders of Hybridon Common Stock
acquired in the Offering Notes Exchange will
be entitled to the Liquidation Put described
above under "Equity Condition (i) --
Contractual Right to Liquidation Put."
CLOSING DATE The Closing Date, upon the consummation
of the closing of each other transaction
forming a part of the Alternative Equity
Offering. See above regarding the Equity
Conditions.
LOCK-UP See "Equity Condition (i) -- Common Stock
Offering -- Lock-up".
LIMITATIONS ON RESALE OF HYBRIDON STOCK
The Series A Preferred Stock and the Exchange Warrants, or the
Alternative Series A Preferred Stock and the Alternative Exchange Warrants, as
the case may be, to be issued in exchange for the Notes in the Offer, as well as
the Hybridon Common Stock issuable upon conversion or exercise of any of the
foregoing securities, shall have the status of securities acquired in a
transaction under the so-called "private placement" exemption under Section 4(2)
of the Securities Act and cannot be resold by the tendering Noteholders without
registration under the Securities Act or an exemption therefrom. Hybridon has
agreed to use its best efforts to file a shelf registration statement under the
Securities Act of the Series A Preferred Stock or the Alternative Series A
Preferred Stock, as the case may be, and the Hybridon Common Stock underlying
Series A Preferred Stock and the Exchange Warrants, or the Alternative Series A
Preferred Stock and the Alternative Exchange Warrants, as the case may be. See
"Alternative Consideration--Registration Rights" and "Terms of the Offer --
Consideration Being Offered -- Registration Rights" in the Original Offer to
Exchange. Prior to the effectiveness of the registration statement covering such
securities, however, the holders thereof may not sell any such securities
without an exemption from registration under the Securities Act.
Each certificate representing the Series A Preferred Stock or the
Exchange Warrants, or the Alternative Series A Preferred Stock and the
Alternative Exchange Warrants, as the case may be, and the Hybridon Common Stock
issuable upon conversion or exercise thereof, shall contain a legend to the
effect that the securities represented by such certificate have the status of
securities acquired in transaction under an exemption of Section 4(2) of the
Securities Act and cannot be resold without registration under the Securities
Act or an exemption therefrom.
-11-
<PAGE>
ANCILLARY AGREEMENTS
In addition to the description appearing under the caption "Purpose of
the Offer; Certain Effects of the Offer--Ancillary Agreements" in the Original
Offer to Exchange with respect to the ancillary agreements to be entered into by
the tendering Noteholders, in case the Alternative Equity Offering is
consummated, the following modifications to such description shall be
applicable:
(i) Under the caption "Purpose of the Offer; Certain Effects of
the Offer--Ancillary Agreements--Certain Sale Restrictions" in
the Original Offer to Exchange, substitute all references to
the term "Series A Preferred Stock" with "Alternative Series A
Preferred Stock";
(ii) Under the caption "Purpose of the Offer; Certain Effects of
the Offer--Ancillary Agreements--Restrictions on Indebtedness
and Senior Equity Issuances; Affiliate Transactions" in the
Original Offer to Exchange, substitute all references to the
term "Restructuring Trigger" with the term "the consummation
of the Alternative Equity Offering," and substitute all
references to the term "Series A Preferred Stock" with
"Alternative Series A Preferred Stock";
(iii) Under the caption "Purpose of the Offer; Certain Effects of
the Offer--Ancillary Agreements--Board Seat" in the Original
Offer to Exchange, substitute in its entirety the description
appearing thereunder with the following:
Following the consummation of the Alternative Equity
Offering, for so long as at least 50% of the
Alternative Series A Preferred Stock initially issued
in the Offer remains outstanding, the holders of such
Alternative Series A Preferred Stock issued in the
Offer shall be entitled to designate one member for
nomination to the Board of Directors of Hybridon (the
"Designated Director"), provided that such nominee is
reasonably acceptable to Hybridon. The initial
Designated Director shall be Mr. Art Berry (unless
the holders of a majority of the Alternative Series A
Preferred Stock to be issued in the Offer shall
instruct otherwise in the Amendment to the Letter of
Transmittal, in which case, the person receiving the
most votes thereon shall become the initial
Designated Director), to hold office until his
successor is duly elected and qualified or until his
earlier resignation or removal; and
(iv) Under the caption "Purpose of the Offer; Certain Effects of
the Offer--Ancillary Agreements--Board Seat" in the Original
Offer to Exchange, substitute all references to the term
"Series A Preferred Stock" with "Alternative Series A
Preferred Stock."
In addition, the accompanying Amendment to the Letter of Transmittal
contains certain representations and warranties which must be made by the
beneficial owners of the Notes being tendered which are required in connection
with the issuance of securities under Section 4(2) of the Securities Act. If any
such beneficial owner is not an "accredited investor" (as such term is defined
in Rule 501 under the Securities Act), such beneficial owner must certify that
he, either alone or with his purchaser representative (who, if any, must meet
the criteria set forth in Rule 501(h) under the Securities Act), possess such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the Offer. In addition, such beneficial owner
must make certain representations as to investment intent. UNLESS SUCH AMENDMENT
IS EXECUTED BY BOTH THE REGISTERED HOLDER AND BENEFICIAL OWNER OF THE NOTES
BEING TENDERED, SUCH TENDER WILL BE DEEMED INVALID.
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Hybridon will not be
required to accept for exchange or exchange any Notes tendered, and may
terminate or amend the Offer with respect thereto, and may postpone (subject to
the requirements of the Exchange Act for prompt payment for or return of Notes)
the exchange of Notes
-12-
<PAGE>
tendered, if any of the following shall have occurred at any time after the date
of this Amendment to the Offer to Exchange and prior to the Expiration Date
(whether or not such occurrence shall be continuing at the time of such
termination, amendment or postponement):
(a) any action or proceeding shall have been threatened,
instituted, pending or taken, or approval shall have been withheld,
withdrawn or abrogated, or any statute, rule, regulation, judgment,
order or injunction shall have been threatened, proposed, sought,
promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the Offer or Hybridon, by any legislative body, court,
authority, agency or tribunal or any other person, including the
Securities and Exchange Commission (the "Commission") or the States of
Delaware or Massachusetts, that, in Hybridon's sole judgment, would or
might directly or indirectly (i) make the acceptance for exchange of,
or exchange of, some or all of the Notes illegal or challenge the
acquisition of such Notes or otherwise or in any manner relate to or
affect the Offer, (ii) materially impair the contemplated benefits of
the Offer to Hybridon or (iii) materially affect the business,
condition (financial or other), income, operations or prospects of
Hybridon, or otherwise materially impair in any way the contemplated
future conduct of the business of Hybridon;
(b) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market, (ii) any change
in the general political, market, economic or financial condition in
the United States or abroad that could have a material adverse effect
on Hybridon's business, operations, prospects or ability to obtain
financing generally or the trading in the equity securities of
Hybridon, (iii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation on, or any event which, in Hybridon's sole judgment, might
affect, the extension of credit by lending institutions in the United
States, (iv) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States, or (v) in the case of any of the foregoing existing at
the time of the commencement of the Offer, in Hybridon's sole judgment,
a material acceleration or worsening thereof; and
(c) the aggregate number of purchasers or recipients of
securities in the Common Stock Offering, the Preferred Stock Offering,
the Offering Notes Exchange and the Offer who are not "accredited
investors" (as such term is defined in Rule 501 promulgated under the
Securities Act), excluding purchasers of securities sold in reliance on
Regulation S under the Securities Act, shall exceed 35.
The foregoing conditions are for the sole benefit of Hybridon and may
be asserted by Hybridon regardless of the circumstances (including any action or
inaction by Hybridon) giving rise to any such condition, and any such condition
may be waived by Hybridon, in whole or in part, at any time and from time to
time in its sole discretion. The failure by Hybridon at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. Any determination by Hybridon concerning the events
described above will be final and binding on all parties.
RECENT DEVELOPMENTS
On February 9, 1998, Hybridon announced that it sold $2,384,000 in
principal amount of the Offering Notes and certain warrants to purchase shares
of Hybridon Common Stock.
Although Hybridon has raised approximately $4.8 million in gross
proceeds from the New Offering described in the Original Offer to Exchange, as
of the date hereof, Hybridon continues to have very limited cash resources and
substantial obligations to lenders (including the Noteholders and the Bank),
equipment lessors, real estate landlords and trade creditors. Hybridon's ability
to continue operations in 1998 depends on its success in raising new funds. If
Hybridon is unable to obtain a substantial amount of additional funding
beginning in April 1998, it will be required to terminate its operations or seek
relief under applicable bankruptcy law by the end of April 1998.
-13-
<PAGE>
Hybridon has been informed by Arthur Andersen LLP, its independent
public accountants, that their report on Hybridon's December 31, 1997 financial
statements will contain an explanatory fourth paragraph addressing the
significant uncertainty regarding Hybridon's ability to continue operating as a
going concern.
PRICE RANGE OF HYBRIDON COMMON STOCK
The high and low bid prices of the Hybridon Common Stock for the
quarter ending March 31, 1998 (through March 27, 1998) were $3 23/64 and $1,
respectively. The last reported bid price on the Nasdaq OTC Bulletin Board, as
of the close of business on March 27, 1998, for the Hybridon Common Stock was
$2.
-14-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
IN THOUSANDS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended December 31, September 30,
---------------------- -----------------------------------------------------
1995 1996 1996 1997 1997 1997
Pro Forma As
Pro Forma(1) Adjusted (2)
====================== =====================================================
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 1,405 $ 4,009 $ 2,946 $ 3,143 $ 3,143 $ 3,143
Interest Expense (173) (124) (88) (3,223) (973) (973)
Net Loss (34,547) (46,853) (32,458) (49,977) (47,727) (47,727)
Net Loss Applicable to
Common Stockholders (3) (34,547) (46,853) (32,458) (49,977) (49,352) (49,706)
Basic and Diluted Loss per
Share (3) $ (11.02) $ (9.67) $ (6.78) $ (9.90) $ (9.78) $ (4.24)
Shares used in Basic and
Diluted Loss per Share 3,135 4,843 4,786 5,047 5,047 11,714
</TABLE>
<TABLE>
<CAPTION>
Capitalization
As of September 30, 1997
-----------------------------------------------------
In thousands, except share data
Pro Forma
Actual Pro Forma (1) As Adjusted(2)
-----------------------------------------------------
<S> <C> <C> <C>
Current Portion Long Term Debt $ 8,063 $ 8,063 $ 8,063
Long-Term Debt, Net of Current Portion 3,557 3,557 3,557
9% Convertible Subordinated Notes Payable 50,000 -- --
Stockholders' (Deficit) Equity
Series A Convertible Preferred Stock, $.01 par value 1,033,232
authorized; issued and outstanding 522,500 pro forma and 678,214 shares
pro forma as adjusted -- 5 7
Common Stock, $.001 par value, 100,000,000 shares authorized;
issued and outstanding 5,058,450 actual and pro forma, 15,058,450
pro forma as adjusted 5 5 15
Additional Paid In Capital 173,692 223,321 249,309
Deficit Accumulated During the Development Stage (199,171) (199,171) (199,171)
Deferred Compensation (1,148) (1,148) (1,148)
-----------------------------------------------------
Total Stockholders' (Deficit) Equity (26,622) 23,012 49,012
-----------------------------------------------------
Total Capitalization $ 34,998 $ 34,632 $ 60,632
=====================================================
</TABLE>
-15-
<PAGE>
OTHER FINANCIAL DATA:
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
December 31, September 30,
------------------ -------------------------------------------------------------------
1997 1997 1997
1995 1996 Pro Forma
Actual Pro Forma(1) As Adjusted (2)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed - - _ _ _
Charges (4)
Book Value per Common Share 3.33 4.54 (5.26) (5.78) (1.25)
(5)
</TABLE>
(1) Pro forma to give effect to the exchange of $50.0 million in principal
amount of the Notes and $2,250,000 of accrued interest thereon for the
Alternative Series A Preferred Stock and the writeoff of $2,616,000 of
deferred financing costs to addition paid in capital. There can be no
assurance that $50.0 million in principal amount of the Notes will be
exchanged. Such pro forma adjustments do not reflect the impact of the
issuance of additional shares of the Alternative Series A Preferred Stock
or the issuance of Hybridon Common Stock in the Alternative Equity
Offering.
(2) Pro forma as adjusted to give effect to the exchange of $50.0 million in
principal amount of the Notes and $2,250,000 of accrued interest thereon
for the Alternative Series A Preferred Stock, the writeoff of $2,616,000 of
deferred financing costs to additional paid in capital, the issuance of
$10.9 million of the Alternative Series A Preferred Stock in the Preferred
Stock Offering, before estimated issuance costs of $1.3 million and the
issuance of $20.0 million of Hybridon Common stock, before issuance costs
of $3.6 million. Approximately $900,000 of the estimated issuance costs on
the Alternative Series A Preferred Stock will be reinvested in the
Preferred Stock Offering to purchase additional shares of the Alternative
Series A Preferred Stock. There can be no assurance that $50.0 million in
principal amount of the Notes will be exchanged and $10.9 million of the
Alternative Series A Preferred Stock and the $20.0 million of Hybridon
Common Stock will be issued in the Alternative Equity Offering.
(3) Basic and diluted loss per share is computed by dividing net loss
applicable to common stockholders (net loss plus cumulative preferred stock
dividends) by the weighted-average number of common shares outstanding
during the period. Diluted loss per share is the same as basic loss per
share since the effect of convertible securities and common stock
equivalents would be antidilutive. For purposes of calculating the Pro
Forma As Adjusted net loss per share, the shares used in the loss per share
calculation assumes an offering price of $2.00 per share for the Hybridon
Common Stock to be issued in the Common Stock Offering. In addition, the
shares are weighted for the nine month period assuming the issuance thereof
occurred on April 1, 1997.
(4) For the purpose of calculating the ratio of earnings to fixed charges,
earnings represent Hybridon's loss from continuing operations before income
taxes plus fixed charges. Fixed charges consist of interest expense on all
indebtedness plus the interest portion of rental expense on non-cancelable
leases and amortization of debt issuance costs and debt discount.
Hybridon's earnings have been inadequate to meet its fixed charges for the
years ended December 31, 1995 and 1996 and for the nine months ended
September 30, 1996 and 1997 by $33.9 million, $46.4 million, $32.1 million
and $44.7 million, respectively. On a pro forma and pro forma as adjusted
basis as described in notes (1) and (2) above, Hybridon's earnings would be
inadequate to meet its fixed charges by $44.7 million in the nine months
ended September 30, 1997.
(5) Book value per common share is computed by dividing net assets by the
number of common shares outstanding at the end of the period. Net assets is
equal to stockholders' (deficit) equity less the liquidation value of
preferred stock ($100.00 per share).
-16-
<PAGE>
SOURCE AND AMOUNT OF CONSIDERATION
Assuming that Hybridon exchanges the Alternative Consideration for all
outstanding Notes pursuant to the Offer, the total amount of consideration to be
paid by Hybridon will consist in the aggregate of (i) approximately 678,214
shares of the Alternative Series A Preferred Stock, which shall be issued from
Hybridon's authorized but unissued shares of Hybridon Preferred Stock, (ii)
Alternative Exchange Warrants to purchase such number of shares of Hybridon
Common Stock equal to 25% of the number of shares of Hybridon Common Stock into
which such shares of Series A Preferred Stock are convertible at the Alternative
Conversion Price. In addition, Hybridon expects to incur fees and other
expenses. See "Fees and Expenses" in the Original Offer to Exchange.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the event that the Alternative Equity Offering is consummated, all
references to Series A Preferred Stock and the Exchange Warrants appearing under
the caption "Certain Federal Income Tax Consequences" in the Original Offer to
Exchange shall be deemed to refer to the Alternative Series A Preferred Stock
and the Alternative Exchange Warrants, respectively.
-17-
<PAGE>
SELECTED FINANCIAL DATA
The information set forth in Item 6, Part II of the 10-K, which was attached as
Annex D to the Original Offer to Exchange, is incorporated herein by reference.
SELECTED CONSOLIDATED FINANCIAL DATA
IN THOUSANDS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------------------
1996 1997 1997 1997
PRO PRO FORMA
STATEMENT OF OPERATIONS DATA: 1995 1996 ACTUAL ACTUAL FORMA(1) AS ADJUSTED(2)
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 1,405 $ 4,009 $ 2,946 $ 3,143 $ 3,143 $ 3,143
Net Loss (34,547) (46,853) (32,458) (49,977) (47,727) (47,727)
Net Loss Applicable to
Common Shareholders(3) (34,547) (46,853) (32,458) (49,977) (49,352) (49,706)
Basic and Diluted Loss per Share(3) $ (11.02) $ (9.67) $ (6.78) $ (9.90) $ (9.78) $ (4.24)
Shares Used in Basic and
Diluted Loss per share 3,135 4,843 4,786 5,047 5,047 11,714
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1997
PRO FORMA
BALANCE SHEET DATA 1995 1996 ACTUAL PRO FORMA(1) AS ADJUSTED(2)
<S> <C> <C> <C> <C> <C>
Cash, Cash Equivalents and Short-Term
Investments(4) $ 5,284 $ 16,419 $ 14,792 $ 14,792 $ 40,792
Working Capital (Deficit) 210 8,999 (2,623) (373) 25,627
Total Assets 19,618 41,537 46,603 43,987 69,987
Long-Term Debt, Net of Current Portion 1,145 9,032 3,557 3,557 3,557
9% convertible Subordinated Notes Payable -- -- 50,000 -- --
Deficit Accumulated During the Development
Stage (102,341) (149,194) (199,171) (199,171) (199,171)
Total Stockholders' Equity (Deficit) $ 12,447 $ 22,855 $ (26,622) $ 23,012 $ 49,012
</TABLE>
QUARTERLY FINANCAL DATA
IN THOUSANDS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1997 1997
----------------------------------------------------
<S> <C> <C> <C>
Revenues $ 1,059 $ 1,415 $ 668
Operating Expenses (15,077) (18,941) (19,102)
Net Loss (14,018) (17,525) (18,434)
Basic and Diluted Loss per Share (3) (2.78) (3.47) (3.65)
Cash, Cash Equivalents and Short-Term Investments(4) 2,490 28,648 14,792
Total Assets 30,967 61,309 46,603
Total Current Liabilities 12,302 9,571 19,668
Long-Term Debt and Capital Lease Obligation, Net of Current 9,500 10,020 3,557
Portion
9% Convertible Subordinated Notes Payable -- 50,000 50,000
Total Stockholders' Equity (Deficit) 9,165 (8,281) (26,622)
</TABLE>
-18-
<PAGE>
(1) Pro forma to give effect to the exchange of $50.0 million in principal
amount of the Notes and $2,250,000 of accrued interest thereon for the
Alternative Series A Preferred Stock and the writeoff of $2,616,000 of
deferred financing costs to additional paid in capital. There can be no
assurance that $50.0 million in principal amount of the Notes will be
exchanged. Such pro forma adjustments do not reflect the impact of the
issuance of additional shares of the Alternative Series A Preferred Stock
or the issuance of Hybridon Common Stock in the Alternative Equity
Offering.
(2) Pro forma as adjusted to give effect to the exchange of $50.0 million in
principal amount of the Notes and $2,250,000 of accrued interest thereon
for the Alternative Series A Preferred Stock, the writeoff of $2,616,000 of
deferred financing costs to additional paid in capital, the issuance of
$10.9 million of the Alternative Series A Preferred Stock in the Preferred
Stock Offering, before estimated issuance costs of $1.3 million, and the
issuance of $20.0 million of Hybridon Common Stock, before issuance costs
of $3.6 million. Approximately $900,000 of the estimated issuance costs on
the Alternative Series A Preferred Stock will be reinvested to purchase
additional shares of the Alternative Series A Preferred Stock. There can be
no assurance that $50.0 million in principal amount of the Notes will be
exchanged and $10.9 million of the Alternative Series A Preferred Stock and
the $20.0 million of Hybridon Common Stock will be issued in the
Alternative Equity Offering.
(3) Basic and diluted loss per share is computed by dividing net loss
applicable to common stockholders (net loss plus cumulative preferred stock
dividends) by the weighted-average number of common shares outstanding
during the period. Diluted loss per share is the same as basic loss per
share since the effect of convertible securities and common stock
equivalents would be antidilutive. For purposes of calculating the Pro
Forma As Adjusted net loss per share, the shares used in the loss per share
calculation assumes an offering price of $2.00 per share for the Hybridon
Common Stock to be issued in the Common Stock Offering. In addition, the
shares are weighted for the nine month period assuming the issuance
occurred on April 1, 1997.
(4) Short-term investments consisted of U.S. government securities with
maturities greater than three months but less than one year from the
purchase date.
This Amendment is dated March 30, 1998
-19-
<PAGE>
ANNEXES TO AMENDMENT TO THE OFFER TO EXCHANGE
Annex A Form of Certificate of Designation of the Alternative Series A Preferred
Stock of Hybridon
Annex B Form of Warrant Agreement for the Alternative Exchange Warrants**
Annex C Current Report on Form 8-K, dated February 9, 1998, of Hybridon
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** Form of Warrant Certificate is attached as Exhibit A thereto.
-20-
ANNEX A
Revised
Structure
CERTIFICATE OF DESIGNATION
for
SERIES A CONVERTIBLE PREFERRED STOCK
of
HYBRIDON INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
HYBRIDON INC., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), does hereby certify that pursuant to
the authority conferred on the board of directors of the Corporation (the "Board
of Directors") by the Restated Certificate of Incorporation (the "Certificate of
Incorporation") of the Corporation and in accordance with Section 151 of the
General Corporation Law of the State of Delaware, the Board of Directors adopted
the following resolution establishing a series of __________/1/ shares of
preferred stock of the Corporation designated as "Series A Convertible Preferred
Stock":
RESOLVED, that pursuant to the authority conferred on the Board of
Directors by the Certificate of Incorporation, a series of preferred stock,
par value $.01 per share, of the Corporation is hereby established and
created, and that the designation and number of shares thereof and the
voting and other powers, preferences and relative participating, optional
or other special rights of, the shares of such series and the
qualifications, limitations and restrictions thereof are as follows:
Series A Convertible Preferred Stock
1. Designation and Amount and Definitions. (a) There shall be a series
of Preferred Stock designated as "Series A Convertible Preferred Stock" and the
number of shares constituting such series shall be ___________/1/. Such series
is referred to herein as the "Series A Preferred Stock". Notwithstanding any
other provision in this Certificate of Designation of the Series A Preferred
Stock (the "Certificate of Designation") to the contrary, such series shall be
senior to the common stock, par value $.001 per share of the Corporation (the
"Common Stock") with respect to dividends and the distribution of assets upon
liquidation, dissolution or
- --------
/1/ To include both 9% Note exchange and private placement of Series A Preferred
Stock. Will include additional shares for PIK dividends.
<PAGE>
winding up. Such number of shares may be increased or decreased by resolution of
the Board of Directors, subject to the provisions of Section 7 hereof; provided,
however, that no decrease shall reduce the number of shares of Series A
Preferred Stock to fewer than the number of shares then issued and outstanding.
(b) As used in this Certificate of Designation, except as otherwise
provided in Subsection 4(c), the following terms shall have the following
meanings:
(i) The "Closing Bid Price" for any security for each trading day
shall be the reported per share closing bid price of such security
regular way on the Stock Market on such trading day, or, if there were
no transactions on such trading day, the average of the reported
closing bid and asked prices, regular way, of such security on the
relevant Stock Market on such trading day.
(ii) "Fair Market Value" of any asset (including any security)
means the fair market value thereof as mutually determined by the
Corporation and the holders of a majority of the Series A Preferred
Stock then outstanding. If the Corporation and the holders of a
majority of the Series A Preferred Stock then outstanding are unable
to reach agreement on any valuation matter, such valuation shall be
submitted to and determined by a nationally recognized independent
investment bank selected by the Board of Directors and the holders of
a majority of the Series A Preferred Stock then outstanding (or, if
such selection cannot be agreed upon promptly, or in any event within
ten days, then such valuation shall be made by a nationally recognized
independent investment banking firm selected by the American
Arbitration Association in New York City in accordance with its
rules), the costs of which valuation shall be paid for by the
Corporation.
(iii) "Market Price" shall mean the average Closing Bid Price for
twenty (20) consecutive trading days, ending with the trading day
prior to the date as of which the Market Price is being determined
(with appropriate adjustments for subdivisions or combinations of
shares effected during such period), provided that if the prices
referred to in the definition of Closing Bid Price cannot be
determined on any trading day, the Closing Bid Price for such trading
day will be deemed to equal Fair Market Value of such security on such
trading day.
(iv) "Registered Holders" shall mean, at any time, the holders of
record of the Series A Preferred Stock.
(v) The "Stock Market" shall mean, with respect to any security,
the principal national securities exchange on which such security is
listed or admitted to trading or, if such security is not listed or
admitted to trading on any national securities exchange, shall mean
The Nasdaq National Market System ("NNM") or The Nasdaq SmallCap
Market ("SCM" and, together with NNM, "Nasdaq") or, if such security
is not quoted on Nasdaq, shall mean the OTC Bulletin Board or, if such
security is not quoted on the OTC Bulletin Board, shall mean the over-
-2-
<PAGE>
the-counter market as furnished by any NASD member firm selected from
time to time by the Corporation for that purpose.
(vi) A "trading day" shall mean a day on which the relevant Stock
Market is open for the transaction of business.
2. Dividends and Distributions. (a) The holders, as of the Dividend
Record Date (as defined below), of the Series A Preferred Stock shall be
entitled to receive semi-annual dividends on their respective shares of Series A
Preferred Stock (aggregating, for this purpose, all shares of Series A Preferred
Stock held of record or, to the Corporation's knowledge, beneficially by such
holder), payable, at the option of the Corporation, in cash or additional shares
of Series A Preferred Stock, at the rate of 6.5% per annum (computed on the
basis of a 360-day year of twelve 30 day months) of the Dividend Base Amount (as
defined below), payable semi-annually in arrears; provided that, to the extent
the declaration or payment of such dividend is prohibited by applicable law,
such dividend need not be paid but shall nevertheless accrue and shall be paid
promptly when applicable law permits. Such dividends shall accrue from the date
of issuance of such share and shall be paid semi-annually on April 1 and October
1 of each year or, if any such day is not a business day, on the next succeeding
business day. Such dividends shall be paid, at the election of the Corporation,
either in cash or additional duly authorized, fully paid and non assessable
shares of Series A Preferred Stock. In calculating the number of shares of
Series A Preferred Stock to be paid with respect to each dividend, the Series A
Preferred Stock shall be valued at $100.00 per share (subject to appropriate
adjustment to reflect any stock split, combination, reclassification or
reorganization of the Series A Preferred Stock). Notwithstanding the foregoing,
the Corporation shall not be required to issue fractional shares of Series A
Preferred Stock; the Corporation may elect, in its sole discretion,
independently for each holder, whether such number of shares (on an aggregated
basis) will be rounded to the nearest whole share (with .5 of a share rounded
upward) or whether such holder will be given cash in lieu of any fractional
shares. The "Dividend Base Amount" of a share of Series A Preferred Stock shall
be $100.00 plus all accrued but unpaid dividends (subject to appropriate
adjustment to reflect any stock split, combination, reclassification or
reorganization of the Series A Preferred Stock). The "Dividend Record Date"
shall mean, for each semi-annual dividend, the March 15 or September 15, as the
case may be, immediately preceding the dividend payment date.
(b) In addition to the foregoing, subject to the rights of the holders
of any shares of any series or class of capital stock ranking prior, and
superior to, or pari passu with, the shares of Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred Stock shall be
entitled to receive, as, when and if declared by the Board of Directors, out of
assets legally available for that purpose, dividends or distributions in cash,
stock or otherwise.
(c) The Corporation shall not declare any dividend or distribution on
any Junior Stock (as defined below) of the Corporation unless all dividends
required by Section 2(a) have been or contemporaneously are declared and paid,
or declared and a sum sufficient for the payment thereof set apart for such
payment, on the Series A Preferred Stock.
-3-
<PAGE>
(d) [Reserved]
(e) All dividends or distributions declared upon the Series A
Preferred Stock shall be declared pro rata per share.
(f) Any reference to "distribution" contained in this Section 2 shall
not be deemed to include any distribution made in connection with or in lieu of
any Liquidation Event (as defined below).
(g) No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on the Series A Preferred Stock
which may be in arrears (it being understood that this provision does not alter
the Corporation's obligations under Section 2(a)).
(h) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any class or series of
stock of the Corporation ranking, as to dividends, on a parity with the Series A
Preferred Stock, for any period unless all dividends have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof set apart for such payment, on the Series A Preferred Stock.
When dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, upon the shares of the Series A Preferred Stock and any
other class or series of stock ranking on a parity as to dividends with the
Series A Preferred Stock, all dividends declared upon such other stock shall be
declared pro rata so that the amounts of dividends per share declared on the
Series A Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that accrued dividends per share on the shares of the
Series A Preferred Stock and on such other stock bear to each other.
(i) So long as any shares of the Series A Preferred Stock are
outstanding, no other stock of the Corporation ranking on a parity with the
Series A Preferred Stock as to dividends or upon liquidation, dissolution or
winding up shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund or
otherwise for the purchase or redemption of any shares of any such stock) by the
Corporation unless the dividends, if any, accrued on all outstanding shares of
the Series A Preferred Stock shall have been paid or set apart for payment.
(j) "Junior Stock" shall mean the Common Stock and any shares of
preferred stock of any series or class of the Corporation, whether presently
outstanding or hereafter issued, which are junior to the shares of Series A
Preferred Stock with respect to (i) the distribution of assets on any voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, (ii)
dividends or (iii) voting.
3. Liquidation Preference. (a) In the event of a (i) liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
(ii) a sale or other disposition of all or substantially all of the assets of
the Corporation or (iii) any consolidation, merger, combination, reorganization
or other transaction in which the Corporation is not the
-4-
<PAGE>
surviving entity or shares of Common Stock constituting in excess of 50% of the
voting power of the Corporation are exchanged for or changed into stock or
securities of another entity, cash and/or any other property (a "Merger
Transaction") (items (i), (ii) and (iii) of this sentence being collectively
referred to as a "Liquidation Event"), after payment or provision for payment of
debts and other liabilities of the Corporation, the holders of the Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, whether such
assets are capital, surplus, or earnings, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of any Junior
Stock of the Corporation, an amount equal to the Dividend Base Amount at such
time; provided, however, in the case of a Merger Transaction, such payment may
be made in cash, property (valued as provided in Subsection 3(b)) and/or
securities (valued as provided in Subsection 3(b)) of the entity surviving such
Merger Transaction. In the case of property or in the event that any such
securities are subject to an investment letter or other similar restriction on
transferability, the value of such property or securities shall be determined by
agreement between the Corporation and the holders of a majority of the Series A
Preferred Stock then outstanding. If upon any Liquidation Event, whether
voluntary or involuntary, the assets to be distributed to the holders of the
Series A Preferred Stock shall be insufficient to permit the payment to such
shareholders of the full preferential amounts aforesaid, then all of the assets
of the Corporation to be distributed shall be so distributed ratably to the
holders of the Series A Preferred Stock on the basis of the number of shares of
Series A Preferred Stock held. Notwithstanding item (iii) of the first sentence
of this Subsection 3(a), any consolidation, merger, combination, reorganization
or other transaction in which the Corporation is not the surviving entity but
the stockholders of the Corporation immediately prior to such transaction own in
excess of 50% of the voting power of the corporation surviving such transaction
and own amongst themselves such interest in substantially the same proportions
as prior to such transaction, shall not be considered a Liquidation Event
provided that the surviving corporation shall make appropriate provisions to
ensure that the terms of this Certificate of Designation survive any such
transaction. All shares of Series A Preferred Stock shall rank as to payment
upon the occurrence of any Liquidation Event senior to the Common Stock and,
unless the terms of such series shall provide otherwise, senior to all other
series of the Corporation's preferred stock.
(b) Any securities or other property to be delivered to the holders of
the Series A Preferred Stock pursuant to Subsection 3(a) hereof shall be valued
as follows:
(i) Securities not subject to an investment letter or other
similar restriction on free marketability:
(A) If actively traded on a Stock Market, the per share
value shall be deemed to be the Market Price of such securities
as of the third day prior to the date of valuation.
(B) If not actively traded on a Stock Market, the value
shall be the Fair Market Value of such securities.
-5-
<PAGE>
(ii) For securities for which there is an active public market
but which are subject to an investment letter or other restrictions on
free marketability, the value shall be the Fair Market Value thereof,
determined by discounting appropriately the per share Market Price
thereof.
(iii) For all other securities, the value shall be the Fair
Market Value thereof.
4. Conversion.
(a) Right of Conversion. Commencing after the expiration of 12 months
following the Alternative Equity Closing Date (as hereinafter defined), but not
prior thereto, the shares of Series A Preferred Stock shall be convertible, in
whole or in part, at the option of the holder thereof and upon notice to the
Corporation as set forth in Subsection 4(b), into fully paid and nonassessable
shares of Common Stock and such other securities and property as hereinafter
provided. The initial conversion price per share of Common Stock (the
"Conversion Price"), shall be equal to the product of 2.125 multiplied by the
per share price (the "Stated Common Price") of Common Stock sold by the
Corporation in connection with the Alternative Equity Offering (as such term is
defined in the Corporation's Offer to Exchange dated February 6, 1998 (the
"Original Offer to Exchange"), as amended by the Amendment thereto (the
"Amendment") dated March 30, 1998 (collectively, the "Offer to Exchange")) and
shall be subject to adjustment as provided herein. The rate at which each share
Series A Preferred Stock is convertible at any time into Common Stock (the
"Conversion Rate") shall be determined by dividing the then existing Conversion
Price (determined in accordance with this Section 4, including the last
paragraph hereof) into the Dividend Base Amount.
The Corporation shall prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Corporation setting forth the Conversion Rate as of
the date of the closing of the Alternative Equity Offering (the "Alternative
Equity Closing Date"), showing in reasonable detail the facts upon which such
Conversion Rate is based, and such certificate shall forthwith be filed with the
transfer agent of the Series A Preferred Stock.
(b) Conversion Procedures. Any holder of shares of Series A Preferred
Stock desiring to convert such shares into Common Stock shall surrender the
certificate or certificates evidencing such shares of Series A Preferred Stock
at the office of the transfer agent for the Series A Preferred Stock, which
certificate or certificates, if the Corporation shall so require, shall be duly
endorsed to the Corporation or in blank, or accompanied by proper instruments of
transfer to the Corporation or in blank, accompanied by irrevocable written
notice to the Corporation that the holder elects so to convert such shares of
Series A Preferred Stock and specifying the name or names (with address) in
which a certificate or certificates evidencing shares of Common Stock are to be
issued. The Corporation need not deem a notice of conversion to be received
unless the holder complies with all the provisions hereof. The Corporation will
instruct the transfer agent (which may be the Corporation) to make a notation of
the date that a notice of conversion is received, which date of receipt shall be
deemed to be the date of receipt for purposes hereof.
-6-
<PAGE>
The Corporation shall, as soon as practicable after such deposit of
certificates evidencing shares of Series A Preferred Stock accompanied by the
written notice and compliance with any other conditions herein contained,
deliver at such office of such transfer agent to the person for whose account
such shares of Series A Preferred Stock were so surrendered, or to the nominee
or nominees of such person, certificates evidencing the number of full shares of
Common Stock to which such person shall be entitled as aforesaid, subject to
Section 4(d). Subject to the following provisions of this paragraph, such
conversion shall be deemed to have been made as of the date of such surrender of
the shares of Series A Preferred Stock to be converted, and the person or
persons entitled to receive the Common Stock deliverable upon conversion of such
Series A Preferred Stock shall be treated for all purposes as the record holder
or holders of such Common Stock on such date; provided, however, that the
Corporation shall not be required to convert any shares of Series A Preferred
Stock while the stock transfer books of the Corporation are closed for any
purpose, but the surrender of Series A Preferred Stock for conversion during any
period while such books are so closed shall become effective for conversion
immediately upon the reopening of such books as if the surrender had been made
on the date of such reopening, and the conversion shall be at the conversion
rate in effect on such date. No adjustments in respect of any dividends on
shares surrendered for conversion or any dividend on the Common Stock issued
upon conversion shall be made upon the conversion of any shares of Series A
Preferred Stock.
The Corporation shall at all times, reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Series A Preferred Stock, such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock.
All notices of conversion shall be irrevocable; provided, however,
that if the Corporation has sent notice of an event pursuant to Subsection 4(g)
hereof, a holder of Series A Preferred Stock may, at its election, provide in
its notice of conversion that the conversion of its shares of Series A Preferred
Stock shall be contingent upon the occurrence of the record date or
effectiveness of such event (as specified by such holder), provided that such
notice of conversion is received by the Corporation prior to such record date or
effective date, as the case may be.
(c) Adjustment of Conversion Rate and Conversion Price.
(i) As used in this Subsection 4(c), the following terms shall
have the following meanings:
"Capital Stock" of any Person means the Common Stock or Preferred
Stock of such Person. Unless otherwise stated herein or the context
otherwise requires, "Capital Stock" means Capital Stock of the
Corporation;
"Common Stock" of any Person other than the Corporation means the
common equity (however designated), including, without limitation,
common stock or partnership or membership interests of, or
participation or interests in
-7-
<PAGE>
such Person (or equivalents thereof). "Common Stock" of the
Corporation means the Common Stock, par value $.001 per share, of the
Corporation, any successor class or classes of common equity (however
designated) of the Corporation into or for which such Common Stock may
hereafter be converted, exchanged or reclassified and any class or
classes of common equity (however designated) of the Corporation which
may be distributed or issued with respect to such Common Stock or
successor class of classes to holders thereof generally. Unless
otherwise stated herein or the context requires otherwise, "Common
Stock" means Common Stock of the Corporation;
"Current Market Price" means, when used with respect to any
security as of any date, the last sale price, regular way, or, in case
no such sale takes place on such date, the average of the closing bid
and asked prices, regular way, of such security in either case as
reported for consolidated transactions on the New York Stock Exchange
or, if such security is not listed or admitted to trading on the New
York Stock Exchange, as reported for consolidated transactions with
respect to securities listed on the principal national securities
exchange on which such security is listed or admitted to trading or,
if such security is not listed or admitted to trading on any national
securities exchange, as reported on the Nasdaq National Market, or, if
such security is not listed or admitted to trading on the Nasdaq
National Market, as reported on the Nasdaq SmallCap Market, or if such
security is not listed or admitted to trading on any national
securities exchange or the Nasdaq National Market or the Nasdaq
SmallCap Market, the average of the high bid and low asked prices of
such security in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations
System or such other system then in use or, if such security is not
quoted by any such organization, the average of the closing bid and
asked prices of such security furnished by an NASD member firm
selected by the Corporation. If such security is not quoted by any
such organization and no such NASD member firm is able to provide such
prices, the Current Market Price of such security shall be the Fair
Market Value thereof;
"Fair Market Value" means, at any date as to any asset, Property
or right (including without limitation, Capital Stock of any Person,
evidence of indebtedness or other securities, but excluding cash), the
fair market value of such item as determined in good faith by the
Board of Directors, whose determination shall be conclusive; provided,
however, that such determination is described in an Officers'
Certificate filed with the transfer agent and that, if there is a
Current Market Price for such item on such date, "Fair Market Value"
means such Current Market Price (without giving effect to the last
sentence of the definition thereof);
"GAAP" means, as of any date, generally accepted accounting
principles in the United States and does not include any
interpretations or regulations that have been proposed but that have
not become effective;
-8-
<PAGE>
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary, any Assistant Secretary or
any Vice President of such Person;
"Officers' Certificate" means a certificate signed on behalf of
the Corporation by two Officers, one of whom must be the Chairman of
the Board, the President, the Treasurer or a Vice-President of the
Corporation;
"Person" means any individual, corporation, partnership,
association, trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality
thereof;
"Preferred Stock" of any Person means the class or classes of
equity, ownership or participation interests (however designated) in
such Person, including, without limitation, stock, share, partnership
and membership interests, which are preferred as to the payment of
dividends or distributions by, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of, such
Person (or equivalent thereof) over interests of any other class of
interests of such Person. Unless otherwise stated herein or the
context otherwise requires, "Preferred Stock" means Preferred Stock of
the Corporation;
"Property" of any Person means any and all types of real,
personal, tangible, intangible or mixed property owned by such Person
whether or not included on the most recent consolidated balance sheet
of such Person in accordance with GAAP;
"Subsidiary" of a Person on any date means any other Person of
whom such Person owns, directly or indirectly through a Subsidiary or
Subsidiaries of such Person, Capital Stock with voting power, acting
independently and under ordinary circumstances, entitling such person
to elect a majority of the board of directors or other governing body
of such other Person. Unless otherwise stated herein or the context
otherwise requires, "Subsidiary" means a Subsidiary of the
Corporation.
(ii) If the Corporation shall (i) pay a dividend or other
distribution, in Common Stock, on any class of Capital Stock of the
Corporation, (ii) subdivide the outstanding Common Stock into a
greater number of shares by any means or (iii) combine the outstanding
Common Stock into a smaller number of shares by any means including,
without limitation, a reverse stock split), then in each such case the
Conversion Price in effect immediately prior thereto shall be adjusted
so that the Registered Holder of any shares of Series A Preferred
Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock that such Registered
Holder would have owned or have been entitled to receive upon the
happening of such event had such Series A Preferred Stock been
converted immediately prior to the relevant record date or, if there
is
-9-
<PAGE>
no such record date, the effective date of such event. An adjustment
made pursuant to this Paragraph 4(c)(ii) shall become effective
immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and
shall become effective immediately after the effective date of such
subdivision or combination, as the case may be.
(iii) If the Corporation shall (i) issue or distribute (at a
price per share less than the Current Market Price per share of such
Capital Stock on the date of such issuance or distribution) Capital
Stock generally to holders of Common Stock or to holders of any class
or series of Capital Stock which is convertible into or exchangeable
or exercisable for Common Stock (excluding an issuance or distribution
of Common Stock described in Paragraph 4(c)(ii)) or (ii) issue or
distribute generally to such holders rights, warrants, options or
convertible or exchangeable securities entitling the holder thereof to
subscribe for, purchase, convert into or exchange for Capital Stock at
a price per share less than the Current Market Price per share of such
Capital Stock on the date of issuance or distribution, then, in each
such case, at the earliest of (A) the date the Corporation enters into
a firm contract for such issuance or distribution, (B) the record date
for the determination of stockholders entitled to receive any such
Capital Stock or any such rights, warrants, options or convertible or
exchangeable securities or (C) the date of actual issuance or
distribution of any such Capital Stock or any such rights, warrants,
options or convertible or exchangeable securities, the Conversion
Price shall be reduced by multiplying the Conversion Price in effect
immediately prior to such earliest date by:
(A) if such Capital Stock is Common Stock, a fraction the
numerator of which is the number of shares of Common Stock
outstanding, on such earliest date plus the number of shares of
Common Stock which could be purchased at the Current Market Price
per share of Common Stock on the date of such issuance or
distribution with the aggregate consideration (based on the Fair
Market Value thereof) received or receivable by the Corporation
either (A) in connection with such issuance or distribution or
(B) upon the conversion, exchange, purchase or subscription of
all such rights, warrants, options or convertible or exchangeable
securities (the "Aggregate Consideration"), and the denominator
of which is the number of shares of Common Stock outstanding on
such earliest date plus the number of shares of Common Stock to
be so issued or distributed or to be issued upon the conversion,
exchange, purchase or subscription of all such rights, warrants,
options or convertible or exchangeable securities; or
(B) if such Capital Stock is other than Common Stock, a
fraction the numerator of which is the Current Market Price per
share of Common Stock on such earliest date minus an amount equal
to (A) the difference between (1) the Current Market Price per
share of such Capital Stock multiplied by the number of shares of
such Capital Stock to be so
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issued and (2) the Aggregate Consideration, divided by (B) the
number of shares of Common Stock outstanding on such date, and
the denominator of which is the Current Market Price per share of
Common Stock on such earliest date.
Such adjustment shall be made successively whenever any such Capital
Stock, rights, warrants, options or convertible or exchangeable
securities are so issued or distributed. In determining whether any
rights, warrants, options or convertible or exchangeable securities
entitle the holders thereof to subscribe for, purchase, convert into
or exchange for shares of such Capital Stock at less than such Current
Market Price, there shall be taken into account the Fair Market Value
of any consideration received or receivable by the Corporation for
such rights, warrants, options or convertible or exchangeable
securities. If any right, warrant,option or convertible or
exchangeable security, the issuance of which resulted in an adjustment
in the Conversion Price pursuant to this Paragraph 4(c)(iii), shall
expire and shall not have been exercised, the Conversion Price shall
immediately upon such expiration be recomputed to the Conversion Price
which would have been in effect if such right, warrant, option or
convertible or exchangeable securities had never been distributed or
issued. Notwithstanding anything contained in this paragraph to the
contrary, (i) the issuance of Capital Stock upon the exercise of such
rights, warrants or options or the conversion or exchange of such
convertible or exchangeable securities will not cause an adjustment in
the Conversion Price if no such adjustment would have been required at
the time such right, warrant, option or convertible or exchangeable
security was issued or distributed; provided, however, that, if the
consideration payable upon such exercise, conversion or exchange
and/or the Capital Stock receivable thereupon are changed after the
time of the issuance or distribution of such right, warrant, option or
convertible or exchangeable security then such change shall be deemed
to be the expiration thereof without having been exercised and the
issuance or distribution of new options, rights, warrants or
convertible or exchangeable securities and (ii) the issuance of
convertible preferred stock of the Corporation as a dividend on
convertible preferred stock of the Corporation will not cause an
adjustment in the Conversion Price if no such adjustment would have
been required at the time such underlying convertible preferred stock
was issued (or as a result of any subsequent modification to the terms
thereof) and the conversion provisions of such convertible stock so
issued as a dividend are the same as in such underlying convertible
preferred stock.
Notwithstanding any contained in this Certificate of Designation
to the contrary, options, rights or warrants issued or distributed by
the Corporation, including options, rights or warrants distributed
prior to the date of filing of this Certificate of Designation, to
holders of Common Stock generally which, until the occurrence of a
specified event or events (a "Trigger Event"), (i) are deemed to be
transferred with Common Stock, (ii) are not exercisable and (iii) are
also issued on a pro rata basis with respect to future issuances of
Common Stock, shall be deemed not to have been issued or distributed
for purposes of this
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<PAGE>
Subsection 4(c) (and no adjustment to the Conversion Price under this
Subsection 4(c) will be required) until the occurrence of the earliest
Trigger Event. Upon the occurrence of a Trigger Event, such options,
rights or warrants shall continue to be deemed not to have been issued
or distributed for purposes of this Subsection 4(c) (and no adjustment
to the Conversion Price under this Subsection 4(c) will be required)
if and for so long as each Registered Holder who thereafter converts
such Registered Holder's Series A Preferred Stock shall be entitled to
receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, a number of such options, rights
or warrants, as the case may be, equal to the number of options,
rights or warrants to which a holder of the number of shares of Common
Stock equal to the number of shares of Common Stock issuable upon
conversion of such Registered Holder's Series A Preferred Stock is
entitled to receive at the time of such conversion in accordance with
the terms and provisions of, and applicable to, such options, rights
or warrants. Upon the expiration of any such options, rights or
warrants or at such time, if any, as a Registered Holder is not
entitled to receive such options, rights or warrants upon conversion
of such Registered Holder's Series A Preferred Stock, an adjustment
(if any is required) to the Conversion Price shall be made in
accordance with this Paragraph 4(c)(iii) with respect to the issuance
of all such options, rights and warrants as of the date of issuance
thereof, but subject to the provisions of the preceding paragraph, if
any such option, right or warrant, including any such options right or
warrants distributed prior to the date of filing of this Certificate
of Designation, are subject to events, upon the occurrence of which
such options, rights or warrants become exercisable to purchase
different securities, evidence of indebtedness, cash, Properties or
other assets or different amounts thereof, then, subject to the
preceding provision of this paragraph, the date of the occurrence of
any and each such event shall be deemed to be the date of distribution
and record date with respect to new options, right or warrants with
such new purchase rights (and a termination or expiration of the
existing options, rights or warrants without exercise thereof). In
addition, in the event of any distribution (or deemed distribution) of
options, rights or warrants, or any Trigger Event or other event of
the type described in the preceding sentence, that required (or would
have required but for the provisions of Paragraph 4(c)(vi) or this
paragraph) an adjustment to the Conversion Price under this Subsection
4(c) and such options, rights or warrants shall thereafter have been
redeemed or repurchased without having been exercised, then the
Conversion Price shall be adjusted upon such redemption or repurchase
to give effect to such distribution, Trigger Event or other event, as
the case may, as though it had instead been a cash distribution, equal
on a per share basis to the result of the aggregate redemption or
repurchase price received by holders of such options, rights or
warrants divided by the number of shares of Common Stock outstanding
as of the date of such repurchase or redemption, made to holders of
Common Stock generally as of the date of such redemption or
repurchase.
(iv) If the Corporation shall pay or distribute, as a dividend or
otherwise, generally to holders of Common Stock or any class or series
of Capital
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<PAGE>
Stock which is convertible into or exercisable or exchangeable for
Common Stock any assets, Properties or rights (including, without
limitation, evidences of indebtedness of the Corporation, any
Subsidiary or any other Person, cash or Capital Stock or other
securities of the Corporation, any Subsidiary or any other Person, but
excluding payments and distributions as described in Paragraphs
4(c)(ii) or (iii), dividends and distributions in connection with a
Liquidation Event and distributions consisting solely of cash
described in Paragraph 4(c)(v)), then in each such case the Conversion
Price shall be reduced by multiplying the Conversion Price in effect
immediately prior to the date of such payment or distribution by a
fraction, the numerator of which is the Current Market Price per share
of Common Stock on the record date for the determination of
stockholders entitled to receive such payment or distribution less the
Fair Market Value per share of Common Stock on such record date of the
assets, Properties or rights so paid or distributed, and the
denominator of which is the Current Market Price per share of Common
Stock on such record date. Such adjustment shall become effective
immediately after such record date. For purposes of this Paragraph
4(c)(iv), such Fair Market Value per share shall equal the aggregate
Fair Market Value on such record date of the assets, Properties or
rights so paid or distributed divided by the number of shares of
Common Stock outstanding on such record date. For all purposes of this
Certificate of Designation, adjustments to any security's conversion
or exercise price pursuant to such security's original terms shall not
be deemed a distribution or dividend to holders thereof.
(v) If the Corporation shall, by dividend or otherwise, make a
distribution (other than in connection with the liquidation,
dissolution or winding up of the Corporation in its entirety),
generally to holders of Common Stock or any class or series of Capital
Stock which is convertible into or exercisable or exchangeable for
Common Stock, consisting solely of cash where (x) the sum of (i) the
aggregate amount for such cash plus (ii) the aggregate amount of all
cash so distributed (by dividend or otherwise) to such holders within
the 12-month period ending on the record date for determining
stockholder entitled to receive such distribution with respect to
which no adjustment has been made to the Conversion Price pursuant to
this Paragraph 4(c)(v) exceeds (y) 10% of the result of the
multiplication of (1) the Current Market Price per share of Common
Stock on such record date times (2) the number of shares of Common
Stock outstanding on such record date, then the Conversion Price shall
be reduced, effective immediately prior to the opening of business on
the day following such record date, by multiplying the Conversion
Price in effect immediately prior to the close of business on the day
prior to such record date by a fraction, the numerator of which is the
Current Market Price per share of Common Stock on such record date
less the aggregate amount of cash per share so distributed and the
denominator of which is such Current Market Price; provided, however,
that, if the aggregate amount of cash per share is equal to or greater
than such Current Market Price, then, in lieu of the foregoing
adjustment, adequate provisions shall be made so that each Registered
Holder shall have the right to receive upon conversion (with respect
to each share of Common Stock issued upon such
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conversion and in addition to the Common Stock issuable upon
conversion) the aggregate amount of cash per share such Registered
Holder would have received had such Registered Holder's Series A
Preferred Stock been converted immediately prior to such record date.
In no event shall the Conversion Price be increased pursuant to this
Paragraph 4(c)(v); provided, however, that if such distribution is not
so made, the Conversion Price shall be adjusted to be the Conversion
Price which would have been in effect if such distribution had not
been declared. For purposes of this Paragraph 4(c)(v), such aggregate
amount of cash per share shall equal such sum divided by the number of
shares of Common Stock outstanding on such record date.
(vi) The provisions of this Subsection 4(c) shall similarly apply
to all successive events of the type described in this Subsection
4(c). Notwithstanding anything contained herein to the contrary, no
adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Conversion Price then in effect; provided, however, that any
adjustments which by reason of this Paragraph 4(c)(vi) are not
required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 4 shall
be made by the Corporation and shall be made to the nearest cent or to
the nearest one hundredth of a share, as the case may be, and the
transfer agent shall be entitled to rely conclusively thereon. Except
as provided in this Section 4, no adjustment in the Conversion Price
will be made for the issuance of Common Stock or any securities
convertible into or exchangeable for Common Stock or carrying the
right to purchase Common Stock or any securities so convertible or
exchangeable.
(vii) Whenever the Conversion Price is adjusted as provided
herein, the Corporation shall promptly file with the transfer agent an
Officers' Certificate setting forth the Conversion Price in effect
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Promptly after delivery of such Officers'
Certificate, the Corporation shall give or cause to be given to each
Registered Holder a notice of such adjustment of the Conversion Price
setting forth the adjusted Conversion Price and the date on which such
adjustment becomes effective.
(viii) Notwithstanding anything contained herein to the contrary,
in any case in which this Subsection 4(c) provides that an adjustment
in the Conversion Price shall become effective immediately after a
record date for an event, the Corporation may defer until the
occurrence of such event (i) issuing to the Registered Holder of any
Series A Preferred Stock converted after such record date and before
the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by
such event over and above the number of shares of Common Stock
issuable upon such conversion before giving effect to such adjustment
and (ii) paying to such Registered Holder any amount in cash in lieu
of any fractional share of Common Stock pursuant to Subsection 4(d).
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(ix) Notwithstanding any other provision hereof, no adjustment to
the Conversion Price shall be made upon the issuance or exercise or
conversion of (1) options or warrants to purchase, in the aggregate,
up to 25% of the securities sold in the offerings of securities of the
Corporation described in the Original Offer to Exchange or any options
or warrants described in the Amendment in respect of the Alternative
Equity Offering, in each case issued to (or to the designee of) any
placement agent or financial advisor (such options or warrants, the
"Offering Warrants"), (2) any equity securities or warrants of the
Corporation (including, without limitation, the Series A Preferred
Stock, warrants and equity securities underlying warrants) issued in
exchange for 9% Convertible Subordinated Notes due 2004 (the "9%
Notes") of the Corporation or accrued interest thereon or pursuant to
the conversion or exercise provisions thereof, (3) any warrants issued
in connection with the offerings described in the Original Offer to
Exchange or the Amendment (collectively, the "Offering"), (4) any
warrants issued to Forum Capital Markets, LLC ("Forum") in exchange
for or in addition to, or any amendment to, any warrants held by
Forum, in each case, pursuant to a letter agreement dated January 5,
1998, between the Corporation and Forum, and any other warrants to
purchase Common Stock or shares of Common Stock issued to Forum or its
designee, (5) any Series A Preferred Stock issued in the Offering, (6)
any Capital Stock issued or cash paid as dividends on the Series A
Preferred Stock or (7) any Capital Stock issued or cash paid upon the
mandatory conversion or redemption of any Series A Preferred Stock in
accordance with Section 5 of this Certificate of Designation.
(d) No Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon conversion of Series A
Preferred Stock. If more than one certificate evidencing shares of Series A
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series A Preferred
Stock so surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of such aggregate number of shares
of Series A Preferred Stock, the Corporation may elect, in its sole discretion,
independently for each holder, whether such number of shares of Common Stock
will be rounded to the nearest whole share (with a .5 of a share rounded upward)
or whether such holder will be given cash, in lieu of any fractional share, in
an amount equal to the same fraction of the Market Price of the Common Stock as
of the close of business on the day of conversion.
(e) [Reserved]
(f) Reservation of Shares; Transfer Taxes, Etc. The Corporation shall
at all times reserve and keep available, out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the Series A Preferred Stock, such number of shares of its Common Stock free of
preemptive rights as shall be sufficient to effect the conversion of all shares
of Series A Preferred Stock from time to time outstanding. The Corporation shall
use its best efforts from time to time, in accordance with the laws of the State
of Delaware to increase the authorized number of shares of Common Stock if at
any time the
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<PAGE>
number of shares of authorized, unissued and unreserved Common Stock shall not
be sufficient to permit the conversion of all the then-outstanding shares of
Series A Preferred Stock.
The Corporation shall pay any and all issue or other taxes (excluding
any income taxes) that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of the Series A Preferred Stock. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue or delivery of Common Stock (or
other securities or assets) in a name other than that in which the shares of
Series A Preferred Stock so converted were registered, and no such issue or
delivery shall be made unless and until the person requesting such issue has
paid to the Corporation the amount of such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid or need not be
paid.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall declare any dividend (or any other
distribution); or
(ii) the Corporation shall authorize the granting to the holders
of Common Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants; or
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no par
value to par value); or
(iv) of any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation
shall be required, or of the sale or transfer of all or substantially
all of the assets of the Corporation or of any compulsory share
exchange whereby the Common Stock is converted into other securities,
cash or other property; or
(v) of any Liquidation Event;
then the Corporation shall cause to be filed with the transfer agent for the
Series A Preferred Stock, and shall cause to be mailed to the Registered
Holders, at their last addresses as they shall appear upon the stock transfer
books of the Corporation, at least 20 days prior to the applicable record date
hereinafter specified, a notice stating (x) the date on which a record (if any)
is to be taken for the purpose of such dividend. distribution or granting of
rights or warrants or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined and a description of the cash,
securities or other property to be received by such holders upon such dividend,
distribution or granting of rights or warrants or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share exchange or
Liquidation Event is expected to become effective, the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable
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<PAGE>
upon such exchange or Liquidation Event and the consideration, including
securities or other property, to be received by such holders upon such exchange;
provided, however, that no failure to mail such notice or any defect therein or
in the mailing thereof shall affect the validity of the corporate action
required to be specified in such notice.
(h) Other Changes in Conversion Rate. The Corporation from time to
time may increase the Conversion Rate by any amount for any period of time if
the period is at least 20 days and if the increase is irrevocable during the
period. Whenever the Conversion Rate is so increased, the Corporation shall mail
to the Registered Holders a notice of the increase at least 15 days before the
date the increased Conversion Rate takes effect, and such notice shall state the
increased Conversion Rate and the period it will be in effect.
The Corporation may make such increases in the Conversion Rate, in
addition to those required or allowed by this Section 4, as shall be determined
by it, as evidenced by a resolution of the Board of Directors, to be advisable
in order to avoid or diminish any income tax to holders of Common Stock
resulting from any dividend or distribution of stock or issuance of rights or
warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.
Notwithstanding anything to the contrary herein, in no case shall the
Conversion Price be adjusted to an amount less than $.001 per share, the current
par value of the Common Stock into which the Series A Preferred Stock is
convertible.
(i) Ambiguities/Errors. The Board of Directors of the Corporation
shall have the power to resolve any ambiguity or correct any error in the
provisions relating to the convertibility of the Series A Preferred Stock, and
its actions in so doing shall be final and conclusive.
5. Mandatory Conversion and Redemption. (a) At any time after the
expiration of 12 months after the Alternative Equity Closing Date, the
Corporation at its option, may cause the Series A Preferred Stock to be
converted in whole or in part, on a pro rata basis, into fully paid and
nonassessable shares of Common Stock using a conversion price equal to 200% of
the Stated Common Price if the Closing Bid Price (or, if the price referenced in
the definition of Closing Bid Price cannot be determined, the Fair Market Value)
of the Common Stock shall have equalled or exceeded 250% of the Conversion Price
for at least 20 trading days in any 30 consecutive trading day period ending
three days prior to the date of notice of conversion (such event, the "Market
Trigger"). Any shares of Series A Preferred Stock so converted shall be treated
as having been surrendered by the holder thereof for conversion pursuant to
Section 4 on the date of such mandatory conversion (unless previously converted
at the option of the holder).
(b) At any time after April 1, 2000, the Corporation, at its option,
may redeem the Series A Preferred Stock for cash equal to the Dividend Base
Amount at such time, if the Market Trigger has occurred in the period ending
three days prior to the date of notice of redemption (unless previously
converted at the option of the holder).
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(c) No greater than 60 nor fewer than 20 days prior to the date of any
such mandatory conversion or redemption, notice by first class mail, postage
prepaid, shall be given to the holders of record of the Series A Preferred Stock
to be converted or redeemed, addressed to such holders at their last addresses
as shown on the stock transfer books of the Corporation. Each such notice shall
specify the date fixed for conversion or redemption, the place or places for
surrender of shares of Series A Preferred Stock and the then effective
Conversion Rate pursuant to Section 4.
Any notice which is mailed as herein provided shall be conclusively
presumed to have been duly given by the Corporation on the date deposited in the
mail, whether or not the holder of the Series A Preferred Stock receives such
notice; and failure properly to give such notice by mail, or any defect in such
notice, to the holders of the shares to be converted or redeemed shall not
affect the validity of the proceedings for the conversion or redemption of any
other shares of Series A Preferred Stock. On or after the date fixed for
conversion or redemption (the "Take-Out Date") as stated in such notice, each
holder of shares called to be converted or redeemed shall surrender the
certificate evidencing such shares to the Corporation at the place designated in
such notice for conversion or redemption. After the mailing of such notice, but
before the Take-Out Date as stated therein, all rights whatsoever with respect
to the shares so called for conversion or redemption (except the right of the
holders to convert such shares pursuant to Section 4 and to have such shares
converted or redeemed, as the case may be, upon surrender of their certificates
therefor, pursuant to this Section 5) shall terminate. On or after the Take-Out
Date, notwithstanding that the certificates evidencing any shares properly
called for conversion or redemption shall not have been surrendered, such shares
shall no longer be deemed outstanding and all rights whatsoever with respect to
the shares so called for conversion or redemption (except the right of the
holders to have such shares converted or redeemed, as the case may be, upon
surrender of their certificates therefor, pursuant to this Section 5) shall
terminate.
6. Outstanding Shares. For purposes of this Certificate of
Designation, a share of Series A Preferred Stock, when issued, shall be deemed
outstanding except (i) from the date, or the deemed date, of surrender of
certificates evidencing shares of Series A Preferred Stock, all shares of Series
A Preferred Stock converted into Common Stock or redeemed pursuant to Section 5
and (ii) from the date of registration of transfer, all shares of Series A
Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.
7. Class Voting Rights. The Corporation shall not, without the
affirmative vote or consent of the holders of at least 50% of all outstanding
Series A Preferred Stock, voting separately as a class, (i) amend, alter or
repeal any provision of the Certificate of Incorporation or the Bylaws of the
Corporation so as adversely to affect the relative rights, preferences,
qualifications, limitations or restrictions of the Series A Preferred Stock (it
being understood that the issuance of securities ranking prior to, or pari passu
with, the Series A Preferred Stock (A) upon a Liquidation Event or (B) with
respect to the payment of dividends or distributions shall not be considered
adversely to affect such relative rights, preferences, qualifications,
limitations or restrictions); or (ii) authorize or issue, or increase the
authorized amount of, Series A Preferred Stock, other than Series A Preferred
Stock issuable in connection with the Offering,
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issuable in exchange for 9% Notes or accrued interest thereon or issuable as
dividends on Series A Preferred Stock.
8. Status of Acquired Shares. Shares of Series A Preferred Stock
received upon conversion or redemption pursuant to Section 4 or Section 5 or
otherwise acquired by the Corporation will be restored to the status of
authorized but unissued shares of Preferred Stock, without designation as to
class, and may thereafter be issued, but not as shares of Series A Preferred
Stock.
9. Preemptive Rights. The Series A Preferred Stock is not entitled to
any preemptive or subscription rights in respect of any securities of the
Corporation.
10. Severability of Provisions. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such changes as
shall be necessary to render the provision in question effective and valid under
applicable law.
11. Restrictions on Change of Control. Notwithstanding anything to the
contrary contained in this Certificate of Designation, without the prior written
consent of the Corporation, so long as any 9% Notes remain outstanding under
that certain Indenture dated as of March 26, 1997 (as amended, the "Indenture")
in respect of the 9% Notes, no holder of Series A Preferred Stock shall have
voting rights granted hereunder, be entitled to receive any voting securities of
the Corporation pursuant hereto or be entitled to exercise any of the conversion
rights set forth herein (each, a "Restricted Event"), to the extent that any
such Restricted Event could, in the Corporation's reasonable judgment, either
alone or in conjunction with other issuances or holdings of capital stock,
warrants or convertible securities of the Corporation, result in a Change of
Control (as defined in the Indenture).
[Signature page follows]
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IN WITNESS WHEREOF, ____________, __________ of the Corporation,
acting for and on behalf of the Corporation, has hereunto subscribed his name
this ____ day of ________, 1998.
HYBRIDON, INC.
By:
--------------------------------
Name:
Title:
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[Revised Structure]
ANNEX B
FORM OF WARRANT AGREEMENT
AGREEMENT, dated as of this ______th day of ________, 1998, by and
among HYBRIDON, INC., a Delaware corporation ("Company"), and CHASEMELLON
SHAREHOLDER SERVICES, L.L.C., a New Jersey limited liability company, as warrant
agent ("Warrant Agent").
W I T N E S S E T H
WHEREAS, the Company has accepted 9% Convertible Subordinated Notes
Due 2004 ("9% Notes") of the Company in exchange for shares of Series A
Convertible Preferred Stock, par value $0.01 per share, (the "Series A Preferred
Stock") of the Company and warrants to be issued pursuant to this Agreement
("Class A Warrants") pursuant to an Offer to Exchange dated February 6, 1998
(the "Original Offer to Exchange") disseminated to all of the holders of the 9%
Notes (as subsequently amended by the Amendment thereto dated March 30, 1998
(the "Amendment"), the "Offer to Exchange," and such exchange offer, as
subsequently amended by the Amendment, the "Exchange Offer");
WHEREAS, pursuant to the Exchange Offer, the Company may issue a
number of Class A Warrants equal to the Warrant Coverage Quantity (as defined
below);
WHEREAS, each Class A Warrant initially entitles the Registered Holder
(as defined below) thereof to purchase one (1) share of Common Stock at the
Purchase Price (as defined below);
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange and redemption of the Class A
Warrants, the issuance of certificates representing the Class A Warrants, the
exercise of the Class A Warrants, and the rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Class A Warrants and the certificates representing the Class A
Warrants and the respective rights and obligations thereunder of the Company,
the holders of certificates representing the Class A Warrants and the Warrant
Agent, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean stock of the Company of any class,
whether now or hereafter authorized, which has the right to participate in the
distribution of earnings and
<PAGE>
assets of the Company without limit as to amount or percentage, which at the
date hereof consisted of 100,000,000 authorized shares of Common Stock, par
value $.001 per share.
(b) The "Closing Bid Price," for each trading day, shall be the
reported per share closing bid price of the Common Stock regular way on the
Stock Market on such trading day or, if there were no transactions on such
trading day, shall mean the average of the reported per share closing bid and
asked prices, regular way, of the Common Stock on the Stock Market on such
trading day.
(c) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which, at any particular time, its principal business shall be
administered, which office is located at the date hereof at 85 Challenger Road,
Overpeck Centre, Ridgefield Park, New Jersey, 07660.
(d) "Exercise Date" shall mean, as to any Class A Warrant, the date on
which the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Class A Warrant, with the subscription form thereon duly
executed by the Registered Holder thereof or his attorney duly authorized in
writing, and (b) payment in cash, or by official bank or certified check made
payable to the Company, of an amount in lawful money of the United States of
America equal to the applicable Purchase Price.
(e) [Reserved]
(f) "Fair Market Value" means, with respect to any security or other
asset, the fair market value set by, or determined in a manner established by,
the Board of Directors of the Company.
(g) "Initial Warrant Exercise Date" shall mean, as to each Class A
Warrant, the date which is 12 months after the Alternative Equity Closing Date
(as hereinafter defined).
(h) "Market Price" shall mean the average Closing Bid Price, for
twenty (20) consecutive trading days, ending with the trading day prior to the
date as of which the Market Price is being determined (with appropriate
adjustments for subdivisions or combinations of shares effected during such
period), provided that if the prices referred to in the definition of Closing
Bid Price cannot be determined for such period, "Market Price" shall mean Fair
Market Value.
(i) The "Purchase Price" per share of Common Stock shall mean the
product of 2.125 multiplied by the per share price of Common Stock sold by the
Company in connection with the Alternative Equity Offering (as such term is
defined in the Amendment), subject to adjustment from time to time pursuant to
the provisions of Section 9, and subject to the Company's right to reduce the
Purchase Price upon notice to all Registered Holders.
(j) [Reserved]
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(k) "Registered Holder" shall mean, as to any Class A Warrant and as
of any particular date, the person in whose name the certificate representing
the Class A Warrant shall be registered on that date on the books maintained by
the Warrant Agent pursuant to Section 6.
(l) The "Stock Market" shall mean the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange, shall mean The Nasdaq National Market System or The Nasdaq SmallCap
Market (collectively, "Nasdaq") or, if the Common Stock is not quoted on Nasdaq,
shall mean the OTC Bulletin Board or, if the Common Stock is not quoted on the
OTC Bulletin Board, shall mean the over-the-counter market as furnished by any
NASD member firm selected from time to time by the Company for that purpose.
(m) A "trading day" shall mean a day on which the Stock Market is open
for the transaction of business.
(n) "Transfer Agent" shall mean ChaseMellon Shareholder Services,
L.L.C., as the Company's transfer agent, or its authorized successor, as such.
(o) "Warrant Coverage Quantity" shall mean 25% of the quotient of (i)
the initial aggregate Dividend Base Amount (as defined in the Certificate of
Designation for the Series A Preferred Stock) of the Series A Preferred Stock
issued pursuant to the Exchange Offer, divided by (ii) the Purchase Price
without giving effect to any adjustments to such Purchase Price occurring after
the date hereof.
(p) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on
the day prior to the fourth anniversary of the Initial Warrant Exercise Date;
provided that if such date shall in the State of New York be a holiday or a day
on which banks are authorized or required to close, then "Warrant Expiration
Date" shall mean 5:00 P.M. (New York time) on the next following day which in
the State of New York is neither a holiday nor a day on which banks are
authorized or required to close. Upon notice to all Registered Holders, the
Company shall have the right to extend the Warrant Expiration Date.
(q) Unless otherwise stated, section references used within this
Warrant Agreement refer to sections of this Warrant Agreement.
SECTION 2. Warrants and Issuance of Warrant Certificates.
(a) A Class A Warrant initially shall entitle the Registered Holder of
the Warrant Certificate representing such Class A Warrant to purchase one share
of Common Stock upon the exercise thereof, in accordance with the terms hereof,
subject to modification and adjustment as provided in Section 9.
(b) The Class A Warrants issued pursuant to the Exchange Offer will
immediately be detachable and separately transferable from the shares of Series
A Preferred Stock also issued pursuant thereto.
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(c) Within five business days after the date that 9% Notes are
irrevocably exchanged pursuant to the Exchange Offer, Warrant Certificates
representing the number of Class A Warrants to be issued pursuant to the
Exchange Offer shall be executed by the Company and delivered to the Warrant
Agent. Within five business days of receipt of the Warrant Certificates by the
Warrant Agent, the Warrant Agent shall send the Warrant Certificates to the
Registered Holders. The Company shall issue a written order, signed by its
Chairman of the Board, President or any Vice President and by its Secretary or
an Assistant Secretary, to the Warrant Agent directing that the Warrant
Certificates shall be countersigned, issued and delivered by the Warrant Agent
in accordance with the preceding sentence.
(d) From time to time, until the Warrant Expiration Date, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations of Common Stock, subject to adjustment as described herein, upon
the exercise of Class A Warrants in accordance with this Agreement.
(e) From time to time, until the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required whole
number denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially issued hereunder, (ii)
those issued on or after the Initial Warrant Exercise Date, upon the exercise of
fewer than all Class A Warrants represented by any Warrant Certificate, to
evidence any unexercised Class A Warrants held by the exercising Registered
Holder, (iii) those issued upon any transfer or exchange pursuant to Section 6;
(iv) those issued in replacement of lost, stolen, destroyed or mutilated Warrant
Certificates pursuant to Section 7 and (v) at the option of the Company, in such
form as may be approved by its Board of Directors, to reflect any adjustment to,
or change in: the Purchase Price; the number of shares of Common Stock
purchasable upon exercise of the Class A Warrants; or the Warrant Expiration
Date.
SECTION 3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the form
annexed hereto as Exhibit A (the provisions of which are hereby incorporated
herein) and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Class A Warrants may be listed, or
to conform to usage or to the requirements of Section 2. The Warrant
Certificates shall be dated the date of issuance thereof (whether upon initial
issuance, transfer, exchange or in lieu of mutilated, lost, stolen, or destroyed
Warrant Certificates) and issued in registered form. Warrant Certificates shall
be numbered serially with the letters AW on Class A Warrants of all
denominations.
(b) Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, President or any Vice President and by its Secretary
or an Assistant Secretary, by manual signatures or by facsimile signatures
printed thereon. Warrant Certificates
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shall be manually countersigned by the Warrant Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Warrant Certificates shall cease to be an officer
of the Company or to hold the particular office referenced in the Warrant
Certificate before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issuance and delivery thereof, such
Warrant Certificates may nevertheless be countersigned by the Warrant Agent,
issued and delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be an officer of the Company
or to hold such office. After countersignature by the Warrant Agent, Warrant
Certificates shall be delivered by the Warrant Agent to the Registered Holder
without further action by the Company, except as otherwise provided herein.
SECTION 4. Exercise. Each Class A Warrant may be exercised by the
Registered Holder thereof at any time on or after the Initial Warrant Exercise
Date, but not after the Warrant Expiration Date, upon the terms and subject to
the conditions set forth herein and in the applicable Warrant Certificate. A
Class A Warrant shall be deemed to have been exercised immediately prior to the
close of business on the Exercise Date and the person entitled to receive the
securities deliverable upon such exercise shall be treated for all purposes as
the holder of those securities upon the exercise of the Class A Warrant as of
the close of business on the Exercise Date. As soon as practicable on or after
the Exercise Date, the Warrant Agent shall deposit the proceeds received from
the exercise of a Class A Warrant and shall notify the Company in writing of the
exercise of the Class A Warrants. Promptly following, and in any event within
five business days after the date of such notice from the Warrant Agent, the
Warrant Agent, on behalf of the Company, shall cause to be issued and delivered
by the Transfer Agent, to the person or persons entitled to receive the same, a
certificate or certificates for the securities deliverable upon such exercise
(plus a certificate for any remaining unexercised Class A Warrants of the
Registered Holder). In the case of payment made in the form of a check drawn on
an account of such investment banks and brokerage houses as the Company shall
approve in writing to the Warrant Agent, certificates shall promptly be issued
without prior notice to the Company nor any delay. Upon the exercise of any
Class A Warrant and clearance of the funds received, the Warrant Agent shall
promptly remit the payment received for the Class A Warrant (the "Warrant
Proceeds") to the Company or as the Company may otherwise direct in writing.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Class A Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Class A Warrants.
The Company covenants that all shares of Common Stock which shall be issuable
upon exercise of the Class A Warrants shall, at the time of delivery (assuming
full payment of the Purchase Price thereof), be duly and validly issued, fully
paid, nonassessable and free from all issuance taxes, liens and charges with
respect to the issue thereof including, without limitation, adverse claims
whatsoever (with the exception of claims arising through the acts of the
Registered Holders themselves and except as arising from applicable Federal and
state securities laws) and that the Company shall have paid all taxes, if any,
in respect of the original issuance thereof (except as otherwise provided in
Subsection 5(c)).
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(b) The Registered Holders of Class A Warrants shall have the
registration rights provided in the Offer to Exchange. The Class A Warrants
shall not be exercisable in any state where such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other similar governmental charges (but in no case income taxes) that may be
imposed with respect to the issuance of Class A Warrants, or the issuance or
delivery of any shares upon exercise of the Class A Warrants; provided, however,
that if the shares of Common Stock are to be delivered in a name other than the
name of the Registered Holder of the Warrant Certificate representing any Class
A Warrant being exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of transfer taxes
or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition
the Company's Transfer Agent from time to time for certificates representing
shares of Common Stock issuable upon exercise of the Class A Warrants, and the
Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Common Stock issuable upon exercise of the Class A Warrants.
SECTION 6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Class A Warrants of the
same class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions hereof, the Company shall execute,
and the Warrant Agent shall countersign, issue and deliver in exchange therefor,
the Warrant Certificate or Warrant Certificates that the Registered Holder
making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject
to such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and any transfers thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Class A Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent on holders
for any exchange or registration of transfer of Warrant Certificates of such
holders. In addition, the
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Company may require payment by such holder of a sum sufficient to cover any tax
or governmental or other charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise, or for exchange
in case of mutilated Warrant Certificates, shall be promptly cancelled by the
Warrant Agent and thereafter retained by the Warrant Agent in a manner
consistent with its customary practices until termination of this Warrant
Agreement or resignation as Warrant Agent or disposed of or destroyed at the
direction of the Company.
(f) Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof and of each Class A Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Warrant Agent of
evidence satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of any Warrant Certificate and (in case of loss, theft or
destruction) of indemnity satisfactory to it, and (in the case of mutilation)
upon surrender and cancellation thereof, the Company shall execute and the
Warrant Agent shall ( in the absence of notice to the Company and/or Warrant
Agent that the Warrant Certificate has been acquired by a bona fide purchaser)
countersign and deliver to the Registered Holder in lieu thereof a new Warrant
Certificate of like tenor representing an equal aggregate number of Class A
Warrants. Applicants for a substitute Warrant Certificate shall comply with such
other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
SECTION 8. [Reserved]
SECTION 9. Adjustment of Purchase Price and Number of Shares of Common
Stock or Class A Warrants. Upon, and only upon, each adjustment of the Purchase
Price pursuant to this Section 9, the total number of shares of Common Stock
purchasable upon the exercise of each Class A Warrant shall (subject to the
provisions contained in Subsection 9(c)) be such number of shares (calculated to
the nearest tenth) purchasable at the Purchase Price in effect immediately prior
to such adjustment multiplied by a fraction, the numerator of which shall be the
Purchase Price in effect immediately prior to such adjustment and the
denominator of which shall be the Purchase Price in effect immediately after
such adjustment.
(a) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Class A Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Class A Warrant as herein provided, so that each Class A Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Class A Warrant held of record prior to such
adjustment of the number of Class A Warrants shall become that number of Class A
Warrants (calculated to the nearest tenth) equal to a fraction, the numerator of
which shall be the Purchase Price in effect immediately prior to such adjustment
and the denominator
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of which shall be the Purchase Price in effect immediately after such
adjustment. Upon each adjustment of the number of Class A Warrants pursuant to
this Section 9, the Company shall, as promptly as practicable, cause to be
distributed to each Registered Holder of Warrant Certificates on the date of
such adjustment Warrant Certificates evidencing, subject to Section 10, the
number of additional Class A Warrants to which such Holder shall be entitled as
a result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrant
Certificates held by him prior to the date of adjustment (and upon surrender
thereof, if required by the Company) new Warrant Certificates evidencing the
number of Class A Warrants to which such Holder shall be entitled after such
adjustment.
(b) Irrespective of any adjustments or changes in the Purchase Price
or the number of shares of Common Stock purchasable upon exercise of the Class A
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Subsection 2(e), continue to express the same Purchase Price per
share, number of shares purchasable thereunder as when the same were originally
issued.
(c) As used in this Section 9, the following terms shall have the
following meanings:
"Capital Stock" of any Person means the Common Stock or Preferred
Stock of such Person. Unless otherwise stated herein or the context
otherwise requires, "Capital Stock" means Capital Stock of the
Company;
"Common Stock" of any Person other than the Company means the
common equity (however designated), including, without limitation,
common stock or partnership or membership interests of, or
participation or interests in such Person (or equivalents thereof).
"Common Stock" of the Company means the Common Stock, par value $.001
per share, of the Company, any successor class or classes of common
equity (however designated) of the Company into or for which such
Common Stock may hereafter be converted, exchanged or reclassified and
any class or classes of common equity (however designated) of the
Company which may be distributed or issued with respect to such Common
Stock or successor class of classes to holders thereof generally.
Unless otherwise stated herein or the context requires otherwise,
"Common Stock" means Common Stock of the Company;
"Current Market Price" means, when used with respect to any
security as of any date, the last sale price, regular way, or, in case
no such sale takes place on such date, the average of the closing bid
and asked prices, regular way, of such security in either case as
reported for consolidated transactions on the New York Stock Exchange
or, if such security is not listed or admitted to trading on the New
York Stock Exchange, as reported for consolidated transactions with
respect to securities listed on the principal national securities
exchange on which such security is listed or admitted to trading or,
if such security is not listed or
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admitted to trading on any national securities exchange, as reported
on the Nasdaq National Market, or, if such security is not listed or
admitted to trading on the Nasdaq National Market, as reported on the
Nasdaq SmallCap Market, or if such security is not listed or admitted
to trading on any national securities exchange or the Nasdaq National
Market or the Nasdaq SmallCap Market, the average of the high bid and
low asked prices of such security in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotations System or such other system then in use or, if
such security is not quoted by any such organization, the average of
the closing bid and asked prices of such security furnished by an NASD
member firm selected by the Company. If such security is not quoted by
any such organization and no such NASD member firm is able to provide
such prices, the Current Market Price of such security shall be the
Fair Market Value thereof;
"Fair Market Value" means, at any date as to any asset, Property
or right (including without limitation, Capital Stock of any Person,
evidence of indebtedness or other securities, but excluding cash), the
fair market value of such item as determined in good faith by the
Board of Directors, whose determination shall be conclusive; provided,
however, that such determination is described in an Officers'
Certificate filed with the transfer agent and that, if there is a
Current Market Pricefor such item on such date, "Fair Market Value"
means such Current Market Price (without giving effect to the last
sentence of the definition thereof);
"GAAP" means, as of any date, generally accepted accounting
principles in the United States and does not include any
interpretations or regulations that have been proposed but that have
not become effective;
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary, any Assistant Secretary or
any Vice President of such Person;
"Officers' Certificate" means a certificate signed on behalf of
the Company by two Officers, one of whom must be the Chairman of the
Board, the President, the Treasurer or a Vice-President of the
Company;
"Person" means any individual, corporation, partnership,
association, trust or any other entity or organization, including a
government or political subdivision or any agency or instrumentality
thereof;
"Preferred Stock" of any Person means the class or classes of
equity, ownership or participation interests (however designated) in
such Person, including, without limitation, stock, share, partnership
and membership interests, which are preferred as to the payment of
dividends or distributions by, or as to the distribution of assets
upon any voluntary or involuntary liquidation or
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dissolution of, such Person (or equivalent thereof) over interests of
any other class of interests of such Person. Unless otherwise stated
herein or the context otherwise requires, "Preferred Stock" means
Preferred Stock of the Company;
"Property" of any Person means any and all types of real,
personal, tangible, intangible or mixed property owned by such Person
whether or not included on the most recent consolidated balance sheet
of such Person in accordance with GAAP;
"Subsidiary" of a Person on any date means any other Person of
whom such Person owns, directly or indirectly through a Subsidiary or
Subsidiaries of such Person, Capital Stock with voting power, acting
independently and under ordinary circumstances, entitling such person
to elect a majority of the board of directors or other governing body
of such other Person. Unless otherwise stated herein or the context
otherwise requires, "Subsidiary" means a Subsidiary of the Company.
(d) If the Company shall (i) pay a dividend or other distribution, in
Common Stock, on any class of Capital Stock of the Company, (ii) subdivide the
outstanding Common Stock into a greater number of shares by any means or (iii)
combine the outstanding Common Stock into a smaller number of shares by any
means including, without limitation, a reverse stock split), then in each such
case the Purchase Price in effect immediately prior thereto shall be adjusted so
that the Registered Holder of any Class A Warrants thereafter surrendered for
exercise shall be entitled to receive the number of shares of Common Stock that
such Registered Holder would have owned or have been entitled to receive upon
the happening of such event had such Class A Warrants been exercised immediately
prior to the relevant record date or, if there is no such record date, the
effective date of such event. An adjustment made pursuant to this Subsection
9(d) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date of such
subdivision or combination, as the case may be.
(e) If the Company shall (i) issue or distribute (at a price per share
less than the Current Market Price per share of such Capital Stock on the date
of such issuance or distribution) Capital Stock generally to holders of Common
Stock or to holders of any class or series of Capital Stock which is convertible
into or exchangeable or exercisable for Common Stock (excluding an issuance or
distribution of Common Stock described in Subsection 9(d) or (ii) issue or
distribute generally to such holders rights, warrants, options or convertible or
exchangeable securities entitling the holder thereof to subscribe for, purchase,
convert into or exchange for Capital Stock at a price per share less than the
Current Market Price per share of such Capital Stock on the date of issuance or
distribution, then, in each such case, at the earliest of (A) the date the
Company enters into a firm contract for such issuance or distribution, (B) the
record date for the determination of stockholders entitled to receive any such
Capital Stock or any such rights, warrants, options or convertible or
exchangeable securities or (C) the date of actual issuance or distribution of
any such Capital Stock or any such rights, warrants, options or convertible or
exchangeable securities, the Purchase Price shall be reduced by multiplying the
Purchase Price in effect immediately prior to such earliest date by:
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(i) if such Capital Stock is Common Stock, a fraction the
numerator of which is the number of shares of Common Stock
outstanding, on such earliest date plus the number of shares of Common
Stock which could be purchased at the Current Market Price per share
of Common Stock on the date of such issuance or distribution with the
aggregate consideration (based on the Fair Market Value thereof)
received or receivable by the Company either (A) in connection with
such issuance or distribution or (B) upon the conversion, exchange,
purchase or subscription of all such rights, warrants, options or
convertible or exchangeable securities (the "Aggregate
Consideration"), and the denominator of which is the number of shares
of Common Stock outstanding on such earliest date plus the number of
shares of Common Stock to be so issued or distributed or to be issued
upon the conversion, exchange, purchase or subscription of all such
rights, warrants, options or convertible or exchangeable securities;
or
(ii) if such Capital Stock is other than Common Stock, a fraction
the numerator of which is the Current Market Price per share of Common
Stock on such earliest date minus an amount equal to (A) the
difference between (1) the Current Market Price per share of such
Capital Stock multiplied by the number of shares of such Capital Stock
to be so issued and (2) the Aggregate Consideration, divided by (B)
the number of shares of Common Stock outstanding on such date, and the
denominator of which is the Current Market Price per share of Common
Stock on such earliest date.
Such adjustment shall be made successively whenever any such Capital
Stock, rights, warrants, options or convertible or exchangeable securities are
so issued or distributed. In determining whether any rights, warrants, options
or convertible or exchangeable securities entitle the holders thereof to
subscribe for, purchase, convert into or exchange for shares of such Capital
Stock at less than such Current Market Price, there shall be taken into account
the Fair Market Value of any consideration received or receivable by the Company
for such rights, warrants, options or convertible or exchangeable securities. If
any right, warrant, option or convertible or exchangeable security, the issuance
of which resulted in an adjustment in the Purchase Price pursuant to this
Subsection 9(e), shall expire and shall not have been exercised, the Purchase
Price shall immediately upon such expiration be recomputed to the Purchase Price
which would have been in effect if such right, warrant, option or convertible or
exchangeable securities had never been distributed or issued. Notwithstanding
anything contained in this paragraph to the contrary, (i) the issuance of
Capital Stock upon the exercise of such rights, warrants or options or the
conversion or exchange of such convertible or exchangeable securities will not
cause an adjustment in the Purchase Price if no such adjustment would have been
required at the time such right, warrant, option or convertible or exchangeable
security was issued or distributed; provided, however, that, if the
consideration payable upon such exercise, conversion or exchange and/or the
Capital Stock receivable thereupon are changed after the time of the issuance or
distribution of such right, warrant, option or convertible or exchangeable
security then such change shall be deemed to be the expiration thereof without
having been exercised and the issuance or distribution of new options, rights,
warrants or convertible or exchangeable securities and (ii) the issuance of
convertible preferred stock of the Company as a dividend on convertible
preferred stock of the Company will not cause an adjustment in the Purchase
Price if no such adjustment would have been required at the time such underlying
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convertible preferred stock was issued (or as a result of any subsequent
modification to the terms thereof) and the conversion provisions of such
convertible stock so issued as a dividend are the same as in such underlying
convertible preferred stock.
Notwithstanding anything contained in this Warrant Agreement to the
contrary, options, rights or warrants issued or distributed by the Company,
including options, rights or warrants distributed prior to the date of this
Warrant Agreement, to holders of Common Stock generally which, until the
occurrence of a specified event or events (a "Trigger Event"), (i) are deemed to
be transferred with Common Stock, (ii) are not exercisable and (iii) are also
issued on a pro rata basis with respect to future issuances of Common Stock,
shall be deemed not to have been issued or distributed for purposes of this
Section 9 (and no adjustment to the Purchase Price under this Section 9 will be
required) until the occurrence of the earliest Trigger Event. Upon the
occurrence of a Trigger Event, such options, rights or warrants shall continue
to be deemed not to have been issued or distributed for purposes of this Section
9 (and no adjustment to the Purchase Price under this Section 9 will be
required) if and for so long as each Registered Holder who thereafter exercises
such Registered Holder's Class A Warrants shall be entitled to receive upon such
exercise, in addition to the shares of Common Stock issuable upon such exercise,
a number of such options, rights or warrants, as the case may be, equal to the
number of options, rights or warrants to which a holder of the number of shares
of Common Stock equal to the number of shares of Common Stock issuable upon
exercise of such Registered Holder's Class A Warrants is entitled to receive at
the time of such exercise in accordance with the terms and provision of, and
applicable to, such options, rights or warrants. Upon the expiration of any such
options, rights or warrants or at such time, if any, as a Registered Holder is
not entitled to receive such options, rights or warrants upon exercise of such
Registered Holder's Class A Warrants, an adjustment (if any is required) to the
Purchase Price shall be made in accordance with this Subsection 9(e) with
respect to the issuance of all such options, rights and warrants as of the date
of issuance thereof, but subject to the provisions of the preceding paragraph,
if any such option, right or warrant, including any such options right or
warrants distributed prior to the date of this Warrant Agreement, are subject to
events, upon the occurrence of which such options, rights or warrants become
exercisable to purchase different securities, evidence of indebtedness, cash,
Properties or other assets or different amounts thereof, then, subject to the
preceding provision of this paragraph, the date of the occurrence of any and
each such event shall be deemed to be the date of distribution and record date
with respect to new options, right or warrants with such new purchase rights
(and a termination or expiration of the existing options, rights or warrants
without exercise thereof). In addition, in the event of any distribution (or
deemed distribution) of options, rights or warrants, or any Trigger Event or
other event of the type described in the preceding sentence, that required (or
would have required but for the provisions of Subsection 9(h) or of this
paragraph) an adjustment to the Purchase Price under this Section 9 and such
options, rights or warrants shall thereafter have been redeemed or repurchased
without having been exercised, then the Purchase Price shall be adjusted upon
such redemption or repurchase to give effect to such distribution, Trigger Event
or other event, as the case may, as though it had instead been a cash
distribution, equal on a per share basis to the result of the aggregate
redemption or repurchase price received by holders of such options, rights or
warrants divided by the number of shares of Common Stock outstanding as of the
date of such repurchase or redemption, made to holders of Common Stock generally
as of the date of such redemption or repurchase.
-12-
<PAGE>
(f) If the Company shall pay or distribute, as a dividend or
otherwise, generally to holders of Common Stock or any class or series of
Capital Stock which is convertible into or exercisable or exchangeable for
Common Stock any assets, Properties or rights (including, without limitation,
evidences of indebtedness of the Company, any Subsidiary or any other Person,
cash or Capital Stock or other securities of the Company, any Subsidiary or any
other Person, but excluding payments and distributions as described in
Subsections 9(d) or (e), dividends and distributions in connection with a
Liquidation Event (as defined in the Certificate of Designation for the Series A
Preferred Stock) and distributions consisting solely of cash described in
Subsection 9(g), then in each such case the Purchase Price shall be reduced by
multiplying the Purchase Price in effect immediately prior to the date of such
payment or distribution by a fraction, the numerator of which is the Current
Market Price per share of Common Stock on the record date for the determination
of stockholders entitled to receive such payment or distribution less the Fair
Market Value per share of Common Stock on such record date of the assets,
Properties or rights so paid or distributed, and the denominator of which is the
Current Market Price per share of Common Stock on such record date. Such
adjustment shall become effective immediately after such record date. For
purposes of this Subsection 9(f), such Fair Market Value per share shall equal
the aggregate Fair Market Value on such record date of the assets, Properties or
rights so paid or distributed divided by the number of shares of Common Stock
outstanding on such record date. For all purposes of this Warrant Agreement,
adjustments to any security's exercise or exercise price pursuant to such
security's original terms shall not be deemed a distribution or dividend to
holders thereof.
(g) If the Company shall, by dividend or otherwise, make a
distribution (other than in connection with the liquidation, dissolution or
winding up of the Company in its entirety), generally to holders of Common Stock
or any class or series of Capital Stock which is convertible into or exercisable
or exchangeable for Common Stock, consisting solely of cash where (x) the sum of
(i) the aggregate amount for such cash plus (ii) the aggregate amount of all
cash so distributed (by dividend or otherwise) to such holders within the
12-month period ending on the record date for determining stockholder entitled
to receive such distribution with respect to which no adjustment has been made
to the Purchase Price pursuant to this Subsection 9(g) exceeds (y) 10% of the
result of the multiplication of (1) the Current Market Price per share of Common
Stock on such record date times (2) the number of shares of Common Stock
outstanding on such record date, then the Purchase Price shall be reduced,
effective immediately prior to the opening of business on the day following such
record date, by multiplying the Purchase Price in effect immediately prior to
the close of business on the day prior to such record date by a fraction, the
numerator of which is the Current Market Price per share of Common Stock on such
record date less the aggregate amount of cash per share so distributed and the
denominator of which is such Current Market Price; provided, however, that, if
the aggregate amount of cash per share is equal to or greater than such Current
Market Price, then, in lieu of the foregoing adjustment, adequate provisions
shall be made so that each Registered Holder shall have the right to receive
upon exercise (with respect to each share of Common Stock issued upon such
exercise and in addition to the Common Stock issuable upon exercise) the
aggregate amount of cash per share such Registered Holder would have received
had such Registered Holder's Class A Warrant been exercised immediately prior to
such record date. In no event shall the Purchase Price be increased pursuant to
this Subsection 9(g); provided, however, that if such distribution is not so
made, the Purchase Price shall be adjusted to be the
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<PAGE>
Purchase Price which would have been in effect if such distribution had not been
declared. For purposes of this Subsection 9(g), such aggregate amount of cash
per share shall equal such sum divided by the number of shares of Common Stock
outstanding on such record date.
(h) The provisions of this Section 9 shall similarly apply to all
successive events of the type described in this Section 9. Notwithstanding
anything contained herein to the contrary, no adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Purchase Price then in effect; provided, however, that any
adjustments which by reason of this Subsection 9(h) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 9 shall be made by the Company and shall be
made to the nearest cent or to the nearest one hundredth of a share, as the case
may be, and the Transfer Agent shall be entitled to rely conclusively thereon.
Except as provided in this Section 9, no adjustment in the Purchase Price will
be made for the issuance of Common Stock or any securities convertible into or
exchangeable for Common Stock or carrying the right to purchase Common Stock or
any securities so convertible or exchangeable.
(i) Whenever the Purchase Price is adjusted as provided herein, the
Company shall promptly file with the Warrant Agent an Officers' Certificate
setting forth the Purchase Price in effect after such adjustment and setting
forth a brief statement of the facts requiring such adjustment. Promptly after
delivery of such Officers' Certificate, the Company shall give or cause to be
given to each Registered Holder a notice of such adjustment of the Purchase
Price setting forth the adjusted Purchase Price and the date on which such
adjustment becomes effective. The Warrant Agent may rely on the information in
such Officers' Certificate as true and correct and has no duty or obligation
independently to verify the amounts or calculations set forth therein.
(j) Notwithstanding anything contained herein to the contrary, in any
case in which this Section 9 provides that an adjustment in the Purchase Price
shall become effective immediately after a record date for an event, the Company
may defer (and shall promptly give the Warrant Agent notice of any such
deferral) until the occurrence of such event (i) issuing to the Registered
Holder of any Class A Warrants exercised after such record date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such exercise by reason of the adjustment required by such event over and above
the number of shares of Common Stock issuable upon such exercise before giving
effect to such adjustment and (ii) paying to such Registered Holder any amount
in cash in lieu of any fractional share of Common Stock pursuant to Section 10.
(k) Notwithstanding any other provision hereof, no adjustment to the
Purchase Price shall be made upon the issuance or exercise or conversion of (1)
options or warrants to purchase, in the aggregate, up to 25% of the securities
sold in the offerings of securities of the Company described in the Original
Offer to Exchange or any options or warrants described in the Amendment in
respect of the Alternative Equity Offering, in each case issued to (or to the
designee of) any placement agent or financial advisor (such options or warrants,
the "Offering Warrants"), (2) any equity securities or warrants of the Company
(including, without limitation, the Series A Preferred Stock, warrants and
equity securities underlying warrants) issued in
-14-
<PAGE>
exchange for 9% Notes or accrued interest thereon or pursuant to the conversion
or exercise provisions thereof, (3) any warrants issued in connection with the
offerings described in the Original Offer to Exchange or the Amendment
(collectively, the "Offering"), (4) any warrants issued to Forum Capital
Markets, LLC ("Forum") in exchange for or in addition to, or any amendment to,
any warrants held by Forum, in each case, pursuant to a letter agreement dated
January 5, 1998, between the Company and Forum, and any other warrants to
purchase Common Stock or shares of Common Stock issued to Forum or its designee,
(5) any Series A Preferred Stock issued in the Offering, (6) any Capital Stock
issued or cash paid as dividends on the Series A Preferred Stock or (7) any
Capital Stock issued or cash paid upon the mandatory conversion or redemption of
any Series A Preferred Stock in accordance with Section 5 of the Certificate of
Designation for the Series A Preferred Stock.
(l) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to Section 9, or as to the amount
of any such adjustment, if required, shall be binding upon the holders of the
Class A Warrants and the Company if made in good faith by the Board of Directors
of the Company.
SECTION 10. Fractional Warrants and Fractional Shares. No fractional
shares or scrip representing fractional shares of Common Stock shall be issued
upon exercise of Class A Warrants. If more than one certificate evidencing Class
A Warrants shall be surrendered for exercise at one time by the same holder, the
number of full shares issuable upon exercise thereof shall be computed on the
basis of the aggregate number of Class A Warrants so surrendered. Instead of any
fractional share of Common Stock which would otherwise be issuable upon exercise
of such aggregate number of Class A Warrants, the Company may elect in its sole
discretion, independently for each holder, whether such number of shares of
Common Stock will be rounded to the nearest whole share (with .5 of a share
rounded upward) or whether such holder will be given cash, in lieu of any
fractional share, in an amount equal to the same fraction of the Market Price of
the Common Stock as of the Exercise Date.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of
Class A Warrants shall, as such, be entitled to vote or to receive dividends or
be deemed the holder of Common Stock that may at any time be issuable upon
exercise of such Class A Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Class A Warrants, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issue or reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Class A
Warrants and been issued shares of Common Stock in accordance with the
provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect to
this Agreement are vested in the respective Registered Holders of the Class A
Warrants, and any Registered Holder of a Class A Warrant, without consent of the
Warrant Agent or of the holder of any other Class A Warrant, may, in his own
behalf and for his own benefit, enforce against
-15-
<PAGE>
the Company his right to exercise his Class A Warrants for the purchase of
shares of Common Stock in the manner provided in the Warrant Certificate and
this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of any Class A
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of any Class A Warrant that:
(a) The Class A Warrants are transferable only on the registry books
of the Warrant Agent by the Registered Holder thereof in person or by his or her
attorney duly authorized in writing and only if the Warrant Certificates
representing such Class A Warrants are surrendered at the office of the Warrant
Agent, duly endorsed or accompanied by a proper instrument of transfer
satisfactory to the Warrant Agent, in its sole discretion, together with payment
of any applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Class A Warrants represented thereby for
all purposes, and neither the Company nor the Warrant Agent shall be affected by
any notice or knowledge to the contrary, except as otherwise expressly provided
in Section 6.
SECTION 14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Class A Warrant or Class A Warrants, the Warrant
Certificate or Warrant Certificates evidencing the same, by redemption or
otherwise, shall thereupon be delivered to the Warrant Agent and canceled by it
and retired. The Warrant Agent shall also cancel the Warrant Certificate or
Warrant Certificates following exercise of any or all of the Class A Warrants
represented thereby or delivered to it for transfer, split up, combination or
exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts
hereunder as agent and in a ministerial capacity for the Company, and its duties
shall be determined solely by the provisions hereof. The Warrant Agent does not
hereby assume any obligation, relationship, agency or trust for or with any of
the holders of Warrant Certificates or beneficial owners of Class A Warrants.
The Warrant Agent shall not, by issuing and delivering Warrant Certificates, or
by any other act hereunder, be deemed to make any representations as to the
validity, value or authorization of the Warrant Certificates or the Class A
Warrants represented thereby or of any securities or other property delivered
upon exercise of any Class A Warrant or whether any stock issued upon exercise
of any Class A Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price provided in this Agreement, or to determine
whether any fact exists that may require any such adjustments, or with respect
to the nature or extent of any such adjustment, when made, or with respect to
the method employed in making the same. It shall not (i) be liable for any
recital or statement of facts contained herein or for any action taken, suffered
or omitted by it in reliance on any Warrant Certificate or other document or
instrument believed by it in good
-16-
<PAGE>
faith to be genuine and to have been signed or presented by the proper party or
parties, (ii) be responsible for any failure on the part of the Company to
comply with any of its covenants and obligations contained in this Agreement or
in any Warrant Certificate, or (iii) be liable for any act or omission in
connection with this Agreement except for its own negligence or willful
misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken, suffered or omitted by it in good faith in
accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, or any Vice President and the Secretary,
or any Assistant Secretary (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation
for its services hereunder and to reimburse it for its reasonable expenses
hereunder as governed by a separate agreement to be entered into between the
Warrant Agent and the Company; the Company further agrees to indemnify the
Warrant Agent and save it harmless against any and all losses, expenses and
liabilities, including judgments, costs and reasonable counsel fees and
expenses, for anything done or omitted by the Warrant Agent in the execution of
its duties and powers hereunder except losses, expenses and liabilities arising
as a result of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties and be discharged from all
further duties and liabilities hereunder (except liabilities arising as a result
of the Warrant Agent's own negligence or willful misconduct), after giving 30
days' prior written notice to the Company. At least 15 days prior to the date
such resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holders of each
Warrant Certificate at the Company's expense. Upon such resignation, or any
inability of the Warrant Agent to act as such hereunder, the Company shall
appoint a new warrant agent in writing. If the Company shall fail to make such
appointment within a period of 15 days after it has been notified in writing of
such resignation by the resigning Warrant Agent, then the Registered Holder of
any Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a bank or trust company having capital
and surplus, as shown by its last published report to its stockholders, of not
less than $10,000,000 or a stock transfer company. After acceptance in writing
of such appointment by the new warrant agent is received by the Company, such
new warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; but if for any reason it
shall be necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the Company
and shall be legally and validly executed
-17-
<PAGE>
and delivered by the resigning Warrant Agent. Not later than the effective date
of any such appointment, the Company shall file notice thereof with the
resigning Warrant Agent and shall forthwith cause a copy of such notice to be
mailed to the Registered Holder of each Warrant Certificate.
Any entity into which the Warrant Agent or any new warrant agent may
be converted or merged or any entity resulting from any consolidation to which
the Warrant Agent or any new warrant agent shall be a party or any entity
succeeding to the trust business of the Warrant Agent shall be a successor
warrant agent under this Agreement without any further act, provided that such
entity is eligible for appointment as successor to the Warrant Agent under the
provisions of the preceding paragraph. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed to the
Company and to the Registered Holder of each Warrant Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or
their officers or directors, may buy and hold or sell Class A Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 16. Modification of Agreement. The parties hereto and the
Company may by supplemental agreement make any changes or corrections in this
Agreement (i) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; (ii) to reflect an increase in the number of Class A Warrants
which are to be governed by this Agreement resulting from a subsequent offering
of Company securities which includes Class A Warrants having the same terms and
conditions as the Class A Warrants, originally covered by or subsequently added
to this Agreement under this Section 16; or (iii) that they may deem necessary
or desirable and that shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, that this Agreement shall not otherwise
be modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders of Warrant Certificates representing more than
50% of the Class A Warrants then outstanding; and provided, further, that no
change in the number or nature of the securities purchasable upon the exercise
of any Class A Warrant, or the Purchase Price therefor, or the acceleration of
the Warrant Expiration Date, shall be made without the consent in writing of the
Registered Holder of the Warrant Certificate representing such Class A Warrant,
other than such changes as are specifically prescribed by this Agreement as
originally executed or are made in compliance with applicable law.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed by means of first class registered or certified
mail, postage prepaid as follows: if to the Registered Holder of a Warrant
Certificate, at the address of such holder as shown on the registry books
maintained by the Warrant Agent; and if to the Company, at 620 Memorial Drive,
Cambridge, Massachusetts, 02139, or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; if to the Warrant
Agent, at its Corporate Office, Attention: Relationship Manager.
-18-
<PAGE>
SECTION 18. Restrictions on Change of Control. Notwithstanding
anything to the contrary contained in this Agreement, without the prior written
consent of the Company, so long as any 9% Notes remain outstanding under that
certain Indenture dated as of March 26, 1997 (as amended, the "Indenture") in
respect of the 9% Notes, no holder of Class A Warrants shall be entitled to
exercise such Class A Warrants to the extent such exercise could, in the
Company's reasonable judgment, either alone or in conjunction with other
issuances or holdings of capital stock, other warrants or convertible securities
of the Company, result in a Change of Control (as defined in the Indenture).
SECTION 19. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without
reference to principles of conflict of laws.
SECTION 20. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended nor shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 21. Termination. This Agreement shall terminate at the close
of business on the Warrant Expiration Date of all the Class A Warrants or such
earlier date upon which all Class A Warrants have been exercised or redeemed,
except that the Warrant Agent shall account to the Company for cash held by it
and Section 15 shall survive such termination.
SECTION 22. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
HYBRIDON, INC.
By:
---------------------------
Authorized Officer
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Warrant Agent
By:
---------------------------
Authorized Officer
-20-
<PAGE>
EXHIBIT A
[FORM OF FACE OF CLASS A WARRANT CERTIFICATE]
THE TERMS OF THIS WARRANT ARE SUBJECT TO THE TERMS OF A WARRANT AGREEMENT, A
COPY OF WHICH IS AVAILABLE FROM HYBRIDON, INC. (THE "COMPANY"). THE SECURITIES
REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE SECURITIES ACT OR AN
EXEMPTION FROM THE SECURITIES ACT. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND THE LAWS OF OTHER
APPLICABLE JURISDICTIONS.
No. __ _______________ Class A Warrants
VOID AFTER __________________, 2003
CLASS A WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
HYBRIDON, INC.
This certifies that FOR VALUE RECEIVED
- --------------------------------------------------------------------------------
____________________________ or registered assigns (the "Registered Holder") is
the owner of the number of Class A Warrants ("Class A Warrants") specified
above. Each Class A Warrant represented hereby initially entitles the Registered
Holder to purchase, subject to the terms and conditions set forth in this
Warrant Certificate and the Warrant Agreement (as hereinafter defined), one
fully paid and nonassessable share of Common Stock, par value $.001 per share
("Common Stock"), of Hybridon, Inc., a Delaware corporation (the "Company"), at
any time between _______________, 1999, and the Expiration Date (as hereinafter
defined), upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of ChaseMellon Shareholder Services, L.L.C., as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of the Purchase Price
(as defined in the Warrant Agreement) in lawful money of the United States of
America in cash or by official bank or certified check made payable to the
Company.
This Warrant Certificate and each Class A Warrant represented hereby
are issued pursuant to, and are subject in all respects to, the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
________ _____, 1998, by and among the Company and the Warrant Agent.
<PAGE>
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price and/or the number of shares of Common Stock
subject to purchase upon the exercise of each Class A Warrant represented hereby
are subject to modification or adjustment. Furthermore, this Warrant may not be
exercised in certain circumstances described in Section 18 of the Warrant
Agreement.
Each Class A Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Common Stock will be
issued. In the case of the exercise of fewer than every Class A Warrant
represented hereby, the Company shall cancel this Warrant Certificate upon the
surrender hereof and shall execute and deliver a new Warrant Certificate or
Warrant Certificates of like tenor, which the Warrant Agent shall countersign,
for the balance of such Class A Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on
____________, 2003, or such earlier date as the Class A Warrants shall be
redeemed. If such date shall in the State of New York be a holiday or a day on
which banks are authorized to close, then the Expiration Date shall mean 5:00
P.M. (New York time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized to close. Upon notice to
all Registered Holders of the Class A Warrants, the Company shall have the right
to extend the Expiration Date.
The Class A Warrants represented hereby shall not be exercisable in
any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Class A Warrants, each of such new Warrant Certificates to
represent such number of Class A Warrants as shall be designated by such
Registered Holder at the time of such surrender. Upon due presentment with any
applicable transfer fee per certificate in addition to any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Class A
Warrants will be issued to the transferee in exchange therefor, subject to the
limitations provided in the Warrant Agreement.
The Registered Holder shall not be entitled to any rights of a
stockholder of the Company in respect of any unexercised Class A Warrants held
by such Registered Holder, including, without limitation, the right to vote or
to receive dividends or other distributions, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided in the
Warrant Agreement.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Class A Warrant represented hereby
(notwithstanding any notations of ownership or writing hereon made by anyone
other than a duly authorized officer of the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
-2-
<PAGE>
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile, by two of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
HYBRIDON, INC.
Dated: By:
--------------------------- --------------------------------------
By:
--------------------------------------
[seal]
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
as Warrant Agent
By:
-----------------------------------
Authorized Officer
-3-
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $___________ PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Class A Warrants
The undersigned Registered Holder hereby irrevocably elects to
exercise _________ Class A Warrants represented by this Warrant Certificate, and
to purchase the securities issuable upon the exercise of such Class A Warrants,
and requests that certificates for such securities shall be issued in the name
of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
[please print or type name and address]
and be delivered to
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
[please print or type name and address]
and if such number of Class A Warrants shall not be all the Class A Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Class A Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.
-4-
<PAGE>
The undersigned represents that the exercise of the within Class A Warrant was
solicited by a member of the National Association of Securities Dealers, Inc. If
not solicited by an NASD member, please write "unsolicited" in the space below.
---------------------------------------
(Name of NASD Member)
Dated: X
----------------------- -------------------------------------
-------------------------------------
-------------------------------------
Address
-------------------------------------
Taxpayer Identification Number
-------------------------------------
Signature Guaranteed
-------------------------------------
-5-
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Class A Warrants
FOR VALUE RECEIVED, _______________________________________________ hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
[please print or type name and address]
________________________________ of the Class A Warrants represented by this
Warrant Certificate, and hereby irrevocably constitutes and appoints
______________________________
- --------------------------------------------------------------------------------
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated: X
----------------------- -------------------------------------
Signature Guaranteed
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM.
-6-
<PAGE>
ANNEX C
As filed with the Securities and Exchange Commission on February 24, 1998
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 9, 1998
0-27352
(Commission File Number)
------------------------------
HYBRIDON, INC.
(Exact name of registrant as specified in its charter)
Delaware 3072298
(State of Incorporation) (IRS Employer
Identification Number)
620 Memorial Drive, Cambridge, Massachusetts 02139
(Address of registrant's principal executive office)
(617) 528-7000
(Registrant's telephone number)
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<PAGE>
ITEM 9. Sales of Equity Securities Pursuant to Regulation S
On February 9, 1998, as part of a private placement (the "Offering"),
Hybridon, Inc. (the "Company") sold $2,384,000 in principal amount of Notes due
2007 (the "Offering Notes"), and warrants (the "Warrants") to purchase common
stock, par value $.001 per share, of the Company, pursuant to the terms of the
Offering described in its Current Report on Form 8-K, and the press release
filed as an exhibit thereto, dated January 22, 1998 (the "January 22, 1998
8-K"). The Offering Notes were issued at face value in offshore transactions
pursuant to Regulation S promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The purchasers of the Offering Notes were
accredited investors (as defined in Regulation D promulgated under the
Securities Act).
The terms of conversion of the Offering Notes and the terms of the
Warrants are described in the January 22, 1998 8-K.
The net proceeds to the Company from the Offering are presently
intended to be used for general corporate purposes, primarily research and
product development activities, including costs of preparing Investigational New
Drug applications and conducting preclinical studies and clinical trials, the
payment of payroll and other accounts payable and for debt service required
under the Company's debt obligations.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HYBRIDON, INC.
By: /s/ E. ANDREWS GRINSTEAD, III
------------------------------------------
Name: E. Andrews Grinstead, III
Title: Chairman of the Board, President and
Chief Executive Officer
Date: February 24, 1998
Exhibit 9(a)(7)
HYBRIDON, INC.
AMENDMENT
TO THE EXCHANGE AGREEMENT AND LETTER OF TRANSMITTAL
TO TENDER AND TO ENTER INTO CERTAIN AGREEMENTS
IN RESPECT OF 9% CONVERTIBLE SUBORDINATED NOTES DUE 2004
OF HYBRIDON PURSUANT TO ITS OFFER TO EXCHANGE
DATED FEBRUARY 6, 1998, AS AMENDED
BY AN AMENDMENT THERETO DATED MARCH 30, 1998
THE OFFER, AS AMENDED, WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
APRIL 10, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). THE OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO 12:00 MIDNIGHT, NEW YORK TIME, ON THE EXPIRATION
DATE.
Hybridon, Inc., a Delaware corporation ("Hybridon"), is hereby
amending the terms of the offer to exchange (the "Offer") with respect to its 9%
Convertible Subordinated Notes due 2004 (the "Notes") set forth in its Offer to
Exchange, dated February 6, 1998 (the "Original Offer to Exchange"). Unless
otherwise provided in this Amendment (this "Amendment") to the Exchange
Agreement and the Letter of Transmittal which was sent together with the
Original Offer to Exchange (the "Original Letter of Transmittal") to the holders
of the Notes or unless the context requires otherwise, the terms of and the
conditions to the Offer contained in the Original Letter of Transmittal and the
Original Offer to Exchange remain unchanged. All capitalized terms used herein
but not defined herein shall have the respective meanings ascribed thereto in
the Original Offer to Exchange, as amended by the accompanying Amendment thereto
dated March 30, 1998 (the "Amendment"; the Original Offer to Exchange, as
amended by the Amendment, being referred to herein as the" Offer to Exchange").
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In the event that the Alternative Consideration is to be issued in
connection with the Offer, any tender of Notes which involves denominations of
less than $1,000 in Exchange Value thereof will be exchanged on a pro rata
basis, except to the extent that such proration would result in the issuance of
a fractional share of Alternative Series A Preferred Stock. In the event that
such fractional share would result, Hybridon shall, at its sole discretion,
either (a) round such fractional share to the nearest whole number of shares
(with 0.5 being rounded up), or (b) pay in cash an amount equal to such fraction
multiplied by $100 (which is the per share stated value of Alternative Series A
Preferred Stock). Hybridon will not issue any fractional shares of Alternative
Series A Preferred Stock in the Offer. In the event that a tendering Noteholder
would otherwise be entitled to receive a fractional Alternative Exchange
Warrant, Hybridon shall round up such fractional Alternative Exchange Warrant to
the nearest whole number of Alternative Exchange Warrants.
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IN ADDITION TO THE ORIGINAL LETTER OF TRANSMITTAL AND OTHER
REQUIRED DOCUMENTS, ALL REGISTERED HOLDERS AND BENEFICIAL OWNERS OF NOTES BEING
TENDERED MUST EXECUTE AND SEND THIS AMENDMENT TO THE DEPOSITARY ON OR PRIOR TO
THE EXPIRATION DATE, REGARDLESS OF WHETHER THEY HAVE HERETOFORE TENDERED THEIR
NOTES PURSUANT TO THE OFFER. ANY TENDER OF NOTES NOT ACCOMPANIED BY THIS
AMENDMENT AND THE ORIGINAL LETTER OF TRANSMITTAL WILL BE DEEMED INVALID. THIS
AMENDMENT MUST BE DELIVERED TO THE DEPOSITARY AT THE ADDRESS OR THE FACSIMILE
NUMBER SHOWN ON THE BACK COVER OF THE ORIGINAL LETTER OF TRANSMITTAL AND IN
ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE ORIGINAL OFFER TO EXCHANGE, AS
AMENDED, AND IN THE ORIGINAL LETTER OF TRANSMITTAL.
<PAGE>
The Original Letter of Transmittal is hereby amended as follows:
(i) In the event that the Alternative Consideration shall be issued
in exchange for the Notes as a result of the consummation of the
Alternative Equity Offering, all references to Series A Preferred
Stock and Exchange Warrants contained in Articles I, II and IV of
the Exchange Agreement portion of the Letter of Transmittal (the
"Exchange Agreement"), and in the instructions forming part of
the Letter of Transmittal, shall be deemed to mean the
Alternative Series A Preferred Stock and the Alternative Exchange
Warrants, respectively.
(ii) Section 2 of Article II of the Exchange Agreement is hereby
amended by inserting the following sentence after the last
sentence thereof:
Notwithstanding anything to the contrary contained in this
Section 2 of Article II, in the event that the Alternative
Consideration is issued in exchange for the Notes as a
result of the consummation of the Alternative Equity
Offering, Hybridon shall use its best efforts to file with
the Commission a Registration Statement pursuant to Rule 415
under the Securities Act no later than the earlier of (i) 60
days following the date on which the Alternative Equity
Offering is consummated and (ii) the date on which any
registration statement under the Securities Act is filed in
respect of the resale of any security sold in the
Alternative Equity Offering.
(iii) Article III of the Exchange Agreement is hereby amended by
replacing in its entirety the existing sentence thereunder with
the following sentence:
For so long as at least 50% of the Series A Preferred Stock
or Alternative Series A Preferred Stock, as the case may be,
initially issued in the Offer remains outstanding, the
holders of such Series A Preferred Stock or such Alternative
Series A Preferred Stock, as the case may be, issued in the
Offer shall be entitled to designate one member for
nomination to the Board of Directors of Hybridon (the
"Designated Director"), provided that such nominee is
reasonably acceptable to Hybridon. The initial Designated
Director shall be Mr. Art Berry (unless the holders of a
majority of the Series A Preferred Stock or the Alternative
Series A Preferred Stock, as the case may be, issued in the
Offer shall instruct otherwise in the space provided in the
Amendment to the Letter of Transmittal, in which case the
person receiving the most votes shall be the initial
Designated Director), to hold office until his successor is
duly elected and qualified or until his earlier resignation
or removal.
(iv) Sections 1 and 2 of Article V of the Exchange Agreement are
hereby amended by replacing the references therein to the
"Restructuring Trigger" with the following:
Restructuring Trigger (in the event that the Original
Consideration is issued in the Offer) or following the
consummation of Alternative Equity Offering (in the event
that the Alternative Consideration is issued in the Offer)
and the reference therein to Series A Preferred Stock shall be
deemed to mean the Alternative Series A Preferred Stock if the
Alternative Consideration is issued in exchange for the Notes as
a result of the consummation of the Alternative Equity Offering.
(v) The reference to Series A Preferred Stock in Section 2 of Article
V of the Exchange Agreement shall be deemed to mean the
Alternative Series A Preferred Stock if the Alternative
Consideration is issued in exchange for the Notes as a result of
the consummation of the Alternative Equity Offering.
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<PAGE>
(vi) Section 3 of Article V of the Exchange Agreement is hereby
amended by inserting the following sentence after the last
sentence thereof:
Notwithstanding anything to the contrary contained in this
Section 3 of Article V, in the event that the Alternative
Equity Offering is consummated, no Reset Warrants shall be
issued by Hybridon to the undersigned.
(vii) In the event that the Alternative Consideration shall be issued
in exchange for the Notes as a result of the consummation of the
Alternative Equity Offering, all references to Series A Preferred
Stock contained in Article V, "Certain Additional Covenants and
Representations of Hybridon," of the Exchange Agreement shall be
deemed to mean the Alternative Series A Preferred Stock.
(viii) In the event that the Alternative Consideration shall be issued
in exchange for the Notes as a result of the consummation of the
Alternative Equity Offering, all references to Series A Preferred
Stock contained in Article VI of the Exchange Agreement shall be
deemed to mean the Alternative Series A Preferred Stock issued in
the Offer as part of the Alternative Consideration and any
Alternative Series A Preferred Stock declared and issued as a
dividend on such Alternative Series A Preferred Stock issued in
the Offer.
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<PAGE>
This Amendment will become effective and binding on the undersigned and
Hybridon at such time that Hybridon accepts for exchange any of the Exchange
Value of the Notes tendered by the undersigned.
PLEASE SIGN AND COMPLETE BELOW
TO BE COMPLETED WHERE APPROPRIATE BY ALL HOLDERS TENDERING NOTES
(WHETHER OR NOT NOTES ARE BEING PHYSICALLY
TENDERED)
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ONLY REGISTERED NOTEHOLDER(S) SHOULD PROVIDE THIS INFORMATION AND SIGN
HERE. (BENEFICIAL OWNERS SHOULD COMPLETE THE INFORMATION REQUESTED ON,
AND SIGN, THE LAST PAGE HEREOF):
I have read this Amendment to the Exchange Agreement and Letter of
Transmittal and agree to be bound by the foregoing.
I hereby certify that, to the best of my knowledge, the Notes being
tendered are beneficially owned by: ____________________________________________
(if beneficially owned by more than one person, I have indicated in parenthesis
the principal amount owned by each such person.)
x___________________________________________________
Signature(s) of Registered Noteholder(s) or Authorized Signatory
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Type or Print Name
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Type or Print Address(es)
----------------------------------------------------
Capacity (Full Title)
Dated:_______________, 1998
Area Code and telephone No(s).:____________________________
Tax Identification or Social Security No(s).:_________________________
Must be signed by the registered Noteholder(s) exactly as the name(s)
appear(s) on the certificate and by person(s) authorized to become registered
Noteholder(s) as evidenced by endorsements and documents. See Instruction 4 to
the Original Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, agent, or
other person acting in a fiduciary or representative capacity, please see
Instruction 4 to the Original Letter of Transmittal.
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<PAGE>
BENEFICIAL OWNER(S) OF THE NOTES BEING TENDERED (INCLUDING ANY REGISTERED
NOTEHOLDER(S) WHO ARE ALSO BENEFICIAL OWNER(S)) MUST CAREFULLY READ THE
FOLLOWING AND COMPLETE AND SIGN BELOW:
I have read this Amendment to the Exchange Agreement and Letter of
Transmittal carefully and agree to be bound by each covenant contained in the
Original Letter of Transmittal, as amended by this Amendment.
I (hereinafter referred to as "Holder") hereby acknowledge and
represent and warrant to Hybridon as follows:
A. Investment Representations
a. Investment Intent. The Holder recognizes that the tender of Notes in
exchange for Series A Preferred Stock and Exchange Warrants (in the event that
the Original Consideration shall be issued in the Offer) or the Alternative
Series A Preferred Stock and the Alternative Exchange Warrants (in the event
that the Alternative Consideration shall be issued in the Offer) and the
Hybridon Common Stock underlying the foregoing securities (the foregoing
securities are hereinafter collectively referred to as the "Exchange
Securities") involves a high degree of risk including, but not limited to, the
following: (i) Hybridon remains a development stage business with limited
operating history and requires substantial additional funds; (ii) an investment
in Hybridon is highly speculative, and only investors who can afford the loss of
their entire investment should consider tendering their Notes in exchange for
the Exchange Securities; (iii) the Holder may not be able to liquidate his
Exchange Securities received in the Offer; (iv) transferability of the Exchange
Securities received in the Offer is extremely limited; (v) in the event of a
disposition of the Exchange Securities received in the Offer such Holder could
sustain the loss of his entire investment and (vi) Hybridon has not paid any
dividends since inception and does not anticipate the payment of dividends on
the Hybridon Common Stock or the Series A Preferred Stock or the Alternative
Series A Preferred Stock (except as required in the applicable Certificate of
Designation) in the foreseeable future.
b. Lack of Liquidity. The Holder confirms that he or it is able (i) to
bear the economic risk of this investment, (ii) to hold the Exchange Securities
received in the Offer for an indefinite period of time, and (iii) presently to
afford a complete loss of the investment; and represents that he or it has
sufficient liquid assets so that the illiquidity associated with this investment
will not cause any undue financial difficulties or affect such Holder's ability
to provide for his or its current needs and possible financial contingencies,
and that his or its commitment to all speculative investments is reasonable in
relation to his or its net worth and annual income. Furthermore, each Holder
acknowledges that the Series A Preferred Stock and the Alternative Series A
Preferred Stock each contains certain applicable restrictions on exercise,
voting, conversion and certain other rights, as more particularly set forth in
the applicable Certificate of Designation.
c. Knowledge and Experience. Such Holder has prior investment
experience, including investment in securities that are non-listed, unregistered
and are not traded on the Nasdaq National or SmallCap Market, nor on the
National Association of Securities Dealers, Inc.'s (the "NASD") automated
quotation system, or such Holder has employed at its own expense the services of
an investment advisor, attorney and/or accountant to request documents from
Hybridon pursuant to Section [e.] hereof and to read all of the documents
furnished or made available by Hybridon to such Holder and to evaluate the
investment, tax and legal merits and the consequences and risks of such a
transaction on such Holder's behalf, that such Holder or such professional
advisor has such knowledge and experience in financial and business matters that
such Holder or such professional advisor is capable of evaluating the merits and
risks of the prospective investment and that such professional advisor, if any,
satisfies the conditions set out in Rule 501(h) under the Securities Act.
d. Holder Capacity. Either by reason of such Holder's business or
financial experience, or the business or financial experience of such Holder's
professional advisors (who are unaffiliated with, and
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<PAGE>
who are not compensated by, Hybridon or any affiliate or selling or placement
agent of Hybridon, directly or indirectly), such Holder has the capacity to
protect such Holder's own interests in connection with the transaction
contemplated hereby.
e. Offer to Exchange. Such Holder hereby acknowledges receipt and
careful review of the Offer to Exchange of Hybridon, as supplemented and
amended, and the annexes and exhibits thereto, all of which constitute an
integral part thereof, including, without limitation, the information contained
in all material concerning Hybridon provided to the registered holders of the
Notes in connection with the Offer and hereby represents that such Holder has
been furnished by Hybridon with all information regarding Hybridon which such
Holder or its representative has requested or desired to know, has been afforded
the opportunity to ask questions of, and to receive answers from, duly
authorized officers or other representatives of Hybridon concerning the terms
and conditions of the Offer and the Exchange Securities and the affairs of
Hybridon and has received any additional information which such Holder or its
representative has requested.
f. Reliance on Information. Such Holder has relied solely upon the
information provided by Hybridon in the Offer to Exchange in making the decision
to tender the Notes. To the extent necessary, each Holder has retained, at the
sole expense of such Holder, and relied upon, appropriate professional advice
regarding the investment, tax and legal merits and consequences of the Offer and
its tender of Notes in exchange for the Exchange Securities.
g. Registration. Such Holder hereby acknowledges that the Offer has not
been reviewed by the Securities and Exchange Commission or any state regulatory
authority, since the Offer is intended to be exempt from the registration
requirements of the Securities Act. No Holder shall sell or otherwise transfer
the Exchange Securities unless such securities are registered under the
Securities Act or unless an exemption from such registration is available.
h. Purchase for own Account. Such Holder understands that none of the
Exchange Securities have been registered under the Securities Act by reason of a
claimed exemption under the provisions of the Securities Act which depends, in
part, upon such Holder's investment intention. In this connection, such Holder
hereby represents that such Holder is tendering Notes in exchange for Exchange
Securities for such Holder's own account, for investment and not with a view
toward the resale or distribution to others, or for resale in connection with,
any distribution or public offering (within the meaning of the Securities Act),
nor with any present intention of distributing or selling the same and such
Holder has no present or contemplated agreement, undertaking, arrangement,
obligation or commitment providing for the disposition thereof. Such Holder, if
an entity, was not formed for the purpose of acquiring the Notes or the Exchange
Securities.
i. Holding Period. Such Holder understands that there is no public
market for the preferred stock or warrants included in the Exchange Securities
and that no market is expected to develop for any such Exchange Securities. Such
Holder understands that even if a public market develops for such Exchange
Securities, reliance upon Rule 144 under the Securities Act for resales
requires, among other conditions, a one-year holding period prior to the resale
(in limited amounts) of securities acquired in a non-public offering without
having to satisfy the registration requirements under the Securities Act. Such
Holder shall hold Hybridon and its directors, officers, employees, controlling
persons and agents and their respective heirs, representatives, successors and
assigns harmless from, and shall indemnify them against, all liabilities, costs
and expenses incurred by them as a result of (i) any misrepresentation made by
such Holder contained in this Amendment, (ii) any sale or distribution by such
Holder in violation of the Securities Act or any applicable non-United States,
state securities or "blue sky" laws or (iii) any untrue statement made by such
Holder.
j. Legends. Such Holder consents to the placement of one or more
restrictive legends on any certificates representing the Exchange Securities
required by applicable securities laws. Such Holder is aware that Hybridon will
make a notation in its appropriate records with respect to the restrictions on
the transferability of such Exchange Securities.
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<PAGE>
k. Financial Review. Such Holder understands that Hybridon will review
this Amendment and is hereby given authority by the undersigned Holder to call
such Holder's bank or place of employment or otherwise review the financial
standing of such Holder; and it is further agreed that Hybridon reserves the
unrestricted right, without further documentation or agreement on the part of
such Holder, to reject or limit any tender of Notes.
l. Residence of Holder. Such Holder hereby represents that the address
of such Holder furnished set forth below is such Holder's principal residence if
such Holder is an individual or its principal business address if it is a
corporation or other entity.
m. NASD. Such Holder acknowledges that if he or she is a registered
representative of an NASD member firm, he or she must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm in the appropriate space provided below.
n. Securities Laws. Such Holder acknowledges that at such time, if
ever, as the Exchange Securities are registered, sales of such Exchange
Securities will be subject to applicable United States and state securities
Laws.
o. Beneficial Owner. Such Holder, whose name appears on the signature
line below, is the beneficial owner of the Notes being tendered, and will be the
beneficial owner of the Exchange Securities that such Holder acquires pursuant
to the Offer.
p. Accredited Investor. Such Holder represents that it has indicated in
Section B below whether or not it is an "accredited investor" as such term is
defined in Rule 501 of Regulation D.
q. Reliance on Representation and Warranties. Such Holder understands
that the Exchange Securities are being offered and sold to the undersigned in
reliance on specific exemptions from the registration requirements of United
States Federal and state securities laws and that Hybridon is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the undersigned set forth herein in order
to determine the applicability of such exemptions and the suitability of the
undersigned to acquire the Exchange Securities pursuant to the Offer.
B. Confidential Questionnaire
a. The undersigned represents and warrants that he, she or it comes
within one category marked below, and that for any category marked, he, she or
it has truthfully set forth where applicable the factual basis or reason that
he, she or it comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to furnish
any additional information which Hybridon deems necessary in order to verify the
answers set forth below.
Category A:____ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint net
worth with his or her spouse, presently exceeds $1,000,000.
Explanation. In calculating net
worth you may include equity in
personal property and real estate,
including your principal residence,
cash, short-term investments, stock
and securities. Equity in personal
property and real estate should be
based on the fair market value of
such property less debt secured by
such property.
Category B:____ The undersigned is an individual (not a partnership,
corporation, etc.) who had an individual income in excess of
$200,000 in each of the two most recent years, or joint income
with his or her spouse in excess of $300,000 in each of those
years (in each
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<PAGE>
case including foreign income, tax exempt income and full
amount of capital gains and losses but excluding any income of
other family members and any unrealized capital appreciation)
and has a reasonable expectation of reaching the same income
level in the current year.
Category C:____ The undersigned is a director or executive officer of
Hybridon.
Category D:____ The undersigned is a bank; a savings and loan association;
insurance company; registered investment company; registered
business development company; licensed small business
investment company ("SBIC"); or employee benefit plan within
the meaning of Title 1 of Employee Retirement Income
Security Act of 1974, as amended (the "ERISA") and (a) the
investment decision is made by a plan fiduciary which is
either a bank, savings and loan association, insurance
company or registered invest- ment advisor, or (b) the plan
has total assets in excess of $5,000,000 or is a self
directed plan with investment decisions made solely by
persons that are accredited investors.
Category E:____ The undersigned is a private business development
company as defined in section 202(a)(22) of the Investment
Advisors Act of 1940.
Category F:____ The undersigned is either a corporation, partnership,
business trust, or non-profit organization within the meaning
of Section 501(c)(3) of the Internal Revenue Code, in each
case not formed for the specific purpose of acquiring the
Notes or the Exchange Securities, and with total assets in
excess of $5,000,000.
Category G:____ The undersigned is a trust with total assets in excess
of $5,000,000, not formed for the specific purpose of
acquiring the Notes or the Exchange Securities, where its
investment decisions are directed by a "sophisticated person"
as defined in Regulation 506(b)(2)(ii) under the Securities
Act.
Category H:____ The undersigned is an entity (other than a trust), all
the equity owners of which are "accredited investors" within
one or more of the above categories. If relying upon this
category alone, each such equity owner must complete a
separate copy of this Amendment.
Category I:____ The undersigned is not within any of the categories above and
is therefore not an accredited investor.
The undersigned agrees that the undersigned will notify Hybridon immediately in
the event that the representations and warranties in this Amendment shall cease
to be true, accurate and complete.
b. NASD Affiliation.
Are you affiliated or associated with an NASD member firm (please check one):
Yes _________ No __________
If Yes, please describe:
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<PAGE>
*If Holder is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice
required by Article 3, Sections 28(a) and (b) of the Rules of Fair
Practice.
---------------------------------
Name of NASD Member Firm
By: ______________________________
Authorized Officer
Date: ____________________________
c. Reliance on Confidential Investor Questionnaire. The
undersigned is informed of the significance to Hybridon of the foregoing
representations and answers contained in the Confidential Questionnaire
contained above and such answers have been provided under the assumption that
Hybridon will rely on them in the Offer.
I hereby certify that the record owner of the Notes beneficially owned
by the undersigned is
----------------------------------------------------------------------.
x___________________________________________________
Signature(s) of Beneficial Owner(s) or Authorized Signatory
----------------------------------------------------
Type or Print Name
----------------------------------------------------
----------------------------------------------------
Type or Print Address(es)
----------------------------------------------------
Capacity (Full Title)
Dated:_______________, 1998
Area Code and telephone No(s).:____________________________
Tax Identification or Social Security No(s).:__________________________
See Instruction 4 to the Original Letter of Transmittal. If signature
is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation, agent, or other person acting in a fiduciary or representative
capacity, please see Instruction 4 to the Original Letter of Transmittal.
[ ] I do not wish to appoint Mr. Art Barry as the initial Designated
Director (see clause (iii) above). I wish to appoint _________________.
(Please check the box only if you agree with this statement).
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EXHIBIT 9(g)(3)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Schedule 13E-4 of our report dated February
21, 1997 (except with respect to the matter discussed in Note 1, as to which the
date is March 26, 1997) included in Hybridon's Form 10-K for the year ended
December 31, 1996, and to all references to our Firm included in this Schedule
13E-4.
/s/ ARTHUR ANDERSEN LLP
-----------------------
Boston, Massachusetts
March 27, 1998
