SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
-------
For the Quarter Ended: March 31, 1998 Commission File Number 0-27352
Hybridon, Inc.
(Exact name of registrant as specified in its charter)
Delaware 04-3072298
(State or other jurisdiction of (I.R.S. Employer Identification Number)
organization or incorporation)
620 Memorial Drive
Cambridge, MA 02139
(Address of principal executive offices, including zip code)
(617) 528-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
-- --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.001 per share 5,061,650
--------------------------------------- ------------
Class Outstanding as of April 30, 1998
<PAGE>
HYBRIDON, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF MARCH 31, 1998 AND
DECEMBER 31, 1997.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1997 AND CUMULATIVE FROM MAY 25, 1989
(INCEPTION) TO MARCH 31, 1998
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND 1997, AND CUMULATIVE FROM MAY 25, 1989
(INCEPTION) TO MARCH 31, 1998
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, December 31,
1998 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 439,214 $ 2,202,202
Accounts receivable 521,887 529,702
Prepaid expenses and other current assets 706,869 1,005,825
----------- -----------
Total current assets 1,667,970 3,737,729
- -------- ----------- -----------
PROPERTY AND EQUIPMENT, AT COST:
Leasehold improvements 15,912,192 16,027,734
- --
Laboratory equipment 6,172,583 6,770,402
Equipment under capital leases 4,905,744 4,879,190
Office equipment 1,935,959 1,947,818
Furniture and fixtures 611,060 645,264
Construction-in-progress 45,409 45,409
-----------
29,582,947 30,315,817
Less--Accumulated depreciation and amortization 12,215,553 11,085,013
-----------
17,367,394 19,230,804
-----------
OTHER ASSETS:
Restricted cash 784,618 3,050,982
Notes receivable from officers 250,100 247,250
Deferred financing costs and other assets 3,246,256 3,354,767
Investment in real estate partnership 5,450,000 5,450,000
-----------
9,730,974 12,102,999
$28,766,338 $35,071,532
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Current portion of long-term debt and capital lease obligations $ 5,723,036 $ 7,868,474
Accounts payable 7,572,385 8,051,817
Accrued expenses 12,663,288 11,917,298
-----------
Total current liabilities 25,958,709 27,837,589
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, NET OF CURRENT 3,249,800 3,282,123
-----------
PORTION
9% CONVERTIBLE SUBORDINATED NOTES PAYABLE 50,000,000 50,000,000
-----------
CONVERTIBLE SUBORDINATED NOTES PAYABLE 4,800,000 -
-----------
STOCKHOLDERS' EQUITY(DEFICIT):
Preferred stock, $.01 par value-
Authorized--5,000,000 shares
Issued and outstanding--None - -
Series A convertible preferred stock, $.01 par value-
Authorized--5,000,000 shares
Issued and outstanding--910,717 shares pro forma - -
Common stock, $.001 par value-
Authorized--100,000,000 shares
Issued and outstanding-- 5,059,650 shares at March 31, 1998, and 5,060
December 31, 1997 and 11,659,650 shares pro forma 5,060
Additional paid-in capital 173,129,531 173,695,698
Deficit accumulated during the development stage (227,337,273) (218,655,101)
Deferred compensation (1,039,489) (1,093,837)
------------ ------------
Total stockholders' equity(deficit) (55,242,171) (46,048,180)
- -------- ------------
$28,766,338 $35,071,532
The accompanying notes are an integral part of these consolidated condensed
financial statements.
</TABLE>
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Cumulative
March 31, from May 25,
1989
(Inception) to
March 31,
1998 1997 1998
<S> <C> <C> <C>
REVENUES:
Research and development $ 150,000 $593,900 $ 5,649,263
Product revenue 825,069 348,154 3,782,106
Interest income 17,845 117,412 3,238,584
Royalty and other income - - 110,321
------------- ----------- -----------
992,914 1,059,466 12,780,274
------------- ----------- -----------
OPERATING EXPENSES:
Research and development 6,402,537 11,476,439 171,862,352
General and administrative 1,665,112 3,430,453 49,481,728
Restructuring charge - - 11,020,000
Interest 1,607,437 170,207 7,753,467
------------- ----------- -----------
9,675,086 15,077,099 240,117,547
------------- ----------- -----------
Net loss $ (8,682,172) $(14,017,633) (227,337,273)
============= ============ =============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ ( 1.72) $ ( 2.78)
============= ============
(Note 2)
SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS
PER COMMON SHARE (Note 2) 5,059,650 5,044,946
============= ============ =============
The accompanying notes are an integral part of these consolidated condensed financial statements
</TABLE>
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED Cumulative
MARCH 31, from
May 25,1989
(Inception) to
March 31,
1998 1997 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (8,682,172) $ (14,017,633) $(227,337,273)
Adjustments to reconcile net loss to net cash used in
operating activities-
Depreciation and amortization 1,130,540 1,227,137 12,316,994
Loss on disposal of fixed assets 359,424 - 359,424
Issuance of common stock for services rendered - 146,875 146,875
Compensation on grant of stock options, warrants and 54,348 133,859 8,178,146
restricted stock
Amortization of discount on convertible promissory notes - - 690,157
payable
Amortization of deferred financing costs 217,021 274,800 913,490
Noncash interest on convertible promissory notes payable - - 260,799
Write-down of assets related to restructuring - - 600,000
Changes in operating assets and liabilities-
Accounts receivable 7,815 (163,984) (521,887)
Prepaid and other current assets 298,956 (190,277) (706,869)
Notes receivable from officers (2,850) (2,304) (250,100)
Amounts payable to related parties - - (200,000)
Accounts payable and accrued expenses 266,558 2,376,928 20,235,673
-------------- --------------- -------------
Net cash used in operating activities (6,350,360) (10,214,599) (185,314,571)
-------------- --------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in short-term investments - 3,785,146 -
Purchases of property and equipment, net - (3,831,655) (29,312,465)
Proceeds from sale of fixed assets 400,000 - 400,000
Investment in real estate partnership - - (5,450,000)
-------------- --------------- -------------
Net cash provided by (used in) investing 400,000 (46,509) (34,362,465)
activities -------------- --------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible preferred stock - - 96,584,154
Proceeds from issuance of common stock related to stock - 47,203 1,260,928
options and restricted stock grants
Proceeds from issuance of common stock related to stock - - 3,185,816
warrants
Net proceeds from issuance of common stock - - 52,355,324
Repurchase of common stock - - (263)
<PAGE>
Proceeds from notes payable - - 9,450,000
Proceeds from issuance of convertible promissory notes 4,233,833 - 63,425,577
payable
Proceeds from long-term debt - - 662,107
Payments on long-term debt and capital leases (2,204,315) (375,874) (5,570,195)
Proceeds from sale/leaseback - 4,001,018
Decrease (increase) in restricted cash and other assets 2,157,854 445,919 (1,981,277)
(Increase) decrease in deferred financing costs - - (3,256,939)
activities -------------- --------------- -------------
Net cash provided by (used in) financing 4,187,372 117,248 220,116,250
activities -------------- --------------- -------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,762,988) (10,143,860) 439,214
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,202,202 12,633,742 -
activities -------------- --------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 439,214 $ 2,489,882 $ 439,214
============== =============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 358,680 $ 170,207 $ 3,989,130
============== =============== ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION
Hybridon, Inc. (the Company) was incorporated in the State of Delaware on
May 25, 1989. The Company is engaged in the discovery and development of
novel genetic medicines based primarily on antisense technology. The
Company is in the development stage. Since inception, the Company has been
engaged primarily in research and development efforts, development of its
manufacturing capabilities and organizational efforts, including
recruiting of scientific and management personnel and raising capital. To
date, the Company has not received revenue from the sale of
biopharmaceutical products developed by it based on antisense technology.
In order to commercialize its own products, the Company will need to
address a number of technological challenges and comply with comprehensive
regulatory requirements. Accordingly, it is not possible to predict the
amount of funds that will be required or the length of time that will pass
before the Company receives revenues from sales of any of these products.
All revenues received by the Company to date have been derived from
collaboration agreements, interest on investment funds and revenues from
the custom contract manufacturing of synthetic DNA and reagent products by
the Company's Hybridon Specialty Products Division. As a result, although
the Company has begun to generate revenues from its contract manufacturing
business, the Company is dependent on the proceeds from possible future
sales of equity securities, debt financings and research and development
collaborations in order to fund future operations.
On January 22, 1998, the Company commenced a private offering of
convertible subordinated notes payable and warrants to purchase common
stock. The Company had issued $4.8 million of such notes as of March 31,
1998. On May 5, 1998, the Company completed the private offering raising
total gross proceeds of approximately $27.3 million for the issuance of
approximately 10,195,000 shares of common stock, including shares issued
in lieu of cash fees to a placement agent unaffiliated with the Company
and its directors, 114,300 shares of Series A convertible preferred stock
and warrants to purchase approximately 3,800,000 shares of common stock at
$2.40 per share, including warrants issued to a placement agent
unaffiliated with the Company and its directors. The gross proceeds
include the conversion of the $4.8 million of convertible subordinated
notes payable outstanding at March 31, 1998 and the conversion of
approximately $6.7 million of accounts payable, capital lease and other
obligations outstanding at March 31, 1998. The Company incurred
approximately $1.0 million of out of pocket expenses related to the
private offering. The compensation arrangement with Pillar, a Company
affiliated with certain directors of the Company, with respect to the
offshore component of the private offering (Offshore Offering) has not
been finalized by the Company's Board of Directors. However, Pillar is
expected to receive fees consisting of (i) 9% of the gross proceeds of
such Offshore Offering and (ii) a non-accountable expense allowance equal
to 4% of such gross proceeds. Pillar has received approximately $1.6
million pursuant to these arrangements as of May 5, 1998. Pillar is also
expected to receive warrants to purchase approximately 1,112,000 shares of
common stock at $2.40 per share.
On February 6, 1998, the Company commenced an exchange offer to the
holders of the 9% Notes to exchange the 9% Notes for Series A convertible
preferred stock and certain warrants of the
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
Company. In the exchange offer, each $1,000 of principal amount and
accrued but unpaid interest on the 9% Notes may be exchanged, upon terms
and subject to the conditions set forth in the Exchange Offer documents,
for 10 shares of Series A convertible preferred stock, stated value $100
per share, and warrants to purchase 25% of the number of shares of common
stock into which such Series A convertible preferred stock would be
convertible. On May 5, 1998, approximately $48.6 million principal amount
of the 9% Notes and approximately $2,355,000 of accrued interest on the 9%
Notes was tendered to the Company to be exchanged for approximately
510,000 shares of Series A convertible preferred stock and warrants to
purchase approximately 3,000,000 shares of common stock at $4.25 per
share.
(2) UNAUDITED INTERIM FINANCIAL STATEMENTS
The unaudited consolidated condensed financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission and include, in
the opinion of management, all adjustments, consisting of normal,
recurring adjustments, necessary for a fair presentation of interim period
results. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes, however, that its disclosures
are adequate to make the information presented not misleading. The results
for the interim periods presented are not necessarily indicative of
results to be expected for the full fiscal year. It is suggested that
these financial statements be read in conjunction with the audited
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
as filed with the Securities and Exchange Commission.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Net Loss per Common Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per
Share which establishes new standards for calculating and presenting
earnings per share. This standard is effective for financial statements
for periods ending after December 15, 1997. These condensed financial
statements have been prepared and based on the new standard. Basic net
loss per share is computed by dividing net loss by the weighted average
number of common shares outstanding during the period. Diluted net loss
per share for the periods presented is the same as basic net loss per
share as the inclusion of the potential common stock equivalents would be
antidilutive.
(4) CASH EQUIVALENTS
The Company applies SFAS No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Under SFAS No. 115, debt securities that the
Company has the positive intent and
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
ability to hold to maturity are recorded at amortized cost and are
classified as held-to-maturity securities. These securities include cash
equivalents and restricted cash. Cash equivalents have original maturities
of less than three months. Cash and cash equivalents at March 31, 1998 and
December 31, 1997
consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, December 31,
1998 1997
<S> <C> <C>
Cash and cash equivalents-
Cash and money market funds $ 155,383 $ 1,702,272
Corporate bond 283,831 499,930
----------------- -----------------
$ 439,214 $ 2,202,202
================= =================
Restricted cash-
Certificates of deposit $ - $ 2,016,364
Savings account 784,618 1,034,618
----------------- -----------------
$ 784,618 $ 3,050,982
================= =================
</TABLE>
(5) 9.0% CONVERTIBLE SUBORDINATED NOTES
On April 2, 1997, the Company issued $50,000,000 of the 9% Notes. As
discussed in Note 1, on May 5, 1998 noteholders holding $48.6 million of
principal value of the 9% Notes tendered such notes and approximately
$2,355,000 of accrued interest in exchange for Series A convertible
preferred stock and warrants to purchase common stock. As of May 5, 1998,
there was $1.4 million principal amount of 9% Notes outstanding. Under the
terms of the 9% Notes, the Company must make semi-annual interest payments
on the outstanding principal balance through the maturity date of April 1,
2004. If the 9% Notes are converted prior to April 1, 2000, the
Noteholders are entitled to receive accrued interest from the date of the
most recent interest payment through the conversion date. The 9% Notes are
subordinate to substantially all of the Company's existing indebtedness.
The 9% Notes are convertible at any time prior to the maturity date at a
conversion price equal to $35.0625 per share, subject to adjustment under
certain circumstances, as defined.
Beginning April 1, 2000, the Company may redeem the 9% Notes at its option
for a 4.5% premium over the original issuance price, provided that from
April 1, 2000 to March 31, 2001, the 9% Notes may not be redeemed unless
the closing price of the common stock equals or exceeds 150% of the
conversion price for a period of at least 20 out of 30 consecutive trading
days and the 9% Notes redeemed within 60 days after such trading period.
The premium decreases by 1.5% each year
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
through March 31, 2003. Upon a change of control of the Company, as
defined, the Company will be required to offer to repurchase the 9% Notes
at 150% of the original issuance price.
(6) NEW ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 requires disclosure of all components
of comprehensive income on an annual and interim basis. Comprehensive
income is defined as the change in equity of a business enterprise during
a period from transactions and other events and circumstances from
non-owner sources. The Company's total comprehensive loss for the three
month periods ended March 31, 1998 and 1997 were the same as reported net
loss for those periods.
In July 1997, the FASB issued SFAS No. 131, Disclosures About Segments of
an Enterprise and Related Information. SFAS No. 131 requires certain
financial and supplementary information to be disclosed on an annual and
interim basis for each reportable segment of an enterprise. SFAS No. 131
is effective for fiscal years beginning after December 15, 1997. Unless
impracticable, companies would be required to restate prior period
information upon adoption.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use. SOP 98-1
requires computer software costs associated with internal use software to
be expensed as incurred until certain capitalization criteria are met. The
Company will adopt SOP 98-1 prospectively beginning January 1, 1999.
Adoption of this statement will not have a material impact on the
Company's consolidated financial position or results of operations.
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of
Start-Up Activities. SOP 98- 5 requires all costs associated with
pre-opening, pre-operating and organization activities to be expensed as
incurred. The Company will adopt SOP 98-5 beginning January 1, 1999.
Adoption of this Statement will not have a material impact on the
Company's consolidated financial position or results of operations.
(7) RESTRUCTURING
Beginning in July 1997, the Company implemented a restructuring plan to
reduce expenditures on a phased basis over the balance of 1997 in an
effort to conserve its cash resources. As part of this restructuring plan,
in addition to terminating the clinical development of GEM 91, the
Company's first generation antisense drug for the treatment of AIDS and
HIV infection, the Company reduced or suspended selected programs
unrelated to its core advanced chemistry antisense drug development
programs, including its ribozyme program. In connection with the reduction
in programs, the Company has accrued termination fees related to research
contracts and has incurred restructuring charges related to programs that
have been suspended or canceled. As part of the restructuring, all outside
testing, public relations, travel and entertainment and consulting
arrangements were reviewed and where appropriate the terms were
renegotiated, contracts canceled or the terms were
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
significantly reduced. In addition, the Company terminated the employment
of 84 employees at its Cambridge and Milford, Massachusetts facilities
since July of 1997 and substantially reduced operations at its Paris,
France office and terminated 10 employees at that location in August 1997.
In connection with the restructuring the Company entered into two
different subleasing arrangements. The Company has subleased one facility
in Cambridge, Massachusetts, and a portion of its headquarters located at
620 Memorial Drive, Cambridge, Massachusetts. The Company incurred
expenses relating to these subleases for broker fees and renovation
expenses incurred in preparing the Memorial Drive space for the new
tenant. In addition, the Company accrued the estimated lease loss of
subleasing 620 Memorial Drive. The Company accrued the remaining lease
costs of its Paris, France office prior to terminating the lease effective
March 31, 1998.
The total cash impact of the restructuring amounted to approximately
$5,165,000. The total cash paid as of March 31, 1998 was approximately
$2,394,000 and the remaining amount will be paid in 1998.
(8) NOTE PAYABLE TO A BANK
In December 1996, the Company entered into a five year $7,500,000 note
payable with a bank. The note contains certain financial covenants that
require the Company to maintain minimum tangible net worth and minimum
liquidity and prohibits the payment of dividends. On April 30, 1998, the
Company received a waiver from the bank for the minimum liquidity and
minimum tangible net worth requirements. The note is payable in 59 equal
installments of $62,500 commencing on February 1, 1997 with a balloon
payment of $3,812,500, due on January 1, 2002. If at specified times the
Company's minimum liquidity is less than $15,000,000, $10,000,000 or
$5,000,000, the Company is required to pledge cash collateral to the bank
equal to 25%, 50% or 100%, respectively, of the then outstanding balance
under the note. During 1997, the Company's minimum liquidity had fallen
below $5,000,000 and the Company deposited $1,758,542 as collateral under
the cash pledge agreement. During 1998, the bank withdrew the full amount
of the restricted cash and applied it against the outstanding balance of
the note. In connection with the waiver issued on April 30, 1998, the
minimum liquidity requirements were amended to provide that if as of the
fifteenth and last day of each calendar month the Company does not have
minimum liquidity of at least $8,000,000 or $4,000,000, as defined, the
Company will be required to immediately repay to the bank 35% and 100%,
respectively, of the then outstanding balance. Also, in connection with
the note, the Company issued five year warrants to purchase 13,000 shares
of common stock at an exercise price of $34.49 per share. These warrants
were fully exercisable at December 31, 1997. As of March 31, 1998,
approximately $5,125,000 was outstanding under the note which is
classified as a current liability in the accompanying March 31, 1998
balance sheet.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company is engaged in the discovery and development of genetic medicines
based on antisense technology. The Company commenced operations in February 1990
and since that time has been engaged primarily in research and development
efforts, development of its manufacturing capabilities and organizational
efforts, including recruitment of scientific and management personnel, and
raising capital. To date, the Company has not received revenue from the sale of
biopharmaceutical products developed by it. In order to commercialize its own
products, the Company will need to address a number of technological challenges
and comply with comprehensive regulatory requirements. Accordingly, it is not
possible to predict the amount of funds that will be required or the length of
time that will pass before the Company receives revenues from sales of any of
these products. All revenues received by the Company to date have been derived
from collaborative agreements, interest on invested funds and revenues from the
custom contract manufacturing of synthetic DNA and reagent products by the
Company's HSP Division.
The Company has incurred cumulative losses from inception through March 31, 1998
of approximately $227.3 million. The Company implemented a restructuring plan in
the second half of 1997 which will significantly reduce the Company's operating
expenses and cost requirements in 1998 from 1997 levels. However, the Company
expects that its research and development expenses will continue to be
significant in 1998 and future years as it pursues its core drug development
programs and expects to continue to incur operating losses and have significant
capital requirements that it will not be able to satisfy with internally
generated funds. The Company continues to explore opportunities to reduce
operating expenses in an effort to conserve its cash resources. The number of
employees has continued to decline, through attrition, resulting in a total of
66 full time employees as of May 5, 1998.
This Quarterly Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes", "anticipates", "plans","expects", "intends",
"may", and other similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements. These factors include the matters set forth under
the heading "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Certain Factors that May Affect Future Results" in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
(the "1997 10-K") which information is incorporated herein by reference.
RESULTS OF OPERATIONS
The Company had total revenues of $993,000 and $1,059,000 in the three months
ended March 31, 1998 and 1997, respectively. Revenues from research and
development collaborations decreased from $594,000 in the first three months of
1997 to $150,000 in the corresponding 1998 period primarily due to the
termination of the Roche collaboration. Revenue from research and development in
the first three months of 1998 consists of revenue from the Company's
collaboration with Searle. During the first quarter of 1998 Searle agreed to
extend their collaboration with the Company until January 2000, and chose a new
target for which the Company has conducted early proof-of-concept studies.
Product revenue from HSP increased from $348,000 in the first quarter of 1997 to
$825,000 in the first quarter of 1998 as a result of an expansion in the
customer base and increasing sales to existing customers of Hybridon Specialty
Products. The decline in interest income during the 1998 quarter is mainly
attributable to lower cash and investments.
The decrease in research and development expenses to $6,403,000 during the first
quarter of 1998 from $11,476,000 in the first quarter of 1997 reflects the
Company's restructuring during the second half of 1997 which included the
termination of the clinical development of GEM 91 and the reduction or
<PAGE>
suspension of selected programs unrelated to the Company's core advanced
chemistry antisense drug development program, including the termination of its
ribozyme program. The restructuring resulted in significant reductions in
employee-related expenses, clinical and outside testing, consulting, materials
and lab expenses. The Company's facility costs were also reduced by the income
received from subleasing its unutilized facilities.
General and administrative expenses decreased to $1,665,000 in the first quarter
of 1998 from $3,430,000 in the first quarter of 1997. This decrease also
resulted primarily from the Company's restructuring program initiated during the
first half of 1997 and its effect on employee-related expenses, consulting, and
net facilities costs.
The increase in interest expense during the first quarter of 1998 is mainly
attributable to the 9% Convertible Subordinated Notes due 2004 ("the 9% Notes")
issued in the second quarter of 1997. The Company's interest expense is expected
to decrease significantly in the future as a result of the conversion of
approximately $48.6 million of the 9% Notes to Series A Convertible Preferred
Stock during the second quarter of 1998.
As a result of the above factors, the Company incurred net losses of $8,682,000
and $14,018,000 during the first quarters of 1998 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1998, the Company's net cash used in
operating activities amounted to $6,350,000. The Company's operating cash
requirements were funded primarily through the utilization of unrestricted cash
balances, the proceeds from the Company's private placement described in the
1997 10-K and the sale of equipment. A portion of the Company's restricted cash
balance was utilized to reduce the related debt and capital lease obligations.
As of May 5, 1998, the Company had raised approximately $27.3 million in private
placement gross proceeds in 1998, including $6.7 million of which was applied to
reduce existing accounts payable and to satisfy lease and other obligations. In
addition, approximately $48.6 million principal amount of its 9% Notes have been
tendered to the Company to be exchanged for equity and warrants The Company
believes that these transactions, together with the committed collaborative
research and development payments from Searle for 1998, certain research and
development funding expected to be received from MethylGene, Inc. and
anticipated product sales by the Company's HSP Division and margins on such
sales, will be adequate to fund the Company's capital requirements through 1998.
See "Item 1. Financial Statements -- Notes to Consolidated Condensed Financial
Statements" for a discussion of the Company's 1998 financing activities.
The Company will be required to raise substantial additional funds through
external sources, including through collaborative relationships and public or
private financings, to support its operations beyond 1998. Except for research
and development funding from Searle (which is subject to early termination in
certain circumstances) and certain research and development funding expected to
be received from MethylGene, Inc., Hybridon has no current external sources of
capital, and, as discussed above, expects no product revenues for at least
several years from sales of products that it is developing (as opposed to sales
of DNA products and reagents manufactured on a custom contract basis by the HSP
Division).
No assurance can be given that additional funds will be available to fund the
Company's operations in future years, or, if available, that such funds will be
available on acceptable terms. If additional funds are raised by issuing equity
securities, further dilution to then existing stockholders will result.
Additionally, the terms of any such additional financing may adversely affect
the holdings or rights of then existing stockholders.
If adequate funds are not available, the Company may be required to further
curtail significantly one or more of its core drug development programs, obtain
funds through arrangements with collaborative
<PAGE>
partners or others that may require the Company to relinquish rights to certain
of its technologies, product candidates or products which the Company would
otherwise pursue on its own or terminate operations.
The Company's future capital requirements will depend on many factors, including
continued scientific progress in its research, drug discovery and development
programs, the magnitude of these programs, progress with preclinical and
clinical trials, sales of DNA products and reagents to third parties by the HSP
Division and the margins on such sales, the time and costs involved in obtaining
regulatory approvals, the costs involved in filing, prosecuting and enforcing
patent claims, competing technological and market developments, the ability of
the Company to establish and maintain collaborative academic and commercial
research, development and marketing relationships, the ability of the Company to
obtain third-party financing for leasehold improvements and other capital
expenditures and the costs of manufacturing scale-up and commercialization
activities and arrangements.
<PAGE>
HYBRIDON, INC.
PART II
OTHER INFORMATION
-------
Items 1-5 None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Certificate of Designation of Series A Convertible Preferred
Stock, par value $.01 per share, dated May 5, 1998.
4.2 Form of 14% Note Due 2007
4.3 Class A Warrant Agreement, dated May 5, 1998
4.4 Class B Warrant Agreement, dated May 5, 1998
4.5 Class C Warrant Agreement, dated May 5, 1998
4.6 Class D Warrant Agreement, dated May 5, 1998
11 Computation of Net Loss Per Common Share.
27 Financial Data Schedule (EDGAR)
99.1 First Amendment to Loan and Security Agreement between
Hybridon, Inc. and Silicon Valley Bank.
(b) The following Current Reports on Form 8-K were filed during the
three months ended March 31, 1998:
1. On January 12, 1998, the Company filed a Current Report on
Form 8-K dated January 12, 1998, reporting that it had commenced a
consent solicitation with respect to certain proposed amendments to the
Indenture, dated as of March 26, 1997 (the "Original Indenture"), by and
between the Company and State Street Bank and Trust Company, as
trustee(the "Trustee"), which governs the Company's 9% Convertible
Subordinated Notes due 2004 (the "9% Notes").
2. On January 15, 1998, the Company filed a Current Report on Form
8-K dated January 15, 1998, reporting that the Company and the Trustee
had entered into a First Supplemental Indenture, dated as of January 13,
1998, which amends the Original Indenture.
3. On January 23, 1998, the Company filed a Current Report on Form
8-K dated January 22, 1998, reporting, among other things, that the
Company had commenced a private offering of units (the "Units"), each
Unit consisting of $100,000 principal amount of Notes due 2007
("Offering Notes") and certain warrants ("Warrants"), to
<PAGE>
overseas investors in accordance with Regulations S under the Securities
Act of 1933 (the "Overseas Offering").
4. On February 2, 1998, the Company filed a Current Report on Form
8-K dated February 2, 1998 reporting that the Company had satisfied the
20 Unit minimum offering threshold for the Overseas Offering.
5. On February 24, 1998, the Company filed a Current Report on Form
8-K dated February 24, 1998, reporting the closing on February 9, 1998
of $2,348,000 of Offering Notes and Warrants pursuant to the terms of
the Overseas Offering.
6. On April 9, 1998, the Company filed a Current Report on Form 8-K
dated April 9, 1998 reporting the closing on March 27, 1998 of $200,000
of Offering Notes and Warrants pursuant to the terms of the Overseas
Offering.
7. On April 27, 1998, the Company filed a Current Report on Form 8-K
dated April 27, 1998, reporting the closing on April 21, 1998 of
$300,000 of Offering Notes and Warrants pursuant to the terms of the
Overseas Offering.
8. On April 28, 1998, the Company filed a Current Report on Form 8-K
dated April 28, 1998, reporting the closing on April 24, 1998 of
$1,020,000 of Offering Notes and Warrants pursuant to the terms of the
Overseas Offering.
9. On May 8, 1998, the Company filed a Current Report on Form
8-K dated May 8, 1998, reporting, inter alia, the closing on May 5, 1998
of approximately 6.6 million shares of Common Stock and 114,300 shares
of Series A Convertible Preferred Stock and that approximately $48.6
million principal amount of its 9% Notes were tendered to the Company to
be exchanged for Series A Preferred Stock.
<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.
May 15, 1998 /s/ E. Andrews Grinstead III
- ------------ ----------------------------
Date E. Andrews Grinstead, III
Chairman, President and Chief Executive
Officer (Principal Executive Officer)
May 15, 1998 /s/ Robert G Andersen
- ------------ ----------------------------
Date Robert G. Andersen
Treasurer (Principal Financial and
Accounting Officer)
<PAGE>
HYBRIDON, INC.
EXHIBIT INDEX
-------
4.1 Certificate of Designation of Series A Convertible Preferred Stock,
par value $.01 per share, dated May 5, 1998.
4.2 Form of 14% Note Due 2007
4.3 Class A Warrant Agreement, dated May 5, 1998
4.4 Class B Warrant Agreement, dated May 5, 1998
4.5 Class C Warrant Agreement, dated May 5, 1998
4.6 Class D Warrant Agreement, dated May 5, 1998
11 Computation of Net Loss Per Common Share.
27 Financial Data Schedule (EDGAR)
99.1 First Amendment to Loan and Security Agreement between Hybridon, Inc.
and Silicon Valley Bank.
<PAGE>
EXHIBIT 4.1
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, as
amended (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 1,500,000 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 1,500,000. 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 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
<PAGE>
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-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
<PAGE>
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.
(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.
<PAGE>
(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 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:
<PAGE>
(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.
(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.
<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 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;
<PAGE>
"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;
"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)
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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 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 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
<PAGE>
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 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.
<PAGE>
(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).
(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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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).
(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
<PAGE>
Offering, 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]
<PAGE>
IN WITNESS WHEREOF, E. Andrews Grinstead, III, President and
Chief Executive Officer of the Corporation, acting for and on behalf of the
Corporation, has hereunto subscribed his name this 5th day of May, 1998.
HYBRIDON, INC.
By: /s/ E. Andrews Grinstead, III
------------------------------------------
Name: E. Andrews Grinstead, III
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT 99.1
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
BETWEEN
HYBRIDON, INC.
AND
SILICON VALLEY BANK
This First Amendment is made, effective as of the 30th day of March,
1998 to that certain Loan and Security Agreement dated as of December 31, 1996
as amended by consent letter agreement (the "Consent Letter") dated January 15,
1998 (as amended, the "Loan Agreement") between Hybridon, Inc., a Delaware
corporation with a principal place of business at 620 Memorial Drive, Cambridge,
Massachusetts (the "Borrower") and Silicon Valley Bank (the "Bank"). Capitalized
terms used, but not defined in this Amendment shall have the meanings ascribed
to them in the Loan Agreement and ancillary documents, instruments and
agreements, in the Consent Letter and ancillary documents, instruments and
agreements, or if not so defined shall have the meanings ascribed to them in the
Uniform Commercial Code, or in the case of financial and accounting terms, in
accordance with generally accepted accounting principles.
RECITALS
Pursuant to the Loan Agreement and on the terms and conditions set forth
therein, on December 31, 1996, the Bank made a secured term loan to the Borrower
in the original face amount of $7,500,000 (the "Loan"). In connection with a
planned offering of Units of investment in the Borrower in January 1998 (the
"Original Offering"), the Borrower requested that the Bank waive or amend the
application of certain covenants contained in the original Loan Agreement, the
Negative Pledge Agreement and certain other and ancillary documents, instruments
and agreements executed and delivered in connection with the Loan Agreement. The
Bank and the Borrower executed the Consent Letter to memorialize such waivers
and amendments. The Borrower has advised the Bank that it wishes to amend the
Original Offering (subject to the occurrence of certain conditions described in
EXHIBIT A hereto) to provide, among other things, for the issuance in the
Amended Offering of common stock, warrants and Series A Preferred Stock only and
not for Senior Subordinated Notes. The Borrower has requested that the Bank
consent to the amendment of the Original Offering on the terms and conditions
set forth in Exhibit A, annexed hereto (the "Amended Offering"), that the Bank
waive certain covenant defaults in the Loan Agreement and that the Bank agree to
amend certain other provisions of the Loan Agreement to accommodate the Amended
Offering. The term "Offering" as used in the Loan Agreement shall include the
Amended Offering or any other equity offering or corporate collaboration not
involving indebtedness of the Borrower.
The Bank is willing to consent to the amendment of the Offering, waive
certain covenant defaults in the Loan Agreement and amend certain other
provisions of the Loan Agreement to accommodate the Amended Offering, but only
upon the terms and conditions set forth in this Amendment.
AGREEMENT
In consideration of the foregoing, and of the undertakings and
obligations of the Borrower and the Bank set forth herein and for other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Borrower and Bank agree as follows:
<PAGE>
1. The Borrower shall pay to the Bank on the date of this Amendment in
good and immediately collectible funds a waiver fee in the amount of
$35,000.
2. The last sentence of Section 6 of the Consent Letter is hereby amended
to provide that the Borrower shall pay to the Bank a monthly
Administrative Fee in the amount of $5,000 which shall be due and
payable in good and immediately collectible funds, on the fifteenth of
each month (or if not a business day, on the next business day) until
the earlier of : (i) full and final payment of the Loan, or (ii) the
receipt by the Borrower of net proceeds in the Offering of at least
$30,000,000.
3. The Borrower acknowledges and agrees that the outstanding balance of
principal and interest on the Loan as of March 31, 1998 is as set
forth in Schedule 3 hereto, and that the Borrower has no claim or
offset which would preclude payment of the full amount of the Loan.
4. The Borrower's Obligations to the Bank under the Loan Agreement, as
amended by the Consent Letter and hereby, are expressly ratified and
confirmed by the Borrower hereby. The Borrower ratifies and confirms
all of the representations and warranties made by it in the Loan
Agreement, except as expressly disclosed to the Bank, and confirms to
the Bank that it is in compliance with the covenants and agreements
contained in the Loan Agreement except for its failure to maintain
compliance with the covenants waived in Sections 7 and 8 of this
Amendment, and except for its failure to comply with Section 6.10(c)
of the Loan Agreement, to the extent that such failure is nevertheless
in compliance with the Intellectual Property Security Agreement (the
"IP Security Agreement") delivered by the Borrower in connection with
the Consent Letter (it being agreed that the provisions of Section
6.10(c) shall be deemed superseded by the analogous provisions of the
IP Security Agreement). To the extent possible, this Amendment shall
be construed to be consistent with the provisions of the Loan
Agreement and Consent Letter; however, to the extent that the
provisions of this Amendment expressly conflict with or contradict the
provisions of the Consent Letter or the Loan Agreement, the provisions
of this Amendment shall be deemed to control.
5. The effective rate of interest to be charged to the Borrower on the
Loan (the "Effective Rate") shall continue to be the sum of the Prime
Rate plus Five (5%) percent per annum. Provided that there has not
occurred and is not continuing an Event of Default, the Effective Rate
will be reduced (i) to the Prime Rate plus Three (3%) percent per
annum as of the first business day of the month after the month in
which less than Fifteen (15%) percent of the Borrower's outstanding
accounts payable are over ninety (90) days past due, (ii) to the Prime
Rate plus Two (2%) percent per annum as of the first business day of
the month after the month in which less than Ten (10%) percent of the
Borrower's outstanding accounts payable are over ninety (90) days past
due, and (iii) to the Prime Rate plus One (1%) percent per annum as of
the first business day of the month after the month in which less than
Five(5%) percent of the Borrower's outstanding accounts payable are
over ninety (90) days past due. The Borrower shall not be entitled to
elect a Libor Rate Loan under the Loan Agreement without the written
consent of the Bank which may be withheld in its sole discretion. For
purposes of computing the above percentages of accounts payable,
credit balances shall be ignored.
6. The following additional reporting requirements of the Borrower are
hereby added to Section 6.3 of the Loan Agreement as subsections (g)
and (h) thereof:
"(g) the Borrower shall report to the Bank on the fifteenth (15th)
and on the last business day of each month (or on the next business
day if either is not a business day) the total of its book balance
of cash(including cash equivalents and marketable securities), and
(h) the
<PAGE>
Borrower shall provide to the Bank on or before thirty (30) days
after the end of each fiscal quarter a listing of all Intellectual
Property owned by it and of all Intellectual Property abandoned or
proposed to be abandoned by it within the next thirty (30) days, and
will fully cooperate with the Bank in, at the Bank's discretion,
amending the Intellectual Property Security Agreement granted to the
Bank or in filing a new Intellectual Property Security Agreement
covering new Intellectual Property in which the Borrower has
acquired any rights."
7. The Bank hereby waives compliance by the Borrower with the Minimum
Tangible Net Worth covenant established in Section 6.8 of the Loan
Agreement for the quarters ended December 31, 1997 and March 31, 1998.
The Bank's agreement to waive this covenant as of the quarter ends set
forth in the preceding sentence does not constitute any agreement by
the Bank to waive such covenant other than for the quarters indicated,
or any other covenant at any time, and shall not be construed to
create a course of dealing with respect to such covenant or any other
covenant. The Bank also waives the requirement of an unqualified
opinion on the Borrower's 1997 fiscal financial statements which would
otherwise be required pursuant to Section 6.3(b) of the Loan
Agreement.
8. The Bank hereby waives compliance by the Borrower with the Minimum
Liquidity covenant established in Section 6.9 of the Loan Agreement
with respect to Borrower's Minimum Liquidity at March 31, 1998. The
Bank's agreement to waive this covenant for the period set forth in
the preceding sentence does not constitute any agreement by the Bank
to waive such covenant other than for the period indicated, or any
other covenant at any time, and shall not be construed to create a
course of dealing with respect to such covenant or any other covenant.
The Minimum Liquidity covenant (as revised hereinafter) shall again be
applicable to the Borrower in respect to Borrower's Minimum Liquidity
at April 30, 1998 and all testing dates thereafter.
9. Section 6.9 of the Loan Agreement and the Consent Letter are hereby
amended to provide that "Minimum Liquidity" shall mean the sum of (i)
Borrower's book balance of cash (including cash equivalents and
marketable securities, but exclusive of the CRLP Withhold), plus (ii)
50% of Borrower's Accounts Receivable, plus (iii) the sum of all
Minimum Liquidity Payments made by the Borrower, including the payment
in the amount of $1,762,825.00 made by the Borrower in January 1998.
"Minimum Liquidity Payments" shall mean all prepayments of the Loan
made by the Borrower as a result of Borrower's failure to meet the
"Minimum Liquidity" required to be maintained by the Borrower pursuant
to Section 6.9 of the Loan Agreement. Section 6.9 of the Loan
Agreement is hereby amended further to provide that, commencing April
30, 1998, compliance with the Minimum Liquidity covenant shall be
tested as of the fifteenth (15th) and as of the last day of each month
(or on the next business day if either is not a business day), and
that if the Borrower fails to maintain Minimum Liquidity at either of
such dates, the Borrower must prepay the Loan by an amount equal to
the applicable percentage (based on the actual Minimum Liquidity
reported) set forth in Section 6.9. Such payment shall be made on the
next business day.
10. At least fifty (50%) of the net proceeds of the Offering and Amended
Offering will be deposited in the Borrower's demand deposit or other
deposit accounts with the Bank, and at least fifty (50%) of the
Borrower's present unencumbered cash will be maintained with the Bank,
all such funds to be used in the Borrower's discretion subject to the
covenants in the Loan Agreement.
11. A new paragraph is hereby added to Section 7.1 of the Loan Agreement
to provide that, provided that there is not a continuing Event of
Default, Fifty (50%) percent of the net cash proceeds of any
dispositions of assets of the Borrower permitted by the Bank (other
than sales of inventory
<PAGE>
and licensing of Intellectual Property in the ordinary course of
Borrower's business and sales of assets permitted by the Bank with net
cash proceeds of less than $5,000 in any instance, or $25,000 in any
fiscal quarter )shall be applied as a prepayment against the most
remote payments due under the Loan, and that the remaining Fifty (50%)
percent of such net proceeds may be used in the Borrower's discretion,
subject to the covenants in the Loan Agreement. After and during the
continuance of an Event of Default, all such payments shall be applied
against the most remote payments due under the Loan. With respect to
Borrower's interest in CRLP, provided that there is not a continuing
Event of Default, Fifty (50%) percent of such net proceeds (estimated
to be $3.4 Million) shall be used by the Borrower to pay past due
accounts payable, with the CRLP Withhold to be deposited in a time
deposit with the Bank and pledged to the Bank as security for the Loan
until the earlier of the time that (i) Borrower has raised net
proceeds of at least $10,000,000 in net proceeds in the Offering, or
(ii) the Termination Date, at which time, provided that there has not
occurred and is not continuing an Event of Default, such amount will
be released to the Borrower to pay past due accounts payable, except
if the Borrower has not raised net proceeds of $10,000,000 in the
Offering by the Termination Date or if there is a continuing Event of
Default at the time that the Borrower has raised $10,000,000 in the
Offering, the CRLP Withhold shall be applied by the Bank to the most
remote payments due under the Loan. The Bank agrees to release its
security interest in the Borrower's interest in CRLP to accommodate a
sale in accordance with this paragraph.
12. The Bank hereby consents to, and waives any Event of Default that
would otherwise arise as a result of, the consummation of the
"Alternative Equity Offering" described in Schedule A (the
"Alternative Equity Offering"), including without limitation, the
compensation to be paid to Pillar Investments, Ltd. referred to
therein. The Bank acknowledges that the Amended Offering does not
constitute a termination or abandonment of the Offering for purposes
of the Loan Agreement, Consent Letter, Intercreditor Agreement and
this Amendment.
13. Section 12.1 is revised to read as follows:
"12.1 Assignments/Participations. This Agreement shall be binding upon
and shall inure to the benefit of Borrower and Bank and their
respective successors and assigns; PROVIDED THAT Borrower may not
assign or transfer any rights or obligations hereunder without Bank's
prior written consent. Bank may at any time pledge all or any portion
of its rights under this Agreement to any of the Federal Reserve Banks
organized under Section 4 of the Federal Reserve Act. No such pledge
or enforcement thereof shall release the Bank from its obligations
under this Agreement. Bank shall also have the right from time to time
without consent of the Borrower to assign all or any portion of its
rights hereunder to one or more banks or financial institutions (an
"Assignee") and Borrower agrees to execute such documents as Bank
shall require to effect such assignment. In addition, at the request
of the Bank and such Assignee, the Borrower shall execute and deliver
one or more new promissory notes in replacement of, but not in
discharge of, the liability evidenced by the promissory note held by
the Bank prior to such assignment and shall reflect the amount of the
respective commitments and loans held by such Assignee and Bank after
giving effect to such assignment. Upon the execution and delivery of
appropriate assignment documentation, amendments and other
documentation required by the Bank in connection with such assignment,
and the payment by the Assignee of the purchase price agreed to by
Bank and such Assignee, such Assignee shall become a party to the Loan
Agreement and shall have all of the rights and obligations of Bank
hereunder and under all related documents to the extent that such
rights and obligations have been assigned by the Bank pursuant to the
assignment documentation between the Bank and such Assignee, and Bank
shall be released from its future obligations hereunder and thereunder
to a corresponding extent."
<PAGE>
14. Section 1 of the Consent letter is hereby amended to change the
reference to the sum of $35,000,000 in clause i) thereof to the sum of
$30,000,000. The Bank acknowledges that the Offset Right shall be as
set forth in the Intercreditor Agreement notwithstanding that the
Amended Offering may be pursued in lieu of the Original Offering.
15. The Bank hereby consents to the deferral by the Borrower of the
Deferred Payments referred to in Section 9 of the Consent Letter,
notwithstanding that the conditions precedent to such deferral
referred to in Section 9 may not have been satisfied.
16. The Borrower further acknowledge that all reasonable out-of-pocket
costs and expenses of the Bank in connection with negotiation,
documentation and administration of this Amendment, including
reasonable fees of attorneys engaged to represent the Bank, shall be
borne by the Borrower.
17. The Borrower acknowledges and confirms that to the extent that the
Borrower may have any claims, offsets, counterclaims, or defenses,
asserted or unasserted, the Borrower, for itself, and on behalf of its
successors, assigns, parents, subsidiaries, agents, affiliates,
predecessors, employees, officers, directors, executors and heirs, as
applicable (collectively, the "Borrower Affiliates") releases and
forever discharges the Bank, its subsidiaries, affiliates, employees,
officers, directors, agents, successors and assigns, both present and
former (collectively, the "Bank Affiliates") of and from any and all
manner of claims, offsets, counterclaims, defenses, action and
actions, cause and causes of action, suits, debts, controversies,
damages, judgments, executions, and demands whatsoever, asserted or
unasserted, in law or in equity, which against the Bank and/or the
Bank Affiliates, they or the Borrower Affiliates ever had to and
including the date hereof, upon or by reason of any matter, cause,
causes or thing whatsoever, in connection with the Loan and/or any of
the transactions and matters related thereto, except for the
obligations of the Bank in such documents, instruments and agreements
to be performed after the date of this Amendment. The Borrower shall
indemnify, defend and hold the Bank harmless of and from any claim
brought or threatened against the Bank by the Borrower or any other
person (as well as from attorneys' fees and expenses in connection
therewith) on account of the Loan Agreement, the Note, the Consent
Letter, the Intellectual Property Security Agreement, Pledge
Agreement, Intercreditor Agreement, this Amendment, and any other
document, instrument or agreement given in connection with the Loan
and any of the transactions and matters related thereto (each of which
may be defended, compromised, settled or pursued by the Bank with
counsel of the Bank's election reasonably acceptable to the Borrower,
but at the expense of the Borrower), except in the case of the Bank's
failure to comply with its obligations hereunder or thereunder, its
gross negligence or willful misconduct.
18. This Amendment represents the entire agreement between the parties
with respect to the modifications contained herein, and shall be
construed in accordance with the laws of the Commonwealth of
Massachusetts as an agreement under seal. The Borrower has voluntarily
entered into this Amendment without coercion or duress of any kind and
has been or has had the opportunity to have been represented by legal
counsel of their choosing.
<PAGE>
WITNESS OUR hands and seals on this 30th day of March, 1998.
HYBRIDON, INC.
By: /s/ F. Andrews Grinstead, III
-----------------------------
SILICON VALLEY BANK
By: /s/ Judy Sanchez
----------------
Judy Sanchez, Senior Vice President
<PAGE>
EXHIBIT 4.2
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A UNIT PURCHASE AGREEMENT, A
COPY OF WHICH IS AVAILABLE FROM HYBRIDON, INC. (THE "COMPANY"). THE SECURITIES
REPRESENTED BY THIS NOTE 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.
THIS NOTE MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO A U.S. PERSON OR
FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE
RESTRICTED PERIOD (AS DEFINED IN THE PURCHASE AGREEMENT), AND NO TRANSFER OR
EXCHANGE OF THIS NOTE MAY BE MADE UNTIL AFTER THE LATER OF THE DATE OF
EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE REQUIRED
CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN PROVIDED IN ACCORDANCE WITH THE
TERMS OF THE PURCHASE AGREEMENT.
HYBRIDON, INC.
No.___
NOTE DUE 2007
$---------
[DATE OF ISSUANCE]
Hybridon, Inc., a Delaware corporation, (the "Company"), for value
received, hereby promises to pay to ___________________________ (the "Holder"),
or registered assigns, the principal sum set forth above, with accrued but
unpaid interest thereon at a rate equal to fourteen percent (14%) per annum, on
December 31, 2007 (the "Maturity Date"); provided, however, that if the offering
(the "Unit Offering") of units ("Units") consisting of Notes (as defined below)
and Warrants is terminated before the Mandatory Conversion Event (as defined
below) has occurred, then the interest rate will increase to eighteen percent
(18%) per annum, effective as of the date the Additional Warrants become
exercisable. Payment shall be made at such place as designated by the Company
upon surrender of this Note, and shall be in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. This Note is one of a duly authorized issue
of Hybridon, Inc. Notes due 2007 (individually a "Note" and collectively the
"Notes") in an aggregate original principal
<PAGE>
amount of up to $68,750,000 plus any Notes issued in lieu of cash interest on
Notes, issued pursuant to a Unit Purchase Agreement which is available from the
Company (the "Purchase Agreement") and similar agreements. The Notes shall be
senior in right of payment to the Company's 9% Convertible Subordinated Notes
Due 2004 (the "9% Notes") to the extent provided in a First Supplemental
Indenture, dated as of January 13, 1998, to an Indenture, dated as of March 26,
1997, pursuant to which such 9% Notes were issued. The Notes shall be
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company. The Notes are secured by certain assets of the Company pursuant
to the Purchase Agreement on a subordinated basis. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Purchase Agreement.
SECTION 7. INTEREST.
The Company will pay interest semi-annually in arrears on April 1
and October 1 of each year (each an "Interest Payment Date"), or if any such day
is not a Business Day, on the next succeeding Business Day to the registered
Holder hereof as of the preceding March 15 or September 15 (each, a "Record
Date"). Interest on this Note will accrue from the most recent Interest Payment
Date to which interest has been paid or, if no interest has been paid, from the
date of its issuance set forth above; provided that if there is no existing
Default in the payment of interest, and if this Note is authenticated between a
Record Date, and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be April 1, 1998 or, if interest is paid
in cash, October 1, 1998. The Company may, with respect to each Interest Payment
Date, at its option and in its sole discretion, in lieu of payment of interest
on the Notes in cash, issue additional Notes ("Interest Notes") in an aggregate
principal amount equal to the amount of interest not paid in cash on such
Interest Payment Date. Each issuance of Interest Notes in lieu of the payment of
cash interest on the Notes shall be made pro rata with respect to the
outstanding Notes; provided, however, that the Company may at its option pay
cash in lieu of issuing Interest Notes in any denomination of less than $1,000.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
SECTION 8. PREPAYMENT.
This Note (including interest accrued on the principal hereof)
may be prepaid by the Company, at any time without penalty or premium.
SECTION 9. MANDATORY CONVERSION
(a) Mandatory Conversion. Upon the occurrence of a Mandatory
Conversion Event (as hereinafter defined), and not before such occurrence under
any circumstances, the Notes and all accrued interest thereon shall
automatically convert into the number of shares of Series B Preferred Stock of
the Company in substantially the form attached to the Purchase Agreement as
Exhibit C (the "Conversion Securities") equal to the Conversion Amount (as
defined below) divided by the then current Conversion Price (as defined below).
The "Conversion Amount" shall be the Liquidation Amount (as defined below). The
"Liquidation Amount" shall be the aggregate principal amount of, plus any
accrued but unpaid interest on,
<PAGE>
the Notes held by such Holder. The "Conversion Price" shall initially be $100,
subject to adjustment as provided below, representing an initial conversion rate
(subject to adjustment) of 10 shares of Conversion Securities per $1,000 of
Conversion Amount (the "Conversion Rate").
A "Mandatory Conversion Event" shall be deemed to have occurred,
effective immediately, when all of the following shall have occurred:
(i) the holders of $40,000,000 or more in aggregate principal
amount of the 9% Convertible Subordinated Notes due 2004 (the "Subordinated
Notes") issued pursuant to the Indenture between the Company and State Street
Bank and Trust Company, as Trustee, dated as of March 26, 1997 (the
"Indenture"), irrevocably exchange such Subordinated Notes and all accrued but
unpaid interest thereon for Series A Preferred Stock of the Company and warrants
to purchase Common Stock of the Company; and
(ii) the Company has received proceeds in the Unit Offering, net
of cash fees, commissions and expenses, equal to or exceeding $20,000,000 in the
aggregate.
(b) Conversion Procedures. Such conversion shall be deemed to
have been made automatically, irrevocably and immediately upon the occurrence of
a Mandatory Conversion Event and, upon such Mandatory Conversion Event, Notes
shall no longer be deemed outstanding and all rights whatsoever in respect
thereof (including the right to receive interest thereon) shall terminate except
as provided in the following sentence. The Company shall deliver to each Holder
certificates evidencing the number of full shares of Conversion Securities to
which such person shall be entitled as provided in Subsection 3(a), subject to
Section 4 hereof.
(c) [Reserved]
(d) Reservation of Shares; Transfer Taxes; Etc. The Company shall
at all times reserve and keep available, out of its authorized and unissued
shares of Conversion Securities, solely for the purpose of effecting the
conversion of the Notes, such number of shares of its Conversion Securities free
of preemptive rights as shall be sufficient to effect the conversion of all
Notes from time to time outstanding. The Company 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 Conversion Securities if at any time the
number of shares of Conversion Securities not outstanding shall not be
sufficient to permit the conversion of all the then-outstanding Notes.
The Company shall pay any and all issue or other taxes (other
than income taxes) that may be payable in respect of any issue or delivery of
shares of Conversion Securities on conversion of the Notes. The Company 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 Conversion Securities (or other
securities or assets) in a name other than that in which the Notes 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 Company the amount of such tax
or has established, to the satisfaction of the Company, that such tax has been
paid.
(e) Other Changes in Conversion Rate. The Company from time to
time may increase the Conversion Rate by any amount for any period of time if
the period is at least 20
<PAGE>
days and if the increase is irrevocable during the period. Whenever the
Conversion Rate is so increased, the Company shall mail to the holder of record
of this Note 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 Company may make such increases in the Conversion Rate, in
addition to those required or allowed by this paragraph (e), as shall be
determined by it, as evidenced by a resolution of the Board of Directors of the
Company, 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.
SECTION 10. FRACTIONAL SHARES.
The Company shall not be required to issue fractions of shares of
Conversion Securities or other capital stock of the Company upon conversion of
any Notes. If any fraction of a share would be issuable on conversion of any
Notes (aggregating, for this purpose, all Notes held by a record holder), the
number of shares of Conversion Securities issuable shall be rounded to the
nearest whole share, with .5 of a share rounded upward.
SECTION 11. EVENTS OF DEFAULT DEFINED.
The following shall each constitute an "Event of Default"
hereunder:
(a) the failure of the Company to make any payment of (i)
principal of this Note when due and payable and such failure shall continue for
five (5) or more days and (ii) interest on this Note when due and payable and
such failure shall continue for thirty (30) or more days, whether or not such
payment is prohibited by the subordination provisions of this Note or the
Purchase Agreement;
(b) the failure of the Company to observe or perform any covenant
in this Note or in the Purchase Agreement, and such failure shall have continued
unremedied for a period of sixty (60) days after written notice as provided in
the last paragraph of this Section 5;
(c) a default occurs (after giving effect to any applicable grace
periods or any extension of any maturity date) in the payment when due of
principal of, or an acceleration of, any indebtedness for money borrowed by the
Company or any of its Subsidiaries (other than an Unrestricted Subsidiary (as
defined below) which is not a Significant Subsidiary and provided there is no
recourse against the Company or any other Subsidiary with respect to the
obligations of such Unrestricted Subsidiary arising as a result of such default)
in excess of $2 million, individually or in the aggregate, if such indebtedness
is not discharged, or such acceleration is not annulled, within 30 days after
written notice as provided in the last paragraph of this Section 5;
(d) the Company or any of its Significant Subsidiaries, pursuant
to or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
<PAGE>
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a Custodian of it or
for all or substantially all of its property, and such Custodian
is not discharged within 30 days,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) admits in writing that it is generally unable to pay its
debts as the same become due;
(e) a court of competent jurisdiction enters and order or decree
under any Bankruptcy Law that:
(i) is for relief in any involuntary case against the
Company or any Significant Subsidiary,
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of the property of the
Company or any Significant Subsidiary, or
(iii) orders the liquidation of the Company or any
Significant Subsidiary, and, in each case, the order or decree
remains unstayed and in effect for 60 consecutive days.
The term "Bankruptcy Law" means Title 11 of the U.S. Code or any
similar federal, foreign or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, examiner or
similar official under any Bankruptcy Law. The term "Significant Subsidiary" has
the same meaning as significant subsidiary has under Regulation SX under the
Securities Act as in effect on the date hereof. "Unrestricted Subsidiary" means
any Subsidiary of the Company which (i) is not wholly-owned by the Company, (ii)
is designated as an Unrestricted Subsidiary by the Board of Directors of the
Company and (iii) at the time of any investment by the Company in such
Subsidiary, in the aggregate holds or comprises less than 20% of the Company's
assets as shown on the Company's consolidated balance sheet prepared in
accordance with generally accepted accounting principles consistently applied as
at the time of such investment.
A Default under Subsection (b) of this Section 5 (other than a
Default under Section 8.14 of the Purchase Agreement, which Default shall be an
Event of Default with the notice but without the passage of time specified in
Subsection (b) of this Section 5) or Subsection (c) of this Section 5 shall not
be an Event of Default until (i) the holders of at least 25% in aggregate
principal amount of the Notes then outstanding shall have notified the Company
of the Default and (ii) the Company shall have failed to cure the Default under
such Subsection (b) within 60 days after receipt of the notice or under such
Subsection (c) within 10 days after receipt of the notice, respectively. Any
such notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default."
SECTION 12. REMEDIES UPON EVENT OF DEFAULT.
<PAGE>
(a) If an Event of Default (other than an Event of Default
specified in Subsections (d) and (e) of Section 5) occurs and is continuing, the
Holders of at least 25% in aggregate principal amount of the Notes then
outstanding (by notice to the Company and the Secured Party), may declare the
unpaid principal of and accrued interest on all the Notes then outstanding to be
due and payable. Upon any such declaration, such principal and accrued interest
shall be due and payable immediately. If an Event of Default specified in
Subsection (d) or (e) of Section 5 occurs, such an amount shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of any Holder. The Holders of at least fifty percent (50%) or more
in aggregate principal amount of the Notes then outstanding may rescind an
acceleration and its consequences if (a) the Company has paid a sum sufficient
to pay (i) all overdue interest on all Notes then outstanding and (ii) the
principal of the Notes then outstanding which have become due otherwise than by
such declaration of acceleration and accrued interest thereon at a rate borne by
the Notes and (b) the rescission would not conflict with any judgment or decree
and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration. No such rescission shall effect any subsequent Default or impair
any right consequent thereto.
(b) The Holders of at least fifty percent (50%) or more in
aggregate principal amount of the Notes then outstanding may waive an existing
Default or Event of Default and its consequences. Upon any such waiver, such
Default shall cease to exist and any Event of Default arising therefrom shall be
deemed to have been cured for every purpose of this Note and the Purchase
Agreement; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
(c) If the Company defaults in a payment of interest on the
Notes, the Company shall pay defaulted interest (plus interest on such defaulted
interest, to the extent lawful, at the rate borne by this Note) in any lawful
manner. The Company shall pay the defaulted interest to the Holders of the Notes
on a special record date. The Company shall fix or cause to be fixed any such
special record date and payment date, which specified record date shall not be
less than 10 days prior to the payment date for such defaulted interest, and
shall promptly mail or cause to be mailed to each Holder a notice that states
the special record date, the payment date and the amount of defaulted interest
to be paid.
(d) No remedy herein conferred upon the Holder of this Note is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
(e) In any suit for the enforcement of any right or remedy under
this Note or the Purchase Agreement, a court in its discretion may require the
filing by any party litigant in the suit of an undertaking to pay the costs of
the suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Subsection 6(e) does not apply to a suit by Holders of more than
10% in aggregate
<PAGE>
principal amount of the then outstanding Notes or any suit for the enforcement
of the mandatory conversion right set forth in Section 3.
SECTION 13. NOTE REGISTER.
(a) The Company shall keep at its principal executive office a
register (herein sometimes referred to as the "Note Register"), in which,
subject to such reasonable regulations as it may prescribe, but at its expense
(other than transfer taxes, if any), the Company shall provide for the
registration and transfer of this Note.
(b) Whenever this Note shall be surrendered at the principal
executive office of the Company for transfer or exchange, accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed by the Holder hereof or his attorney duly authorized in writing,
and, subject to compliance with applicable securities laws, the Company shall
execute and deliver in exchange therefor a new Note or Notes, as may be
requested by such Holder, in the same aggregate unpaid principal amount and
payable on the same date as the principal amount of the Note or Notes so
surrendered; each such new Note shall be dated as of the date to which interest
has been paid on the unpaid principal amount of the Note or Notes so surrendered
and shall be in such principal amount and registered in such name or names as
such Holder may designate in writing.
(c) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Note
and of indemnity reasonably satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Note (in case of mutilation) the Company will make and
deliver in lieu of this Note a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on the unpaid
principal amount of this Note in lieu of which such new Note is made and
delivered.
SECTION 14. MISCELLANEOUS.
(a) Amendments and Waivers. The holders of at least fifty percent
(50%) or more in principal amount of outstanding Notes or the Secured Party on
behalf of the holders of the Notes may waive or otherwise consent to the
amendment of any of the provisions hereof, provided that no such waiver or
amendment may reduce the principal amount of or interest on any of the Notes or
change the stated maturity of the principal or reduce the percentage of holders
of Notes necessary to waive or amend the provisions of this Note, without the
consent of each holder of any Note affected thereby.
(b) Restrictions on Transferability. In addition to the
restrictions set forth in the Purchase Agreement, the securities represented by
this Note have been acquired for investment and have not been registered under
the Securities Act of 1933, as amended, or the securities laws of any state or
other jurisdiction. Without such registration, such securities may not be sold,
pledged, hypothecated or otherwise transferred, except pursuant to exemptions
from the Securities Act of 1933, as amended, and the securities laws of any
state or other jurisdiction.
<PAGE>
(c) Forbearance from Suit. No holder of Notes shall institute any
suit or proceeding for the enforcement of the payment of principal or interest
unless the holders of at least 25% in principal amount of all of the outstanding
Notes join in such suit or proceeding.
(d) No Recourse Against Others. No directors, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under this Note, the Purchase Agreement or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. The Holder of this Note by accepting this Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of this Note.
(e) Subordination. The Holder by accepting this Note agrees that
the payment (by set-off or otherwise) of principal of and interest on the Notes
is subordinated in right of payment, to the extent and in the manner provided in
Section 9 of the Purchase Agreement, to the prior payment in full of all
obligations in respect of Senior Indebtedness of the Company, whether
outstanding on the date of the Purchase Agreement or thereafter incurred.
(f) Denominations. This Note is issuable in minimum denominations
of $1,000 and integral multiples of $1,000 in excess thereof, except as
otherwise provided in Section 1 hereof.
(g) Governing Law. This Note shall be governed by, and construed
in accordance with, the laws of the State of New York, excluding the body of law
relating to conflict of laws. Notwithstanding anything to the contrary contained
herein, in no event may the effective rate of interest collected or received by
the Holder exceed that which may be charged, collected or received by the Holder
under applicable law.
(h) Interpretation. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
(i) Successors and Assigns. This Note shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of the
Holder and its successors and registered assigns.
(j) Notices. All notices, requests, consents and demands shall be
made in writing and shall be mailed postage prepaid, or delivered by hand, to
the Company or to the Holder thereof at their respective addresses set forth
below or to such other address as may be furnished in writing to the other party
hereto:
If to the Holder: At the address shown on Schedule A attached
hereto
If to the Company: Hybridon, Inc.
620 Memorial Drive
Cambridge, Massachusetts 02139
Attention: E. Andrews Grinstead, III
<PAGE>
(k) Saturdays, Sundays, Holidays. If any date that may at any
time be specified in this Note as a date for the making of any payment of
principal or interest under this Note shall fall on Saturday, Sunday or on a day
which in New York or Massachusetts or California shall be a legal holiday, then
the date for the making of that payment shall be the next subsequent day which
is not a Saturday, Sunday or legal holiday.
(l) Purchase Agreement. This Note is subject to the terms
contained in the Purchase Agreement and the registered Holder of this Note is
entitled to the benefits of such Purchase Agreement to the extent provided
therein and may, in addition to any rights hereunder, enforce the agreements of
the Company contained therein and exercise the remedies provided for thereby or
otherwise available in respect thereof.
(m) No Adverse Interpretation of Other Agreements. This Note and
the Purchase Agreement may not be used to interpret another note, indenture,
loan or debt agreement of the Company or a Subsidiary. Any such note, indenture,
loan or debt agreement may not be used to interpret this Note or the Purchase
Agreement.
<PAGE>
IN WITNESS WHEREOF, this Note has been executed and delivered on the
date first above written by the duly authorized representative of the Company.
HYBRIDON, INC.
By:
------------------------
Name:
Title:
<PAGE>
SCHEDULE A
Name of Holder Address of Holder
- -------------- -----------------
<PAGE>
EXHIBIT 4.3
FORM OF WARRANT AGREEMENT
AGREEMENT, dated as of this fifth day of May, 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:
<PAGE>
(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 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
<PAGE>
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]
(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.
<PAGE>
(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.
(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
<PAGE>
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 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
<PAGE>
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)).
(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
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
(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 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;
<PAGE>
"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;
"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 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;
<PAGE>
"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:
(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
<PAGE>
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 convertible preferred stock was issued (or as a
result of any subsequent modification to the terms
<PAGE>
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
<PAGE>
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.
(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
<PAGE>
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 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 t convertible into or
exchangeable for Common Stock or carrying the right to purchase Common t Stock
or any securities so convertible or exchangeable. t
(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
<PAGE>
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 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.
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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.
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.
<PAGE>
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.
<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: /s/ E. Andrews Grinstead
-----------------------------
Authorized Officer
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Warrant Agent
By: /s/ Lynore Le Conche
-----------------------------
Authorized Officer
<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. AWA _______________ Class A Warrants
VOID AFTER MAY 4, 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 May 5, 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.
<PAGE>
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
May 5, 1998, by and among the Company and the Warrant Agent.
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 May
4, 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,
<PAGE>
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.
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
<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.
<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
<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.
<PAGE>
EXHIBIT 4.4
FORM OF WARRANT AGREEMENT
AGREEMENT, dated as of this fifth day of May, 1998, by and among
HYBRIDON, INC., a Delaware corporation ("Company"), CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., a New Jersey limited liability company, as warrant agent
("Warrant Agent"), and PILLAR INVESTMENTS LTD. (the "Placement Agent")..
W I T N E S S E T H
WHEREAS, the Alternative Equity Closing Conditions referred to in
Supplement and Amendment No. 2 dated April 1, 1998 (the "Amendment") to the
Confidential Term Sheet of the Company dated January 15, 1998 (the "Original
Term Sheet") have been satisfied;
WHEREAS, each Class B 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 B
Warrants, the issuance of certificates representing the Class B Warrants, the
exercise of the Class B 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 B Warrants and the certificates representing the Class B
Warrants and the respective rights and obligations thereunder of the Company,
the holders of certificates representing the Class B 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 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
<PAGE>
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 B Warrant, the
date on which the Warrant Agent shall have received both (a) the Warrant
Certificate representing such Class B 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
B Warrant, the Alternative Equity Financing Closing Date (as defined in the
Amendment).
(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) "Purchase Price" shall mean 120% of $2.00, 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]
(k) "Registered Holder" shall mean, as to any Class B Warrant and
as of any particular date, the person in whose name the certificate representing
the Class B 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
<PAGE>
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) [Reserved]
(p) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on the day prior to the fifth 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 B Warrant initially shall entitle the Registered
Holder of the Warrant Certificate representing such Class B 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 B Warrants issued pursuant hereto will immediately
be detachable and separately transferable from the shares of Common Stock
included in the Alternative Equity Units (as defined in the Amendment).
(c) Within five business days after the Alternative Equity
Financing Closing Date, Warrant Certificates representing the number of Class B
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.
<PAGE>
(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 B 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 B Warrants represented by any Warrant
Certificate, to evidence any unexercised Class B 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 B 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 B 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 B 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 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
<PAGE>
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 B 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 B 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 B 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 B Warrant and shall notify the Company in writing of the
exercise of the Class B 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 B 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 B Warrant and clearance of the funds received, the Warrant Agent shall
promptly remit the payment received for the Class B 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 B Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Class B Warrants.
The Company covenants that all shares of Common Stock which shall be issuable
upon exercise of the Class B 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)).
(b) The Registered Holders of Class B Warrants shall have the
registration rights provided in the Unit Purchase Agreement attached as
Supplemental Exhibit D to the Amendment. The Class B Warrants shall not be
exercisable in any state where such exercise would be unlawful.
<PAGE>
(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 B Warrants, or the issuance or
delivery of any shares upon exercise of the Class B 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
B 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 B
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 B
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 B 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 B 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 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.
<PAGE>
(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 B 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 B
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 B 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 B 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 B Warrants outstanding, in lieu
of the adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Class B Warrant as herein provided, so that each Class B
Warrant outstanding after such adjustment shall represent the right to purchase
one share of Common Stock. Each Class B Warrant held of record prior to such
adjustment of the number of Class B Warrants shall become that number of Class B
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 of which shall be the Purchase Price in effect immediately
after such adjustment. Upon each adjustment of the
<PAGE>
number of Class B 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 B 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 B 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 B 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 admitted
<PAGE>
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 a 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 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;
"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
<PAGE>
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 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 B 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 B 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
<PAGE>
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:
(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
<PAGE>
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
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 B 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 B 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 B 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
<PAGE>
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.
(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 Company's Certificate of Designation (the
"Series A Certificate of Designation") for the Series A Convertible Preferred
Stock, par value $.01 per share (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
<PAGE>
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 B 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
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 B Warrants exercised after such record date and before the
occurrence of such event the additional shares of Common Stock issuable upon
such exercise by
<PAGE>
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 Term Sheet or any options or warrants described in the Amendment in
respect of the Alternative Equity Financing (as defined in the Amendment), in
each case issued to (or to the designee of) any placement agent or financial
advisor, (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 exchange for the Company's 9% Convertible
Subordinated Notes due 2004 (the "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 Term Sheet 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
Series A Certificate of Designation.
(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 B 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 B Warrants. If more than one certificate
evidencing Class B 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 B Warrants so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon exercise of such aggregate number of Class B
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 B Warrants shall, as such, be entitled to vote or to receive dividends or
be deemed the holder of
<PAGE>
Common Stock that may at any time be issuable upon exercise of such Class B
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Class B 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 B
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 B
Warrants, and any Registered Holder of a Class B Warrant, without consent of the
Warrant Agent or of the holder of any other Class B Warrant, may, in his own
behalf and for his own benefit, enforce against the Company his right to
exercise his Class B 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 B Warrant, by his acceptance thereof, consents and agrees with the
Company, the Warrant Agent and every other holder of any Class B Warrant that:
(a) The Class B 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 B 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 B 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 B Warrant or Class B 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 B 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,
<PAGE>
relationship, agency or trust for or with any of the holders of Warrant
Certificates or beneficial owners of Class B 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 B Warrants represented
thereby or of any securities or other property delivered upon exercise of any
Class B Warrant or whether any stock issued upon exercise of any Class B 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 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
<PAGE>
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 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 B 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 B Warrants
which are to be governed by this Agreement resulting from a subsequent offering
of Company securities which includes Class B Warrants having the same terms and
conditions as the Class B 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
<PAGE>
writing of the Registered Holders of Warrant Certificates representing more than
50% of the Class B Warrants then outstanding; and provided, further, that no
change in the number or nature of the securities purchasable upon the exercise
of any Class B 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 B 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; and, if to
Pillar, at Pillar Investments Ltd., 28 Avenue de Messine 75008 Paris, France,
Attention: Youssef El Zein..
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 B Warrants shall be entitled to
exercise such Class B 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 Placement Agent, 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 B Warrants or
such earlier date upon which all Class B 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.
<PAGE>
SECTION 22. Counterparts. This Agreement may be executed in
several counterparts, which taken together shall constitute a single document.
<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: /s/ E. Andrews Grinstead, III
-----------------------------
Authorized Officer
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Warrant Agent
By: /s/ Lynore Le Conche
-----------------------------
Authorized Officer
PILLAR INVESTMENTS LTD.
By: /s/ Youssef El-Zein
-----------------------------
Authorized Officer
<PAGE>
EXHIBIT A
[FORM OF FACE OF CLASS B 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.
THIS WARRANT AND THE SECURITIES UNDERLYING THIS WARRANT MAY NOT BE OFFERED OR
SOLD IN THE UNITED STATES OR TO A U.S. PERSON OR FOR THE ACCOUNT OR BENEFIT OF A
U.S. PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED IN THE
UNIT PURCHASE AGREEMENT, DATED AS OF APRIL 1, 1998 (THE "UNIT PURCHASE
AGREEMENT"), A COPY OF WHICH IS AVAILABLE FROM THE COMPANY), AND NO TRANSFER OR
EXCHANGE OF THIS WARRANT AND THE SECURITIES UNDERLYING THIS WARRANT MAY BE MADE
UNTIL AFTER THE LATER OF THE DATE OF EXPIRATION OF THE RESTRICTED PERIOD AND THE
DATE ON WHICH THE REQUIRED CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN
PROVIDED IN ACCORDANCE WITH THE TERMS OF THE UNIT PURCHASE AGREEMENT. HEDGING
TRANSACTIONS INVOLVING THIS WARRANT AND THE SECURITIES UNDERLYING THIS WARRANT
MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.
No. AWB _______________ Class B Warrants
VOID AFTER MAY 4, 2003
CLASS B WARRANT CERTIFICATE FOR PURCHASE
OF COMMON STOCK
HYBRIDON, INC.
This certifies that FOR VALUE RECEIVED
- --------------------------------------------------------------------------------
____________________________ or registered assigns (the "Registered Holder") is
the owner
<PAGE>
of the number of Class B Warrants ("Class B Warrants") specified above. Each
Class B 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 May 5, 1998, 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 B 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
May 5, 1998, by and among the Company and the Warrant Agent.
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 B 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 B 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 B 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 B Warrant.
The term "Expiration Date" shall mean 5:00 P.M. (New York time)
on May 4, 2003, or such earlier date as the Class B 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 B Warrants, the Company shall have the right to extend the
Expiration Date.
The Class B 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 B Warrants,
<PAGE>
each of such new Warrant Certificates to represent such number of Class B
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 B 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 B 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 B 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.
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.,
<PAGE>
as Warrant Agent
By:
------------------------------
Authorized Officer
<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 B Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_________ Class B Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Class B 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 B Warrants shall not be all the Class B Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Class B Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.
<PAGE>
The undersigned represents that the exercise of the within Class B 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
--------------------------------
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Class B 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 B 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.
<PAGE>
EXHIBIT 4.5
FORM OF WARRANT AGREEMENT
AGREEMENT, dated as of this fifth day of May, 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, each Registered Holder (as defined below) has executed a
Subscription Agreement (the "Subscription Agreement") which has been accepted by
the Company, and the Closing Date (as defined in the Subscription Agreement) has
occurred.
WHEREAS, each Class C 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 C
Warrants, the issuance of certificates representing the Class C Warrants, the
exercise of the Class C 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 C Warrants and the certificates representing the Class C
Warrants and the respective rights and obligations thereunder of the Company,
the holders of certificates representing the Class C 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 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
<PAGE>
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 C Warrant, the
date on which the Warrant Agent shall have received both (a) the Warrant
Certificate representing such Class C 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
C Warrant, the Closing Date (as defined in the Subscription Agreement).
(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) "Purchase Price" shall mean 120% of $2.00, 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]
(k) "Registered Holder" shall mean, as to any Class C Warrant and
as of any particular date, the person in whose name the certificate representing
the Class C 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
<PAGE>
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) [Reserved]
(p) "Warrant Expiration Date" shall mean 5:00 P.M. (New York
time) on the day prior to the fifth 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 C Warrant initially shall entitle the Registered
Holder of the Warrant Certificate representing such Class C 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 C Warrants issued pursuant hereto will immediately
be detachable and separately transferable from the shares of Common Stock
included in the Alternative Equity Units (as defined in the Amendment).
(c) Within five business days after the Closing Date, Warrant
Certificates representing the number of Class C Warrants to be issued pursuant
to the Offering (as defined in the Subscription Agreement) 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.
<PAGE>
(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 C 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 C Warrants represented by any Warrant
Certificate, to evidence any unexercised Class C 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 C 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 C 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 C 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 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
<PAGE>
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 C 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 C 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 C 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 C Warrant and shall notify the Company in writing of the
exercise of the Class C 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 C 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 C Warrant and clearance of the funds received, the Warrant Agent shall
promptly remit the payment received for the Class C 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 C Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Class C Warrants.
The Company covenants that all shares of Common Stock which shall be issuable
upon exercise of the Class C 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)).
(b) The Registered Holders of Class C Warrants shall have the
registration rights provided in the Subscription Agreement. The Class C 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
<PAGE>
the issuance of Class C Warrants, or the issuance or delivery of any shares upon
exercise of the Class C 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 C 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 C
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 C
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 C 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 C 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 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
<PAGE>
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 C 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 C
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 C 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 C 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 C Warrants outstanding, in lieu
of the adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Class C Warrant as herein provided, so that each Class C
Warrant outstanding after such adjustment shall represent the right to purchase
one share of Common Stock. Each Class C Warrant held of record prior to such
adjustment of the number of Class C Warrants shall become that number of Class C
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 of which shall be the Purchase Price in effect immediately
after such adjustment. Upon each adjustment of the number of Class C 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
<PAGE>
of such adjustment Warrant Certificates evidencing, subject to Section 10, the
number of additional Class C 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 C 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 C 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 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
<PAGE>
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 a 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 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;
"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 dissolution of, such Person (or equivalent
thereof) over interests of any other class of interests
<PAGE>
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 C 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 C 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
<PAGE>
convertible or exchangeable securities, the Purchase Price shall be reduced by
multiplying the Purchase Price in effect immediately prior to such earliest date
by:
(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
<PAGE>
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 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 C 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 C 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 C 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
<PAGE>
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.
(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 Company's Certificate of Designation (the
"Series A Certificate of Designation") for the Series A Convertible Preferred
Stock, par value $.01 per share (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
<PAGE>
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 C 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
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 C 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
<PAGE>
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 to the extent that no adjustment to the
Purchase Price would be required under the warrant agreements entered into
pursuant to the Common Stock Offering (as such term is defined in the
Subscription Agreement).
(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 C 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 C Warrants. If more than one certificate
evidencing Class C 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 C Warrants so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon exercise of such aggregate number of Class C
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 C 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 C Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Class C 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 C
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 C
Warrants, and any Registered Holder of a Class C Warrant, without consent of the
Warrant Agent or of the holder of any other Class C Warrant, may, in his own
behalf and for his own benefit, enforce against the Company his right to
exercise his Class C Warrants for the purchase of shares of Common Stock in the
manner provided in the Warrant Certificate and this Agreement.
<PAGE>
SECTION 13. Agreement of Warrant Holders. Every holder of any
Class C Warrant, by his acceptance thereof, consents and agrees with the
Company, the Warrant Agent and every other holder of any Class C Warrant that:
(a) The Class C 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 C 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 C 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 C Warrant or Class C 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 C 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 C 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 C
Warrants represented thereby or of any securities or other property delivered
upon exercise of any Class C Warrant or whether any stock issued upon exercise
of any Class C 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 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
<PAGE>
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 and delivered by the resigning Warrant
Agent. Not later than the effective date of any such appointment, the
<PAGE>
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 C 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 C Warrants
which are to be governed by this Agreement resulting from a subsequent offering
of Company securities which includes Class C Warrants having the same terms and
conditions as the Class C 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 C Warrants then outstanding; and provided, further, that no
change in the number or nature of the securities purchasable upon the exercise
of any Class C 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 C 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; and if to the Warrant
Agent, at its Corporate Office, Attention:
Relationship Manager.
<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 C Warrants shall be entitled to
exercise such Class C 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 Placement Agent, 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 C Warrants or
such earlier date upon which all Class C 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.
<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: /s/ E. Andrews Grinstead, III
-----------------------------
Authorized Officer
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Warrant Agent
By: /s/ Lynore Le Conche
-----------------------------
Authorized Officer
<PAGE>
EXHIBIT A
[FORM OF FACE OF CLASS C 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. AWC _______________ Class C Warrants
VOID AFTER MAY 4, 2003
CLASS C 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 C Warrants ("Class C Warrants") specified
above. Each Class C 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 May 5, 1998, 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.
<PAGE>
This Warrant Certificate and each Class C 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
May 5, 1998, by and among the Company and the Warrant Agent.
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 C 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 C 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 C 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 C Warrant.
The term "Expiration Date" shall mean 5:00 P.M. (New York time)
on May 4, 2003, or such earlier date as the Class C 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 C Warrants, the Company shall have the right to extend the
Expiration Date.
The Class C 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 C Warrants, each of such new Warrant
Certificates to represent such number of Class C 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 C
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 C Warrants held
by such Registered Holder,
<PAGE>
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 C 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.
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
<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 C Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_________ Class C Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Class C 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 C Warrants shall not be all the Class C Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Class C Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.
<PAGE>
The undersigned represents that the exercise of the within Class C 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
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Class C 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 C 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.
<PAGE>
EXHIBIT 4.6
FORM OF WARRANT AGREEMENT
AGREEMENT, dated as of this fifth day of May, 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 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, the Company has sold, pursuant to several subscription
agreements (each, a "Subscription Agreement") units consisting of shares of
Series A Preferred Stock and Class D Warrants to be issued pursuant to this
Agreement ("Units");
WHEREAS, each Class D 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 D
Warrants, the issuance of certificates representing the Class D Warrants, the
exercise of the Class D 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 D Warrants and the certificates representing the Class D
Warrants and the respective rights and obligations thereunder of the Company,
the holders of certificates representing the Class D 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:
<PAGE>
(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 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 D Warrant, the date on
which the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Class D 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 D
Warrant, the date which is 12 months after the closing date of the Alternative
Equity Offering (as such term is defined in the Amendment).
(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 1.2 multiplied by the per share price of Common Stock sold by the
Company in connection with the Alternative Equity Offering, 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]
<PAGE>
(k) "Registered Holder" shall mean, as to any Class D Warrant and as of
any particular date, the person in whose name the certificate representing the
Class D 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 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.
(p) 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 D Warrant initially shall entitle the Registered Holder of
the Warrant Certificate representing such Class D 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 D Warrants included in the Units will immediately be
detachable and separately transferable from the shares of Series A Preferred
Stock included in the Units.
(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 D Warrants to be issued pursuant to the
Subscription Agreements shall be executed by the Company and delivered to the
<PAGE>
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 D 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 D Warrants represented by any Warrant Certificate, to
evidence any unexercised Class D 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 D 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 D 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 D 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 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,
<PAGE>
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 D 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 D 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 D 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 D Warrant and shall notify the Company in writing of the
exercise of the Class D 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 D 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 D Warrant and clearance of the funds received, the Warrant Agent shall
promptly remit the payment received for the Class D 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 D Warrants, such number of shares of Common Stock as
shall then be issuable upon the exercise of all outstanding Class D Warrants.
The Company covenants that all shares of Common Stock which shall be issuable
upon exercise of the Class D 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)).
(b) The Registered Holders of Class D Warrants shall have the
registration rights provided in the Subscription Agreement. The Class D Warrants
shall not be exercisable in any state where such exercise would be unlawful.
<PAGE>
(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 D Warrants, or the issuance or
delivery of any shares upon exercise of the Class D 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
D 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 D 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 D 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 D 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 D 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 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.
<PAGE>
(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 D 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 D
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 D 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 D 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 D Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Class D Warrant as herein provided, so that each Class D Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Class D Warrant held of record prior to such
adjustment of the number of Class D Warrants shall become that number of Class D
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 of which shall be the Purchase Price in effect immediately
after such adjustment. Upon each adjustment of the number of Class D 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 D Warrants to which such Holder shall be entitled as
a result of such adjustment or, at the option of the
<PAGE>
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 D 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 D
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 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
<PAGE>
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 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;
"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 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;
<PAGE>
"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 D 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 D 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:
(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
<PAGE>
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
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
<PAGE>
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 D 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 D 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 D 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.
(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
<PAGE>
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 D 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 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
<PAGE>
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 D 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 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
D 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 D Warrants. If more than one certificate evidencing Class
D 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 D Warrants so surrendered. Instead of any
fractional share of Common Stock
<PAGE>
which would otherwise be issuable upon exercise of such aggregate number of
Class D 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
D 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 D Warrants for any purpose whatsoever, nor shall anything
contained herein be construed to confer upon the holder of Class D 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 D
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 D
Warrants, and any Registered Holder of a Class D Warrant, without consent of the
Warrant Agent or of the holder of any other Class D Warrant, may, in his own
behalf and for his own benefit, enforce against the Company his right to
exercise his Class D 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 D
Warrant, by his acceptance thereof, consents and agrees with the Company, the
Warrant Agent and every other holder of any Class D Warrant that:
(a) The Class D 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 D 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 D 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 D Warrant or Class D 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
<PAGE>
and retired. The Warrant Agent shall also cancel the Warrant Certificate or
Warrant Certificates following exercise of any or all of the Class D 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 D 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 D
Warrants represented thereby or of any securities or other property delivered
upon exercise of any Class D Warrant or whether any stock issued upon exercise
of any Class D 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 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.
<PAGE>
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 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 D 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 D Warrants
which are to be governed by this Agreement resulting from a subsequent offering
of Company securities which includes Class D Warrants having the same terms and
conditions as the Class D 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
<PAGE>
with the consent in writing of the Registered Holders of Warrant Certificates
representing more than 50% of the Class D Warrants then outstanding; and
provided, further, that no change in the number or nature of the securities
purchasable upon the exercise of any Class D 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 D 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.
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 D Warrants shall be entitled to exercise such
Class D 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 D Warrants or such
earlier date upon which all Class D 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.
<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: /s/ E. Andrews Grinstead, III
-----------------------------
Authorized Officer
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C., as Warrant Agent
By: /s/ Lynore Le Conche
---------------------
Authorized Officer
<PAGE>
EXHIBIT A
[FORM OF FACE OF CLASS D 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. AWD _______________ Class D Warrants
VOID AFTER MAY 4, 2003
CLASS D 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 D Warrants ("Class D Warrants") specified above. Each Class
D 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 May 5, 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 D 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
May 5, 1998, by and among the Company and the Warrant Agent.
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 D 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.
<PAGE>
Each Class D 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 D 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 D Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York time) on May
4, 2003, or such earlier date as the Class D 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 D Warrants, the Company shall have the right to extend the
Expiration Date.
The Class D 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 D Warrants, each of such new Warrant Certificates to
represent such number of Class D 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 D
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 D 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 D 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.
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.
<PAGE>
HYBRIDON, INC.
Dated: By:_______________________________
By:_______________________________
[seal]
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
as Warrant Agent
By: ______________________________
Authorized Officer
<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 D Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_________ Class D Warrants represented by this Warrant Certificate, and to
purchase the securities issuable upon the exercise of such Class D 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 D Warrants shall not be all the Class D Warrants
evidenced by this Warrant Certificate, that a new Warrant Certificate for the
balance of such Class D Warrants be registered in the name of, and delivered to,
the Registered Holder at the address stated below.
<PAGE>
The undersigned represents that the exercise of the within Class D 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
____________________________
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Class D 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 D 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
HYBRIDON, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 439,214
<SECURITIES> 0
<RECEIVABLES> 521,887
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,667,970
<PP&E> 29,582,947
<DEPRECIATION> 12,215,553
<TOTAL-ASSETS> 28,766,338
<CURRENT-LIABILITIES> 25,958,709
<BONDS> 58,049,800
5,060
0
<COMMON> 0
<OTHER-SE> (55,247,231)
<TOTAL-LIABILITY-AND-EQUITY> 28,766,338
<SALES> 825,069
<TOTAL-REVENUES> 992,914
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,067,649
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,607,437
<INCOME-PRETAX> (8,682,172)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,682,172)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,682,172)
<EPS-PRIMARY> (1.72)
<EPS-DILUTED> (1.72)
</TABLE>
