As filed with the Securities and Exchange Commission on February 15, 2000
Registration No. 333-69649
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HYBRIDON, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 2836 04-3072298
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification
Number)
155 Fortune Blvd.
Milford, Massachusetts 01757
(508) 482-7500
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
SUDHIR AGRAWAL
President and Acting Chief Executive Officer
HYBRIDON, INC.
155 Fortune Blvd.
Milford, Massachusetts 01757
(508) 482-7500
(Name, Address Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copy to:
MONICA C. LORD, ESQ.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
(212) 715-9100
Approximate date of commencement of proposed sale to
the public: From time to time after this registration
statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Title of Each Class Amount to be Proposed Proposed Amount of Amount Amount Due
of Securities to be Registered Maximum Maximum Registration Previously
Registered Offering Aggregate Fee Paid
Price Per Offering Price
Share
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series A preferred 662,167 100 (2) $66,216,700 $19,865.01 $20,063.59 $0
stock, $.01 par value
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.001 9,869,483 1.15625 (3) 11,411,589 $3,423.48 $3,571.82 $0
par value
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.001 460,000 0.54687 (4) 251,560 $76.23 $76.23 $0
par value
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.001 par 173,333 3.00 (1)(6) 519,999 $157.58 $157.58 $0
value, issuable upon
exercise of Forum
warrants
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.001 par 15,580,400 -(5) - - - -
value, issuable upon (1)
conversion of Series A
preferred stock
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.001 par 3,002,958 (1) 4.25 (1)(6) 12,762,571 $3,867.05 $3,867.05 $0
value, issuable upon
exercise of Class A
warrants
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.001 1,752,945 (1) 2.40 (1)(6) 4,207,068 $1,274.74 $1,274.74 $0
par value, issuable upon
exercise at Class B
warrants
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.001 904,274 (1) 2.40 (1)(6) 2,170,257 $657.88 $657.88 $0
par value, issuable upon
exercise of Class C
warrants
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.001 672,267 (1) 2.40 (1)(6) 1,613,441 $488.87 $488.87 $0
par value, issuable upon
exercise of Class D
warrants
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.0001 609,195 2.40 (1)(6) 1,462,065 $443.01 $443.01 $0
par value, issuable upon
exercise of Forum warrants
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.0001 588,235 4.25 (1)(6) 2,499,999 $757.50 $757.50 $0
par value, issuable upon
exercise of Forum
warrants
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
Common stock, $.0001 1,111,630 2.40 (1)(6) 2,667,912 $808.38 $808.38 $0
par value, issuable upon
exercise of Pillar
Investment warrants
- -------------------------- -------------- --------------- --------------- --------------- ------------- -----------
</TABLE>
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<PAGE>
(1) Pursuant to Rule 416, Hybridon is also registering that number of
additional shares of common stock that may become issuable pursuant to
applicable anti-dilution provisions.
(2) Estimated solely for purposes of calculating the registration fee using
the proposed offering price of the Series A preferred stock, as
required by Rule 457(i). Does not include any shares of Series A
preferred stock that may be issued in the future as a dividend, which
shares are expressly excluded from this registration statement pursuant
to Rule 416(b) under the Securities Act.
(3) Estimated solely for purposes of calculating the registration fee using
the average of the bid and ask price for the common stock on December
17, 1998, as required by Rule 457(c).
(4) Estimated solely for purposes of calculating the registration fee using
the average of the bid and ask price for the common stock on June 29,
1999, as required by Rule 457(i).
(5) Pursuant to Rule 457(i) no additional registration fee is required.
(6) Estimated solely for purposes of calculating the Registration Fee using
the exercise price of the warrants, as required by Rule 457(g)(1).
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective, on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted
SUBJECT TO COMPLETION, FEBRUARY 15, 2000
HYBRIDON, INC.
155 Fortune Boulevard Milford, Massachusetts 01757
Secondary Offering Prospectus
662,167 Shares of Series A preferred stock
and
34,727,717 Shares of Common Stock
Hybridon is offering for resale by the holders in transactions
registered under the Securities Act of 1933 662,167 shares of Series A preferred
stock of Hybridon and 34,724,717 shares of common stock of Hybridon.
The common stock is quoted on the NASD Over-the-Counter or "OTC,"
Bulletin Board under the symbol "HYBN." Prior to this offering there has been no
public market for the convertible preferred stock.
See "Risk Factors" beginning page 5 of this Prospectus for a discussion
of certain factors that you should consider in evaluating an investment in the
Hybridon's common stock or Series A preferred stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is __________, 2000.
<PAGE>
TABLE OF CONTENTS
Page
Summary Financial Data........................................................3
Risk Factors..................................................................5
Forward-Looking Statements....................................................7
Business......................................................................7
Properties...................................................................18
Legal Proceedings............................................................19
Market for Registrant's Common Equity and Related Stockholder Matters .......19
Dividend Policy..............................................................19
Use of Proceeds..............................................................20
Selected Financial Data......................................................21
Management's Discussion and Analysis of Financial Condition and Results
of Operations................................................................25
Directors and Executive Officers of Hybridon.................................32
Executive Compensation.......................................................33
Security Ownership of Certain Beneficial Owners and Management...............41
Certain Relationships and Related Transactions...............................46
Selling Stockholders.........................................................50
Description of Capital Stock.................................................54
Transfer Agent and Registrar.................................................56
Delaware Law and Certain Provisions of Hybridon's Restated Certificate
of Incorporation, Bylaws and Indebtedness..................................56
Plan of Distribution.........................................................57
Legal Matters................................................................58
Experts......................................................................58
Additional Information.......................................................58
Index to Consolidated Financial Statements..................................F-1
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<PAGE>
SUMMARY FINANCIAL DATA
Years Ended
December 31,
<TABLE>
<CAPTION>
-----------------------------------------------------
1996 1997 1998
-----------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Product and service revenue............................ $1,080 $1,877 $3,254
Research and development............................... 1,419 945 1,100
Royalty income......................................... 62 48 -
Interest income...................................... 1,447 1,079 148
-----------------------------------------------------
4,008 3,949 4,502
Total revenues
-----------------------------------------------------
Operating Expenses:
Research and development............................... 39,390 46,828 20,977
General and administrative............................. 11,347 11,026 6,573
Interest............................................... 124 4,536 2,932
Restructuring........................................ -- 11,020 --
-----------------------------------------------------
Total operating expenses............................. 50,861 73,410 30,482
-----------------------------------------------------
Loss from operations...................................... (46,853) (69,461) (25,980)
-----------------------------------------------------
Extraordinary item:
Gain on conversion of 9% convertible
subordinated notes payable.......................... -- -- 8,877
-----------------------------------------------------
Net loss.................................................. (46,853) (69,461) (17,103)
Accretion of preferred stock dividend..................... -- -- 2,689
-----------------------------------------------------
Net loss to common stockholders........................... $(46,853) $(69,461) $(19,792)
=====================================================
Basic and diluted net loss per common share from:
Operations........................................... $(10.24) $(13.76) $(2.19)
Extraordinary gain................................... -- -- 0.75
-----------------------------------------------------
Net loss per share................................... (10.24) (13.76) (1.44)
Accretion of preferred stock dividends............... -- -- (0.23)
-----------------------------------------------------
Net loss per share applicable to common
stockholders...................................... $(10.24) $(13.76) $(1.67)
=====================================================
Shares used in computing basic and
diluted net loss per Common Share (1).................. 4,576 5,050 11,859
Balance Sheet Data: Decembr 31,
-----------------------------------
1997 1998
-----------------------------------
Cash, cash equivalents and short-term $2,202 $5,607
investments(2).........................................
Working capital deficit................................... (24,100) (5,614)
Total assets.............................................. 35,072 16,536
Long-term debt and capital lease
obligations, net of current portion.................... 3,282 473
9% convertible subordinated notes payable................. 50,000 1,306
Accumulated deficit....................................... (218,655) (238,448)
Total stockholders' equity (deficit)...................... (46,048) 2,249
</TABLE>
(1) Computed on the basis described in Notes 2(k) of Notes to Consolidated
Financial Statements appearing elsewhere in this Prospectus.
(2) Short-term investments consisted of U.S. government securities with
maturities greater than three months but less than one year from the
purchase date.
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<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1998 1999
-----------------------------
(unaudited)
<S> <C> <C>
Statement of Operations Data:
Revenues
Product and service revenue ........................................ $2,353 $4,644
Research and development ........................................... 950 450
Royalty income ..................................................... -- 107
Interest income .................................................... 106 82
------------------------
3,409 5,823
Operating Expenses
Research and development ........................................... 17,181 10,106
General and administrative ......................................... 5,818 2,947
Interest ........................................................... 2,880 562
------------------------
Total operating expenses ......................................... 25,879 13,615
------------------------
Loss from operations .................................................. (22,470) (8,332)
Extraordinary item:
Gain on conversion of 9% convertible
subordinated notes payable ...................................... 8,877 --
------------------------
Net loss .............................................................. (13,593) (8,332)
Accretion of preferred stock dividend ................................. 1,647 3,194
------------------------
Net loss to common stockholders ....................................... $(15,240) $(11,526)
Basic and diluted net loss per common share from:
Operations ....................................................... $(2.11) $(0.54)
Extraordinary gain ............................................... 0.83 --
------------------------
Net loss per share ............................................... (1.29) (0.54)
Accretion of preferred stock dividends ........................... (0.15) (0.20)
------------------------
Net loss per share applicable to common
stockholders .................................................. $(1.43) $(0.74)
Shares used in computing basic and
diluted net loss per Common Share (1) .............................. 10,648 15,654
Balance Sheet Data: ................................................... September 30,
1999
------------
(Unaudited)
Cash, cash equivalents and short-term investments(2)................... $500
Working capital deficit ............................................... (10,540)
Total assets .......................................................... 9,193
Long-term debt and capital lease ...................................... 414
obligations, net of current portion
9% convertible subordinated notes payable ............................. 1,306
Accumulated deficit ................................................... (249,974)
Total stockholders' equity (deficit) .................................. (4,507)
</TABLE>
(1) Computed on the basis described in Notes 2(k) of Notes to Consolidated
Financial Statements appearing elsewhere in this Prospectus.
(2) Short-term investments consisted of U.S. government securities with
maturities greater than three months but less than one year from the
purchase date.
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<PAGE>
RISK FACTORS
Investing in our common stock is very risky, and you should be able to
bear the complete loss of your investment. You should carefully consider the
risks presented by the following factors, in addition to the other information
in this prospectus.
Our Financial Condition and Need for Substantial Additional Funding
If we do not secure additional funding by June, 2000, we will be forced to
cease doing business or file for bankruptcy.
If we do not secure additional funding by June, 2000, or if we do not
establish a suitable partnership or collaboration with a third party, we could
be forced to cease doing business or file for bankruptcy, and shareholders may
lose their entire investment. If this happens, you could lose your entire
investment. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Your investment could be substantially diluted if we issue shares to obtain
financing we need.
In order to obtain the funds we currently need to continue our
operations, and the additional funds we will need in the future, we may need to
issue shares of common stock or debt or equity securities convertible into
shares of common stock. We will probably need to issue a significant number of
shares in order to raise sufficient funds to pay our creditors, meet covenants
of our credit facility and continue our operations. This will result in
substantial dilution to your investment.
We are not in compliance with some of the covenants in our loan agreement and
note offering. If our lenders and noteholders foreclose, we will have few, or
no, assets to distribute to our shareholders.
We have taken out a $6 million loan and have completed a $7.1 million
8% note offering, both of which are secured by substantially all of our assets.
The loan and the 8% notes are owned in part by our affiliates. The loan
agreement for the $6 million loan requires us to maintain liquidity of
$2,000,000 and a net worth of $6,000,000. The 8% notes require us to maintain
liquidity of $1,500,000. We believe that we currently meet the liquidity
requirements, but we do not meet the net worth requirement. We do not expect to
be able to comply with these requirements in the future unless we are able to
obtain significant additional financing. Our lenders have in the past waived our
compliance with these requirements, but they may not be willing to do so in the
future. If our lenders and noteholders decline to give us waivers, we will be in
default and they will have the right to accelerate the repayment date on the
loan and the 8% notes and foreclose on our assets. Foreclosure will likely force
us to cease doing business or file for bankruptcy. If this happens, and we are
liquidated, there will be few or no assets available for distribution to our
shareholders. Since the debt is owned in part by our affiliates, the court may
treat the loan as a capital contribution or as a junior debt, in which case
there may be assets available for distribution to our shareholders, along with
the lenders.
We expect our operating losses to continue into the future.
As of September 30, 1999, we have incurred operating losses of
approximately $250 million. We expect to continue incurring operating losses
until revenues from the sale of any drugs that we succeed in developing exceed
our research and development and administrative costs. Assuming we are able to
obtain adequate funding to continue our operations, we will need to spend
substantial additional amounts on research and development, including
preclinical studies and clinical trials, in order to obtain the necessary
regulatory approvals. If we obtain regulatory approval, we will also need to
spend substantial amounts on sales and marketing efforts.
See "Business--Anticipated and Potential Costs."
Our Operations
We may not succeed in developing a commercially viable drug.
We do not currently have any drugs on the market and the drug
candidates we are working on are still in development. These drugs have not yet
been proven to be effective in humans. For example, our drug closest to
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commercialization, GEM(R) 231, is still in Phase II clinical trials. All of our
other drugs candidates have not yet begun human testing. Historically, drug
candidates have a low overall probability of being commercialized, but that
probability increases as the drug progresses through the various development
stages. A drug may, for instance, be ineffective, have undesirable side effects,
or demonstrate other therapeutic characteristics that prevent or limit its
commercial use, or may prove too costly to produce in commercial quantities. If
we determine that our drug candidates cannot be successfully developed, or if we
are unable to obtain the necessary regulatory approval, we will not be able to
generate the revenues from the sale of drugs that we would need in order to be
profitable.
We have many competitors, and may not be able to compete successfully against
them.
Several companies, in particular Isis Pharmaceuticals, Inc. and Genta
Incorporated, are also in the business of developing antisense drugs. Isis has
received the approval of the U.S. Food and Drug Administration, or "FDA," for
Vitravene, is currently marketing this drug for the treatment of CMV retinitis,
and has several other drugs in clinical testing for the possible treatment of
cancer, including ISIS 3521 and 2503. Genta is testing G3139 in humans, also for
the treatment of cancer. These drugs candidates are further along in clinical
testing than Hybridon's cancer drug GEM(R) 231. Other companies have antisense
drugs in preclinical and clinical development, including Inex and AVI Biopharma.
In general, the human health care products industry is extremely
competitive. Many drugs are currently marketed for the treatment of cancer, such
as Taxol, Carboplatin, Taxotere and Camptosar. While it is unlikely that GEM(R)
231 will compete against these drugs, it may be used in combination with them.
GEM(R) 231 and other Hybridon antisense drugs may not, however, be able to
capture sufficient market share to be profitable.
Furthermore, biotechnology and related pharmaceutical technologies have
undergone rapid and significant change and we expect that the technologies
associated with biotechnology research and development will continue to develop
rapidly. Our prospects depend in large part on our ability to compete with these
technologies. Any compounds, drugs or processes that we develop may become
obsolete before we recover the expenses incurred in developing them.
Our ability to compete will suffer if we are unable to protect our patent rights
and trade secrets or if we infringe the proprietary rights of third parties.
Our success will depend to a large extent on our ability to obtain U.S.
and foreign patent protection for drug candidates and processes, preserve trade
secrets and operate without infringing the proprietary rights of third parties.
To obtain a patent on an invention, one must be the first to invent it
or the first to file a patent application for it. We cannot be sure that the
inventors of subject matter covered by patents and patent applications that we
own or license were the first to invent, or the first to file patent
applications for, those inventions. Furthermore , patents we own or license may
be challenged, infringed upon, invalidated, found to be unenforceable, or
circumvented by others, and our rights under any issued patents may not provide
sufficient protection against competing drugs or otherwise cover commercially
valuable drugs or processes. See "Business--Patents, Trade Secrets, and
Licenses."
We seek to protect trade secrets and other unpatented proprietary
information , in part by means of confidentiality agreements with our
collaborators, employees, and consultants. If any of these agreements is
breached, we may be without adequate remedies. Also, our trade secrets may
become known or be independently developed by competitors.
Our Securities
Because "penny stock" rules apply to trading in our common stock, you may find
it difficult to sell the shares you purchase in this offering.
Our common stock is a "penny stock," as it is not listed on an exchange
and trades at less than $5.00 a share. Broker-dealers who sell penny stocks must
provide purchasers of these stocks with a standardized risk-disclosure document
prepared by the SEC. It provides information about penny stocks and the nature
and level of risks involved in investing in the penny-stock market. A broker
must also give a purchaser, orally or in writing, bid and offer quotations and
information regarding broker and salesperson compensation, make a written
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<PAGE>
determination that the penny stock is a suitable investment for the purchaser,
and obtain the purchaser's written agreement to the purchase. The penny stock
rules may make it difficult for you to sell your shares of our stock. Because of
the rules, there is less trading in penny stocks. Also, many brokers choose not
to participate in penny stock transactions.
Certain existing stockholders hold a substantial portion of our stock, and
consequently could control most matters requiring approval by stockholders.
Our officers, directors and principal stockholders own or control more
than 60% of our common stock on a fully-diluted basis. As a result, these
stockholders, acting together, have the ability to control most matters
requiring approval by the stockholders. This concentration of ownership may have
the effect of delaying or preventing a change in control of Hybridon.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that do not reflect
historical facts, but instead reflect Hybridon's current expectations, estimates
and projections regarding its business. Forward-looking statements can be found
in the material set forth under "Risk Factors," "Business," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
are characterized by use of words such as "believes," "plans," "expects," and
"anticipates." Forward-looking statements are not guarantees of future
performance, and necessarily involve risks and uncertainties, and Hybridon's
results could differ materially from those anticipated in the forward-looking
statements contained in this prospectus.
BUSINESS
HYBRIDON
Hybridon, established in 1989, is a leader in the discovery and
development of genetic drugs, which are drugs that treat diseases by acting on a
particular gene or protein. The genetic drugs being developed by Hybridon are
based on "antisense" technology, in that they use synthetic genetic material,
also called oligonucleotides, with the aim of stopping or reducing the body's
production of proteins that directly or indirectly cause a given disease.
Hybridon has developed and owns antisense technology that includes
important new medicinal chemistries (relating to the design and manufacture of
new medicinal compounds), analytical chemistry (relating to the detection and
identification of compounds inside and out of the body), and manufacturing
technology. It also has rights to technology allowing the chemical modification
of oligonucleotides, has particular expertise in the efficient design and
development of antisense drugs, and has devised innovations in the manufacture
of oligonucleotides. In addition, it has one of the few large-scale
oligonucleotide manufacturing facilities.
These aspects of Hybridon's business are discussed below.
TECHNOLOGY OVERVIEW
Introduction
The heart, brain, liver and other organs in the human body function
together to support life. Each microscopic cell within these organs produces
proteins that affect how that cell functions within its organ, and ultimately
how efficiently each organ functions within the body. Almost all human diseases
are caused by abnormal production or performance of proteins within individual
cells. In some instances, cell proteins act directly to cause or support a
disease. In other instances, cell proteins interfere with other proteins that
prevent or combat disease. Traditional drugs are designed to interact with
protein molecules that cause or support diseases. Antisense drugs are designed
to work at an earlier stage, in that they are designed to stop the production of
disease-causing or disease-supporting proteins.
The information that controls a cell's production of a specific protein
is contained in the gene relating to that protein. Each gene is made up of two
intertwined strands of DNA that form a structure called a "double helix." Each
strand of DNA consists of a string of individual DNA building blocks, called
nucleotides, arranged in a specific sequence.
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<PAGE>
One of the paired strands contains the information that directs the composition
of a specific protein, and is called the "coding" strand. The other strand, the
"non-coding" strand, contains a different but complementary sequence of
nucleotides. Each strand is made of linked molecules, known as the "backbone,"
and attached to the backbone are molecules known as "bases." It is the sequence
of bases that contains genetic information.
The full complement of human genes, known as the human "genome,"
consists of over 100,000 genes and contains the information required to produce
all human proteins. A copy of the complete human genome is present in each cell,
and each cell makes proteins based on its copy of the genome. Cells make
proteins in a two-stage process. First, the cell creates a molecule of messenger
RNA consisting of a string of nucleotides in a sequence complementary to the
sequence of the coding strand of DNA. This is called the "sense" sequence. A
sequence that is complementary to the sense sequence is called the "antisense"
sequence. The cell then produces proteins based on the information contained in
the messenger RNA. The number of copies of messenger RNA the cell produces will
affect how many copies of a given protein it produces.
A normal cell produces a given set of normal proteins in the right
amount for the body to function properly. A diseased cell produces inappropriate
or mutant proteins, or produces the wrong amount of normal proteins. A cell
produces mutant proteins when its DNA changes, either through mutation, as in
many types of cancer cells, or by infection with a virus.
Conventional Drugs
Most drugs are chemicals that stimulate or suppress the function of a
particular molecule, usually a protein, with tolerable side effects. Most side
effects arise when a drug interacts with proteins in addition to the target
protein. Generally, the fewer other proteins a drug interacts with, the fewer
the side effects.
Conventional drugs generally aim to bind only two or three points of
the target molecule. Frequently, however, sites on other non-target molecules
resemble the target binding site enough to permit the conventional drug to bind
to some degree to those non-target molecules. This lack of selectivity can
result in unwanted side effects, potentially leading to decreased effectiveness.
A further characteristic of conventional drugs is that developing them
is a time-consuming and expensive process, as for every compound that is found
to be effective and have tolerable side effects, thousands may be investigated
and rejected.
Antisense Drugs
An oligonucleotide with a sequence exactly complementary to that of the
messenger RNA of a specific gene can bind to and inactivate the messenger RNA,
thereby decreasing or eliminating the production of disease-causing or
disease-supporting proteins. Antisense technology involves the design and
synthesis of such oligonucleotides. Hybridon believes that drugs based on
antisense technology may be more effective, cause fewer side effects, and have a
greater range of applications than conventional drugs because antisense drugs
are designed to intervene in the production of proteins, rather than after the
proteins are made, and in a highly specific fashion.
Advances in mapping the human genome, including work conducted by
academic institutions, biotechnology companies and pharmaceutical companies,
have allowed many targets for antisense drugs to be identified. Once a gene
associated with a disease-associated protein is identified, an antisense
oligonucleotide can be designed, and the pharmaceutical effects of that
oligonucleotide can be improved by chemical modification. Chemically-modified
oligonucleotides can be composed of DNA, RNA, or a combination of the two.
Because the nucleotide sequence of a chemically-modified antisense
oligonucleotide is complementary to its target sequence on the messenger RNA of
a given gene, the antisense oligonucleotide forms a large number of bonds at the
target site, typically between 40 and 60. This allows it to form a strong bond
with the messenger RNA. A few identical messenger RNA molecules can cause the
cell to produce many copies of a protein; similarly, a few identical
chemically-modified antisense oligonucleotides can stop this process. This is
due in part to an enzyme called RNase H that can destroy messenger RNA bound to
an oligonucleotide without destroying the oligonucleotide itself, thus freeing
the oligonucleotide to bind with, and cause the destruction of, other messenger
RNA molecules. This process is generally
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<PAGE>
known as catalytic activity. All of Hybridon's drugs are designed to take
advantage of this catalytic activity so that a relatively small number of
antisense molecules can effectively inhibit production of disease-associated
proteins.
HYBRIDON ANTISENSE TECHNOLOGY
Hybridon's antisense chemistry builds on the pioneering work in the
antisense field begun in the 1970s by Dr. Paul C. Zamecnik, a founder,
consultant and director of Hybridon. The development of Hybridon's antisense
chemistry has been directed by Dr. Sudhir Agrawal, Hybridon's President, Acting
Chief Executive Officer and Chief Scientific Officer, and is based on what is
referred to in this prospectus as "advanced chemistries," namely Hybridon's
ability to alter the chemical makeup of the oligonucleotide backbone in a manner
that makes oligonucleotides safer and more stable without adversely affecting
their ability to promote the destruction of messenger RNA.
Medicinal Chemistries. Hybridon's first antisense drug, GEM(R) 91, was
based on first-generation phosphorothioate chemistry, which altered the
naturally-occurring, or native, form of oligonucleotides by replacing certain
phosphorus atoms in the backbone with sulfur atoms. GEM(R) 91 was more stable
than native DNA, but was still able to trigger the action of RNaseH, leading to
catalytic activity. However, there were side effects caused by the
administration of this modified DNA into the body. In particular, in the last
clinical trial of GEM(R) 91 three of the nine patients treated experienced
unacceptable decreases in platelet counts, which increased the possibility of
uncontrolled bleeding. As a result, Hybridon discontinued the GEM(R) 91 program.
Hybridon has, however, used the information gained from the human clinical
trials of GEM(R) 91 to design its advanced oligonucleotide chemistries.
Hybridon's scientists have designed and made over twenty families of
advanced oligonucleotide chemistries, including DNA/RNA combinations, also
called hybrid or mixed backbone chemistries. Hybridon believes that antisense
compounds based on these advanced chemistries will show favorable pharmaceutical
characteristics and significantly improve therapeutic value compared to earlier
antisense drug candidates. These compounds are likely to have the following
desirable characteristics:
o fewer side effects
o greater stability in the body, thereby permitting a patient to take
doses less frequently
o greater potency, thereby permitting a patient to take lower doses
o potential for multiple routes of administration (such as by injection,
orally, or topically)
Manufacturing Technology. Hybridon's expertise in the synthesis of
chemically modified oligonucleotides has served as the foundation of its
manufacturing technology and know-how. Hybridon has developed proprietary
technology, including equipment, to increase the purity of its oligonucleotides,
make the production process more efficient, increase the scale of production,
and significantly reduce the cost of oligonucleotide-based drugs.
Proprietary Analytical Tools. Hybridon has established analytical tools
and processes that enable it to test the purity of oligonucleotides more quickly
and accurately than would be feasible using traditional methods. Hybridon uses
the resulting information to improve quality control, to assist it in complying
with regulatory requirements, and to monitor absorption and stability of its
drugs in preclinical and clinical trials.
Regulatory Know-How. Hybridon drug development and manufacturing
personnel have extensive experience in working with the FDA and other drug
regulatory agencies in an efficient and cost-effective manner. Hybridon often
assists customers of Hybridon Specialty Products, Hybridon's contract
manufacturing division, also called "HSP," by contributing essential components
of their submissions to the FDA.
DRUG DEVELOPMENT AND DISCOVERY
The Drug Development and Approval Process
The process of taking a compound from the laboratory to human patients
generally takes 10 to 15 years. This process is extremely expensive and is
rigorously regulated by governmental agencies, including, in the U.S., the Food
and Drug Administration, or the "FDA". Each drug must undergo a series of trials
(preclinical and clinical) before the FDA will consider approving it for
commercial sale. The FDA or any company conducting drug trials can discontinue
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those trials at any time if it feels that patients are being exposed to an
unacceptable health risk or if there is not enough evidence that the drug is
effective. The FDA may also require a company to provide additional information
or conduct additional tests before it will permit a drug to proceed from one
phase of trials to the next.
The phases of preclinical and clinical trials are described below:
o Preclinical Studies. Preclinical trials involve the testing of a given
compound in animals to provide data on the activity and safety of the
compound before the compound is administered to humans.
o Investigational New Drug Application. If the data from research and
preclinical trials are promising, the company will file an
Investigational New Drug Application, or "IND," with the FDA. The IND
contains the results of the preclinical trials and the protocol for the
first clinical trial. The IND becomes active in 30 days unless the FDA
disapproves it or requires additional information. Once the IND becomes
active, the company can begin clinical trials in humans.
o Phase I Clinical Trials. In Phase I trials, the drug is given to a
small group of healthy individuals or patients with the disease. These
trials are designed to produce data on the drug's safety, the maximum
safe dose, and how the drug is absorbed, distributed, metabolized and
excreted over time. In some cases, Phase I trials can give an early
indication of a drug's effectiveness. A limited Phase I trial is
sometimes called a Pilot Phase I trial.
o Phase I/II Clinical Trials. In Phase I/II trials, the drug is given to
patients with the diseases to evaluate safety and to get an early
indication of a drug's effectiveness. This type of trial is commonly
used in the evaluation of oncology drugs.
o Phase II Clinical Trials. In Phase II trials, the drug is given to a
larger group of patients with the disease for purposes of evaluating
the drug's effectiveness and side effects at varying doses and
schedules of administration and thereby determining the optimal dose
and schedule for the larger Phase III trials that follow.
o Phase III Clinical Trials. These trials generally have a large number
of patients. The primary purpose of a Phase III trial is to confirm the
drug's effectiveness and produce additional information on side
effects.
o New Drug Application. Once Phase III trials are complete, the company
will file a New Drug Application, or "NDA," with the FDA. The NDA
contains all of the information gathered from the Phase I, II and III
trials. Based on the FDA's review of the NDA, the FDA may approve the
drug for commercial sale. The FDA may deny an NDA if the applicable
regulatory requirements are not met. The FDA may also require
additional tests before approving an NDA. Even after approval by the
FDA, the company must file additional reports about the drug with the
FDA from time to time. The FDA may withdraw product approvals if a
company fails to comply with ongoing regulatory standards or if
problems occur after a company starts marketing a drug.
o Accelerated Approval. The FDA is authorized to grant accelerated review
to NDAs for drugs that are intended to treat persons with debilitating
and life-threatening illnesses, especially if no satisfactory
alternatives are available. The more severe the disease, the more
likely it is that the drug will qualify for accelerated review. If a
new drug is approved after accelerated review, the FDA may require the
company that filed the NDA to conduct specific post-marketing studies
regarding the drug's safety, benefits and optimal use.
The regulatory process in other countries is generally similar to the
U.S. regulatory process.
Hybridon Drug Development and Discovery Programs
Hybridon is focusing its drug development and discovery efforts on
developing antisense compounds for the treatment of diseases in three major
therapeutic areas: cancer, viral infections and diseases of the eye.
Hybridon believes there are significant additional opportunities for
the use of antisense, particularly in the treatment of cancer. Compared to
conventional anti-cancer drugs, antisense may provide:
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o more specific therapy
o more rapid development of drugs targeting newly-discovered
cancer-related proteins
o fewer toxic side effects, thereby allowing repeat and long-term
therapy, either alone or in combination with other cancer therapies
(such as radiation or chemotherapy)
o when used in combination therapy, therapeutic effects that complement
the benefits of conventional drugs
For these reasons, Hybridon is exploring new antisense targets relevant
to the treatment of cancer.
CLINICAL PROGRAMS
Hybridon has conducted clinical trials with antisense drugs targeting
the following diseases. Hybridon is seeking partners for each of its compounds
in clinical development.
Cancer
Unlike normal human cells, cancer cells grow in an uncontrolled and
harmful manner. The protein molecule protein kinase A, or "PKA," has been
implicated in the formation and growth of various solid tumors, including colon,
ovarian, breast, and lung tumors. There are two kinds of PKA. It is normal to
find type I in developing fetuses, but abnormal to find it in adults. By
contrast, PKA type II is found in, and is necessary to the health of, normal
adults. Certain cancer cells produce PKA type I in adults. Hybridon has
developed a cancer drug, GEM(R) 231, that is designed to reduce the production
of the harmful PKA type I without interfering with the production of PKA type
II. Current drug candidates based on conventional mechanisms have unacceptable
side effects.
Hybridon has conducted a Phase I clinical trial to evaluate the safety
of GEM(R) 231 at multiple doses, and has found that patients tolerate it well.
This trial explored the maximum tolerated dose of GEM(R) 231 for both single
doses and multiple doses, and even high doses of GEM(R) 231 did not show the
side effects normally seen with current cancer treatments. This trial was not
conducted for the purpose of evaluating the efficiency of GEM(R) 231.
Hybridon is currently conducting additional studies with GEM(R) 231 in
patients with solid tumors that had not been cured by prior therapy. These
studies include a pilot Phase II trial and a Phase I/II trial. In addition,
Hybridon has begun the first in a series of Phase I/II trials treating patients
with solid tumors with GEM(R) 231 in combination with the anti-cancer therapies
Taxol(R) and Taxotere(R).
HIV-1 and AIDS
Acquired Immune Deficiency Syndrome, "AIDS," is caused by infection
with the Type 1 Human Immunodeficiency Virus, or "HIV-1," and leads to severe,
life-threatening impairment of the immune system. AIDS therapy using a
combination of drugs has resulted in decreased rates of death and improvement in
the quality of life for patients who are HIV-positive or have AIDS. There are
however, increasing reports that this therapy may be failing to give sustained
clinical benefit. Hybridon believes this underscores the need for new AIDS
therapies.
Hybridon has completed a Pilot Phase I clinical study in Europe of
GEM(R) 92, Hybridon's advanced chemistry compound for the treatment of HIV-1
infection and AIDS. This study was designed to explore the safety of GEM(R) 92
and to provide information on its absorption after oral dosing and injection.
The patients tolerated well all doses given in the pilot study. Further, GEM(R)
92 was detected in the blood after both oral dosing and injection, suggesting
that it may be possible to develop GEM(R) 92 as an oral drug. Hybridon believes
this was the first study of the oral administration of an antisense molecule to
humans. In in-vitro studies, beneficial effects were observed when GEM(R) 92 was
used in combination with several marketed AIDS drugs. Importantly, both its
medicinal approach and genetic target are unique, in that no antisense drug has
been approved for the treatment of AIDS, and no other drug has the same target
on the HIV-1 genome.
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PRECLINICAL PROGRAMS
Hybridon has also conducted preclinical studies in the following areas:
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------ --------------------------------------
Primary Therapeutic
Target Indication(s) Status
- ------------------------------------------------- ------------------------------ --------------------------------------
<S> <C> <C>
MDM2 (a protein involved in programmed cell Cancer Ongoing; part of the Searle
death) collaboration
- ------------------------------------------------- ------------------------------ --------------------------------------
Vascular Endothelial Growth Cancer Seeking partner
Factor (a protein that can cause abnormal
formation of new blood vessels) Retinopathies (e.g. macular Seeking partner
degeneration and diabetic
retinopathy)
Psoriasis Seeking partner
- ------------------------------------------------- ------------------------------ --------------------------------------
Hepatitis C Virus Hepatitis C (which can lead Seeking partner
to liver cancer)
- ------------------------------------------------- ------------------------------ --------------------------------------
</TABLE>
HYBRIDON SPINOUTS
Hybridon has used multiple strategies to fund applications of its
antisense technology that it cannot develop at present without external funding.
Hybridon has used one such strategy, formation of spinout companies, to form
MethylGene, Inc. and OriGenix Technologies Inc. for the continued development of
certain product candidates.
MethylGene, Inc.
In 1996, Hybridon and three Canadian institutional investors formed
MethylGene. Hybridon owns approximately 30% of MethylGene. Hybridon has granted
exclusive worldwide licenses and sublicenses to MethylGene to develop and market
(1) antisense compounds to inhibit the protein DNA methyltransferase for the
treatment of any disease, (2) other methods of inhibiting DNA methyltransferase
for the treatment of any disease, and (3) antisense compounds to inhibit up to
two additional targets for the treatment of cancers. Research has shown that DNA
methyltransferase, a protein, is overproduced in some tumors, such as
non-small-cell lung cancer, colon cancer, and breast cancer tumors. MethylGene
is obligated to purchase from Hybridon at specified prices all bulk
oligonucleotides that MethylGene requires. Hybridon is also performing drug
development and other services for MethylGene.
The Canadian investors who invested in MethylGene have the right to
exchange all (but not less than all) of the shares of stock in MethylGene that
they initially purchased for shares of Hybridon common stock on the basis of
37.5 MethylGene shares (for which they paid approximately U.S. $56.25) for one
share of Hybridon common stock (subject to adjustment for stock splits, stock
dividends and the like). This option expires no later than 2001.
MethylGene commenced Phase I clinical trials of its first compound,
MG98, for the treatment of cancer in May 1999.
OriGenix Technologies Inc.
In January 1999, Hybridon and three Canadian institutional investors
formed OriGenix to develop and market drugs for the treatment of infectious
diseases, with an initial focus on viral diseases. Hybridon owns approximately
40% of OriGenix.
Hybridon has granted to OriGenix worldwide exclusive licenses and
sublicenses to antisense technology developed by Hybridon for the treatment of
human papillomavirus, or "HPV," and hepatitis B virus infections. HPV
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infection can cause a variety of warts, including benign genital warts. HPV
infection can also lead to cervical cancer. Hepatitis B infections can lead to
liver cirrhosis and cancer of the liver. OriGenix may in the future negotiate
with Hybridon for licenses or sublicenses relating to additional targets. In
addition, OriGenix is obligated to purchase from Hybridon at specified prices
all bulk oligonucleotides it requires. Hybridon may also perform drug
development and other services for OriGenix.
CORPORATE COLLABORATIONS
An important part of Hybridon's business strategy is to enter into
research and development collaborations, licensing agreements, or other
strategic alliances with others, primarily biotechnology and pharmaceutical
corporations, to develop certain products. Hybridon intends to proceed with
Phase II clinical trials of its cancer drug GEM(R) 231. Otherwise, Hybridon does
not anticipate proceeding with any of its other clinical programs beyond their
current stages of development without a collaborative arrangement with a
corporate partner. Hybridon is currently a party to corporate collaborations
with Searle and Medtronic. Hybridon expects to retain the rights to manufacture
many of the products it may license pursuant to its existing and any future
collaborations.
G.D. Searle & Co.
In January 1996, Hybridon and Searle entered into a collaboration for
research and development of therapeutic antisense compounds in the areas of
inflammation/immunomodulation. The collaboration agreement, as modified in April
1998, provides that Searle may also select specific targets in the fields of
cancer and cardiovascular disease.
Hybridon and Searle are currently conducting research and development
relating to compounds targeting MDM2, a protein that is involved in programmed
cell death and that may play a role in cancer. In this project, Searle is
funding certain research and development efforts at Hybridon, and Searle and
Hybridon have committed personnel to the collaboration. The initial phase of
research and development activities will be conducted through the earlier of (1)
the achievement of certain milestones and (2) January 31, 2000, subject to early
termination by Searle. The parties may agree to extend this collaboration.
Searle has notified Hybridon that it intends to inform Hybridon by
February 29, 2000, whether it is electing to extend the collaboration.
In addition, Searle may designate up to six additional molecular
targets in the specified fields on terms substantially consistent with the terms
applicable to the initial targets. To do so, it must pay specified cash amounts
(in addition to specific research payments relating to each additional target)
and purchase additional common stock from Hybridon (at the then fair market
value), with the total payment per additional target equaling $10,000,000. If
Searle designates all of the additional targets, Searle will pay $24,000,000 in
cash and purchase $36,000,000 of equity. If Searle has not designated all of the
additional targets by the time any drug relating to the initial molecular target
reaches a certain stage of preclinical development, Searle must purchase up to
an additional $10,000,000 of common stock (at the then fair market value) in
order to keep its right to designate any of the additional targets. This payment
will be credited against the equity investment payments made by Searle for any
additional targets it designates in the future.
Searle has exclusive rights to commercialize any drugs resulting from
the collaboration. If Searle elects to commercialize a drug, Searle will fund
and perform preclinical studies and clinical trials of that drug and will be
responsible for obtaining regulatory approvals for, and marketing of, that drug.
Hybridon has agreed to perform certain research and development work exclusively
with Searle. In addition, for each drug candidate Searle must make payments to
Hybridon of up to $10,000,000 upon the achievement of development milestones.
Hybridon will also be entitled to royalties from net sales of products
commercialized as a result of the collaboration. As long as Hybridon satisfies
certain requirements relating to its manufacturing capacities and capabilities,
Hybridon will retain manufacturing rights, and Searle will be required to
purchase its requirements of bulk oligonucleotides from Hybridon on an exclusive
basis at specified prices. Upon a change in control of Hybridon, Searle would
have the right to terminate Hybridon's manufacturing rights, although the
royalty payable to Hybridon from net sales would be increased.
If Searle designates all of the additional targets or if Hybridon fails
to satisfy certain requirements relating to its manufacturing capacities and
capabilities, Searle will have the right to require Hybridon to form a joint
venture with Searle for the development and commercialization of antisense
therapeutic products in the area of inflammation/immunomodulation (other than
products relating to targets that have already been designated by Searle) to
which Searle will contribute $50,000,000 in cash and certain intellectual
property rights. Hybridon will also contribute certain intellectual property and
technology and, if the fair market value of that technology is less than
$50,000,000, Hybridon will, at its discretion, either contribute the difference
in cash or have its share of the first profits of the joint venture
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reduced by the amount of that difference. Hybridon and Searle would each own 50%
of the joint venture, although Searle's ownership interest could increase to as
much as 75% if the joint venture is established because of Hybridon's failure to
satisfy the requirements relating to its manufacturing capacities and
capabilities.
Pursuant to their collaboration, Searle also purchased 200,000 shares
of common stock in Hybridon's initial public offering.
Medtronic, Inc.
In May 1994, Hybridon and Medtronic agreed to test a device for
delivering Hybridon's antisense oligonucleotides for the treatment of
Alzheimer's disease. The agreement provides that Hybridon is responsible for the
development of, and will hold all rights to, any drug developed as a result of
this agreement and Medtronic is responsible for the development of, and will
hold all rights to, any delivery system developed as a result of this agreement.
The parties may agree to extend this collaboration to other neurodegenerative
disease targets. Hybridon is not currently conducting any activities under this
agreement.
As part of their collaboration, Medtronic purchased a total of 131,667
shares of Hybridon common stock.
HYBRIDON SPECIALTY PRODUCTS
In 1996, Hybridon formed Hybridon Specialty Products, or "HSP," to
manufacture oligonucleotide compounds both for Hybridon's internal use, for use
by its collaborators and for sale to third parties. Hybridon believes that the
current interest in genetic medicine or drugs based on genetic information will
continue, and even increase, as the potential of these technologies for the
development of new classes of drugs becomes more widely understood, and that as
a result demand for oligonucleotide compounds will increase. Hybridon's strategy
is to position HSP to take advantage of this increased demand. There can be no
assurance that this strategy will be successful or that demand will increase as
anticipated. HSP is, however, attempting to minimize this risk by manufacturing
oligonucleotides for many applications, at different stages of development. HSP
is currently manufacturing oligonucleotides for genomic, diagnostic and
therapeutic applications, and Hybridon believes HSP's customers are developing
over 20 oligonucleotide drugs, with at least eight currently in clinical
studies.
HSP manufactures oligonucleotides at its 36,000-square-foot leased
facility, which Hybridon believes is the only facility currently capable of
manufacturing oligonucleotides on a large scale. HSP first began producing
oligonucleotide compounds for sale in June 1996 and had revenues of
approximately $1.1 million in 1996, $1.9 million in 1997 and $2.8 million in
1998. HSP's principal customers in 1998 included Genta Incorporated, LaJolla
Pharmaceuticals, Inc. and MethylGene, Inc.
HSP has developed a manufacturing technology platform that combines
multiple methods to improve the production process and increase the amount of
compounds produced in a single batch, thereby permitting economies of scale. HSP
has developed two separate machines, called synthesizers, for the large-scale
synthesis of oligonucleotides. One of these machines was developed by Hybridon
alone and the other in collaboration with Pharmacia Biotech. Pharmacia has the
right to make and sell synthesizers based on the design developed in the
collaboration but must also pay Hybridon royalties. Hybridon believes that its
synthesizers are the first commercial-scale oligonucleotide synthesizers
designed for advanced oligonucleotide chemistries. In addition, HSP has
developed purification processes that use water in place of chemical solvents,
thereby decreasing the impact of the process on the environment and permitting
HSP to purify large quantities of oligonucleotides. HSP has also developed
processes and unique chemicals used in the process, which HSP believes may
further lower its production costs.
In 1996, Hybridon entered into a four-year sales and supply agreement
with the Applied Biosystems Division of Perkin-Elmer, pursuant to which
Perkin-Elmer agreed to refer potential customers to HSP, and Hybridon agreed to
purchase certain raw materials from Perkin-Elmer for the manufacture of
oligonucleotides sold to those customers. Hybridon is required to pay
Perkin-Elmer a percentage of the sales price paid by those customers. In
addition, Perkin-Elmer licensed to Hybridon its oligonucleotide synthesis
patents.
HSP is targeting three market areas for oligonucleotides: antisense
therapeutics, non-antisense therapeutics, and diagnostic/genomic DNA probes,
which are oligonucleotides designed to detect the presence of specific genes.
Within
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each area there is a large number of potential products. HSP is currently
manufacturing oligonucleotides for customers in each of these three market
areas.
The production of oligonucleotides is similar in many respects to the
chemical synthesis used to produce conventional drugs. However, unlike many
conventional drugs, one can with the same chemical building blocks and
essentially the same manufacturing processes and equipment make different
antisense compounds for treating different diseases. As a result, the knowledge
and experience that HSP obtains manufacturing one oligonucleotide compound can
be applied to the manufacture of other oligonucleotide compounds. Furthermore,
since several different oligonucleotide compounds can be manufactured in one
facility, Hybridon anticipates that HSP will have the ability to manufacture
multiple marketed oligonucleotide-based drugs without having to build a separate
plant for each such compound.
In order to meet Hybridon's needs and satisfy outside demand, HSP may
need to increase its manufacturing capacity by adding more oligonucleotide
synthesizers. In addition, in order for Hybridon to successfully commercialize
its drugs or for HSP to achieve a satisfactory profit on sales, HSP may need to
reduce its production costs further.
Hybridon believes that it is currently manufacturing oligonucleotides
according to FDA Good Manufacturing Practices, or "GMP". The FDA has not
formally reviewed HSP's facility and procedures, and Hybridon may need to revise
those procedures in the future as production increases. Since 1996, HSP has
undergone multiple significant audits for GMP compliance conducted by
biotechnology and pharmaceutical companies. No significant deficits have been
identified. In addition, in 1997, HSP was one of two biotechnology companies
chosen to participate in the FDA's Biotechnology PAI Pilot Initiative, a pilot
program that allows FDA regulatory officials to provide advice to the selected
companies on compliance with FDA standards before they submit drug approval
filings. The FDA would have informed Hybridon of any substantial issues if any
had arisen.
MARKETING STRATEGY
Hybridon plans to market the drugs it is developing either directly,
using its own sales force, or through co-marketing, licensing, distribution or
similar arrangements with other pharmaceutical and biotechnology companies,
particularly if the products are intended to serve a large,
geographically-diverse patient population. Direct marketing of any of its
proposed drugs would require a substantial marketing staff and sales force
supported by a distribution system. Co-marketing or other arrangements with
other pharmaceutical or biotechnology companies would allow Hybridon to avoid
the significant cost involved in direct marketing, but would make Hybridon
reliant on the efforts of others. While Hybridon has developed general marketing
strategies, it has not begun to implement any of these strategies.
ACADEMIC AND RESEARCH COLLABORATIONS
Hybridon has entered into a number of collaborative research
relationships with independent researchers and leading academic and research
institutions and U.S. government agencies, including the National Institutes of
Health, or "NIH". Such research relationships allow Hybridon to augment its
internal research capabilities and obtain access to specialized knowledge or
expertise.
In general, Hybridon's collaborative research agreements require
Hybridon to pay various amounts to support the research. Hybridon usually
provides the oligonucleotides, which the collaborator then tests. If in the
course of conducting research under its agreement with Hybridon a collaborator,
solely or jointly with Hybridon, creates any invention, Hybridon generally has
an option to negotiate an exclusive, worldwide, royalty-bearing license to the
invention. Inventions developed solely by Hybridon's scientists in connection
with a collaborative relationship generally are owned exclusively by Hybridon.
Most of these collaborative agreements are nonexclusive and can be cancelled on
short notice.
Since July 1997, as part of its restructuring, Hybridon has allowed a
number of its collaborative research agreements to expire and has terminated
certain others, but has maintained those that it believes support its current
drug discovery and development programs.
DRUG DEVELOPMENT SERVICES
Hybridon's Drug Development Department has experience in the design and
conduct of preclinical and clinical trials and has prepared and submitted
reports and other regulatory documents in connection with the three Hybridon
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advanced chemistry antisense compounds that have entered clinical studies.
Pursuant to a contract with MethylGene, Hybridon's Drug Development Department
has also used its expertise to help design and monitor the preclinical trials of
MethylGene's antisense compound, MG98, that led to MethylGene's submission of
IND applications in Canada and the U.S. MethylGene compensated Hybridon for
these services. Hybridon may perform similar services for OriGenix.
PATENTS, TRADE SECRETS, AND LICENSES
Hybridon's success will largely depend on its ability to:
o obtain U.S. and foreign patent protection for drug candidates and
processes
o preserve trade secrets
o operate without infringing the proprietary rights of third parties
Hybridon's policy is to file patent applications to protect technology,
inventions and improvements that it considers important to development of its
business, and to obtain licenses to other patents that could help Hybridon
maintain or enhance its competitive position. As of January 15, 2000, Hybridon
owned or exclusively licensed in excess of 113 U.S. and foreign issued and
allowed patents, of which 79 are U.S. patents, and 59 other U.S. and 88 other
foreign patent applications. These patents and applications cover various
chemically advanced oligonucleotides, target sequences, oligonucleotide
products, methods for making and purifying oligonucleotides, analytical methods,
and methods for antisense treatment of various diseases. The patents expire on
dates ranging from 2006 to 2015.
Hybridon is the worldwide exclusive licensee under several U.S. issued
patents or allowed patent applications owned by University of Massachusetts
Medical Center, or "UMMC" (formerly the Worcester Foundation), relating to
oligonucleotides and hybrid or mixed backbone chemistries. Many of these patents
and patent applications have corresponding patents issued by, or corresponding
patent applications on file in, other major industrial countries. One of the
issued U.S. patents and one of the issued European patents cover antisense
oligonucleotides as new compositions of matter for stopping the replication of
HIV. Coverage of the other issued U.S. patents includes composition and use of
oligonucleotides based on advanced chemistries, methods of oligonucleotide
production, composition of certain modified oligonucleotides that are useful for
diagnostic tests or assays, and methods of purifying oligonucleotides. The UMMC
patents licensed to Hybridon expire at various dates starting in 2006.
Hybridon is the exclusive licensee under various other U.S. and foreign
patents and patent applications, including two U.S. patent applications owned by
McGill University relating to oligonucleotides and DNA methyltransferase.
Hybridon and Massachusetts General Hospital jointly own one issued U.S. patent
applicable to Alzheimer's disease. Hybridon holds an exclusive license to
Massachusetts General Hospital's interests under this patent.
Hybridon is a nonexclusive licensee of certain patents held by the
National Institutes of Health, or "NIH," relating to oligonucleotide
phosphorothioates and is a nonexclusive licensee of an NIH patent covering the
phosphorothiolation of oligonucleotides. The field of each of these licenses
extends to a wide variety of genetic targets. Hybridon is also a nonexclusive
licensee of certain patents exclusively licensed to Genzyme covering certain
technology relating to MDM2.
The U.S. Patent and Trademark Office, or "PTO," has informed Hybridon
that certain patent applications exclusively licensed by Hybridon from UMMC will
be submitted to the Board of Patent Appeals and Interferences of the PTO to
determine whether an interference should be declared with issued U.S. patents
held by the NIH relating to oligonucleotide phosphorothioates. An interference
proceeding is a proceeding to determine who was the first to invent, and thus
who is entitled to a patent for, a claimed invention. McDonnell Boehnen Hulbert
& Berghoff, a U.S. patent counsel for Hybridon, is of the opinion that the UMMC
patent application has a prima-facie case for priority against the NIH for an
invention that includes phosphorothioate-modified oligonucleotides. There can be
no assurance, however, that the PTO will declare an interference, or if it does,
what the outcome will be. If Hybridon were to lose the interference, its
nonexclusive license from the NIH of the NIH phosphorothioate patents would not
be affected. If Hybridon were to win the interference, others making, using or
selling certain phosphothioate-modified oligonucleotides would be required to
obtain a license from Hybridon.
The PTO also declared a four-way interference involving two UMMC U.S.
patents, for which Hybridon is the exclusive licensee, relating to a particular
type of modified oligonucleotides. The other parties to this interference were
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Integrated DNA Technologies, or "IDT," Isis Pharmaceuticals, Inc. and Gilead
Sciences, Inc. This interference was settled in early 1999. In connection with
the settlement, Hybridon has obtained a nonexclusive license to certain patents
and patent applications owned by IDT that broadly claim chemical modifications
to oligonucleotides. Hybridon has also granted a nonexclusive license to IDT to
make, use, and sell limited quantities of oligonucleotides incorporating certain
of Hybridon's advanced chemistries.
Under its licenses, Hybridon is obligated to pay royalties on its net
sales of products or processes covered by the licensed technology and, in some
cases, to pay a percentage of sublicense income that it receives. These licenses
impose various commercialization, sublicensing, insurance and other obligations
on Hybridon. If Hybridon fails to comply with these requirements, the license
could be terminated.
Legal standards relating to the validity of patents covering
pharmaceutical and biotechnological inventions and the scope of claims made
under such patents are still developing. As a result, Hybridon's ability to
obtain and enforce patents that protect its drugs is uncertain and involves
complex legal and factual questions.
That Hybridon owns or licenses pending or future patent applications
does not mean that patents based on those applications will ultimately be
issued. First, to obtain a patent on an invention, one must be the first to
invent it or the first to file a patent application for it. Patent applications
in the U.S. are maintained in secrecy until patents issue, and publication of
any given discovery in the scientific or patent literature tends to lag behind
actual date of that discovery by several months. Consequently, Hybridon cannot
be certain that the inventors of subject matter covered by patents and patent
applications that it owns or licenses were the first to invent, or the first to
file patent applications for, those inventions.
Others, including Hybridon's competitors, also hold issued patents and
patent applications relating to antisense technology or particular genetic
targets, including an issued patent in Europe covering the gene MDM2. Holders of
any of these patents or patent applications may be able to require Hybridon to
change or cease making or using certain products or processes, or obtain an
exclusive or nonexclusive license in return for licensing fees, which may be
substantial. Hybridon may not be able to obtain any such licenses at a
reasonable cost. Furthermore, such licenses may be made available to competitors
of Hybridon on an exclusive or nonexclusive basis. Failure to obtain such
licenses could have a material adverse effect on Hybridon. Previously, a
competitor was granted another European patent relating to certain types of
stabilized synthetic oligonucleotides for use as therapeutic agents for
selectively blocking the translation of a messenger RNA into a targeted protein
by binding with a portion of the messenger RNA to which the stabilized synthetic
oligonucleotide is substantially complementary. This European patent was revoked
in its entirety in an opposition proceeding before the European Patent Office in
September 1995. The holder of this patent appealed this decision. This appeal
was dismissed on February 18, 1999.
Hybridon requires its employees, consultants, outside scientific
collaborators, sponsored researchers and other advisors to execute
confidentiality agreements. These agreements provide that all confidential
information developed or made known by Hybridon to the individual is to be kept
confidential, subject to specific exceptions. In the case of employees, the
agreements provide that all inventions conceived by the individual are the
exclusive property of Hybridon. These agreements may not, however, provide
meaningful protection for Hybridon's trade secrets or adequate remedies in the
event of breach.
Consistent with pharmaceutical industry and academic standards,
Hybridon's agreements with academic and research institutions and U.S.
government agencies may provide that the results of a given collaboration, or
any developments that derive from the collaboration, will be freely published,
that information or materials supplied by Hybridon will not be treated as
confidential, and that Hybridon must negotiate a license to developments and
results in order to commercialize products incorporating them. There can be no
assurance that Hybridon will be able successfully to obtain any such license at
a reasonable cost or that such developments and results will not be made
available to competitors of Hybridon on an exclusive or nonexclusive basis. See
"Business--Academic and Research Collaborations."
GOVERNMENT REGULATION
Hybridon's research, clinical development and production activities are
regulated for safety, effectiveness and quality by numerous governmental
authorities in the U.S. and other countries. Hybridon believes that it is in
material compliance with all applicable federal, state and foreign legal and
regulatory requirements.
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<PAGE>
FDA Approvals. In addition to product approvals by the FDA, as
described above, the FDA may require that it inspect Hybridon's manufacturing
facilities for compliance with GMP and other applicable rules and regulations
before it will permit a product manufactured by Hybridon to be marketed in the
U.S. Any material change by Hybridon in its manufacturing process or equipment,
including relocation of the manufacturing facility, would necessitate additional
FDA review and approval.
Other Regulation. In addition to regulations enforced by the FDA,
Hybridon also is subject to regulation under the Occupational Safety and Health
Act and other present and potential future federal, state or local regulations.
Furthermore, because Hybridon uses hazardous materials, chemicals, viruses, and
various radioactive compounds, it must comply with U.S. Department of
Transportation and Environmental Protection Agency regulations and other
federal, state, and foreign laws and regulations regarding hazardous waste
disposal, air emissions, and waste-water discharge. Although Hybridon believes
that it complies with these laws and regulations, it cannot completely eliminate
the risk of accidental contamination or injury from these materials.
COMPETITION
There are a number of companies, both privately and publicly held, that
are conducting research and development activities on technologies and products
aimed at therapeutic regulation of gene expression, including antisense drugs.
One competitor of Hybridon has recently received FDA approval to market an
antisense therapeutic product for the treatment of CMV retinitis. Hybridon
believes that the interest in these technologies and products will increase. It
is possible that Hybridon's competitors will succeed in developing products that
are more effective than Hybridon's. Furthermore, Hybridon's proposed drugs will
be competing with other kinds of drugs. Given the fundamental differences
between antisense technology and other drug technologies, antisense drugs may be
less effective at treating some diseases than other kinds of drugs.
Biotechnology and related pharmaceutical technologies have undergone
and continue to be subject to rapid and significant change. Hybridon expects
that the technologies associated with biotechnology research and development
will continue to develop rapidly. Hybridon's future will depend in large part on
its ability to compete with these technologies
Hybridon has many competitors, including major pharmaceutical and
chemical companies, biotechnology firms, and universities and other research
institutions. Many of these competitors have substantially greater financial,
technical, and human resources than Hybridon, and many have significantly
greater experience than Hybridon in undertaking preclinical studies and clinical
trials of new pharmaceutical products and obtaining FDA and other regulatory
approvals. Accordingly, Hybridon's competitors may succeed in obtaining
regulatory approvals for products more rapidly than Hybridon. Furthermore, if
Hybridon receives approval to commence commercial sales of products, it will
also be competing with respect to manufacturing efficiency and marketing
capabilities, areas in which it has limited experience.
HSP also faces competition, as Hybridon's customers may begin to
produce oligonucelotides internally or may find other sources. Hybridon may be
forced to reduce the cost of its products to meet the competition.
EMPLOYEES
As of January 24, 2000, Hybridon employed 45 individuals full-time, of
whom 15 held advanced degrees. Eight of these employees are engaged in research
and development activities and ten are employed in finance, corporate
development, and legal and general administrative activities. In addition, 27 of
these employees are employees of HSP, of whom 5 are employed in quality control.
Many of Hybridon's management and professional employees have had prior
experience with pharmaceutical, biotechnology, or medical products companies.
None of Hybridon's employees is covered by a collective bargaining agreement,
and management considers relations with its employees to be good.
PROPERTIES
Hybridon leases its 36,000 square foot facility in Milford,
Massachusetts under a lease that expires in 2004. Hybridon has an option to
extend this lease for two additional five-year terms.
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<PAGE>
In addition, Hybridon leases approximately 26,000 square feet of
supplemental laboratory space in Cambridge, Massachusetts under a lease that
expires April 30, 2007. The annual rent for this space is approximately $23 per
square foot. Hybridon is currently subleasing approximately 20,000 square feet
of this to a third party under a sublease that expires September 30, 2000.
LEGAL PROCEEDINGS
Hybridon is not a party to any litigation that it believes could damage
Hybridon or its business.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
From January 24, 1996 until December 2, 1997, Hybridon's common stock
was traded on the Nasdaq National Market under the symbol "HYBN." Prior to
January 24, 1996, there was no established public trading market for Hybridon's
common stock.
On December 2, 1997, Hybridon's common stock was removed from the
Nasdaq National Market and began being quoted on the NASD OTC Bulletin Board.
Quotes on the NASD OTC Bulletin Board may reflect inter-dealer prices, without
retail markups, markdowns or commissions and do not necessarily represent actual
transactions.
On December 10, 1997 Hybridon effected a one-for-five reverse stock
split of its common stock. As a result of the reverse stock split, each five
shares of common stock was automatically converted into one share of common
stock, with cash payments for any fractional shares.
The following table sets forth for the periods indicated the high and
low sales prices per share of the common stock during each of the quarters set
forth below as reported on the Nasdaq National Market and the NASD OTC Bulletin
Board since January 1, 1998:
HIGH LOW
---- ---
1998
First Quarter.......................................... $3.359 $1.000
Second Quarter......................................... 2.75 1.609
Third Quarter.......................................... 2.516 1.125
Fourth Quarter......................................... 3.25 1.125
1999
First Quarter.......................................... $1.875 $1.000
Second Quarter......................................... 1.50 0.250
Third Quarter.......................................... 1.50 0.350
Fourth Quarter......................................... 1.75 0.406
The reported closing bid price of the common stock on the NASD OTC
Bulletin Board on February 2, 2000 was $1.75 per share.
DIVIDEND POLICY
The convertible preferred stock pays dividends at 6.5% per year,
payable semi-annually in arrears. These dividends may be paid either in cash or
in additional shares of convertible preferred stock, at the discretion of
Hybridon.
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<PAGE>
Hybridon has never declared or paid cash dividends on its capital
stock, and Hybridon does not expect to pay any dividends on its common stock or
any cash dividends on the convertible preferred stock in the foreseeable future.
The indenture under which Hybridon issued 9% convertible subordinated notes on
April 2, 1997, limits Hybridon's ability to pay dividends or make other
distributions on its common stock or to pay cash dividends on the convertible
preferred stock. As of January 31, 2000, $1.3 million in total principal amount
of the 9% notes remained outstanding.
In addition, Hybridon is currently prohibited from paying cash
dividends under the loan held by the Lender. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation--1998 Financing
Activities--Credit Facility."
USE OF PROCEEDS
Hybridon will not receive any proceeds from the sale of the securities
by selling stockholders other than proceeds upon exercise of certain Hybridon
warrants. Those proceeds will be added to Hybridon's general working capital.
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<PAGE>
SELECTED FINANCIAL DATA
The selected balance sheet data set forth below, as of December 31,
1997 and 1998, and the statements of operations data for each of the three years
in the period December 31, 1998, come from Hybridon's consolidated financial
statements which have been audited by Arthur Andersen LLP, independent public
accountants, and which are included elsewhere in this prospectus. The selected
financial data as of December 31, 1994, 1995 and 1996 and for the years ended
December 31, 1994 and 1995 come from Hybridon's consolidated financial
statements not included in this prospectus, all of which have been audited by
Arthur Andersen LLP, independent public accountants. The selected financial data
as of September 30, 1999 and for the nine months ended September 30, 1998 and
1999 come from Hybridon's unaudited consolidated financial statements which are
included elsewhere in this prospectus and which include, in the opinion of
Hybridon, all normal recurring adjustments that are necessary for a fair
presentation of its financial position and the results of its operations for
those periods. Operating results for the nine months ended September 30, 1999
may not be indicative of the results that may be expected for the fiscal year
ending December 31, 1999. The selected financial data should be read along with,
and are qualified by reference to, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," Hybridon's consolidated
financial statements and notes thereto and the Report of Independence Public
Accountants included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- -----
(In Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Product and service revenue ............. $ -- $ -- $ 1,080 $ 1,877 $ 3,254
Research and development ................ 1,032 1,186 1,419 945 1,100
Royalty income .......................... -- -- 62 48 --
Interest income ......................... 135 219 1,447 1,079 148
Total revenues .................. 1,167 1,405 4,008 3,949 4,502
Operating Expenses :
Research and development ................ 20,024 29,685 39,390 46,828 20,977
General and administrative .............. 6,678 6,094 11,347 11,026 6,573
Interest ............................... 69 173 124 4,536 2,932
Restructuring ........................... -- -- -- 11,020 --
-------- -------- -------- -------- --------
Total operating expenses ............... 26,771 35,952 50,861 73,410 30,482
Loss from operations ......................... (25,604) (34,547) (46,853) (69,461) (25,980)
Extraordinary item:
Gain on conversion of 9% convertible .... -- -- -- -- 8,877
-------- -------- -------- -------- --------
subordinated notes payable
Net loss ..................................... (25,604) (34,547) (46,853) (69,461) (17,103)
Accretion of preferred stock dividend ........ -- -- -- -- 2,689
-------- -------- -------- -------- --------
Net loss to common stockholders .............. $(25,604) $(34,547) $(46,853) $(69,461) $(19,792)
Basic and diluted net loss per common share $ (70.77) $ (94.70) $ (10.24) $ (13.76) $ (2.19)
from:
Operations
Extraordinary gain ..................... -- -- -- -- 0.75
-------- -------- -------- -------- --------
Net loss per share ...................... (70.77) (94.70) (10.24) (13.76) (1.44)
Accretion of preferred stock dividends .. -- -- -- -- (0.23)
-------- -------- -------- -------- ========
Net loss per share applicable to common
stockholders ........................... $ (70.77) $ (94.70) $ (10.24) $ (13.76) $ (1.67)
Shares Used in Computing Basic and
Diluted Net Loss per Common Share(1) .... 362 365 4,576 5,050 11,859
</TABLE>
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Balance Sheet Data:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and short-term $ 3,396 $ 5,284 $ 16,419 $ 2,202 $ 5,607
investments(2)
Working capital (deficit) .............. (1,713) 210 8,888 (24,100) (5,614)
Total assets ......................... 11,989 19,618 41,537 35,072 16,536
Long-term debt and capital lease
obligations, net of current portion 1,522 1,145 9,032 3,282 473
9% convertible subordinated
notes payable .......................... -- -- -- 50,000 1,306
Accumulated deficit .................... (67,794) (102,341) (149,194) (218,655) (238,448)
Total stockholders' equity (deficit) ... 4,774 12,447 22,855 (46,048) 2,249
</TABLE>
(1) Computed on the basis described in Notes 2(k) of Notes to consolidated
financial statements appearing elsewhere in this prospectus.
(2) Short-term investments consisted of U.S. government securities with
maturities greater than three months but less than one year from the
purchase date.
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<PAGE>
Nine Months
Ended September 30,
----------------------
1998 1999
(Unaudited)
Statement of Operations Data:
Revenues:
Product and service revenue ................ $ 2,353 $ 4,644
Research and development ................... 950 450
Royalty income ............................. -- 107
Interest income ............................ 106 82
Total revenues .................... 3,409 5,283
Operating Expenses:
Research and development ................... 17,181 10,106
General and administrative ................. 5,818 2,947
Interest ................................... 2,880 562
Restructuring .............................. -- --
Total operating expenses ................... 25,879 13,615
Loss from operations ............................ (22,470) (8,332)
Extraordinary item:
Gain on conversion of 9% convertible ....... 8,877 --
subordinated notes payable
Net loss ........................................ (13,593) (8,332)
Accretion of preferred stock dividend ........... 1,647 3,194
Net loss to common stockholders ................. $(15,240) $(11,526)
Basic and diluted net loss per common share from: $ (2.11) $ (0.54)
Operations
Extraordinary gain ......................... 0.83 --
Net loss per share ......................... (1.28) (0.54)
Accretion of preferred stock dividends .... (0.15) (0.20)
Net loss per share applicable to common
stockholders .......................... $ (1.43) $ (0.74)
Shares Used in Computing Basic and .............. 10,648 15,654
Diluted Net Loss per Common Share(1)
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<PAGE>
Balance Sheet Data: September 30,
1999
---------------
(Unaudited)
Cash, cash equivalents and short-term ...................... $ 500
investments(2)
Working capital (deficit) .................................. (10,540)
Total assets ............................................... 9,193
Long-term debt and capital lease
obligations, net of current portion ..................... 414
9% convertible subordinated
notes payable ............................................ 1,306
Accumulated deficit ........................................ (249,974)
Total stockholders' equity (deficit) ....................... (4,507)
(1) Computed on the basis described in Notes 2(K) of Notes to consolidated
financial statements appearing elsewhere in this prospectus.
(2) Short-term investments consisted of U.S. government securities with
maturities greater than three months but less than one year from the
purchase date.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RECENT FINANCING ACTIVITIES
The discussion in the sections below relates to Hybridon's financial
condition and results of operations through September 30, 1999, which is the
period covered by the financial statements included elsewhere in this
prospectus. This section summarizes developments since September 30, 1999.
Hybridon sold an aggregate of $1,500,000 principal amount of promissory
notes to E. Andrews Grinstead, III, Hybridon's Chief Executive Officer, at face
value during September and November of 1999. These notes accrue interest at 12%
per annum (15% if Hybridon elects to pay this interest in shares of common stock
rather than cash). It was intended that upon the closing of any third-party debt
financing on or before March 1, 2000, these notes would be converted into the
debt sold in that financing, and in December 1999 they were converted into 8%
notes of Hybridon due 2002. Hybridon also sold an aggregate of approximately
$525,000 of debt to purchasers in a private placement transaction in October and
November 1999; as of December 13, 1999, this debt automatically converted into
8% notes.
On December 13, 1999, Hybridon sold an aggregate of an additional $5.1
million principal amount of 8% notes to purchasers in a private placement
transaction. Including the 8% notes issued upon conversion of the debt issued to
Mr. Grinstead and other purchasers, there is $7.1 million principal amount of 8%
notes outstanding. These notes earn interest semi-annually at 8% per annum,
mature on November 30, 2002 and are convertible into Hybridon's common stock at
an initial conversion price of $.60 per share.
In connection with the offering of these notes, Forum and the entities
advised by Pecks entered into a Subordination and Intercreditor Agreement with
Hybridon and the representative of the purchasers of the notes whereby, among
other things, they agreed to subordinate their loan to the notes, subject to
certain conditions. Also in connection with this offering, Hybridon agreed to
issue warrants to purchase an aggregate of 2.75 million shares of Hybridon's
common stock to designees of Pecks and Forum. These warrants are exercisable
from December 31, 2000 until December 31, 2002 at $.60 per share.
The notes permit the noteholders' representative to declare an event of
default, among other things, if Hybridon fails to maintain, as of the last day
of any calendar month, consolidated cash on hand (and cash equivalents and
marketable securities) of at least $1.5 million. As of January 31, 2000,
Hybridon met this requirement. If an event of default under the notes were
declared and not cured in the requisite time period, then the respective
representatives of the notesholders, Forum and the entities advised by Pecks
could declare their debt securities immediately due and payable, in which case
Hybridon may be required to sell substantial assets to raise funds for this
repayment and, if the proceeds of those sales together with any other funds
available are insufficient, Hybridon could be forced to declare bankruptcy.
GENERAL
Hybridon's existing cash resources are expected to be sufficient to
fund operations up to June 2000. Hybridon's ability to continue operations
beyond that time will depend on its success in obtaining new funding, either
through additional financing or new partnerships or collaborations with third
paries, particularly if its existing collaboration with Searle is terminated.
See "Business- Corporate Collaborations-G.D. Searle & Co." If Hybridon is unable
to obtain substantial additional new funding by June 2000, Hybridon may have to
terminate operations or seek relief under applicable bankruptcy laws.
Hybridon is involved in the discovery and development of genetic
medicines based on antisense technology. Hybridon began operations in February
1990 and since that time has been involved primarily in research and development
efforts, developing its manufacturing capabilities, and raising capital. In
order to commercialize its therapeutic products, Hybridon will need to address a
number of technological challenges and comply with comprehensive regulatory
requirements. All revenues received by Hybridon to date have been come from
collaborative agreements, interest on invested funds and revenues from the
custom contract manufacturing of synthetic DNA and reagent products by Hybridon
Specialty Products.
Hybridon has had total losses of approximately $250 million through
September 30, 1999. Hybridon adopted a restructuring plan in the second half of
1997 that has significantly reduced its operating expenses. However, Hybridon
expects that its research and development expenses will be significant in 1999
and future years as it pursues its core drug development programs and expects to
continue to have operating losses and significant capital needs beyond its
internally generated funds. As of January 24, 2000, Hybridon has 45 full-time
employees.
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<PAGE>
RESTRUCTURING PLAN
During the second half of 1997, Hybridon adopted a restructuring plan
to reduce spending in order to save money. As part of this plan, in addition to
stopping the development of GEM(R) 91, Hybridon limited or suspended programs
unrelated to its main advanced chemistry antisense drug development programs. In
addition, in 1997, Hybridon ended the employment of a substantial number of
employees at its Cambridge and Milford, Massachusetts and Paris, France
facilities and substantially limited operations at its Paris, France office. In
December 1998, Hybridon began the final process of ending all operations in
Europe.
In 1997 Hybridon subleased a portion of each of its facilities in
Cambridge, Massachusetts (including a substantial portion of its former
headquarters). In June 1998, Hybridon moved its headquarters from Cambridge,
Massachusetts to its facility in Milford, Massachusetts and then sold its
interest in Charles River Building Limited Partnership, or the "Cambridge
Landlord," which owned the former Cambridge headquarters. As a result, Hybridon
received $6,163,000 in cash, which included the return of a portion of its
security deposit for its Cambridge headquarters and the reclassification on
Hybridon's balance sheet of $660,000 from restricted cash to cash and cash
equivalents. The Cambridge facility was leased in September 1998 to a third
party, subject to a sublease of a portion of the premises. As a result of these
actions, Hybridon was relieved of its substantial lease obligations for the
Cambridge facility, subject to a continuing liability for any defaults which may
arise under the sublease.
RESULTS OF OPERATIONS
Nine months ended September 30, 1999 and 1998
Hybridon had total revenues of $5.3 million and $3.4 million for the
nine months ended September 30, 1999 and 1998, respectively. Revenues from
products and services were $4.6 million and $2.4 million for the nine months
ended September 30, 1999 and 1998, respectively. The increase was primarily the
result of increased sales to Hybridon Specialty Products customers and receipt
of service revenues from MethylGene, Inc., an entity in which Hybridon has an
approximately 30% equity interest , and OriGenix Technologies, Inc., an entity
in which Hybridon has an approximately 49% equity interest. The revenues
received from MethylGene decreased from $1.6 million to $0.9 million and
increased for OriGenix from zero to $76,000 for the nine months ended September
30, 1998 and 1999, respectively.
Revenues from research and development collaborations were $0.5 million
and $0.9 million for the nine months ended September 30, 1999 and 1998,
respectively. This decrease was primarily due to a reduction in revenues
recorded under a License Agreement with MethylGene, Inc.
Hybridon's research and development expenses were $10.1 million and
$17.2 million for the nine months ended September 30, 1999 and 1998,
respectively. The decrease reflects Hybridon's reduction of its operating
expenses in 1997 and 1998 pursuant to the restructuring that began in 1997 and
was completed in 1998 and the lower levels of cash available for expenditures in
1999. The restructuring included ending operations at Hybridon's facilities in
Europe, and also resulted in significant reductions in employees and
employee-related expenses, clinical and outside testing, consulting, materials
and lab expenses.
In addition, the facilities expense included in research and
development expenses decreased significantly in 1999 as a result of moving
Hybridon's corporate offices and lab space in July 1998 from Cambridge to
Milford, Massachusetts and the sublease of its remaining unused Cambridge
facilities .
Hybridon's general and administrative expenses were $2.9 million and
$5.8 million for the nine months ended September 30, 1999 and 1998,
respectively. The decrease reflects Hybridon's reduction of its operating
expenses in 1997 and 1998 pursuant to the restructuring which began in 1997 and
completed in 1998 and which resulted in significant reduction in employees and
employee-related expenses and consulting expenses . General and administrative
expenses related to business development, public relations and legal and
accounting expenses also decreased in 1999.
In addition, the facilities expense included in general and
administrative expenses also decreased significantly in 1999 as a result of
moving Hybridon's corporate offices to Milford, Massachusetts in 1998.
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<PAGE>
Hybridon's patent expenses remained at approximately the same level in
1999 as 1998.
Hybridon's interest expense was $0.6 million and $2.9 million for the
nine months ended September 30, 1999 and 1998, respectively. The decrease is
attributable to the exchange of approximately $48.7 million of the 9%
convertible subordinated notes issued in the second quarter of 1997 for Series A
preferred stock on May 5, 1998. In addition, the outstanding balance of
borrowings to finance the purchase of property and equipment was reduced in May
1998, resulting in a subsequent reduction in interest expense.
As a result of the above factors, Hybridon incurred net losses from
operations of $8.3 million and $22.5 million for the nine months ended September
30, 1999 and 1998, respectively.
Hybridon had extraordinary income of $8.9 million for the nine months
ended September 30, 1998 resulting from the conversion of $48.7 million
principal amount of its 9% notes to Series A preferred stock in the second
quarter of 1998. In accordance with Statement of Financial Accounting Standards
No. 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings,
Hybridon recorded an extraordinary gain of approximately $8.9 million related to
the exchange. The extraordinary gain represents the difference between the
carrying value of the 9% notes offered for exchange and the fair value of the
Series A preferred stock issued upon the exchange, as determined by the per
share sales price of such stock sold in May 1998 in the private offering
described below. As a result of this transaction, Hybridon reduced its net loss
to $13.6 million for the nine months ended September 30, 1998.
Hybridon had preferred stock dividends of $3.2 million and $1.6 million
for the nine months ended September 30, 1999 and 1998, respectively, reflecting
the accrued portion of dividends payable to the holders of Series A preferred
convertible stock, resulting in a net loss to common stockholders of $11.5
million and $15.2 million for the nine months ended September 30, 1999 and 1998,
respectively.
Years ended December 31, 1996, 1997 and 1998
Hybridon had total revenues of $4.0 million in 1996, $3.9 million in
1997, and $4.5 million in 1998. During 1996, 1997 and 1998, Hybridon received
revenues from research and development collaborations of $1.4 million, $0.9
million and $1.1 million, respectively. Research and development collaboration
revenues decreased in 1997 from 1996 because of the cancellation by Roche of its
collaboration with Hybridon and the resulting elimination of research funding by
Roche. Research and development collaboration revenues increased in 1998 from
1997, primarily due to Hybridon receiving certain payments under its license
agreement with MethylGene, Inc.
Product and service revenues were $1.1 million in 1996, $1.9 million in
1997 and $3.3 million in 1998. The increase in revenues in 1997 over those in
1996 resulted from a full year of operations for Hybridon Specialty Products,
which commenced operations in the third quarter of 1996. As of December 31,
1998, Hybridon Specialty Products had a backlog of $0.9 million. The increase in
revenues in 1998 was primarily the result of an expansion by Hybridon Specialty
Products in the customer base and increased sales to certain existing customers,
and was also due in part to Hybridon receiving $0.4 million in service revenue
from MethylGene.
Revenues from interest income were $1.4 million in 1996, $1.1 million
in 1997 and $0.1 million in 1998. The decrease in interest income in 1997 from
1996, and in 1998 from 1997, was the result of lower cash balances available for
investment each year.
During 1996, 1997 and 1998, Hybridon expended $39.4 million, $46.8
million and $21.0 million, respectively, on research and development activities.
The increases in research and development expenses in 1997 from 1996
reflected increasing expenses related primarily to ongoing clinical trials of
Hybridon's product candidates, including (a) clinical trials of two different
formulations of GEM(R) 132, which were first initiated during the third quarter
of 1996 and the first quarter of 1997, (b) clinical trials of GEM(R) 92, which
were initiated in the third quarter of 1997 and (c) clinical trials of GEM(R)
91, which were initiated in France in October 1993 and in the U.S. in May 1994,
and were terminated in July 1997. Clinical expenses related to GEM(R) 91
decreased significantly during the second half of 1997 after Hybridon terminated
development of this compound. Research and development expenses also increased
in 1997 over 1996 due to significant
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<PAGE>
increases in preclinical expenses incurred to meet the filing requirements to
begin clinical trials of Hybridon's product candidates in the U.S.
The decrease in research and development expenses in 1998 reflects
Hybridon's restructuring that began during the second half of 1997. The
restructuring included ending operations at Hybridon's facilities in Europe,
stopping the clinical development of GEM(R) 91 and limiting or suspending
selected programs unrelated to Hybridon's main advanced chemistry antisense drug
development program. The restructuring resulted in significant reductions in
employee-related expenses, clinical and outside testing, consulting, materials
and lab expenses.
The facilities expense related to the research and development area
increased significantly in 1997 as a result of moving the corporate offices to
Cambridge, Massachusetts and decreased significantly in 1998 as a result of
moving in July 1998 from Cambridge to Milford, Massachusetts. Hybridon's
facility costs in 1998 related to research and development were also reduced by
the income received from subleasing its Cambridge facilities.
Research and development salaries and related costs remained at
approximately the same level in 1997 as 1996 because of the costs involved in
releasing employees in 1997. Research and development salaries and related costs
decreased in 1998 from 1997 due to the substantial reduction in the number of
employees involved in research and development in 1998.
Patent expenses also remained at approximately the same level in 1998
as 1997 and 1996, as Hybridon continued to limit the scope of patent protection
that it sought as part of its effort to conserve its cash resources, while
prosecuting and maintaining key patents and patent applications.
Hybridon incurred general and administrative expenses of $11.3 million
in 1996, $11.0 million in 1997 and $6.6 million in 1998. The decrease in general
and administrative expenses in 1998 resulted primarily from Hybridon's
restructuring program which began during the second half of 1997 and its effect
on employee-related and consulting expenses and net facilities costs.
The facilities expense related to the general and administrative area
increased significantly in 1997 over 1996 as a result of moving the corporate
offices to Cambridge, Massachusetts. However, as a result of adopting the
restructuring plan in the second half of 1997, such increase was offset by
decreases in general and administrative salaries and related costs and in
consulting expenses in the second half of 1997, which carried over into 1998.
Hybridon's facilities expense related to the general and administrative area
decreased significantly in 1998 as a result of its moving to Milford,
Massachusetts. Facility costs in 1998 were also reduced by the income received
from subleasing Cambridge facilities. General and administrative expenses
related to business development, public relations and legal expenses decreased
in 1998 from 1997, but remained at approximately the same level in 1997 as 1996.
Interest expense was $0.1 million in 1996, $4.5 million in 1997 and
$2.9 million in 1998. The decrease in interest expense in 1998 is mainly due to
the exchange of approximately $48.7 million of its 9% notes for Series A
preferred stock on May 5, 1998. In addition, the outstanding balance of debt to
finance the purchase of property and equipment was reduced in May 1998,
resulting in a reduction in interest expense. The increase in interest expense
in 1997 from 1996 reflected an increase in Hybridon's debt outstanding
associated with the issuance of its 9% notes and interest incurred on borrowings
to finance the purchase of property and equipment.
As a part of its restructuring plan, Hybridon recorded an $11.0 million
restructuring charge in 1997 to provide for (i) the termination costs of certain
research programs and other contracts, (ii) the loss of certain leased
facilities, net of sublease income and other contracts, (iii) severance,
benefits and related costs for 95 terminated employees and (iv) the write down
of assets to net realizable value.
As a result of the above factors, Hybridon incurred net losses before
extraordinary items of $46.9 million in 1996, $69.5 million in 1997 and $26.0
million in 1998. Hybridon had extraordinary income of $8.9 million in 1998
resulting from the exchange of 9% notes for Series A preferred stock in the
second quarter of 1998. As a result of this transaction, Hybridon reduced its
net loss before preferred stock dividends to $17.1 million in 1998. Hybridon had
an accretion of preferred stock dividends of $2.7 million at December 31, 1998
to reflect the 1998 portion of dividends payable to the holders of Series A
preferred stock, resulting in a net loss to common stockholders of $19.8 million
for 1998.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The following discussion pertains to Hybridon's financial position as of
September 30, 1999. For a discussion of Hybridon's current financial position,
see "Recent Financing Activities," above.
During the nine months ended September 30, 1999, Hybridon used
approximately $6.0 million to fund operating activities. The primary use of cash
for operating activities was to fund a portion of Hybridon's operating loss of
$8.3 million.
Hybridon had cash and cash equivalents of $0.5 million at September 30,
1999. However, since that date, Hybridon has spent a portion of such cash
resources and continues to have substantial obligations to lenders, real estate
landlords, trade creditors and others. On November 12, 1999, Hybridon's
obligations included a $1.0 million loan described below with E. Andrews
Grinstead, III, Hybridon's Chief Executive Officer, $1.3 million principal
amount of 9% notes, a $6.0 million loan with Forum Capital Markets, LLC and
others (collectively, the "Lenders"), a $0.5 million loan as described below,
approximately $0.5 million in 8% convertible notes as described below, and
approximately $2.5 million of accounts payable. Because of Hybridon's financial
condition, many trade creditors are only willing to provide Hybridon with
products and services on a cash on delivery basis. The note to the Lenders
contains certain financial covenants that require Hybridon to maintain minimum
tangible net worth and minimum liquidity. Hybridon is not in compliance with
those covenants. However, Forum Capital Markets has granted Hybridon a waiver of
compliance with the minimum tangible net worth requirement and the minimum
liquidity requirement at September 30, 1999 and has agreed not to require that
Hybridon comply with those requirements for any periods commencing October 1,
1999 through November 30, 1999. A representative of the other Lenders has
indicated informally to Hybridon that the other Lenders intend to do likewise,
but they have not yet entered into a written agreement to that effect.
On September 1, 1999 and September 27, 1999, Hybridon entered into two
six-month, $500,000 promissory notes payable and a loan agreement with E.
Andrews Grinstead, III. The loan is payable with interest, at the option of the
lender, at the rate of either (a) 12% per annum, payable in cash or (b) 15% per
annum, payable in Hybridon's common stock at the rate of $0.50 per share.
Interest is due and payable monthly in arrears on the first business day of each
month commencing on October 1, 1999 until March 1, 2000. The loan agreement
provides that it is the intent of the parties that upon the closing of any third
party debt financing on or before March 1, 2000, this loan will be converted
into a portion of the credit facility made pursuant to such debt financing. If
for any reason the third party debt financing does not close on or before March
1, 2000, the lender will have the option (a) to convert the entire loan to a
five-year term loan bearing interest at 8% per annum, with the right to receive
warrants to purchase in the aggregate 2,100,000 shares of Hybridon common stock
at per-share exercise prices of $1.50 (for three-year warrants) and $1.25 (for
four-year warrants), subject to downward adjustment, at the one-year anniversary
of the warrant issuance date, to the per-share market price of Hybridon's common
stock, in the case of the warrants having a $1.50 exercise price, and to 83.3%
of the per-share market price of Hybridon's common stock, in the case of the
warrants with a $1.25 exercise price, if the market price does not exceed $1.50,
(b) to convert the entire loan to a demand loan bearing interest at the lender's
option at either (i) 12% per annum, payable in cash or (ii) 15% per annum,
payable in Hybridon's common stock at the rate of $0.50 per share, or (c) to
declare the entire principal and interest immediately due and payable. The loan
may be prepaid without premium or penalty at any time. The loan is secured by
substantially all the assets of Hybridon.
During October and November 1999, Hybridon raised approximately
$500,000 under a loan agreement with various parties. The loan will be
converted, at the lenders' option, into either (a) preferred equity, or (b)
secured debt, no later than December 31, 1999, as described below. Hybridon will
pay the lenders interest monthly in arrears on the unpaid principal amount of
the loan at the rate of 8% per annum, payable in common stock at the rate of
$0.50 per share, on the first business day of each month that the loan is
outstanding, commencing November 1, 1999. The loan may be prepaid without
premium or penalty at any time. Any preferred stock into which such loan is
converted will (i) rank senior to existing preferred stock, but junior to all
debt, (ii) will be paid a dividend of 8% per annum, payable semi-annually in
arrears, which will be payable in Hybridon common stock, priced at the market
price on the record date, (iii) will be convertible to Hybridon common stock at
the rate of $0.50 per share at any time and (iv) will be callable by Hybridon at
any time after three years. Any secured debt into which such loan will be
converted will (a) have a five-year term, (b) will bear 8% interest, payable
semi-annually in arrears, payable in cash or Hybridon common stock, at
Hybridon's option, (c) will be convertible into common stock at $0.60 per share,
(d) will be prepayable by Hybridon, in whole or in part, at any time in cash;
provided however, that if the loan is prepaid at Hybridon's election during the
first three years of the term, Hybridon will issue a number of warrants with an
exercise price of $0.60 per share to purchase common stock
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<PAGE>
equal to the number of shares into which the amount prepaid was convertible, (e)
will be secured by all assets of Hybridon and (f) will rank pari passu with the
current $6.0 million loan held by the Lenders.
During October 1999, Hybridon commenced an offering that will extend
through December 1999. If such offering is consummated, the September notes and
October loans described above are expected to convert and become part of the
offering. The terms of the offering are as follows: (a) three-year term; (b)
interest rate of 8%, payable semi-annually in arrears; (c) interest is payable
in cash or in additional notes, at Hybridon's option; (d) convertible into
common stock at $0.60 per share; (e) prepayable by Hybridon, in whole or in
part, at any time in cash; (f) if prepaid at Hybridon's election during the
first three years of the term, Hybridon will issue a number of warrants to
purchase common stock equal to the number of shares into which the amount
prepaid was convertible, with a $0.60 strike price; and (g) secured by
substantially all assets. The securities offered have not been and will not be
registered under the Securities Act and may not be offered or sold in the U.S.
absent registration or an applicable exemption from registration requirements.
As of November 15, 1999, Hybridon had received approximately $500,000 (and an
additional $400,000 in escrow) under the terms of this offering. While the terms
of this financing have been agreed to, the parties have not yet finalized the
documentation. It is therefore possible that Hybridon may not consummate this
financing and gain use of these funds. Hybridon does not, however, anticipate
any such difficulties.
Hybridon's ability to continue operations in 1999 depends on its
success in obtaining new funds in the immediate future. Hybridon is currently
seeking debt or equity financing in an amount sufficient to support its
operations into 2000, and in connection therewith, is in negotiations with
several parties to obtain such financing. However, there can be no assurance
that Hybridon will obtain any funds or as to the timing thereof. Hybridon's
existing cash resources are expected to be sufficient to fund Hybridon's
operations through the end of 1999. If Hybridon is unable to obtain substantial
additional new funding by the end of 1999, Hybridon will be required to obtain
funds through arrangements with collaborative partners or others that may
require it to relinquish rights to certain of its technologies, product
candidates or products which it would otherwise pursue on its own, or terminate
operations or seek relief under applicable bankruptcy laws.
1998 FINANCING ACTIVITIES
On February 6, 1998, Hybridon commenced an offer to the holders of the
9% notes to exchange the 9% notes for Series A preferred stock and certain
warrants of Hybridon. On May 5, 1998, noteholders holding $48.7 million of
principal and $2.4 million of interest tendered such principal and accrued
interest to Hybridon for 510,505 shares of Series A preferred stock and warrants
to purchase 3,002,958 shares of common stock with an exercise price of $4.25 per
share.
On May 5, 1998, Hybridon completed a private offering of equity
securities raising total gross proceeds of approximately $26.7 million from the
issuance of 9,597,476 shares of common stock, 114,285 shares of Series A
preferred stock and warrants to purchase 3,329,486 shares of common stock at
$2.40 per share. The gross proceeds include the conversion of approximately $5.9
million of accounts payable, capital lease obligations and other obligations
into common stock. Hybridon incurred approximately $1.6 million of cash expenses
related to the private offering and issued 597,699 shares of common stock and
warrants to purchase 1,720,825 shares of common stock at $2.40 per share to the
placement agents. In addition, Hybridon is obligated to issue an additional
300,000 shares in connection with this transaction. For more information about
this transaction, see note 15(c) of the notes to consolidated statements.
Credit Facility
In December 1996, Hybridon entered into a five-year $7,500,000 note
payable with a bank. The note contained certain financial obligations that
required Hybridon to maintain a minimum worth and a minimum liquidity and
prohibited the payment of dividends. The note was payable in 59 equal
installments of $62,500 beginning on February 1, 1997, with a balloon payment of
the then remaining outstanding principal balance due on January 1, 2002. Because
Hybridon was required to make certain prepayments of principal during 1998, the
outstanding principal balance of the loan at November 16, 1998 was approximately
$2.8 million. The lender granted Hybridon a waiver of compliance with the
minimum worth requirement at December 31, 1998 and March 31, 1999 and the
minimum liquidity requirement at April 15, 1999.
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<PAGE>
Effective November 20, 1998, Forum Capital Markets, LLC and certain
investors associated with Pecks Management Partners Ltd. purchased the loan from
the bank. Forum and Pecks are affiliates of two members of Hybridon's board of
directors. In connection with this purchase, Forum and Pecks lent an additional
$3.2 million to Hybridon so as to increase the outstanding principal amount of
the note to $6,000,000. In addition, the terms of the note payable were amended
as follows:
o the maturity was extended to November 30, 2003
o the interest rate was decreased to 8%
o interest is payable monthly in arrears, with the principal due in full
at maturity
o the note payable is convertible, at the option of Forum and Pecks, in
whole or in part, into shares of common stock of Hybridon at a
conversion price equal to $2.40 a share
o the threshold of the minimum liquidity obligation was reduced from
$4,000,000 to $2,000,000
o the note payable may not be prepaid, in whole or in part, at any time
prior to December 1, 2000
The other terms of the note payable were unchanged.
For further information about this loan, see note 7 of the notes to
consolidated financial statements.
Facility Leases
As of December 31, 1998, Hybridon has future operating lease
commitments of approximately $7.7 million through 2007 for its existing leases.
Net Operating Loss Carryforwards
As of December 31, 1998, Hybridon had approximately $220.0 million and
$3.9 million of net operating loss and tax credit carryforwards, respectively.
The Tax Reform Act of 1986 contains certain provisions that may limit Hybridon's
ability to utilize net operating loss and tax credit carryforwards in any given
year if certain events occur, including cumulative changes in ownership
interests in excess of 50% over a three-year period. Hybridon has completed
several financings since the effective date of the Tax Act, which, as of
December 31, 1998, have resulted in ownership changes in excess of 50%, as
defined under the Tax Act and which will limit Hybridon's ability to utilize its
net operating loss carryforwards.
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
Since inception, Hybridon has incurred significant losses, which it has
funded through the issuance of equity securities, debt issuances, sales by
Hybridon Specialty Products, and through research and development collaborations
and licensing arrangements.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
Even though Hybridon has obtained sufficient cash to fund its
operations for the balance of 1999, it will be required to raise substantial
additional funds through external sources, including through collaborative
relationships and public or private financing, to support its operations
throughout 2000 and beyond . Except for research and development funding from
Searle under its collaborative agreement with Searle (which is subject to early
termination in certain circumstances), Hybridon has no committed external
sources of capital, and, as discussed above, expects no product revenues for
several years from sales of the therapeutic products that it is developing (as
opposed to sales of DNA products and reagents manufactured and sold by Hybridon
Specialty Products). No guarantee can be given that additional funds will be
available to fund operations for the balance of 1999 or 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.
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<PAGE>
Hybridon'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
Hybridon Specialty Products 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, Hybridon's ability to establish and maintain collaborative
academic and commercial research, development and marketing relationships, its
ability to obtain third-party financing for leasehold improvements and other
capital expenditures and the costs of manufacturing scale-up and
commercialization activities and arrangements.
DIRECTORS AND EXECUTIVE OFFICERS
OF HYBRIDON
The following table sets forth certain information regarding the
executive officers and directors of Hybridon as of February 15, 2000.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
E. Andrews Grinstead, III................. 54 Director (Class III), President and Chief Executive
Officer
Sudhir Agrawal, D. Phil................... 45 President and Acting Chief Executive Officer,
Senior Vice President of Discovery, Chief Scientific Officer,
and Director (Class III)
James B. Wyngaarden, M.D.................. 73 Chairman of the Board of Directors (Class II)
Nasser Menhall............................ 42 Director (Class I)
Arthur W. Berry........................... 56 Director (Class I)
Harold L. Purkey.......................... 54 Director (Class I)
Paul C. Zamecnik, M.D..................... 85 Director (Class II)
Camille Chebeir........................... 60 Director (Class II)
Youssef El-Zein........................... 49 Director (Class III)
</TABLE>
E. Andrews Grinstead, III joined Hybridon in June 1991 and was
appointed Chairman of the board and Chief Executive Officer in August 1991 and
President in January 1993. He has served on the board of directors since June
1991. Mr. Grinstead resigned as Chairman in December 1999. On February 15, 2000,
Hybridon announced that Mr. Grinstead had taken an unexpected medical leave of
absence of indefinite duration due to a serious illness and that Mr. Grinstend
had been replaced as President. Prior to joining Hybridon, Mr. Grinstead served
as Managing Director and Group Head of the life sciences group at Paine Webber,
Incorporated, an investment banking firm, from 1987 to October 1990; Managing
Director and Group Head of the life sciences group at Drexel Burnham Lambert,
Inc., an investment banking firm, from 1986 to 1987; and Vice President at
Kidder, Peabody & Co. Incorporated, an investment banking firm, from 1984 to
1986, where he developed the life sciences corporate finance specialty group.
Mr. Grinstead served in a variety of operational and executive positions with
Eli Lilly and Company, an international pharmaceutical company, from 1976 to
1984, most recently as General Manager of Venezuelan Pharmaceutical, Animal
Health and Agricultural Chemical Operations and at Eli Lilly Corporate Staff as
Administrator, Strategic Planning and Acquisitions. Since 1991, Mr. Grinstead
has served as a director of Pharmos Corporation, a development stage company
engaged in the development of novel pharmaceutical compounds and drug delivery
systems. Mr. Grinstead also serves as a director of Meridian Medical
Technologies, Inc., a pharmaceutical and medical device company. Mr. Grinstead
was appointed to The President's Council of the National Academy of Sciences and
the Institute of Medicine in January 1992 and the board of the Massachusetts
Biotech Council in 1997. Since 1994, Mr. Grinstead has served as a member of the
board of trustees of the Albert B. Sabin Vaccine Foundation, a charitable
foundation dedicated to disease prevention. Mr. Grinstead received an A.B. from
Harvard College in 1967, a J.D. from the University of Virginia School of Law in
1974 and an M.B.A. from the Harvard Graduate School of Business Administration
in 1976.
Sudhir Agrawal joined Hybridon in February 1990 and served as Principal
Research Scientist from February 1990 to January 1993 and as Vice President of
Discovery from December 1991 to January 1993 prior to being appointed Chief
Scientific Officer in January 1993, Senior Vice President of Discovery in March
1994, and President and Acting Chief Executive Officer in February
2000. He has served on the board of directors since March 1993. Prior to joining
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<PAGE>
Hybridon, Dr. Agrawal served as a Foundation Scholar at the Worcester Foundation
from 1987 through 1991. Dr. Agrawal served as a Research Associate at Research
Council Laboratory of Molecular Biology in Cambridge, England from 1985 to 1986,
studying synthetic oligonucleotides. Dr. Agrawal received a B.Sc. in chemistry,
botany and zoology in 1973, an M.Sc. in organic chemistry in 1975 and a D. Phil.
in chemistry in 1980 from Allahabad University in India.
James B. Wyngaarden was appointed member of the board of directors of
Hybridon in 1990, was Vice Chairman of the board of directors of Hybridon from
February 1997 to February 2000, and in February 2000 was appointed Chairman of
the board of directors of Hybridon. He was Foreign Secretary of the National
Academy of Sciences and the Institute of Medicine of the National Academy of
Sciences from 1990 to 1994; council member of the Human Genome Organization from
1990 to 1993 and Director from 1990 to 1991; and Director of the National
Institutes of Health from 1982 to 1989. He is a member of the board of directors
of Human Genome Sciences, Inc. and Magainin Pharmaceuticals, Inc.
Nasser Menhall was appointed member of the board of directors of
Hybridon in 1992. He has been a member of the board of directors and Chief
Executive Officer of the WorldCare Group, a teleradiology company, since 1993;
President of Pillar Limited, a private investment and management consulting
firm, since 1990; and President of Biomedical Associates, a private investment
firm, since 1990.
Arthur W. Berry was appointed member of the board of directors of
Hybridon in 1998. He has been Chairman and Managing Partner of Pecks Management
Partners, since 1990, and was Vice President and Co-Manager of the Alliance
Convertible Securities Group and President of the Alliance Convertible Fund from
1985 to 1990. Prior to joining Alliance, he was Vice President and Head of
Special Funds Section and Manager of the Harris Convertible Fund at Harris Bank
and Senior Portfolio Manager in the bank's Individual Investment Management
Group. He is also a member of the board of directors of Intellicorp, Inc.
Harold L. Purkey was appointed member of the board of directors of
Hybridon in 1998. He is President of Forum Capital Markets LLC, and was
previously Senior Managing Director of convertible securities at Smith Barney
Shearson from 1990 to 1994, and Senior Executive Vice President of Drexel
Burnham Lambert from 1982 to 1989. He is also a member of the board of directors
of Richardson Electronics.
Paul C. Zamecnik was appointed member of the board of directors of
Hybridon in 1990. He was Principal Scientist at the Worcester Foundation for
Biomedical Research, Inc. from 1979 to 1996, and has been Collis P. Huntington
Professor of Oncologic Medicine Emeritus at the Harvard Medical School since
1979. He is also currently Senior Scientist and Honorary Physician at
Massachusetts General Hospital in Boston.
Youssef El-Zein was appointed member of the board of directors of
Hybridon in 1992, and has been Vice Chairman of the board of directors of
Hybridon since February 1997. He has been Executive Officer of Pillar S.A., a
private investment and management consulting firm, since 1991; Chairman of the
WorldCare Group since 1993; and member of the board of directors of Pillar
Investment Limited ("Pillar Investment"), a private investment and management
consulting firm, since 1991.
Camille Chebeir was appointed member of the board of directors of
Hybridon in 1999. Since 1995, he has been President of Sedco Services, Inc., a
company which manages investments of the bin Mafouz Saudi Arabian family. In
that capacity, he serves on the boards of various entities in which Sedco
Services, Inc. invests. Mr. Chebeir was previously the Executive Vice
President/General Manager of National Commercial Bank, New York branch. Mr.
Chebeir is a former President of the Arab Bankers Association of North America.
Hybridon's restated certificate of incorporation provides for a
staggered board of directors consisting of three classes, with each class being
as nearly equal in number as possible. At each annual meeting of Hybridon's
stockholders, the term of one class ends and the successors of the directors in
that class are elected for a term of three years. Hybridon has designated three
Class I directors, three Class II directors, and four Class III directors; they
are identified in the above table. They are to serve until the annual meeting of
stockholders to be held in 2000, 2001 and 2002, respectively, and until their
respective successors are elected and qualified, or until their earlier
resignation or removal. The restated certificate of incorporation provides that
directors may be removed only for cause by a majority of stockholders.
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<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth the compensation for the fiscal years
ended December 31, 1999 ("fiscal 1999"), December 31, 1998 and December 31, 1997
for Hybridon's Chief Executive Officer and Chief Scientific Officer, who were
serving as Executive Officers at December 31, 1999 and whose total annual salary
and bonus exceeded $100,000 in fiscal 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------------- AWARDS
OTHER
NAME AND PRINCIPAL POSITION ANNUAL SECURITIES
- --------------------------- COMPEN- UNDERLYING ALL OTHER
SALARY BONUS SATION OPTIONS COMPENSATION
------ ----- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
E. Andrews Grinstead, III ........... 1999 $ 375,000 0 $ 93,750(1) 1,763,319(3) $ 42,548(2)
Chief Executive Officer 1998 $ 375,000 0 $ 93,750(1) 500,000 $ 44,832(2)
and Director 1997 $ 375,000 0 $ 93,750(1) 66,806 $ 53,784(2)
Sudhir Agrawal, D. Phil ............. 1999 $ 250,000 0 $ 50,000(1) 1,618,263(3) $ 25,962(2)
President, Acting Chief Executive . 1998 $ 250,000 0 $ 50,000(1) 500,000 $ 22,115(2)
Senior Vice President of 1997 $ 250,000 0 $ 50,000(1) 32,263 $ 13,462(2)
Discovery, and Chief Scientific
Officer and Director
</TABLE>
- ----------
(1) Other annual compensation paid, or to be paid, by Hybridon to, or for
the benefit of, the named executive officers is as follows:
E. Andrews Grinstead, III 1999 1998 1997
- ------------------------- ---- ---- ----
Paid in lieu of employee benefits .. $79,288 $79,903 $34,902
Purchase of life insurance and other
payments to third parties ........ 14,462 13,487 58,848
Total .............................. $93,750 $93,750 $93,750
Sudhir Agrawal, D. Phil 1999 1998 1997
- ----------------------- ---- ---- ----
Paid in lieu of employee benefits .. $36,789 $37,462 $38,132
Purchase of life insurance and other
payments to third parties 13,211 12,538 11,868
Total .............................. $50,000 $50,000 $50,000
(2) All other compensation paid, or to be paid, by Hybridon to, or for the
benefit of, the named executive officers is as follows:
E. Andrews Grinstead, III 1999 1998 1997
- ------------------------- ---- ---- ----
Surrender of unused vacation days .. $42,548 $28,832 $37,300
Additional payments ................ 0 16,000 16,484
Total .............................. $42,548 $44,832 $53,784
Sudhir Agrawal, D. Phil 1999 1998 1997
- ----------------------- ---- ---- ----
Surrender of unused vacation days .. $25,962 $22,115 $13,462
Total .............................. $25,962 $22,115 $13,462
(3) During 1999 Hybridon reduced the exercise price of all employee stock
options to $.50 per share. The number of repriced stock options amounts to
1,263,319 and 1,118,263 for Mr. Grinstead and Dr. Agrawal, respectively.
These repriced stock options are included in the "Summary Compensation
Table."
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<PAGE>
Option Grants and Repricings Table
The following table sets forth certain information concerning grants
and repricings of stock options made during fiscal 1999 to each of the named
executive officers:
OPTION GRANTS AND REPRICINGS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTIONS TERM(2)
UNDERLYING EMPLOYEES IN PRICE
OPTIONS FISCAL YEAR PER EXPIRATION
GRANTED SHARE DATE(1) 5% 10%
E. Andrews Grinstead, III
<S> <C> <C> <C> <C> <C> <C> <C>
01/01/99 grant 500,000 7.7% $2.00 0/1/01/09 $323,477 $1,107,416
1999 repricings 1,263,319 19.4% $0.50 Various $ 79,821 $ 423,299
Total granted or repriced in 1,763,319
1999
Less duplication for options
granted and repriced in (500,000)
1999
Total options outstanding at
12/31/99 1,263,319
Sudhir Agrawal, D.Phil.
01/01/99 grant 500,000 7.7% $2.00 0/1/01/09 $323,477 $1,107,416
1999 repricings 1,118,263 17.2% $0.50 Various $ 82,267 $ 405,914
Total granted or repriced in 1,618,263
1999
Less duplication for options (500,000)
granted and repriced in
1999
Total options outstanding at 1,118,263
12/31/99
</TABLE>
- ---------------
(1) The expiration date of each option is the tenth anniversary of the date
on which the option was originally granted.
(2) The amounts shown on this table represent hypothetical gains that could
be achieved for the respective options if exercised at the end of the
option term. These gains are based on assumed rates of stock increase
of 5% and 10%, compounded annually from the date the respective options
were repriced or granted to their expiration date. The gains shown are
net of the option exercise price, but do not include deductions for
taxes or other expenses associated with the exercise. Actual gains, if
any, on stock option exercises will depend on the future performance of
the common stock, the optionholder's continued employment through the
option period, and the date on which the options are exercised. As of
February 2, 2000, the last sale price of common stock of Hybridon was
$1.75.
(3) Mr. Grinstead and Dr. Agrawal had 680,596 and 551,356 exercisable
options, respectively, at 12/31/99. The remaining options become
exercisable over various periods through 9/30/03.
-35-
<PAGE>
Stock Option Repricing
The following table sets forth all repricings of stock options held by
E. Andrews Grinstead, III, Hybridon's Chief Executive Officer, and Sudhir
Agrawal, Hybridon's President and Acting Chief Executive Officer, since
Hybridon's initial public offering on February 2, 1996.
<TABLE>
<CAPTION>
10-YEAR OPTION/SAR REPRICINGS
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE ORIGINAL OPTION
UNDERLYING OF STOCK AT EXERCISE TERM REMAINING
OPTIONS/SARS' TIME OF PRICE AT TIME NEW AT DATE OF
DATE REPRICED OR REPRICING OR OF REPRICING EXERCISE REPRICING OR
AMENDED AMENDMENT OR AMENDMENT PRICE AMENDMENT
<S> <C> <C> <C> <C> <C> <C>
E. Andrews Grinstead, III
09/23/99 500,000 $0.38 $2.00 $0.50 9.28
09/23/99 500,000 $0.38 $2.00 $0.50 8.83
09/23/99 12,000 $0.38 $31.88 $0.50 7.66
09/23/99 38,000 $0.38 $30.00 $0.50 7.54
09/23/99 16,806 $0.38 $31.25 $0.50 7.41
09/23/99 50,000 $0.38 $57.85 $0.50 6.42
09/23/99 30,000 $0.38 $37.50 $0.50 5.48
09/23/99 19,600 $0.38 $37.50 $0.50 3.96
09/23/99 70,246 $0.38 $37.50 $0.50 3.62
09/23/99 26,667 $0.38 $25.00 $0.50 2.38
Sudhir Agrawal, D.Phil.
09/23/99 500,000 $0.38 $2.00 $0.50 9.28
09/23/99 500,000 $0.38 $2.00 $0.50 8.83
09/23/99 6,000 $0.38 $31.88 $0.50 7.66
09/23/99 19,000 $0.38 $30.00 $0.50 7.54
09/23/99 7,263 $0.38 $31.25 $0.50 7.41
09/23/99 25,000 $0.38 $57.85 $0.50 6.42
09/23/99 20,000 $0.38 $37.50 $0.50 5.48
09/23/99 10,000 $0.38 $37.50 $0.50 3.29
09/23/99 21,000 $0.38 $17.50 $0.50 3.29
09/23/99 10,000 $0.38 $1.25 $0.50 2.38
</TABLE>
The board of directors repriced all employee stock options effective September
23, 1999. The options were repriced in order to provide additional incentives to
employees, since the previous option exercise prices were greater than the
market price of Hybridon's common stock.
Aggregated Option Exercises and Year-End Option Table
The following table sets forth certain information concerning the
number and value of unexercised options held by each of the named executive
officers on December 31, 1999:
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END
OPTION VALUES
NUMBER OF VALUE OF
SHARES UNEXERCISED
UNDERLYING IN THE MONEY
OPTIONS AT OPTIONS AT FISCAL
FISCAL YEAR-END YEAR- END(1)
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
E. Andrews Grinstead, III............ 680,596 / 582,723 $347,104 / $297,189
Sudhir Agrawal....................... 551,356 / 566,907 $281,192 / $289,123
- ----------
(1) The closing price for the common stock as reported by The Nasdaq OTC
Bulletin Board on December 31, 1999 was $1.01. Value is calculated on
the basis of the difference between the option exercise price and
$1.01, multiplied by the number of shares of common stock underlying
the option.
DIRECTOR COMPENSATION
Each non-employee director is paid $1,500 for personal or telephonic
attendance at a board of directors or committee meeting. Other directors are not
entitled to compensation in their capacities as directors. All of the directors
are reimbursed for their expenses incurred in connection with their attendance
at board of directors and committee meetings. In addition, Dr. Zamecnik received
compensation in the amount of $83,995 in 1998 and $26,000 in 1999 in connection
with certain consulting services to Hybridon. Of this amount, Dr. Zamecnik
received 25,000 shares of common stock and warrants to purchase 6,250 shares of
common stock in lieu of $50,000 in cash, and $26,000 in convertible debt in lieu
of $26,000 in cash, which is convertible, at Dr. Zamecnik's option, into 43,333
shares of common stock. The remaining $33,995 was paid in cash. Hybridon also is
a party to consulting, advisory and other arrangements with various directors
and their affiliates. For a description of the foregoing arrangements with
Hybridon and certain other transactions between Hybridon and affiliates of
certain directors, see "Certain Transactions."
In October 1995, Hybridon adopted the 1995 director stock option plan.
Under the terms of the director plan, options to purchase 1,000 shares of common
stock were granted to each director of Hybridon, other than Mr. Grinstead and
Dr. Agrawal, (a) as of January 24, 1996 at an exercise price of $65.625 per
share, (b) as of May 1, 1997, at an exercise price of $27.50 per share, (c) as
of May 1, 1998 at an exercise price of $2.375 per share, and (d) as of May 1,
1999 at an exercise price of $1.22 per share. The director plan also provides
that options to purchase 5,000 shares of common stock will be granted to each
new director upon his or her initial election to the board of directors.
However, because of the one-for-five reverse stock split described below,
options to purchase 1,000 shares of common stock were granted to Camille Chebeir
and H.F. (Jake) Powell upon their appointment to the board of directors in 1999.
(Mr. Powell has since resigned from Hybridon's board of directors.) In addition,
on June 8, 1999, Hybridon's stockholders approved a one-time grant of options to
purchase 8,000 shares of Hybridon's common stock at an exercise price of $0.47
per share to each director other than Mr. Grinstead and Dr. Agrawal. Annual
options to purchase 5,000 shares of common stock will be granted to each
eligible director on May 1 of each year. All options will vest on the first
anniversary of the date of grant or, in the case of options granted
automatically each year, on April 30 of the year following the date of the
grant; provided, that the exercisability of these options will be accelerated
upon the occurrence of a change in control, as defined in the director plan. A
total of 400,000 shares of common stock may be issued upon the exercise of stock
options granted under the director plan. The exercise price of options granted
under the director plan will equal the closing price of the common stock on the
date of grant. As of June 15, 1999, options to purchase an aggregate of 93,000
shares of common stock were outstanding under the director plan.
Non-employee directors also have received options to purchase common
stock of Hybridon under Hybridon's 1997 stock incentive plan and Hybridon's 1995
stock option plan. In particular, in 1998, the board of directors voted to grant
an option to purchase 50,000 shares of common stock at $2.00 per share to Dr.
Wyngaarden and Mr. El-Zein, in recognition of their services as Vice Chairmen of
the board of directors during the previous
-37-
<PAGE>
twelve months. Mr. El-Zein declined this grant. In addition, in 1998, the board
of directors voted to grant 50,000 shares of common stock of Hybridon to Dr.
Zamecnik in recognition of his outstanding contributions to Hybridon.
Employment Agreements, Termination of Employment and Change in Control
Arrangements
Hybridon is party to an employment agreement with Mr. Grinstead for the
period commencing July 1, 1996 and ending June 30, 2001. Under this agreement,
Mr. Grinstead is currently entitled to receive an annual base salary of
$375,000. Mr. Grinstead also is eligible to receive (i) a cash bonus each year
related to the attainment of management objectives specified by the board of
directors and (ii) additional payments of $16,000 in 1996, 1997 and 1998. In the
event Mr. Grinstead's employment is terminated by Hybridon without cause or by
him for good cause, Hybridon will pay Mr. Grinstead during the 24-month period
following his termination a monthly amount equal to one-twelfth of the sum of
Mr. Grinstead's annual base salary as of the date of termination and the average
bonus paid to him during the three years preceding his termination. Hybridon
also will continue Mr. Grinstead's benefits for such period, subject to earlier
termination under certain circumstances. If his employment is terminated by
Hybridon for failure to perform his assigned duties, he will continue to receive
his annual base salary and benefits during the six-month period following such
termination. Notwithstanding the foregoing, in the event that Mr. Grinstead's
employment is terminated for any of the above reasons within 12 months following
a change in control of Hybridon, Mr. Grinstead will be entitled to receive, in
lieu of the payments described above, a lump sum payment equal to 300% of the
sum of his annual base salary and his average bonus amount.
On February 15, 2000, Hybridon announced that Mr. Grinstead had taken
an unexpected medical leave of absence of indefinite duration due to a serious
illness. Mr. Grinstead's employment agreement remains in effect.
In accordance with the terms of Mr. Grinstead's previous employment
agreement, Hybridon loaned $190,000 to Mr. Grinstead in December 1992 pursuant
to the terms of a promissory note bearing simple interest at a rate of 6% per
year, which originally provided for the payment of principal and all interest on
the earlier of December 23, 1995 or the expiration or termination of Mr.
Grinstead's employment by Hybridon, but is currently payable on demand. This
loan remained outstanding as of December 31, 1999, at which date the total
unpaid balance of principal and interest was $270,050.
Hybridon is party to an employment agreement with Dr. Agrawal for the
period beginning July 1, 1996 and ending June 30, 2000. Under this agreement,
Dr. Agrawal serves as Senior Vice President of Discovery and Chief Scientific
Officer of Hybridon and is currently entitled to receive an annual base salary
of $250,000. When Dr. Agrawal was appointed President and Acting Chief Executive
Officer on February 14, 2000, the terms of his employment remained unchanged.
Dr. Agrawal is eligible to receive a cash bonus each year for achieving
management objectives specified by the Chief Executive Officer and the board of
directors. In the event Dr. Agrawal's employment is terminated by Hybridon
without cause or by him for good cause, Hybridon will pay Dr. Agrawal during the
24-month period following his termination a monthly amount equal to one-twelfth
of the sum of Dr. Agrawal's annual base salary as of the date of termination and
the average bonus paid to him during the three years preceding his termination.
Hybridon will also continue Dr. Agrawal's benefits for such period, subject to
earlier termination under certain circumstances. If his employment is terminated
by Hybridon for failure to perform his assigned duties, he will continue to
receive his annual base salary and benefits during the six-month period
following such termination. Notwithstanding the foregoing, in the event that Dr.
Agrawal's employment is terminated for any of the above reasons within 12 months
following a change in control of Hybridon, Dr. Agrawal will be entitled to
receive, in lieu of the payments described above, a lump sum payment equal to
300% of the sum of his annual base salary and his average bonus amount.
The employment agreements entered into between Hybridon and each of Mr.
Grinstead and Dr. Agrawal also provide that all stock options held by any of the
Named Executive Officers, including existing options and options to be granted
in the future, shall include terms providing (i) that in the event that such
Named Executive Officer's employment is terminated by Hybridon without cause or
by him for good cause the exercisability of such stock options will be
accelerated by two years and such stock options will be exercisable for a
two-year period following termination and (ii) that in the event of certain
changes in control of Hybridon, its liquidation or the sale of all or
substantially all of its assets, all such stock options not then exercisable
will vest and become immediately exercisable. Hybridon is also a party to
registration rights agreements with Mr. Grinstead that provide that in the event
Hybridon proposes to register any of its securities under the Securities Act, at
any time, with certain exceptions, Mr. Grinstead shall be entitled to include
the shares of common stock held by him in such registration, subject to the
right of the managing underwriter of any underwritten offering to exclude from
such registration for marketing reasons some or all of such shares.
-38-
<PAGE>
Hybridon also is a party to indemnification agreements with Mr. Grinstead
pursuant to which Hybridon has agreed to indemnify him for certain liabilities,
including liabilities arising under the Securities Act.
Stock options to purchase an aggregate of 207,513 shares of common
stock granted to the Named Executive Officers pursuant to the 1990 Plan provide
that, upon a change in control, all options granted thereunder will become fully
exercisable. In addition, pursuant to the terms of the employment agreements
entered into between Hybridon and each of the Named Executive Officers described
above (i) in April 1997, stock options to purchase an aggregate of 156,069
shares of common stock granted to the Named Executive Officers under Hybridon's
1995 plan were amended to provide that such options will become fully
exercisable upon a change in control of Hybridon, and (ii) all stock options
granted to the Named Executive Officers after March 1, 1997 will provide that
such options will become fully exercisable upon a change of control of Hybridon.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On June 16, 1998 the board of directors re-established a Compensation
Committee consisting of Messrs. Berry and El-Zein and Dr. Wyngaarden. None of
the directors or executive officers of Hybridon had any "interlock"
relationships to report during Hybridon's fiscal year ended December 31, 1999.
Since January 1, 1999, Hybridon has entered into or is involved in
certain ongoing transactions with (i) Pillar S.A., Pillar Investment, Pillar
Limited and Charles River Building Limited Partnership, entities of which
Messrs. El-Zein and Menhall are affiliates; (ii) entities advised by Pecks, an
entity of which Mr. Berry is a principal; (iii) Forum, an entity of which Mr.
Purkey is an affiliate; and (iv) each of Drs. Wyngaarden and Zamecnik and Mr.
Powell. See "Certain Transactions."
-39-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of December 31,
1999 with respect to the beneficial ownership of shares of common stock by each
person known to Hybridon to own beneficially more than 5% of the outstanding
shares of common stock, assuming conversion of all convertible debt or preferred
stock and exercise of all warrants and stock options by such person and only by
such person.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Ownership(1)
Name and Address of Number of Percent of
Beneficial Owner Shares Class
- ---------------- ------ -----
5% STOCKHOLDERS
<S> <C> <C>
Forum Capital Markets LLC................... 6,083,394(2) 28.23%
53 Forest Ave.
Old Greenwich, CT 06870
Pecks Management Partners Ltd...............
One Rockefeller Plaza 4,160,048(3) 20.37%
New York, New York 10022
General Motors Employees....................
Domestic Group Trust 3,832,220(4) 19.07%
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10020
E. Andrews Grinstead, III...................
Hybridon, Inc. 3,344,843(5) 17.10%
155 Fortune Blvd.
Milford, MA 01757
Guardian Life Insurance..................... 3,255,110(6) 16.68%
Company of America
201 Park Avenue South, 7A
New York, New York 10003
Youssef El-Zein............................. 2,692,339(7) 14.56%
28 Avenue de Messine
75008 Paris, France
Nasser Menhall.............................. 2,670,351(8) 14.46%
28 Avenue de Messine
75008 Paris, France
Pillar Investment Limited................... 2,560,356(9) 13.94%
28 Avenue de Messine
75008 Paris, France
Intercity Holdings Ltd...................... 2,216,666(10) 13.32%
c/o Cuson Milner House
18 Parliament Street
Hamilton, Bermuda
Abdelah Bin Mahfouz......................... 2,216,666(11) 13.32%
c/o SEDCO
P.O. Box 4384
Jeddah 21491
Saudi Arabia
Delaware State Employees.................... 2,549,833(12) 13.55%
Retirement Fund
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10020
</TABLE>
-40-
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Ownership(1)
Name and Address of Number of Percent of
Beneficial Owner Shares Class
- ---------------- ------ -----
<S> <C> <C>
Yahia M. A. Bin Laden....................... 1,373,977(13) 8.33%
2 rue Charles Bonnet
1206 Geneva, Switzerland
Nicris Limited.............................. 1,360,644(14) 8.25%
c/o Magnin Dunand & Associates
2 rue Charles Bonnet
1206 Geneva, Switzerland
1,317,755(15) 7.72%
Darrier Hentsch & Cie.......................
4, rue de Saussure
1204 Geneva, Switzerland 1,279,717(16) 7.29%
Lincoln National Life Insurance Co..........
c/o Lynch & Mayer
520 Madison Avenue
New York, New York 10022
1,043,112(17) 6.32%
Faisal Finance Switzerland SA...............
84 Ave Louis Casi
1216 Geneva, Switzerland
Finova Technology Finance Inc. ............. 896,875 (18) 5.43%
10 Waterside Drive
Farmington, CT 06032
Declaration of Trust for the................ 924,456(19) 5.38%
Defined Benefit Plan of ICI
American Holdings, Inc.
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10022
</TABLE>
(1) The number of shares beneficially owned is determined under rules
promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for
any other purpose. Under these rules, beneficial ownership includes
any shares as to which the individual has sole or shared voting power
or investment power and also any shares which the individual has the
right to acquire within 60 days after December 31, 1999 through the
exercise of any stock option or other right. The inclusion herein of
such shares, however, does not constitute an admission that the named
stockholder is a direct or indirect beneficial owner of such shares.
Unless otherwise indicated, each person or entity named in the table
has sole voting power and investment power, or shares such power with
his or her spouse, with respect to all shares of capital stock listed
as owned by such person or entity.
(2) Includes (a) 328,677 shares issuable upon exercise of Class B
warrants, (b) 280,517 shares issuable upon the exercise of Class C
warrants, (c) 468,859 shares issuable upon exercise of Class A
warrants, (d) 25,812 shares issuable upon the exercise of Class D
warrants, (e) 761,568 shares issuable upon exercise of other warrants,
(f) 1,250,000 shares issuable upon conversion of Forum's portion of
the $6,000,000 bank loan to Hybridon, and (g) 1,755,035 shares
issuable upon conversion of 74,589 shares of Series A preferred stock
owned by Forum and (h) 416,667 shares issuable upon conversion of
$250,000 in convertible debt.
(3) Includes 122,078 shares of Series A preferred stock owned by four
investment advisory clients of Pecks, which clients would receive
dividends and the proceeds from the sale of such shares. Two of these
clients are Delaware State Employees Retirement Fund and Declaration
of Trust for the Defined Benefit Plan of ICI American Holdings, Inc.
These shares of Series A preferred stock are convertible into
2,872,424 shares of common stock of Hybridon. This amount also
includes 208,895 shares issuable upon the exercise of Class A warrants
and 394,354 shares issuable upon the exercise of Class D warrants held
in the total by the foregoing entities. This number also includes
684,375 shares issuable upon conversion of a portion of the $6,000,000
bank loan to Hybridon owned by certain of the foregoing entities.
-41-
<PAGE>
(4) Includes 117,887 shares of Series A preferred stock which are
convertible into 2,773,812 shares of common stock of Hybridon. This
amount also includes 492,783 shares issuable upon the exercise of
Class A warrants and 565,625 shares issuable upon conversion of a
portion of a $6,000,000 bank loan to Hybridon owned by this entity.
(5) Includes 730,596 shares subject to outstanding stock options are
exercisable within the 60 day period following December 31, 1999, as
well as 2,566,667 shares issuable upon the conversion of $1,540,000 in
convertible debt owed by Mr. Grinstead.
(6) Includes 112,612 shares of Series A preferred stock which are
convertible into 2,649,694 shares of common stock of Hybridon. This
amount also includes 353,316 shares issuable upon the exercise of
Class A warrants and 252,100 shares issuable upon the exercise of
Class D warrants.
(7) Includes (a) 82,183 shares issuable upon the exercise of warrants held
by Mr. El-Zein, (b) 366 shares issuable upon the exercise of warrants
held by Pillar Associated, (c) 20,000 shares issuable upon the
exercise of warrants held by Pillar S.A., (d) 20,000 shares issuable
upon the exercise of warrants held by Pillar S.A.R.L., (e) 37,500
shares issuable upon the exercise of Class C warrants held by Pillar
Investment Limited, (f) 473,598 issuable upon the exercise of advisory
warrants held by Pillar Investment Limited, (g) 638,032 shares
issuable upon the exercise of placement warrants held by Pillar
Investment Limited, (h) 5,243 shares issuable upon the exercise of
other warrants held by Pillar Investment Limited, (i) 462,800 shares
held by Pillar Investment Limited, (j) 9,000 shares issuable upon the
exercise of stock options held by Mr. El-Zein, (k) 447,150 shares
issuable upon the conversion of $269,290 in convertible debt to be
issued to Pillar Investment Limited and (l) 496,833 shares issuable
upon the conversion of $298,100 in convertible debt that Pillar
Investment Limited has the right to acquire upon exercise of warrants.
Receipt by Pillar Investment Limited of the securities described in
(k) and (l) is subject to receipt by Hybridon of a fairness opinion.
Mr. El-Zein, an affiliate of Pillar Associated, Pillar S.A., Pillar
S.A.R.L. and Pillar Investment Limited, may be considered a beneficial
owner of the shares beneficially owned by such entities.
(8) Includes (a) 60,195 shares issuable upon the exercise of warrants held
by Mr. Menhall, (b) 366 shares issuable upon the exercise of warrants
held by Pillar Associated, (c) 20,000 shares issuable upon the
exercise of warrants held by Pillar S.A., (d) 20,000 shares issuable
upon the exercise of warrants held by Pillar S.A.R.L., (e) 37,500
shares issuable upon the exercise of Class C warrants held by Pillar
Investment Limited, (f) 473,598 issuable upon the exercise of advisory
warrants held by Pillar Investment Limited, (g) 638,032 shares
issuable upon the exercise of placement warrants held by Pillar
Investment Limited, (h) 5,243 shares issuable upon the exercise of
other warrants held by Pillar Investment Limited, (i) 462,800 shares
held by Pillar Investment Limited, (j) 9,000 shares issuable upon the
exercise of stock options held by Mr. Menhall, (k) 447,150 shares
issuable upon the conversion of $269,290 in convertible debt to be
issued to Pillar Investment Limited and (l) 496,833 shares issuable
upon the conversion of $298,100 in convertible debt that Pillar
Investment Limited has the right to acquire upon exercise of warrants.
Receipt by Pillar Investment Limited of the securities described in
(k) and (l) is subject to receipt by Hybridon of a fairness opinion.
Mr. Menhall, an affiliate of Pillar Associated, Pillar S.A., Pillar
S.A.R.L. and Pillar Investment Limited, may be considered a beneficial
owner of the shares beneficially owned by such entities.
(9) Includes (a) 37,500 shares issuable upon the exercise of Class C
warrants held by Pillar Investment Limited, (c) 473,598 issuable upon
the exercise of advisory warrants held by Pillar Investment Limited,
(c) 638,032 shares issuable upon the exercise of placement warrants
held by Pillar Investment Limited, (d) 5,243 shares issuable upon the
exercise of other warrants held by Pillar Investment Limited, (e)
447,150 shares issuable upon the conversion of $269,290 in convertible
debt to be issued to Pillar Investment Limited and (f) 496,833 shares
issuable upon the conversion of $298,100 in convertible debt that
Pillar Investment Limited has the right to acquire upon exercise of
warrants. Receipt by Pillar Investment Limited of the securities
described in (e) and (f) is subject to the receipt by Hybridon of a
fairness opinion.
(10) Includes 375,000 shares issuable upon the exercise of Class B warrants
held by Intercity Holdings Ltd.
-42-
<PAGE>
(11) Includes 1,841,666 shares held by Intercity Holdings Ltd. and 375,000
shares issuable upon exercise of Class B warrants held by Intercity
Holdings. Mr. Mahfouz, a controlling stockholder of Intercity Holdings
Ltd., may be considered a beneficial owner of the shares beneficially
owned by such entity.
(12) Includes 75,926 shares of Series A preferred stock which are
convertible into 1,786,494 shares of common stock of Hybridon. This
amount also includes 137,918 shares issuable upon the exercise of
Class A warrants, 270,271 shares issuable upon the exercise of Class D
warrants and 355,250 shares issuable upon conversion of portion of the
$6,000,000 bank loan to Hybridon owned by this entity.
(13) Includes 1,125,880 shares held by Nicris Limited and 234,764 shares
issuable upon the exercise of Class B warrants held by Nicris Limited.
Mr. Bin Laden, a controlling stockholder of Nicris, may be considered
a beneficial owner of the shares beneficially owned by such entity.
(14) Includes 234,764 shares issuable upon the exercise of Class B warrants
held by Nicris Limited.
(15) Includes 143,636 shares issuable upon the exercise of Class B warrants
held by Darrier Hentsch and 666,667 shares issuable upon the
conversion of $400,000 in convertible debt owned by Darrier Hentsch.
(16) Includes 44,272 shares of Series A preferred stock which are
convertible into 1,041,694 shares of common stock of Hybridon. This
amount also includes 238,023 shares issuable upon the exercise of
Class A warrants.
(17) Includes 233,026 shares issuable upon the exercise of Class B warrants
held by Faisal Finance Switzerland SA.
(18) Includes 259,375 shares issuable upon the exercise of Class C warrants
held by Finova Technology Finance Inc.
(19) Includes 27,412 shares of Series A preferred stock which are
convertible into 644,988 shares of common stock of Hybridon. This
amount also includes 42,153 shares issuable upon the exercise of Class
A warrants, 74,265 shares issuable upon the exercise of Class D
warrants and 163,050 shares issuable upon conversion of a portion of
the $6,000,000 bank loan to Hybridon owned by this entity.
The following table sets forth certain information as of December 31,
1999, with respect to the beneficial ownership of shares of common stock and
Series A preferred stock by (i) the directors of Hybridon and (ii) the Chief
Executive Officer and other Named Executive Officers, and (iii) the directors
and executive officers of Hybridon as a group, assuming conversion of all
convertible debt or preferred stock and exercise of all warrants and stock
options by such person and only by such person.
<TABLE>
<CAPTION>
Series A
Common Stock Convertible Preferred Stock
------------ ---------------------------
Name of Beneficial Owner Amount and Nature Percent of Amount and Nature Percent of
of Beneficial Class of Beneficial Class
Ownership(1) Ownership(1)
DIRECTORS
<S> <C> <C> <C> <C>
Arthur W. Berry....................... 4,494,381(2) 21.65% 122,078(3) 18.43%
Harold W. Purkey...................... 6,251,061(4) 28.23% 74,589(5) 11.26%
Youssef El-Zein....................... 2,692,339(6) 14.56% 0 0
Nasser Menhall........................ 2,670,351(7) 14.46% 0 0
E. Andrews Grinstead, III ............ 3,344,843(8) 17.10% 0 0
Sudhir Agrawal........................ 619,116(9) 3.67% 0 0
Paul Z. Zamecnik...................... 449,013(10) 2.73% 0 0
James B. Wyngaarden................... 123,350(11) * 0 0
Camille A. Chebeir.................... 25,000 * 0 0
H.F. Powell........................... 222,917(12) 1.35 0 0
All directors and executive officers as
a group (10 persons).................. 18,315,054(13) 55.56% 196,655 29.69%
* Less than 1%.
</TABLE>
(1) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the SEC, and the
information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, beneficial ownership includes any
shares as to which the individual has sole or
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shared voting power or investment power and also any shares which the
individual has the right to acquire within 60 days after December 31,
1999 through the exercise of any stock option or other right. The
inclusion herein of such shares, however, does not constitute an
admission that the named stockholder is a direct or indirect
beneficial owner of such shares. Unless otherwise indicated, each
person or entity named in the table has sole voting power and
investment power (or shares such power with his or her spouse) with
respect to all shares of capital stock listed as owned by such person
or entity.
(2) Includes 122,078 shares of Series A preferred stock owned by four
investment advisory clients of Pecks, which clients would receive
dividends and the proceeds from the sale of such shares. Two of these
clients are Delaware State Employees Retirement Fund and Declaration
of Trust for the Defined Benefit Plan of ICI American Holdings, Inc.
These shares of Series A preferred stock are convertible into
2,872,424 shares of common stock of Hybridon. This amount also
includes 208,895 shares issuable upon the exercise of Class A warrants
and 394,354 shares issuable upon the exercise of Class D warrants held
in total by the foregoing entities. This number also includes 684,375
shares issuable upon conversion of a portion of the $6,000,000 bank
loan to Hybridon owned by certain of the foregoing entities. Mr.
Berry, a principal of Pecks, may be considered a beneficial owner of
the shares owned by such entities. Mr. Berry disclaims beneficial
ownership of these shares. This number also includes 333,333 shares
issuable upon conversion of $200,000 in convertible debt owned by Mr.
Berry.
(3) Includes 122,078 shares of Series A preferred stock owned by four
investment advisory clients of Pecks, which clients would receive
dividends and the proceeds from the sale of such shares. Mr. Berry, a
principal of Pecks, may be considered a beneficial owner of the shares
owned by such entities. Mr. Berry disclaims beneficial ownership of
these shares.
(4) Includes (a) 796,259 shares of common stock owned by Forum Capital
Markets LLC, (b) 328,677 shares issuable upon the exercise of Class B
warrants owned by Forum, (c) 280,517 shares issuable upon the exercise
of Class C warrants owned by Forum, (d) 468,859 shares issuable upon
the exercise of Class A warrants owned by Forum, (e) 25,812 shares
issuable upon the exercise of Class D warrants, (f) 61,568 shares
issuable upon the exercise of other warrants held by Forum, (g)
1,250,000 shares issuable upon conversion of Forum's portion of the
$6,000,000 bank loan to Hybridon, (h) 1,755,035 shares issuable upon
conversion of 74,589 shares of Series A preferred stock owned by Forum
and (i) 416,667 shares issuable upon conversion of $250,000 in
convertible debt owned by Forum. Mr. Purkey, an affiliate of Forum,
may be considered a beneficial owner of the shares beneficially owned
by such entity. This amount also includes 166,667 shares issuable upon
conversion of $100,000 in convertible debt owned by Mr. Purkey.
(5) Consists of 74,589 shares of Series A preferred stock owned by Forum.
Mr. Purkey, an affiliate of Forum, may be considered a beneficial
owner of the shares beneficially owned by Forum.
(6) Includes (a) 82,183 shares issuable upon the exercise of warrants held
by Mr. El-Zein, (b) 366 shares issuable upon the exercise of warrants
held by Pillar Associated, (c) 20,000 shares issuable upon the
exercise of warrants held by Pillar S.A., (d) 20,000 shares issuable
upon the exercise of warrants held by Pillar S.A.R.L., (e) 37,500
shares issuable upon the exercise of Class C warrants held by Pillar
Investment Limited, (f) 473,598 issuable upon the exercise of advisory
warrants held by Pillar Investment Limited, (g) 638,032 shares
issuable upon the exercise of placement warrants held by Pillar
Investment Limited, (h) 5,243 shares issuable upon the exercise of
other warrants held by Pillar Investment Limited, (i) 462,800 shares
held by Pillar Investment Limited, (j) 9,000 shares issuable upon the
exercise of stock options held by Mr. El-Zein, (k) 447,150 shares
issuable upon the conversion of $269,290 in convertible debt to be
issued to Pillar Investment Limited and (l) 496,833 shares issuable
upon the conversion of $298,100 in convertible debt that Pillar
Investment Limited has the right to acquire upon exercise of warrants.
Receipt by Pillar Investment Limited of the securities described in
(k) and (l) is subject to the receipt by Hybridon of a fairness
opinion. Mr. El-Zein, an affiliate of Pillar Associated, Pillar S.A.,
Pillar S.A.R.L. and Pillar Investment Limited, may be considered a
beneficial owner of the shares beneficially owned by such entities.
(7) Includes (a) 60,195 shares issuable upon the exercise of warrants held
by Mr. Menhall, (b) 366 shares issuable upon the exercise of warrants
held by Pillar Associated, (c) 20,000 shares issuable upon the
exercise of warrants held by Pillar S.A., (d) 20,000 shares issuable
upon the exercise of warrants held by Pillar S.A.R.L., (e) 37,500
shares issuable upon the exercise of Class C warrants held by Pillar
Investment Limited, (f) 473,598 issuable
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upon the exercise of advisory warrants held by Pillar Investment
Limited, (g) 638,032 shares issuable upon the exercise of placement
warrants held by Pillar Investment Limited, (h) 5,243 shares issuable
upon the exercise of other warrants held by Pillar Investment Limited,
(i) 462,800 shares held by Pillar Investment Limited, (j) 9,000 shares
issuable upon the exercise of stock options held by Mr. Menhall, (k)
447,150 shares issuable upon the conversion of $269,290 in convertible
debt to be issued to Pillar Investment Limited and (l) 496,833 shares
issuable upon the conversion of $298,100 in convertible debt that
Pillar Investment Limited has the right to acquire upon exercise of
warrants. Receipt by Pillar Investment Limited of the securities
described in (k) and (l) is subject to the receipt by Hybridon of a
fairness opinion. Mr. Menhall, an affiliate of Pillar Associated,
Pillar S.A., Pillar S.A.R.L. and Pillar Investment Limited, may be
considered a beneficial owner of the shares beneficially owned by such
entities.
(8) Includes 730,596 shares subject to outstanding stock options which are
exercisable within the 60-day period following December 31, 1999, as
well as 2,566,667 shares issuable upon the conversion of $1,540,000 in
convertible debt owned by Mr. Grinstead.
(9) Includes 601,356 shares subject to outstanding stock options which are
exercisable within the 60-day period following December 31, 1999.
(10) Includes (a) 113,250 shares subject to outstanding stock options which
are exercisable within the 60-day period following December 31, 1999,
(b) 31,250 shares issuable upon the exercise of Class C warrants and
(c) 43,333 shares issuable upon the conversion of $26,000 in
convertible debt owned by Dr. Zamecnik.
(11) Includes (a) 118,250 shares subject to outstanding stock options which
are exercisable within the 60-day period following December 1, 1999
and (b) 700 shares held by Mr. Wyngaarden's children.
(12) Includes 56,260 shares subject to outstanding stock options which are
exercisable within 60-day period following December 31, 1999 and
166,667 shares issuable upon the conversion of $100,000 in convertible
debt owned by Mr. Powell.
(13) Securities owned by Pillar Associated, Pillar S.A., Pillar S.A.R.L.
and Pillar Investment Limited are included only once, although such
amounts were included above for both Messrs. El-Zein and Menhall.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1997, Hybridon has entered into or has been engaged in
the following transactions with the following Hybridon directors and officers,
stockholders who beneficially own more than 5% of the outstanding common stock
of Hybridon, and affiliates or immediate family members of those directors,
officers and 5% Stockholders.
TRANSACTIONS WITH PILLAR S.A. AND CERTAIN OF ITS AFFILIATES
Hybridon has entered into certain transactions with Pillar S.A., Pillar
Investment and Charles River Building Limited Partnership, the entity which
owned Hybridon's former headquarters in Cambridge, Massachusetts (the "Cambridge
Landlord"). Pillar S.A. and Pillar Investment are affiliates of Messrs. El-Zein
and Menhall, two directors of Hybridon. The Cambridge Landlord is an affiliate
of Messrs. El-Zein and Menhall and Mohamed El-Khereiji, a former director of
Hybridon. The following is a summary of those transactions that relate to
Hybridon's 1998 fiscal year.
In 1997 and 1998, Hybridon was a party to a consulting agreement with
Pillar S.A. dated as of March 1, 1994, under which Pillar S.A. provided Hybridon
with financial advisory and managerial services in connection with Hybridon's
overseas operations, including support services in connection with contracts and
agreements. Under the terms of the 1994 Pillar consulting agreement, Hybridon
paid Pillar S.A. consulting fees of $60,000 per month and $23,000 per month for
overhead costs, and reimbursed certain authorized out-of-pocket expenses. The
1994 Pillar consulting agreement expired on February 28, 1998. Pursuant to the
1994 Pillar consulting agreement, Hybridon issued to Pillar S.A two five year
warrants to purchase an aggregate of 40,000 shares of Hybridon common stock.
On July 8, 1995, Hybridon entered into an additional agreement with
Pillar S.A. pursuant to which Pillar S.A. agreed for a period of two years to
provide to Hybridon certain consulting, advisory and related services, in
addition to
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the services to be provided under the 1994 Pillar Consulting Agreement, and
serve as Hybridon's exclusive agent in connection with potential corporate
partnerships in Europe and as a non-exclusive placement agent of Hybridon in
connection with private placements of securities of Hybridon. On November 1,
1995, the Pillar Europe agreement was amended to provide that (1) Pillar S.A.
would cease to serve as Hybridon's executive agent in connection with potential
corporate partnerships in Europe, but would continue to serve as a non-exclusive
agent in that connection, (2) Pillar S.A. would receive a retainer of $26,470
per month for the balance of the term of the Pillar Europe agreement, (3) the
fees provided for in the Pillar Europe agreement would only be payable to Pillar
S.A. in connection with potential collaborations with any French pharmaceutical
company with which Hybridon was involved in discussions during the 12-month
period ended November 1, 1995 as a result of introductions by Pillar S.A., and
(4) any compensation payable to Pillar S.A. in connection with its services with
respect to other corporate collaborations or any placements of securities would
be negotiated on a case-by-case basis and would be subject to the approval of
the independent members of the board of directors of Hybridon. The Pillar Europe
agreement expired on April 1, 1997.
In 1998, Hybridon paid Pillar Investment a total of $300,000 under
these agreements, in the form of 150,000 shares of common stock and warrants to
purchase 37,500 shares of common stock, at an exercise price of $2.40 per share,
subject to adjustment, in lieu of cash. In 1997, Hybridon paid Pillar S.A.
$903,267 under the 1994 Pillar consulting agreement and the Pillar Europe
agreement.
Hybridon has retained Pillar Investment as placement agent in
connection with the private placements of securities of Hybridon in offshore
transactions in reliance upon an exemption from registration under Regulation S
promulgated under the Securities Act of 1933. Pillar Investment received fees
consisting of (1) 9% of the gross proceeds of each Regulation S Offering, (2) a
non-accountable expense allowance equal to 4% of those gross proceeds, (3) the
right to purchase, for nominal consideration, warrants to purchase 473,598
shares of common stock, at an exercise price of $2.40 per share, subject to
adjustment, (4) the right to purchase, for nominal consideration, warrants to
purchase a number of shares of the common stock of Hybridon equal to 10% of the
total number of shares of common stock sold by Hybridon for which Pillar
Investment acted as placement agent, exercisable at 120% of the relevant common
stock offering price, for a period of five years, resulting, as of the date
hereof, in the right to receive warrants to purchase 638,032 shares at $2.40 per
share, subject to adjustment, and (5) a consulting/restructuring fee of $960,000
payable in common stock of Hybridon valued at the market price and payable in
three equal installments as net proceeds of $25,000,000, $30,000,000 and
$35,000,000 are received in the aggregate from private placements effected by
Hybridon in 1998 to the extent contemplated by the consent and waiver dated as
of January 12, 1998 given by certain beneficial holders of Hybridon's 9%
convertible subordinated notes, or otherwise to the extent contemplated by the
Placement Agency agreement between Hybridon and Pillar Investment, subject to
Hybridon's receiving of a fairness opinion regarding this. Pillar Investment may
not receive compensation in excess of the level that was approved by the holders
of the 9% notes. Pillar Investment has received $1,635,400 in cash pursuant to
these arrangements and Pillar has received warrants to purchase 1,111,630 shares
of common stock.
In addition, in connection with the Regulation S offerings, Hybridon
and Pillar Investment have entered into an advisory agreement dated May 5, 1998,
under which Pillar Investment acts as Hybridon's non-exclusive financial
advisor. This agreement requires that Hybridon pay an affiliate of Pillar
Investment a monthly retainer of $5,000, with a minimum engagement of 24 months
beginning on May 5, 1998, and further provides that Pillar Investment is
entitled to receive (1) out-of-pocket expenses, (2) subject to Hybridon's
receiving a fairness opinion on this matter, 300,000 shares of common stock in
connection with Pillar Investment's efforts in assisting Hybridon in
restructuring its balance sheet, and (3) certain cash and equity success fees in
the event Pillar Investment assists Hybridon in connection with certain
financial and strategic transactions. As of April 16, 1999, Hybridon issued to
Pillar Investment the stipulated 300,000 shares of common stock. Hybridon
received a fairness opinion in connection with that issuance. In addition,
Hybridon was a party to a lease with a third party dated March 23, 1994 for
approximately 1,800 square feet of space in Paris, France. Hybridon's
obligations under the Paris lease was guaranteed by Pillar S.A. Hybridon
terminated the Paris lease on March 31, 1998. Pursuant to a 1999 private
placement offering, Hybridon sold 8% notes to certain investors, including some
investors that Pillar Investment introduced to Hybridon. In connection with this
offering, and in lieu of any compensation due under the financial advisory
agreement between Hybridon and Pillar Investment, Hybridon agreed to pay Pillar
Investment's reasonable expenses and to issue to Pillar Investment and its
designees additional 8% notes in an aggregate principal amount equal to 9% of
the aggregate principal amount of 8% notes purchased by those Pillar-introduced
investors. Hybridon also agreed to issue to Pillar Investment and its designees
warrants to purchase additional 8% notes in an aggregate principal amount equal
to 10% of the aggregate principal amount of 8% notes purchased by those
Pillar-introduced investors. These warrants have a strike price equal to 110% of
the principal amount of the 8% notes purchasable thereunder. Hybridon's
obligations to issue the 8% notes and the warrants and to reimburse Pillar
Investment's
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expenses are subject to the condition precedent that Hybridon will have had
delivered to it a fairness opinion in form and substance deemed by Hybridon, in
its sole discretion, to satisfy the requirements of the indenture relating to
Hybridon's 9% notes. As of December 31, 1999, Pillar Investment had earned the
right to receive $269,290 in 8% notes and warrants to purchase an additional
$298,100 in 8% notes.
TRANSACTIONS WITH THE CAMBRIDGE LANDLORD
From February 4, 1997 to September 16, 1998, Hybridon was a party to a
lease with the Cambridge Landlord for its Cambridge facilities. The Cambridge
Lease originally provided for an annual rent equal to $30 per square foot on a
triple-net basis, where the tenant pays taxes, insurance, and operating costs,
for the first five years, $33 per square foot on a triple-net basis for the next
five years and the greater of $30 per square foot on a triple-net basis or the
then-market value of leased property for each of the five-year renewal terms. In
connection with Hybridon's election to acquire an interest in the Cambridge
Landlord, as described below, the annual rent due under the Cambridge lease was
increased for the first five years of the lease term to $38 per square foot on a
triple-net basis, for the second five years to $42 per square foot on a
triple-net basis and for the third five years to $47 per square foot on a
triple-net basis.
On July 1, 1996, Hybridon decided to fund approximately $5.5 million of
the costs, primarily relating to tenant improvements, of the construction of the
leased premises through contributions to the capital of the Cambridge Landlord
in exchange for a limited partnership interest in the Cambridge Landlord. The
partnership interest entitled Hybridon to an approximately 32% interest in the
Cambridge Landlord. Hybridon had the right, for a period of three years ending
February 2000, to sell the partnership interest back to certain limited partners
of the Cambridge Landlord for a price equal to the greater of (1) the total cash
contribution made by Hybridon to the Cambridge Landlord or (2) the fair market
value of the partnership interest at the time.
In 1997, Hybridon had on deposit with Bank fur Vermogensanlagen und
Handel the amount of $1,034,618. In November 1997, German banking authorities
imposed a moratorium on Bank fur Vermogensanlagen und Handel and closed Bank fur
Vermogensanlagen und Handel for business. Pursuant to an agreement dated
November 28, 1997, the Cambridge Landlord agreed to assume the risk for the Bank
fur Vermogensanlagen und Handel deposit and to pay to Hybridon the amount of
$75,000 a month after each rent payment under the Cambridge lease was made until
such time as $1,000,000 had been paid to Hybridon or the Bank fur
Vermogensanlagen und Handel deposit was released.
In June 1998, Hybridon moved its headquarters from the Cambridge
facility to its facility in Milford, Massachusetts. The Cambridge facility was
re-leased in September 1998 to a third party, subject to a sublease of a portion
of the facility. As a result, Hybridon terminated the Cambridge lease and was
relieved of its substantial lease obligations under the Cambridge lease, subject
to a contingent continuing liability for any sublessee defaults. Further, in
November 1998 Hybridon completed the sale of its partnership interest. As a
result of these transactions, Hybridon received $6,163,000 from the Cambridge
Landlord, which included payment for the partnership interest, the return of a
portion of the security deposit required under the Cambridge lease, and payment
in full of the Bank fur Vermogensanlagen und Handel deposit. Hybridon has agreed
to reimburse the Cambridge landlord for any cash received under this agreement,
up to the amount realized by Hybridon from the final settlement of the Bank fur
Vermogensanlagen und Handel deposit, after the moratorium is lifted.
TRANSACTIONS WITH FORUM CAPITAL MARKETS LLC AND PECKS MANAGEMENT PARTNERS LTD.
In 1998, Hybridon entered into certain transactions with Forum, an
affiliate of Mr. Purkey, a director of Hybridon, and entities advised by Pecks
Management Partners Ltd. Mr. Berry, a principal of Pecks, is a director of
Hybridon.
Hybridon retained Forum as a placement agent of Hybridon in connection
with Hybridon's 1998 Regulation D offering of Series A preferred stock and Class
D warrants in the U.S. Forum received as compensation for its services as
placement agent with regard to the Regulation D offering and its assistance with
an exchange offer made by Hybridon to the holders of its 9% notes, 597,699
shares of common stock and warrants to purchase prior to May 4, 2003 a total of
609,194 shares of common stock exercisable at $2.40 per share, in each case
subject to adjustment. In addition, in exchange of the agreements made by Forum
consenting to the Regulation D offering and waiving certain obligations of
Hybridon to Forum, Hybridon agreed to amend Forum's warrant dated as of April 2,
1997, to purchase up to 71,301 shares of common stock of Hybridon, to change the
exercise price to $4.25 per share, subject to adjustment,
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and increase the number of shares of common stock purchasable upon exercise to
588,235, in each case subject to adjustment, and to provide that it may not be
exercised until May 5, 1999 and the transactions contemplated by those private
placements and by the exchange offer will not trigger any anti-dilution
adjustments to its exercise price or the number of shares of common stock
purchasable upon exercise.
In November 1998, Forum and entities advised by Pecks purchased
Hybridon's bank loan. In connection with the purchase of the loan, the
purchasing entities advanced an additional amount to Hybridon so as to increase
the outstanding principal amount of the loan to $6,000,000. In addition, the
purchasing entities agreed to amend the terms of the loan. This principal amount
of the loan and unpaid interest thereon is convertible, in whole or in part, at
the lenders' option into common stock at a conversion price of $2.40 per share.
In connection with the purchase of the loan, Forum received a fee of
$400,000, which Forum has reinvested by purchasing from Hybridon 160,000 shares
of common stock and warrants to purchase an additional 40,000 shares of common
stock at $3.00 per share. In addition, Forum received warrants exercisable until
maturity of the Loan to purchase 133,333 shares of common stock at $3.00 per
share.
In connection with the offering of these notes, Forum and the entities
advised by Pecks entered into a Subordination and Intercreditor Agreement with
Hybridon and the representative of the purchasers of the notes whereby, among
other things, they agreed to subordinate their loan to the notes, subject to
certain conditions. Also in connection with this offering, Hybridon agreed to
issue warrants to purchase an aggregate of 2.75 million shares of Hybridon's
common stock to designees of Pecks and Forum. These warrants are exercisable
from December 31, 2000 until December 31, 2002 at $0.60 per share.
Hybridon maintains an investment account at Forest Investment
Management LLC, an affiliate of Forum and Mr. Purkey.
OTHER TRANSACTIONS
In March 1999, Hybridon entered into consulting arrangements with each
of Mr. Powell, Dr. Zamecnik and Dr. Wyngaarden providing that each of them will
act as a consultant to Hybridon for a two-year period and will receive a
consulting fee of $20,000 per year for general consulting services. In addition,
each agreement provides that they each will receive a consulting fee of $1,500
per day of on-site consulting services they provide at Hybridon's corporate
offices, or at an alternative site agreed upon by the parties, and at Hybridon's
prior request. Additional fees for special projects will be negotiated
separately between the parties. Each of Mr. Powell, Dr. Zamecnik and Dr.
Wyngaarden also received options to purchase 150,000 shares of Hybridon's common
stock at $2.00 per share; such options will vest over a two-year period. Dr.
Zamecnik has received $26,000 in convertible notes for his 1999 consulting
services and board fees, which he may at his option convert into 43,333 shares
of common stock. Mr. Powell's consulting agreement terminated when Mr. Powell
resigned from the board of directors of Hybridon in February 2000.
Certain persons and entities, including Dr. Zamecnik, Pillar S.A.,
Pillar Limited, Forum, the entities advised by Pecks, Intercity Holdings, Mr.
Bin Laden and Nicris Limited, are entitled to certain rights with respect to the
registration under the Securities Act of certain shares of Hybridon's common
stock, including shares of common stock that may be acquired pursuant to the
exercise of options or warrants, under the terms of agreements among Hybridon
and the rightsholders. The registration agreements generally provide that in the
event Hybridon proposes to register any of its securities under the Securities
Act at any time, with certain exceptions, the rightsholders, including Pillar
S.A., Pillar Limited, Intercity Holdings, Mr. Bin Laden and Nicris Limited, but
excluding, among others, Dr. Zamecnik, have the additional right under certain
registration agreements to require Hybridon to prepare and file registration
statements under the Securities Act, if rightsholders holding specified
percentages of the registrable shares so request, and Hybridon is required to
use its best efforts to effect that registration, subject to certain conditions
and limitations.
Hybridon sold an aggregate of $1,500,000 principal amount of promissory
notes to E. Andrews Grinstead, III, Hybridon's Chief Executive Officer, at face
value during September and November of 1999. These notes accrued interest at 12%
per annum (15% upon Hybridon's election to pay this interest in shares of common
stock rather than cash) and, upon the closing of any third-party debt financing
that closed on or before March 1,
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2000, were intended to be converted into the debt sold in that financing. These
notes have, together with $40,000 in accrued interest, been converted into 8%
notes of Hybridon due 2002.
In addition , in connection with the financing conducted in December
1999, other Hybridon directors and certain affiliates of Hybridon directors
purchased Hybridon 8% notes in the amount set forth below:
Forum Capital Markets LLC $250,000
Arthur W. Berry $100,000
Harold w. Purkey $100,000
H. F. Powell $100,000
Two other principals of Forum Capital Markest LLC each purchased
$100,000 of the 8% notes.
Hybridon believes that the terms of the transactions described above
were no less favorable than Hybridon could have obtained from unaffiliated third
parties.
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SELLING STOCKHOLDERS
The tables below set forth, to the knowledge of Hybridon, certain
information as of December 31, 1999 with respect to the selling stockholders.
The table entitled "Stockholders Selling Common Stock" includes information with
respect to selling stockholders who are selling common stock in this offering.
The table entitled "Stockholders Selling Preferred Stock" includes information
with respect to selling stock holders who are selling preferred stock in this
offering. Except as noted below, no selling stockholder selling common or
preferred stock in this offering will beneficially own 1% or more of the
outstanding stock of Hybridon after the offering.
Except as described below, none of the selling stockholders holds any
position or office with, or has otherwise had a material relationship with,
Hybridon within the past three years.
Stockholders Selling Common Stock
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Common Stock Beneficially Number of Shares of Common Stock
Owned Common Beneficially Owned
Name of Selling Stockholder Prior to Offering1 Stock Included in Offering After Offering1
- --------------------------- ------------------ -------------------------- ---------------
<S> <C> <C> <C>
Fouad M.O. Tawfig and Hanan H. 330,876 6,250 324,626
Zagzoug
Torben Duer 126,750 18,750 108,000
Thomas Fr. Duer 62,500 62,500 0
Darier Hentsch & Cie 1,317,755 651,088 666,667
Finn Trunk Black 3,750 3,750 0
MM Pictet & Cie 588,000 588,000 0
Nicris Limited7 1,360,644 1,050,644 310,000
Raji Abou Hadar 395,833 62,500 333,333
Intercity Ltd.7 2,216,666 1,875,000 341,666
Clapham Investments Ltd. 458,833 125,000 333,833
LGT Bank in Liechtenstein AG 312,500 312,500 0
Participations Besancon 125,000 125,000 0
Loxhall Limited 62,500 62,500 0
MicroTech Software a/s 33,000 31,250 11,750
JSP Holdings ApS 24,500 12,500 12,000
Jan Poulson 18,750 18,750 0
Mr. Mohamad Hassan Abdul Ghani 67,717 67,717 0
Dr. Khaled M.R. Abdul Ghani 635,435 135,435 500,000
Mr. Imad Mustapha Mansour 67,717 67,717 0
Mr. Malek Salam 88,033 88,033 0
Faisal Finance (Switzerland) S.A. 1,043,113 1,009,779 33,334
Mr. Guy Semon 22,149 22,149 0
Mrs. Francoise Semon 22,149 22,149 0
Mr. Le Pelley Dumanoir 22,149 22,149 0
Mr. Moh'd Abdo Sweidan 67,119 67,119 0
Mr. Isam Moh'd Khairy Kabbani 67,119 67,119 0
Dr. Essam Ahmad Jawadm Alamdar 301,357 201,357 100,000
Arab Islamic Bank (E.C.) 503,394 503,394 0
Mr. Sobbi Adra 23,492 23,492 0
Mr. Mansour S.M.A. Al-Sharif 107,639 65,972 41,667
Mr. Nafez M.M. Al-Jindi 65,972 65,972 0
Solter Corporation 467,345 196,047 271,298
Carset Overseas Corporation 176,375 176,375 0
Mr. Ali A. Bajrai 163,310 163,310 0
Pillar Investment Limited2 2,560,356 1,599,130 961,226
Bioreliance Corporation 16,697 16,697 0
Chestnut Partners 62,500 62,500 0
Datamonitor 62,500 62,500 0
Finova Technology Finance, Inc. 896,875 896,875 0
HPC America, Inc. 218,750 218,750 0
Hyal Pharmaceutical Corporation 17,500 17,500 0
SEIF Foundation 319,725 119,725 200,000
Janitronics 45,724 45,724 0
Kinetic Systems, Inc. 163,238 163,238 0
Massachusetts Eye & Ear Infirmary 62,500 62,500 0
Norwegian Radium Hospital 37,500 37,500 0
Research Foundation
Susan and Anthony Russo 62,500 62,500 0
Pharmakinetics Laboratories, Inc. 55,803 55,803 0
</TABLE>
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<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Common Stock Beneficially Number of Shares of Common Stock
Owned Common Beneficially Owned
Name of Selling Stockholder Prior to Offering1 Stock Included in Offering After Offering1
- --------------------------- ------------------ -------------------------- ---------------
<S> <C> <C> <C>
The Perkin Elmer Corporation 205,377 205,377 0
Primedica Corporation 364,418 364,418 0
Quintiles Transnational Corp. 379,175 379,175 0
Siena Construction Corporation 31,250 31,250 0
Sierra Biomedical, Inc. 150,203 150,203 0
SP Pharmaceuticals LLC 115,985 115,985 0
Southern Research Institute 68,860 68,860 0
Transamerica Business Credit 318,750 318,750 0
Corporation
Triumvirate Environmental, Inc. 19,138 19,138 0
University of Kansas 29,260 29,260 0
University of Massachusetts 84,450 84,450 0
Paul C. Zamecnik and Mary V. 449,013 156,250 292,763
Zamecnik, JTWROS3,7
Allstate Insurance Company 499,895 499,895 0
Angelo Gordon & Co., L.P. 116,636 116,636 0
Michael Angelo, L.P. 316,627 316,627 0
Ramius Fund Ltd. 233,272 233,272 0
Raphael, L.P. 316,627 316,627 0
Medici Partners, L.P. 99,961 99,961 0
CNA Income Shares, Inc. 499,895 499,895 0
Forest Alternative Strategies 26,653 26,653 0
Fund II, L.P. Series A5I4
Forest Alternative Strategies 13,350 13,350 0
Fund II, L.P. Series A5M4
Forest Alternative Strategies 744 744 0
Fund II, L.P. Series B-34
Forest Fulcrum Ltd.4 108,310 108,310 0
Forest Global Convertible Fund 160,441 160,441 0
Series A54
Forest Greyhound4 6,199 6,199 0
Forest Performance Fund4 7,152 7,152 0
LLT Ltd. 4 26,653 26,653 0
Forest Convertible Fund 17,106 17,106 0
Forum Capital Markets LLC5,7 6,083,394 4,378,167 1,705,227
Providian Life & Health 672,204 672,204 0
Monumental Life Insurance Co. 546,769 546,769 0
The Guardian Pension Trust Fund 99,961 99,961 0
Harris Investment Management 92,524 92,524 0
Offshore Strategies Ltd. 333,307 333,307 0
Libertyview Plus Fund 49,007 49,007 0
Libertyview Fund LLC 24,507 24,507 0
CPR (USA) 113,623 113,623 0
Lincoln National Life Insurance 1,279,717 1,279,717 0
Co.
Lincoln National Convertible 496,594 496,594 0
Securities Fund
Weirton Trust 144,989 144,989 0
Walker Art Center 10,230 10,230 0
United National Insurance Co. 23,330 23,330 0
Equi Select Growth & Income Fund 166,642 166,642 0
Zazove Convertible Fund, L.P. 159,530 159,530 0
Lois Wilkens 6,389 6,389 0
Winchester Convertible Plus Ltd. 129,988 129,988 0
Foundation Account No. 1 69,983 69,983 0
LLC Account No. 1 33,328 33,328 0
GPS Fund Limited 99,959 99,959 0
Telefix (First Delta) 16,676 16,676 0
Guardian Life Insurance Co. of 3,255,110 3,255,110 0
America
Declaration of Trust for the 924,456 741,406 163,050
Defined Benefits Plan of ICI
America Holdings, Inc.7
J.W. McConnell Family Foundation6 65,988 8,988 57,000
Delaware State Employees 2,552,933 2,194,683 355,250
Retirement Fund6,7
General Motors Employees Domestic 3,832,220 3,266,595 565,625
Group Trust7
</TABLE>
-51-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Common Stock Beneficially Number of Shares of Common Stock
Owned Common Beneficially Owned
Name of Selling Stockholder Prior to Offering1 Stock Included in Offering After Offering1
- --------------------------- ------------------ -------------------------- ---------------
<S> <C> <C> <C>
Zeneca Holdings6 619,670 510,595 109,075
Thermo Electron Balanced 8,871 8,871 0
Investment Fund
Tucker Anthony & R.L. Day, Inc. 6,199 6,199 0
</TABLE>
NOTES:
1. Includes common stock issuable upon the exercise of stock options,
warrants, convertible preferred stock and convertible debt.
2. Mr. Nasser Menhall and Mr. Youssef El-Zein, members of the board of
directors of Hybridon, are principals of Pillar Investment Limited.
3. Dr. Zamecnik is a member of the board of directors of Hybridon and is a
consultant to Hybridon.
4. Harold W. Purkey, a member of the board of directors of Hybridon, is an
affiliate of this selling stockholder.
5. Harold W. Purkey, a member of the board of directors of Hybridon, is
the President and a 10% owner of Forum Capital Markets.
6. Arthur W. Berry, a member of the board of directors of Hybridon, serves
as investment advisor to this selling stockholder.
7. These selling stockholders will beneficially own greater than 1% of
Hybridon's common stock (which for purposes of this calculation
includes common stock issuable upon exercise of warrants or conversion
of convertible debt within 60 days after December 31, 1999) after the
offering, as follows:
<TABLE>
<CAPTION>
Percentage of Outstanding Common
Selling Stockholder Stock Beneficially Owned After the Offering
------------------- -------------------------------------------
<S> <C>
Forum Capital Markets LLC 9.51%
Pillar Investment Limited 5.79%
Darrier Hentsch & Cie 4.73%
General Motors Employees Domestic Group Trust 3.36%
Delaware State Employees Retirement Fund 2.14%
Intercity Ltd. 2.10%
Raji Abou Hader 2.01%
Clapham Investments Ltd. 2.01%
Fouad M.O. Tawfig and Hanan H. Zagzoug 1.96%
Nicris Limited 1.91%
Solter Corporation 1.64%
Khaled M.R. Abdul Ghani 1.21%
Paul C. Zamecnik and Mary V. Zamecnik, JTWROS 1.13%
</TABLE>
Stockholders Selling Preferred Stock
<TABLE>
<CAPTION>
Number of Shares of
Convertible Number of Shares of Number of Shares of
Preferred Convertible Convertible
Stock Beneficially Preferred Preferred
Name of Owned Prior to Stock Included in Stock Beneficially
Selling Stockholder Offering Offering Owned After Offering
------------------- -------- -------- --------------------
<S> <C> <C> <C>
Allstate Insurance Company 17,294 17,294 0
Angelo Gordon & Co., L.P. 4,035 4,035 0
Michael Angelo, L.P. 10,954 10,954 0
Ramius Fund Ltd. 8,070 8,070 0
Raphael, L.P. 10,954 10,954 0
Medici Partners, L.P. 3,458 3,458 0
CNA Income Shares, Inc. 17,294 17,294 0
Forest Alternative Strategies 922 922 0
Fund II, L.P. Series A5I1
Forest Alternative Strategies 462 462 0
Fund II, L.P. Series A5M1
Forest Fulcrum Ltd.1 3,747 3,747 0
Forest Global Convertible Fund 5,765 5,765 0
Series A51
Forest Performance Fund1 138 138 0
Forest Convertible Fund1 727 727 0
LLT Ltd.1 922 922 0
Forum Capital Markets LLC2 74,589 74,589 0
</TABLE>
-52-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of
Convertible Number of Shares of Number of Shares of
Preferred Convertible Convertible
Stock Beneficially Preferred Preferred
Name of Owned Prior to Stock Included in Stock Beneficially
Selling Stockholder Offering Offering Owned After Offering
------------------- -------- -------- --------------------
<S> <C> <C> <C>
Providian Life & Health 22,264 22,264 0
Monumental Life Insurance Co. 16,933 16,933 0
The Guardian Pension Trust Fund 3,458 3,458 0
Harris Investment Management 3,201 3,201 0
Offshore Strategies Ltd. 11,531 11,531 0
Libertyview Plus Fund 497 497 0
Libertyview Fund LLC 248 248 0
CPR (USA) 864 864 0
Lincoln National Life Insurance 44,272 44,272 0
Co.
Lincoln National Convertible 17,180 17,180 0
Securities Fund
Weirton Trust 5,016 5,016 0
United National Insurance Co. 807 807 0
Equi Select Growth & Income Fund 5,765 5,765 0
Zazove Convertible Fund, L.P. 5,519 5,519 0
Lois Wilkens 221 221 0
Winchester Convertible Plus Ltd. 4,497 4,497 0
Foundation Account No. 1 2,421 2,421 0
LLC Account No. 1 1,153 1,153 0
GPS Fund Limited 3,458 3,458 0
Telefix (First Delta) 577 577 0
Guardian Life Insurance Co. of 112,612 112,612 0
America
Declaration of Trust for the 27,412 27,412 0
Defined Benefits Plan of ICI
America Holdings, Inc.3
J.W. McConnell Family Foundation 382 382 0
Delaware State Employees 75,926 75,926 0
Retirement Fund3
General Motors Employees 117,887 117,887 0
Domestic Group Trust
Zeneca Holdings3 18,358 18,358 0
Thermo Electron Balanced 377 377 0
Investment Fund
- --------------------------------- -------------------- -------------------- --------------------
</TABLE>
NOTES:
1. Harold W. Purkey, a member of the board of directors of Hybridon, is an
affiliate of this selling stockholder.
2. Harold W. Purkey, a member of the board of directors of Hybridon, is
the President and a 10% owner of Forum Capital Markets.
3. Arthur W. Berry, a member of the board of directors of Hybridon, serves
as investment advisor to this selling stockholder.
-53-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Hybridon consists of 100,000,000 shares
of common stock and 5,000,000 shares of preferred stock, par value $.01 per
share, of which 1,500,000 have been designated as convertible preferred stock.
On January 31, 2000, there were issued and outstanding 16,262,722 shares of
common stock and 662,167 shares of convertible preferred stock.
There follows a brief summary of the terms of the common stock and the
convertible preferred stock. For further information please refer to the
restated certificate of incorporation of Hybridon, including the certificate of
designation for the Series A preferred stock, which is filed as an exhibit to
the registration statement.
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
such any dividends declared by the board of directors out of legally available
funds, subject to any preferential dividend rights of the preferred stock or
other securities. Upon the liquidation, dissolution or winding up of Hybridon,
the holders of common stock are entitled to receive ratably the net assets of
Hybridon available after the payment of all debts and other liabilities and
subject to the prior rights of any outstanding shares of preferred stock and to
the Liquidation Put Right described in the next paragraph. Holders of common
stock have no preemptive, subscription, redemption or conversion rights. The
rights, preferences and privileges of holders of common stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock that Hybridon may designate and issue in the future,
and the rights of creditors of Hybridon.
Pursuant to the terms of the Unit Purchase Agreement, the initial
purchasers of certain of the shares of common stock sold in the Regulation S and
the Regulation D offerings (those shares, the "Put Shares" those purchasers, the
"Liquidation Put Holders") have the right to put those shares back to Hybridon
upon the liquidation of Hybridon, but only after all other indebtedness and
obligations of Hybridon and all rights of any holders of any capital stock
ranking prior and senior to the common stock with respect to liquidation have
been satisfied in full (that right, the "Liquidation Put"). The Liquidation Put
is not transferable, and therefore purchasers of common stock pursuant to this
prospectus will not be able to exercise the Liquidation Put with respect to
those shares. Any Liquidation Put Holders that have not sold or otherwise
transferred any Put Shares will, however, be able to exercise the Liquidation
Put with respect to those Put Shares upon a liquidation of Hybridon.
Consequently, in the event of liquidation of Hybridon, holders of shares of
common stock that are not subject to the Liquidation Put right may receive
smaller liquidation distributions per share than they would have had no
Liquidation Put Holders exercised the Liquidation Put. As of January 31, 2000,
there were 9,246,476 Put Shares outstanding.
PREFERRED STOCK
Under the terms of the restated certificate of incorporation, the board
of directors is authorized, subject to any limitations prescribed by law,
without stockholder approval, to issue up to 5,000,000 shares of preferred stock
in one or more series with such rights, preferences, privileges and
restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as the board of directors
determines.
SERIES A PREFERRED STOCK
Dividends. Each share of Series A preferred stock is entitled to
receive cumulative semi-annual dividends payable, at the option of Hybridon, in
cash or additional shares of convertible preferred stock, at the rate of 6.5%
per annum plus accrued but unpaid dividends. Dividends accrue from the date of
issuance and 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 business day. Dividends are paid, at
the election of Hybridon, either in cash or additional shares of convertible
preferred stock. In calculating the number of shares of convertible preferred
stock to be paid with respect to each dividend, the convertible preferred stock
is valued at $100.00 per share (subject to appropriate adjustment to reflect any
stock split, combination, reclassification or reorganization of the convertible
preferred stock).
-54-
<PAGE>
Liquidation Preference. In the event of a (1) liquidation, dissolution
or winding up of Hybridon, whether voluntary or involuntary, (2) a sale or other
disposition of all or substantially all of the assets of Hybridon, or (3) any
consolidation, merger, combination, reorganization or other transaction in which
Hybridon is not the surviving entity or if stock constituting more than 50% of
Hybridon's voting power is exchanged for or changed into stock or securities of
another entity, cash, or any other property (a "Merger Transaction") (items (1),
(2) and (3) of this sentence being collectively referred to as a "Liquidation
Event"), after payment of debts and other liabilities of Hybridon, the holders
of shares of convertible preferred stock will be entitled to be paid out of
Hybridon's available assets, before any payment to holders of shares ranking
junior to the convertible preferred stock, an amount equal to the Dividend Base
Amount. In the case of a Merger Transaction, however, this payment may be made
in cash, property or securities of the entity surviving the Merger Transaction.
If upon any Liquidation Event, whether voluntary or involuntary, the assets to
be distributed to the holders of the convertible preferred stock are
insufficient to permit the payment to such shareholders of the full amount owed,
then all of Hybridon's available assets will be distributed ratably to the
holders of the convertible preferred stock. All shares of convertible preferred
stock rank, as to payment upon the occurrence of any Liquidation Event, senior
to the common stock and senior to all other series of preferred stock, unless
the terms of any Series provides otherwise.
Right of Conversion. Commencing after May 5, 1999, shares of
convertible preferred stock became convertible, at the option of the holder,
into shares of common stock or other securities and property. The initial
conversion price per share of common stock (the "Conversion Price") is $4.25,
and is subject to adjustment as described below. The rate at which each share of
convertible preferred stock is convertible at any time into common stock (the
"Conversion Rate") will be determined by dividing the then-existing Conversion
Price into the "Dividend Base Amount" of a share of convertible preferred stock,
which is equal to $100 plus accrued but unpaid dividends (subject to adjustment
to reflect any stock split, combination, reclassification or reorganization of
the convertible preferred stock).
Adjustment of Conversion Rate and Conversion Price. As of June 15,
1999, each share of convertible preferred stock was convertible into
approximately 23.53 shares of common stock. In order to preserve the economic
value of shares of convertible preferred stock, the Conversion Price will be
adjusted if Hybridon does the following;
o pays a dividend or makes a distribution on any class of capital stock
in shares of its common stock;
o subdivides its outstanding common stock into a greater number of
shares;
o combines its outstanding common stock into a smaller number of shares;
o issues shares of common stock or preferred stock to any holder of
common stock or preferred stock rights to acquire shares of common
stock or preferred stock at a price per share less than the market
price (as defined);
o pays or distributes to the holders of common stock or preferred stock
assets, properties, or rights to acquire Hybridon Capital Stock at a
price per share less than the market price; or
o makes a distribution consistently solely of cash to the holders of any
class of capital stock where, during a specified 12-month period, the
cash distribution exceeds 10% of the product of the market price of the
common stock multiplied by the total outstanding common stock.
Exceptions to Adjustments. No adjustment will, however, be made to
either the Conversion Rate or the Conversion Price for issuances of common stock
or preferred stock or cash paid to holders of shares of convertible preferred
stock (1) as payment for accrued dividends or (2) as a mandatory conversion or
mandatory redemption payment as described below.
Other Changes in Conversion Rate. Hybridon 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, Hybridon will notify registered
holders.
Hybridon may also increase the Conversion Rate 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.
-55-
<PAGE>
The Conversion Price may not be adjusted to an amount less than $.001
per share, the current par value of the common stock into which the convertible
preferred stock is convertible.
Mandatory Conversion and Redemption. Upon giving notice to the holders
of the convertible preferred stock, Hybridon may, at its option, cause the
convertible preferred stock to be converted in whole or in part, on a pro rata
basis, into shares of common stock using a Conversion Price equal to $4.00 if
the closing bid price of the common stock equals or exceeds 250% of the
Conversion Price for at least 20 trading days in any period of 30 consecutive
trading days.
At any time after April 1, 2000, Hybridon may, at its option, redeem
the convertible preferred stock for cash equal to the Dividend Base Amount.
Class Voting Rights. Hybridon shall not, without the affirmative vote
or consent of the holders of at least 50% of all outstanding shares of
convertible preferred stock, voting separately as a class, (1) amend, alter or
repeal any provision of the restated certificate of incorporation or bylaws so
as adversely to affect the rights of the convertible preferred stock (except
that the issuance of securities ranking prior to, or pari passu with, the
convertible preferred stock (A) upon a Liquidation Event or (B) with respect to
the payment of dividends or distributions will not be considered to affect
adversely the relative rights of the convertible preferred stock), or (2)
authorize or issue, or increase the authorized amount of, the convertible
preferred stock, other than the convertible preferred stock issuable as
dividends on the convertible preferred stock.
Preemptive Rights. The convertible preferred stock is not entitled to
any preemptive or subscription rights in respect of any securities of Hybridon.
Restrictions on Change of Control. So long as any of Hybridon's 9%
notes remain outstanding, no holder of any shares of convertible preferred stock
will, without the prior written consent of Hybridon, be granted voting rights,
be entitled to receive any voting securities of Hybridon, or be entitled to
exercise any conversion rights if that could, in Hybridon's reasonable judgment,
either alone or in conjunction with other issuances or holdings of capital
stock, warrants or convertible securities of Hybridon, result in a Change of
Control (as defined in the Indenture).
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services LLC.
DELAWARE LAW AND CERTAIN PROVISIONS OF HYBRIDON'S RESTATED
CERTIFICATE OF INCORPORATION, BYLAWS AND INDEBTEDNESS
Hybridon is subject to the provisions of Section 203 of the Delaware
General Corporation Law, which prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three years
did own, 15% or more of the corporation's voting stock. The existence of this
provision could deter certain business combinations, including transactions that
might otherwise result in holders of voting stock being paid a premium over the
market price for their shares.
The restated certificate of incorporation provides for the division of
the board of directors into three classes as nearly equal in size as possible,
with the classes having staggered three-year terms. In addition, the restated
certificate of incorporation provides that directors may be removed only for
cause by the affirmative vote of the holders of at least two-thirds of the
shares of capital stock entitled to vote. Under the restated certificate of
incorporation, any vacancy on the board of directors, however occurring,
including a vacancy resulting from an enlargement of the board, may filled only
by vote of a majority of the directors then in office. The classification of the
board of directors and the limitations on the removal of directors and filling
of vacancies could have the effect of making it more difficult for anyone to
acquire, or of discouraging anyone from acquiring, control of Hybridon.
-56-
<PAGE>
The restated certificate of incorporation also requires that any action
required or permitted to be taken by the stockholders of Hybridon at an annual
meeting or special meeting of stockholders may be taken only if it is properly
brought before that meeting and may not be taken by written action in lieu of a
meeting and will require reasonable advance notice by a stockholder of a
proposal or director nomination which that stockholder desires to present at any
annual or special meeting of stockholders. The restated certificate of
incorporation further provides that special meetings of the stockholders may be
called only by the Chief Executive Officer or, if none, the President of
Hybridon, or by the board of directors. Under Hybridon's bylaws, in order for
any matter to be considered "properly brought" before a meeting, a stockholder
must comply with certain requirements regarding advance notice to Hybridon. The
foregoing provisions could have the effect of delaying until the next
stockholders meeting any given stockholder action, even though it might be
favored by the holders of a majority of the outstanding voting securities of
Hybridon. These provisions may also discourage any person or entity from making
a tender offer for Shares of common stock, because such person or entity, even
if it acquired a majority of the outstanding voting securities of Hybridon,
would be able to take action as a stockholder (such as electing new directors or
approving a merger) only at a duly called stockholders meeting, and not by
written consent.
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or bylaws, unless
a corporation's certificate of incorporation or by-law requires a greater
percentage. The restated certificate of incorporation and the bylaws require the
affirmative vote of the holders of at least 75% of the shares of capital stock
of Hybridon issued and outstanding and entitled to vote to amend or repeal any
of the provisions described in the prior two paragraphs. Moreover, the board of
directors has the authority, without further action by the stockholders, to fix
the rights and preferences of, and to issue shares of, any preferred stock other
than the convertible preferred stock.
In addition to these provisions of Delaware law, the restated
certificate of incorporation and the bylaws, the terms of Hybridon's outstanding
9% notes, which were issued in the aggregate original principal amount of $50.0
million and of which approximately $1.3 million in principal amount remains
outstanding, require Hybridon, upon a Change of Control of Hybridon (as defined
in the indenture for the 9% notes), to offer to repurchase the 9% notes at a
repurchase price equal to 150% of the principal amount thereof, plus accrued and
unpaid interest to the date of repurchase. This provision, together with the
provisions of the restated certificate of incorporation described above and
other provisions of the restated certificate of incorporation, may have the
effect of deterring takeovers or delaying or preventing changes in control or
management of Hybridon, including transactions in which stockholders might
otherwise receive a premium for their shares over then current market prices. In
addition, these provisions may limit the ability of stockholders to approve
transactions that they may deem to be in their best interests.
PLAN OF DISTRIBUTION
The securities offered in this prospectus may be sold from time to time
by the selling stockholders or their pledgees, donees, transferees or other
successors in interest. Sales of the securities may be effected on the NASD OTC
Bulletin Board or in negotiated transactions at prices then prevailing or
related to the then-current market price, or at negotiated prices.
The securities may be sold directly or through brokers or dealers by
means of one or more of the following methods: (i) block trades in which the
broker or dealer attempts to sell shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (ii) purchases
by a broker or dealer as principal and resales by that broker or dealer for its
own account pursuant to this prospectus, including resale to another broker or
dealer; and (iii) ordinary brokerage transactions and transactions in which the
broker solicits purchasers. In effecting sales, brokers and dealers engaged by
selling stockholders may arrange for other brokers or dealers to participate.
Brokers or dealers may receive commissions or discounts from selling
stockholders (or, if any such broker or dealer acts as agent for the purchaser
of any securities, from that purchaser) in amounts to be negotiated. A
broker-dealer may agree with the selling stockholders to sell a specified number
of securities at a stipulated price per share, and, to the extent that
broker-dealer is unable to do so acting as agent for the selling stockholders,
to purchase as principal any unsold securities at the price required to fulfill
the broker-dealer commitment to the selling stockholders. Broker-dealers who
acquire securities as principal may thereafter resell those securities.
The selling stockholders and any broker-dealers participating in
distribution of the securities may be deemed "underwriters" within the meaning
of Section 2(11) of the Securities Act, and any profit on the sale of securities
by the selling stockholders and any commissions or discounts given to
broker-dealers may be deemed
-57-
<PAGE>
underwriting commissions or discounts under the Securities Act. In addition, any
of the securities that qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this prospectus.
Hybridon has agreed to indemnify certain of the selling stockholders,
each underwriter of certain of the securities, and each person controlling
certain of the selling stockholders within the meaning of Section 15 of the
Securities Act, against certain liabilities in connection with the offer and
sale of the securities, including liabilities under the Securities Act, and to
contribute to payments those persons may be required to make in respect of such
liabilities. Certain of the selling stockholders have agreed to indemnify, in
certain circumstances, Hybridon against certain liabilities in connection with
the offer and sale of the securities, including liabilities under the Securities
Act, and to contribute to payments Hybridon may be required to make in respect
thereof.
LEGAL MATTERS
The validity of the securities offered by this prospectus will be
passed upon for Hybridon by Kramer Levin Naftalis & Frankel LLP, New York, New
York.
EXPERTS
The consolidated financial statements of Hybridon as of December 31,
1996, 1997, and 1998 and for each of the years in the three-year period ended
December 31, 1998 included in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, which report
includes a paragraph stating that there is substantial doubt about Hybridon's
ability to continue as a going concern, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the Securities
and Exchange Commission relating to the common stock offered by this prospectus.
This prospectus does not contain all of the information set forth in the
registration statement and the exhibits and schedules to the registration
statement. Statements contained in this prospectus concerning the contents of
any contract or other document referred to are not necessarily complete and in
each instance we refer you to the copy of the contract or other document filed
as an exhibit to the registration statement, each such statement being qualified
in all respects by such reference.
For further information with respect to us and the common stock offered
in this prospectus, please refer to the registration statement. A copy of the
registration statement can be inspected by anyone without charge at the public
reference room of the SEC, Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's Regional Offices located at 7 World Trade Center, Suite
1300, New York, New York 10048, and 500 West Madison Street, Chicago, Illinois
60601. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference room. Copies of these materials can be
obtained by mail from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC maintains a
Web site (http://www.sec.gov) that contains information regarding registrants
that file electronically with the SEC.
-58-
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997,
DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 (UNAUDITED) F-3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996,
DECEMBER 31, 1997 AND DECEMBER 31, 1998 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999 (UNAUDITED) F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE YEARS
ENDED DECEMBER 31, 1996, DECEMBER 31, 1997 AND DECEMBER 31, 1998 AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996,
DECEMBER 31, 1997 AND DECEMBER 31, 1998 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1999 (UNAUDITED) F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Hybridon, Inc.:
We have audited the accompanying consolidated balance sheets of Hybridon, Inc.
(a Delaware corporation) and subsidiaries as of December 31, 1997 and 1998, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hybridon, Inc. and subsidiaries
as of December 31, 1997 and 1998 and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. Since inception, the Company
has incurred significant losses which it has funded through the issuance of debt
and equity securities and through research and development collaborations and
licensing agreements. The Company expects such resources to fund operations
through May 1999. There is substantial doubt about the Company's ability to
continue as a going concern. See Note 1 for management's plans. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 19, 1999 (except with respect to the matter
discussed in Note 7(b) as to which the date is April 15, 1999)
F-2
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30,
December 31, 1999
1997 1998 (unaudited)
------------------- ----------------- -----------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,202,202 $ 5,607,882 $ 500,179
Accounts receivable 529,702 1,175,441 838,852
Prepaid expenses and other current assets 1,005,825 110,827 102,185
------------------ ---------------- -------------
Total current assets 3,737,729 6,894,150 1,441,216
------------------ ---------------- -------------
PROPERTY AND EQUIPMENT, AT COST:
Leasehold improvements 16,027,734 11,127,035 11,127,035
Laboratory and other equipment 14,288,083 11,432,435 9,988,579
------------------ ---------------- -------------
30,315,817 22,559,470 21,115,614
Less--Accumulated depreciation and amortization 11,085,013 13,788,979 14,162,190
------------------ ---------------- -------------
19,230,804 8,770,491 6,953,424
------------------ ---------------- -------------
OTHER ASSETS:
Deferred financing costs and other assets 3,354,767 612,374 531,423
Note receivable from officer 247,250 258,650 267,200
Restricted cash 3,050,982 -- --
Investment in real estate partnership 5,450,000 -- --
------------------ ---------------- -------------
12,102,999 871,024 798,623
------------------ ---------------- -------------
$ 35,071,532 $ 16,535,665 $ 9,193,263
================== ================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt $ 7,868,474 $ 6,070,951 $ 6,078,179
Related party promissory notes payable -- -- 1,000,000
Accounts payable 8,051,817 2,368,163 2,512,738
Accrued expenses 11,917,298 4,068,679 2,389,804
----------------- ---------------- -------------
Total current liabilities 27,837,589 12,507,793 11,980,721
----------------- ---------------- -------------
LONG-TERM DEBT, NET OF CURRENT PORTION 3,282,123 473,094 413,523
----------------- ---------------- -------------
9% CONVERTIBLE SUBORDINATED NOTES PAYABLE 50,000,000 1,306,000 1,306,000
----------------- ---------------- -------------
COMMITMENTS AND CONTINGENCIES (Notes 11 and 16)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value-
Authorized--5,000,000 shares
Series A convertible preferred stock-
Designated--1,500,000 shares
Issued and outstanding--641,259 shares at -- 6,413 6,410
December 31, 1998 and 641,023 shares at September 30, 1999
(Liquidation preference of $65,178,199 at September 30, 1999)
Common stock, $.001 par value-
Authorized--100,000,000 shares
Issued and outstanding--5,059,650 shares at December 31,
1997 and 15,304,825 at December 31, 1998 5,060 15,305 16,261
and 16,260,722 shares at September 30, 1999 (unaudited),
respectively
Additional paid-in capital 173,695,698 241,632,024 246,227,811
Accumulated deficit (218,655,101) (238,447,837) (249,974,144)
Deferred compensation (1,093,837) (957,127) (783,319)
------------------ ------------------ -----------
Total stockholders' (deficit) equity (46,048,180) 2,248,778 (4,506,981)
------------------ ---------------- -------------
$ 35,071,532 $ 16,535,665 $ 9,193,263
=============== ================ =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
HYBRIDON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
Years Ended December 31, September 30,
1996 1997 1998 1998 1999
--------------------------------------------------------------------------------
(unaudited)
REVENUES:
<S> <C> <C> <C> <C> <C>
Product and service $ 1,080,175 $ 1,876,862 $ 3,253,879 $ 2,353,435 $ 4,643,842
Research and development 1,419,389 945,000 1,099,915 949,916 450,000
Royalty and other income 62,321 48,000 -- -- 106,950
Interest 1,446,762 1,079,122 148,067 106,457 81,724
------------ ------------ ------------ ------------ ------------
4,008,647 3,948,984 4,501,861 3,409,807 5,282,516
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES:
Research and development 39,390,525 46,827,915 20,977,370 17,180,927 10,106,459
General and administrative 11,346,670 11,026,748 6,572,502 5,817,864 2,946,564
Interest 124,052 4,535,647 2,932,362 2,880,307 561,949
Restructuring -- 11,020,000 -- -- --
------------ ------------ ------------ ------------ ------------
Total operating expenses 50,861,247 73,410,310 30,482,234 25,879,098 13,614,972
------------ ------------ ------------ ------------ ------------
Loss before extraordinary item (46,852,600) (69,461,326) (25,980,373) (22,469,291) (8,332,456)
EXTRAORDINARY ITEM:
Gain on exchange of 9% -- -- 8,876,685 8,876,685 --
convertible subordinated notes
payable ------------ ------------ ------------ ------------ ------------
Net loss (46,852,600) (69,461,326) (17,103,688) (13,592,606) (8,332,456)
============ ============ ============= ============= ============
ACCRETION OF PREFERRED STOCK
DIVIDENDS -- -- 2,689,048 1,647,000 3,193,851
------------ ------------ ------------- ------------ -----------
Net loss applicable to
common stockholders $(46,852,600) $(69,461,326 $(19,792,736 $(15,239.606) $(11,526,307)
============= ============ ============ ============= =============
BASIC AND DILUTED NET LOSS PER
COMMON SHARE:
Loss per share before $ (10.24) $ (13.76) $ (2.19) $ (2.11) $ (0.54)
extraordinary item
Extraordinary item -- -- 0.75 0.83 --
------------- ------------- ------------- ------------- -------------
Net loss per share (10.24) (13.76) (1.44) (1.28) (0.54)
Accretion of preferred stock -- -- (.23) (0.15) (0.20)
dividends
------------- ------------- ------------- ------------- -------------
Net loss per share applicable
to common stockholders $ (10.24) $ (13.76) $ (1.67) $ (1.43) $ (0.74)
------------- ------------- ------------- ------------- -------------
SHARES USED IN COMPUTING BASIC
AND DILUTED NET LOSS PER COMMON SHARE 4,575,555 5,049,840 11,859,350 10,648,116 15,653,562
============== ============= ============== ============= ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Convertible Series A Convertible Common Stock
Preferred Stock Preferred Stock
Number of $.01 Par Number of $.01 Par Number of $.001 Par
Shares Value Shares Value Shares Value
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 3,196,435 $ 31,965 -- $ -- 368,733 $ 369
Issuance of common stock related to initial
public offering, net of issuance
costs of $5,268,756 -- -- -- -- 1,150,000 1,150
Conversion of convertible preferred stock to
common stock (3,196,435) (31,965) -- -- 3,371,330 3,371
Issuance of common stock related to the
exercise of stock options -- -- -- -- 57,740 58
Issuance of common stock related to the
exercise of warrants -- -- -- -- 81,512 81
Deferred compensation related to grants of
stock options to nonemployees -- -- -- -- -- --
Amortization of deferred compensation -- -- -- -- -- --
Net loss -- -- -- -- -- --
----------- --------- ------ -------- --------- ---------
BALANCE, DECEMBER 31, 1996 -- -- -- -- 5,029,315 5,029
Issuance of common stock related to the
exercise of stock options -- -- -- -- -- 25,005
Issuance of common stock related to the
exercise of warrants -- -- -- -- 330 --
Issuance of common stock for services
rendered -- -- -- -- 5,000 5
Deferred compensation related to grants of
stock options to nonemployees -- -- -- -- -- --
Amortization of deferred compensation -- -- -- -- -- --
Net loss -- -- -- -- -- --
----------- --------- ------ -------- --------- ---------
BALANCE, DECEMBER 31, 1997 -- -- -- -- 5,059,650 5,060
<CAPTION>
Total
Additional Accumulated Deferred Stockholders'
Paid-in Deficit Compensation Equity
Capital (Deficit)
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $ 114,755,394 $(102,341,175) $ -- $ 12,446,553
Issuance of common stock related to initial
public offering, net of issuance
costs of $5,268,756 52,230,094 -- -- 52,231,244
Conversion of convertible preferred stock to
common stock 28,594 -- -- --
Issuance of common stock related to the
exercise of stock options 1,089,618 -- -- 1,089,676
Issuance of common stock related to the
exercise of warrants 3,176,660 -- -- 3,176,741
Deferred compensation related to grants of
stock options to nonemployees 1,967,116 -- (1,967,116) --
Amortization of deferred compensation -- -- 763,190 763,190
Net loss -- (46,852,600) -- (46,852,600)
----------- ------------ ---------- ----------
BALANCE, DECEMBER 31, 1996 173,247,476 (149,193,775) (1,203,926) 22,854,804
Issuance of common stock related to the
exercise of stock options 26 86,300 -- 86,326
Issuance of common stock related to the
exercise of warrants 9,075 -- -- 9,075
Issuance of common stock for services
rendered 146,869 -- -- 146,874
Deferred compensation related to grants of
stock options to nonemployees 205,978 -- (205,978) --
Amortization of deferred compensation -- -- 316,067 316,067
Net loss -- (69,461,326) -- (69,461,326)
----------- ------------ ---------- ----------
BALANCE, DECEMBER 31, 1997 173,695,698 (218,655,101) (1,093,837) (46,048,180)
</TABLE>
F-5
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Continued)
<TABLE>
<CAPTION>
Convertible Series A Convertible Common Stock
Preferred Stock Preferred Stock
Number of $.01 Par Number of $.01 Par Number of $.001 Par
Shares Value Shares Value Shares Value
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 -- -- -- -- 5,059,650 5,060
Issuance of Series A convertible preferred stock
and attached warrants in exchange for
conversion of 9% convertible subordinated
notes payable and accrued interest, net
of issuance costs of $1,195,398 -- -- 510,504 5,105 -- --
Issuance of common stock and attached
warrants in exchange for conversion of accounts
payable and other obligations -- -- -- -- 3,217,154 3,217
Issuance of Series A convertible preferred stock -- -- 114,285 1,143 -- --
Issuance of common stock to Placement Agent -- -- -- -- 597,699 598
Issuance of common stock and attached
warrants in exchange for conversion of
convertible notes payable, net of issuance
costs of $566,167 -- -- -- -- 3,157,322 3,157
Issuance of common stock and attached
warrants, net of issuance costs of $1,069,970 -- -- -- -- 3,223,000 3,223
Issuance of common stock for services -- -- -- -- 50,000 50
rendered
Deferred compensation related to grants of
stock options to nonemployees, net of
terminations -- -- -- -- -- --
Issuance of warrants in connection with
notes payable -- -- -- -- -- --
Accretion and issuance of Series A
convertible preferred stock dividends -- -- 16,470 165 -- --
Amortization of deferred compensation -- -- -- -- -- --
Net loss -- -- -- -- --
===== ==== ======= ========== ========== =======
BALANCE, DECEMBER 31, 1998 -- -- 641,259 6,413 15,304,825 15,305
Issuance of common stock to placement agents -- -- -- -- 460,000 460
Amortization of deferred compensation -- -- -- -- -- --
Compensation expense related to
grants of stock options to nonemployees -- -- -- -- -- --
Accretion and issuance of Series A convertible
preferred stock dividend -- -- 20,840 208 -- --
Conversion of Series A convertible preferred
stock into common stock -- -- (21,076) (211) 495,897 496
Net loss -- -- -- -- -- --
===== ==== ======= ========== ========== =======
BALANCE, SEPTEMBER 30, 1999 (UNAUDITED) -- -- 641,023 $ 6,410 16,260,722 $16,261
===== ==== ======= ========== ========== =======
<CAPTION>
Total
Additional Accumulated Deferred Stockholders'
Paid-in Deficit Compensation Equity
Capital (Deficit)
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 173,695,698 (218,655,101) (1,093,837) (46,048,180)
Issuance of Series A convertible preferred stock
and attached warrants in exchange for
conversion of 9% convertible subordinated
notes payable and accrued interest, net
of issuance costs of $1,195,398 38,729,489 -- -- 38,734,594
Issuance of common stock and attached
warrants in exchange for conversion of accounts
payable and other obligations 5,931,341 -- -- 5,934,558
Issuance of Series A convertible preferred stock 7,998,817 -- -- 7,999,960
Issuance of common stock to Placement Agent 1,194,800 -- -- 1,195,398
Issuance of common stock and attached
warrants in exchange for conversion of
convertible notes payable, net of issuance
costs of $566,167 4,230,676 -- -- 4,233,833
Issuance of common stock and attached
warrants, net of issuance costs of $1,069,970 6,873,453 -- -- 6,876,676
Issuance of common stock for services 93,700 -- -- 93,750
rendered
Deferred compensation related to grants of
stock options to nonemployees, net of
terminations 109,734 -- (109,734) --
Issuance of warrants in connection with
notes payable 85,433 -- -- 85,433
Accretion and issuance of Series A
convertible preferred stock dividends 2,688,883 (2,689,048) -- --
Amortization of deferred compensation -- -- 246,444 246,444
Net loss -- (17,103,688) -- (17,103,688)
============= ============= ============= =============
BALANCE, DECEMBER 31, 1998 241,632,024 (238,447,837) (957,127) 2,248,778
Issuance of common stock to placement agents 999,540 -- -- 1,000,000
Amortization of deferred compensation -- -- 173,808 173,808
Compensation expense related to
grants of stock options to nonemployees 402,889 -- -- 402,889
Accretion and issuance of Series A convertible
preferred stock dividend 3,193,643 (3,193,851) -- --
Conversion of Series A convertible preferred
stock into common stock (285) -- -- --
Net loss -- (8,332,456) -- (8,332,456)
============= ============= ============= =============
BALANCE, SEPTEMBER 30, 1999 (UNAUDITED) $ 246,227,811 $ 249,974,144 $ (783,319) $ (4,506,981)
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31, Nine Months Ended September 30,
1996 1997 1998 1998 1999
CASH FLOWS FROM OPERATING ACTIVITIES: (Unaudited)
<S> <C> <C> <C> <C> <C>
Net loss $(46,852,600) $(69,461,326) $(17,103,688) $(13,592,606) $ (8,332,456)
Adjustments to reconcile net loss to net
cash used in operating activities-
Extraordinary gain on exchange of 9%
convertible subordinated notes payable -- -- (8,876,685) (8,876,685) --
Depreciation and amortization 2,393,751 4,488,719 4,057,286 2,419,269 1,825,370
Loss on disposal of fixed assets -- -- -- 424,675 --
Issuance of common stock for services rendered -- 146,874 93,750 -- --
Amortization of deferred compensation 763,190 316,067 246,444 163,044 576,697
Amortization of deferred financing costs -- 479,737 160,813 240,611 80,951
Noncash portion of restructuring charge -- 1,255,000 -- -- --
Changes in assets and liabilities-
Accounts receivable (573,896) 44,194 (645,739) (295,966) 336,589
Prepaid expenses and other current assets (593,797) 539,499 894,998 557,703 8,642
Note receivable from officer (9,845) 70,728 (11,400) (8,550) (8,550)
Accounts payable 2,010,981 3,987,398 (3,059,002) (377,733) 144,575
Accrued expenses 736,141 7,071,532 1,565,806 706,406 (678,875)
Deferred revenue -- (86,250) -- -- --
Amounts payable to related parties (12,500) -- -- -- --
Net cash used in operating activities (42,138,575) (51,147,828) (22,677,417) (18,639,832) (6,047,057)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in short-term investments (3,785,146) 3,785,146 -- -- --
Purchases of property and equipment (8,902,989) (7,509,755) (471,949) (340,507) --
Proceeds from sale of property and equipment -- -- 714,400 460,000 (8,303)
(Investment in) sale of real estate partnership (3,751,552) -- 5,450,000 -- --
Net cash (used in) provided by investing
activities (16,439,687) (3,724,609) 5,692,451 119,493 (8,303)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Series A convertible
preferred stock -- -- 7,999,960 7,999,960 --
Proceeds from issuance of common stock related
to stock options and restricted stock grants 1,089,676 86,326 -- -- --
Net proceeds from issuance of common stock 52,231,244 -- 6,876,676 6,876,676 --
Proceeds from notes payable 7,500,000 -- 6,000,000 -- --
Proceeds from issuance of convertible promissory
notes payable -- 50,000,000 4,233,833 4,233,833 --
Proceeds from related party promissory notes payable -- -- -- -- 1,000,000
Proceeds from issuance of common stock related to 3,176,741 9,075 -- -- --
stock warrants
Proceeds from sale/leaseback of fixed assets 1,722,333 1,205,502 -- -- --
Payments on long-term debt (446,163) (1,564,268) (7,296,646) (4,236,693) (52,343)
Decrease (increase) in deferred financing costs 251,921 (2,820,790) (400,000) -- --
Decrease (increase) in restricted cash and other assets 401,990 (2,474,948) 2,976,823 2,327,186 --
Net cash provided by financing activities 65,927,742 44,440,897 20,390,646 17,200,962 947,657
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,349,480 (10,431,540) 3,405,680 (1,319,377) (5,107,703)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,284,262 12,633,742 2,202,202 2,202,202 5,607,882
CASH AND CASH EQUIVALENTS, END OF YEAR $ 12,633,742 $ 2,202,202 $ 5,607,882 $ 882,825 $ 500,179
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
HYBRIDON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Including Data Applicable to Unaudited Periods)
(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.
Since inception, the Company has devoted substantially all of its efforts
toward product research and development, its custom contract
manufacturing business (Hybridon Specialty Products or HSP) and raising
capital. Management anticipates that substantially all future revenues
will be derived from the sale of proprietary biopharmaceutical products
under development or to be developed in the future, and custom contract
manufacturing of synthetic DNA products and reagent products (by HSP), as
well as from research and development revenues and fees and royalties
derived from licensing of the Company's technology. Accordingly, although
the Company has begun to generate revenues from its custom contract
manufacturing business, the Company is dependent on the proceeds from
possible future sales of debt and equity securities and research and
development collaborations in order to fund future operations. There is
substantial doubt concerning its ability to continue as a going concern.
As of December 31, 1998, the Company had cash and cash equivalents of
approximately $5.6 million. The Company expects such resources to fund
operations through May 1999. The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
The Company is currently seeking debt or equity financing in an amount
sufficient to support its operations through the end of 1999, and in
connection therewith, is in negotiations with several parties to obtain
such financing. If the Company is unable to obtain this sufficient amount
of additional funding in May 1999, it will be forced to terminate its
operations or seek relief under applicable bankruptcy law by the end of
May 1999.
See Note 22 for additional information through February 1, 2000.
On December 3, 1997, the Company was delisted from the Nasdaq Stock
Market, Inc. (NASDAQ) because the Company was not in compliance with the
continued listing requirements of the NASDAQ National Market. The Company
is currently trading on the NASD OTC as a result of the delisting.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Management Estimates and Uncertainties
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The Company is subject to a number of risks and uncertainties
similar to those of other companies of the same size within the
biotechnology industry, such as uncertainty with clinical trials,
uncertainty of additional funding and history of operating losses.
F-8
<PAGE>
(b) Principles of Consolidation
The accompanying consolidated financial statements include the
results of the Company and its subsidiaries, Hybridon S.A.
(Europe), a French corporation, and Hybridon Canada, Inc. (an
inactive majority-owned subsidiary). The consolidated financial
statements also reflect the Company's 30% interest in MethylGene,
Inc. (MethylGene), a Canadian corporation which is accounted for
under the equity method (see Note 14). All material intercompany
balances and transactions have been eliminated in consolidation.
(c) Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less when purchased to be cash
equivalents. Cash and cash equivalents and restricted cash at
December 31, 1997 and 1998 consisted of the following (at
amortized cost, which approximates fair market value):
1997 1998
---------- ----------
Cash and cash equivalents-
Cash and money market funds $1,702,272 $3,865,365
Corporate bond 499,930 1,742,517
---------- -----------
Total cash and cash equivalents $2,202,202 $5,607,882
========== ==========
Restricted cash-
Note payable to bank (Note 7(a)) $1,758,542 $ -
Foreign bank account (Note 6) 1,034,618 -
Capital lease obligations
(Note 7(d)) 257,822 -
---------- ----------
$3,050,982 $ -
========== ==========
(d) Depreciation and Amortization
Depreciation and amortization are computed using the straight-line
method based on the estimated useful lives of the related assets
as follows:
Estimated
Asset Classification Useful Life
Leasehold improvements Life of lease
Laboratory equipment and other 3-5 years
(e) Accrued Expenses
At December 31, 1997 and 1998, accrued expenses consist of the
following:
F-9
<PAGE>
1997 1998
----------- -------------
Restructuring (Note 3) $ 8,316,148 $ 469,485
Interest 1,125,000 29,385
Payroll and related costs 742,452 1,151,742
Outside research and clinical costs 1,231,818 797,593
Professional fees 150,000 149,957
Contingent stock (Notes 7(b) and 15(c)) - 1,000,000
Other 351,880 470,517
------------ ------------
$11,917,298 $4,068,679
(f) Reclassifications
Certain amounts in the prior periods consolidated financial
statements have been reclassified to conform with the current
period's presentation.
(g) Revenue Recognition
The Company has recorded revenue under the consulting and research
agreements discussed in Notes 8, 9 and 14. Revenue is recognized
as earned on a straight-line basis over the term of the agreement,
which approximates when work is performed and costs are incurred.
Revenues from product and service sales are recognized when the
products are shipped or the services are performed. Product
revenue during 1997 and 1998 represents revenues from the sale of
oligonucleotides manufactured on a custom contract basis by HSP.
Revenue from related parties totaled $50,000, $102,000,
$1,686,000, $1,600,000 and $976,000 for 1996, 1997 and 1998 and
the nine months ended September 30, 1998 and 1999, respectively.
(h) Research and Development Expenses
The Company charges research and development expenses to
operations as incurred.
(i) Patent Costs
The Company charges patent expenses to operations as incurred.
(j) Comprehensive Loss
The Company applies Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income. Comprehensive loss
is defined as the change in equity of a business enterprise during
a period from transactions and other events and circumstances from
nonowner sources. The Company's comprehensive loss is the same as
the reported net loss for all periods presented.
(k) Net Loss per Common Share
The Company applies SFAS No. 128, Earnings per Share. Under SFAS
No. 128, basic net loss per common share is computed using the
weighted average number of shares of common stock outstanding
during the period. Diluted net loss per common share is the same
as basic net loss per common share as the effects of the Company's
potential common stock
F-10
<PAGE>
equivalents are antidilutive. Antidilutive securities which
consist of stock options, warrants and convertible preferred stock
(on an as-converted basis) that are not included in diluted net
loss per common share were 2,595,496, 2,404,561 and 27,774,883 for
1996, 1997 and 1998, respectively.
(l) Segment Reporting
The Company applies SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 establishes
standards for reporting information regarding operating segments
in annual financial statements and requires selected information
for those segments to be presented in interim financial reports
issued to stockholders. SFAS No. 131 also establishes standards
for related disclosures about products and services and geographic
areas. To date, the Company has viewed its operations and manages
its business as principally one operating segment. As a result,
the financial information disclosed herein, represents all of the
material financial information related to the Company's principal
operating segment. All of the Company's revenues are generated in
the U.S. and substantially all assets are located in the U.S.
(3) RESTRUCTURING
Beginning in July 1997, the Company implemented a restructuring plan to
reduce expenditures on a phased basis in an effort to conserve its cash
resources. As part of this restructuring plan, in addition to terminating
the clinical development of GEM(R) 91, the Company's first generation
antisense drug for the treatment of AIDS and HIV infection, the Company
reduced or suspended programs unrelated to its core advanced chemistry
antisense drug research and development programs. In connection with the
reduction in programs, the Company has accrued termination fees related
to research contracts and has written off assets 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 cancelled or the terms significantly
reduced. As a result of the implementation of these changes, the Company
terminated the employment of 84 employees at its Cambridge and Milford,
Massachusetts, facilities in 1997 and closed its operations in Paris,
France, terminating 11 employees at that location.
In connection with the restructuring, the Company entered into different
subleasing arrangements. During 1997, the Company subleased a portion of
each of its facilities in Cambridge, Massachusetts (including a
substantial portion of its former headquarters located at 620 Memorial
Drive (the Cambridge Headquarters)). The Company incurred expenses
relating to these subleases for broker fees and renovation expenses
incurred in preparing the Cambridge Headquarters space for the new
tenant. In addition, the Company accrued the estimated lease loss of
subleasing the Cambridge Headquarters which were vacated during 1998. The
Company also subleased its office in Paris, France, and accrued the
estimated lease loss.
The following are the significant components of the $11,020,000 charge
for restructuring (in thousands):
<TABLE>
<CAPTION>
To be Paid
as of
Restructuring Non-Cash Cash December 31,
Charge Portion Disbursed 1998
---------------- --------------- -------------- ------------
<S> <C> <C> <C> <C>
Estimated loss on facility leases $ 6,372 $ 5,976 $ 356 $ 40
Employee severance, benefits and 2,738 - 2,548 190
related costs
Write-down of assets to net realizable 946 946 - -
value
Termination costs of certain 964 672 53 239
---------- ---------- ---------- ----------
research programs
$ 11,020 $ 7,594 $ 2,957 $ 469
========== ========== ========== ==========
</TABLE>
F-11
<PAGE>
The Company disbursed cash totaling approximately $1,453,000 and
$1,504,000 in 1997 and 1998, respectively, with respect to the
restructuring. The remaining accrued amount of approximately $469,000
will be paid during 1999.
(4) INVESTMENT IN REAL ESTATE PARTNERSHIP
Under the terms of the lease for the Cambridge Headquarters (the
Cambridge Lease), the Company accounted for $5,450,000 of its payments
for a portion of the costs of construction of the leased premises as
contributions to the capital of the Cambridge landlord in exchange for a
limited partnership interest in the Cambridge landlord (the Partnership
Interest). Under the terms of the Partnership Interest, the Company
exercised its right to sell back the Partnership Interest and received
payment of the $5,450,000 in 1998.
(5) NOTE RECEIVABLE FROM OFFICER
At December 31, 1997 and 1998 the Company has a note receivable from
officer, including accrued interest, of $247,250 and $258,650,
respectively. The note has an interest rate of 6.0% per annum and matures
in April 2001.
(6) RESTRICTED CASH - BVH
In November 1997, the Company was notified by Bank Fur Vermogensanlagen
Und Handel AG (BVH) that the Federal Banking Supervisory Office in
Germany had imposed a moratorium on BVH and had closed BVH for business.
Accordingly, the Company classified its deposit with BVH as restricted
cash. The Company sold the deposit to the Cambridge Landlord, an
affiliate of certain directors of the Company, and recovered the full
amount in 1998.
(7) LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Future minimum principal payments due under various notes payable,
excluding the 9% convertible subordinated notes (the 9% Notes) due April
1, 2004, are as follows at December 31, 1998:
December 31, Amount
------------ ------
1999 $ 6,070,951
2000 80,746
2001 91,892
2002 104,576
2003 119,010
Thereafter 76,870
------------
Total long-term debt obligations 6,544,045
Less--Current portion 6,070,951
$ 473,094
(a) Note Payable to a Bank
F-12
<PAGE>
In December 1996, the Company entered into a five-year $7,500,000
note payable to a bank. In November 1998, the outstanding balance
of approximately $2,895,000 was purchased from the bank by Forum
Capital Markets, LLC (Forum) and certain investors associated with
Pecks Management Partners Ltd. (Pecks) (collectively, the
Lenders), which are affiliates of two members of the Company's
Board of Directors.
(b) Note Payable to Lenders
In connection with the purchase by the Lenders of the note payable
to the bank, the Lenders lent an additional $3,200,000 so as to
increase the outstanding principal amount of the note to
$6,000,000. The terms of the note payable were amended as follows:
(i) the maturity was extended to November 30, 2003; (ii) the
interest rate was decreased to 8%; (iii) interest is payable
monthly in arrears, with the principal due in full at maturity of
the loan; (iv) the note payable is convertible, at the Lenders'
option, in whole or in part, into shares of common stock at a
conversion price equal to $2.40 per share; (v) the note includes a
minimum liquidity, as defined covenant of $2,000,000; and (vi) the
note payable may not be prepaid, in whole or in part, at any time
prior to December 1, 2000. On March 30, 1999, the Company received
a waiver for noncompliance with the minimum tangible net worth
covenant effective as of December 31, 1998 and March 31, 1999. On
April 15, 1999, the Company also received a waiver for
non-compliance with the minimum liquidity covenant effective as of
April 15, 1999. The Company has classified the outstanding balance
of $6,000,000 at December 31, 1998 as a current liability in the
accompanying consolidated balance sheet as it does not currently
have the financing to remain in compliance with the financial
covenants. In connection with the purchase of the note payable,
Forum is entitled to receive $400,000 as a fee, which Forum has
agreed to reinvest by purchasing common stock or preferred stock,
both with attached warrants. The Company has recorded the $400,000
as a deferred financing cost, which will be amortized to interest
expense over the term of the note and an accrued expense for the
issuance of common stock or preferred stock, both with attached
warrants, which will occur in 1999. In addition, Forum is entitled
to receive warrants to purchase $400,000 of shares of common stock
of the Company at the per share valuation of the next financing,
or $3.00 per share if the financing is not completed by May 1,
1999. The Company determined the value of the warrants to be
$85,433, by using the Black-Scholes option pricing model. The
Company has recorded this $85,433 as a deferred financing cost,
which will be amortized to interest expense over the term of the
note. (See Note 22 for additional information through February 1,
2000.)
(c) Note Payable to Landlord
In December 1994, the Company issued a $750,000 promissory note to
its landlord to fund specific construction costs associated with
the development of its manufacturing plant in Milford,
Massachusetts. The promissory note bears interest at 13% per annum
and is to be paid in equal monthly installments of principal and
interest over the remainder of the 10-year lease term.
(d) Capital Lease Obligations
The Company had entered into various capital leases for equipment.
During 1998, the Company settled its capital lease obligations in
full through the issuance of common stock and warrants (see Note
15(c)).
(e) 9% Convertible Subordinated Notes Payable
On April 2, 1997, the Company issued $50,000,000 of the 9% Notes.
Under the terms of the 9% Notes, the Company must make semiannual
interest payments on the outstanding
F-13
<PAGE>
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 convertible at any time prior to the maturity date at a
conversion price equal to $35.0625, 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 are
redeemed within 60 days after such trading period. The premium
decreases by 1.5% each year 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.
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 warrants. On May 5, 1998,
noteholders holding $48,694,000 of principal and $2,361,850 of
accrued interest tendered such principal and accrued interest to
the Company for 510,505 shares of Series A convertible preferred
stock and warrants to purchase 3,002,958 shares of common stock
with an exercise price of $4.25 per share. In accordance with SFAS
No. 15, Accounting by Debtors and Creditors for Troubled Debt
Restructurings, the Company recorded an extraordinary gain of
$8,876,685 related to the exchange. The extraordinary gain
represents the difference between the carrying value of the 9%
Notes plus accrued interest, less $2,249,173 of deferred financing
costs written off, and the fair value of the Series A convertible
preferred stock, as determined by the per share sales price of
Series A convertible preferred stock sold in the 1998 Unit
Financing (see Note 15(c)), and warrants to purchase common stock
issued by the Company.
(8) G.D. SEARLE & CO. AGREEMENT
In January 1996, the Company and G.D. Searle & Co. (Searle) entered into
a collaboration relating to research and development of therapeutic
antisense compounds. According to the collaboration agreement, as
modified in April 1998, targets can be selected from those in the fields
of cancer, cardiovascular disease and inflammation/immunomodulation (the
Searle Field).
Pursuant to the collaboration, the parties are conducting research and
development relating to a compound directed at MDM2. In this project,
Searle is funding certain research and development efforts by the
Company, and both Searle and the Company have committed certain of its
own personnel to the collaboration. The initial phase of research and
development activities will be conducted through the earlier of (i) the
achievement of certain milestones, and (ii) January 31, 2000, subject to
early termination by Searle. The parties may extend the initial
collaboration by mutual agreement, including agreement as to additional
research funding by Searle. Searle has advised the Company that it
intends to inform the Company by February 29, 2000 whether it intends to
extend this collaboration.
In addition, under the collaboration, Searle has the right to designate
up to six additional molecular targets in the Searle Field (the
Additional Targets) on terms substantially consistent with the terms of
the collaboration applicable to the initial molecular target. This right
is exercisable by Searle with respect to each of the Additional Targets
upon the payment by Searle of certain research payments (beyond the
project-specific payments relating to the particular Additional Target)
and the purchase of additional common stock from the Company by Searle
(at the then fair market value). The aggregate amount to be paid by
Searle for such research payments and equity investment in order to
designate each of the Additional Targets is $10,000,000 per Additional
Target. In the event that Searle designates all of the Additional
Targets, the aggregate amount to be paid by Searle for research payments
will be $24,000,000, and the aggregate amount to be paid by
F-14
<PAGE>
Searle in equity investment will be $36,000,000. If Searle has not
designated all of the Additional Targets by the time the initial
molecular target reaches a certain stage of preclinical development,
Searle will be required to purchase an additional $10,000,000 of common
stock (at the then fair market value) in order to maintain its right to
designate any of the Additional Targets. The payment for any such common
stock will be creditable against the equity investment portion of the
payments to be made by Searle with respect to the designation of any of
the Additional Targets that Searle has not yet designated.
Searle has exclusive rights to commercialize any products resulting from
the collaboration. If Searle elects to commercialize a product, Searle
will fund and perform preclinical tests and clinical trials of the
product candidate and will be responsible for regulatory approvals for
and marketing of the product. The Company has agreed to perform research
and development work exclusively with Searle. In addition, for each
product candidate, the Company will be entitled to milestone payments
from Searle totaling up to an aggregate of $10,000,000 upon the
achievement of certain development benchmarks. The Company also will be
entitled to royalties from net sales of products resulting from the
collaboration. Subject to satisfying certain conditions relating to its
manufacturing capacities and capabilities, the Company will retain
manufacturing rights, and Searle will be required to purchase its
requirements of products from the Company on an exclusive basis at
specified prices. Upon a change in control of the Company, Searle would
have the right to terminate the Company's manufacturing rights, although
the royalty payable would be increased in such event.
In the event that Searle designates all of the Additional Targets or if
Hybridon fails to satisfy certain requirements relating to its
manufacturing capacities and capabilities, Searle will have the right to
require Hybridon to form a joint venture with Searle, as defined. The
Company and Searle would each own 50% of the joint venture, although
Searle's ownership interest in the joint venture would increase based
upon a formula to up to a maximum of 75% if the joint venture is
established in certain instances relating to the Company's failure to
satisfy certain requirements relating to its manufacturing capacities and
capabilities.
During 1996, 1997 and 1998, the Company earned $400,000, $600,000 and
$600,000, respectively, in research and development revenues from Searle.
Under the collaboration, Searle also purchased 200,000 shares of common
stock in the Company at the offering price of $50.00 per share.
(9) F. HOFFMANN-LA ROCHE LTD. (ROCHE) COLLABORATION
In December 1992, the Company and Roche entered into a collaboration
involving the application of the Company's antisense oligonucleotide
chemistry to develop compounds for the treatment of hepatitis B,
hepatitis C and human papilloma virus. On September 3, 1997, Roche
notified the Company that it had decided not to pursue further
collaboration with the Company and was terminating the collaboration
effective February 28, 1998.
The Company has recorded $1,019,389 and $345,000 of research and
development revenue related to this collaboration in 1996 and 1997,
respectively. Due to the termination of the collaboration, as discussed
above, the Company recognized no revenue with respect to this
collaboration in 1998.
(10) MEDTRONIC, INC. COLLABORATIVE STUDY AGREEMENT
In May 1994, the Company and Medtronic, Inc. (Medtronic) entered into a
collaborative study agreement (the Medtronic Agreement) involving the
development of antisense compounds for the treatment of Alzheimer's
disease and a drug delivery system to deliver such compounds into the
central nervous system. The agreement provides that the Company is
responsible for the development of, and hold all rights to, any drug
developed pursuant to this collaboration, and Medtronic is responsible
for the development of, and hold all rights to, any delivery system
F-15
<PAGE>
developed pursuant to this collaboration. The parties may extend this
collaboration by mutual agreement to other neurodegenerative disease
targets. The Company is not currently conducting any activities under
this collaboration.
(11) LICENSING AGREEMENT
The Company has entered into a licensing agreement with the Worcester
Foundation for Biomedical Research, Inc., which has merged with the
University of Massachusetts Medical Center, under which the Company has
received exclusive licenses to certain patents and patent applications.
The Company is required to make royalty payments based on future sales of
products employing the technology or falling under claims of a patent, as
well as a specified percentage of sublicense income received related to
the licensed technology. Additionally, the Company is required to pay an
annual maintenance fee through the life of the patents.
(12) PHARMACIA BIOTECH, INC. COLLABORATION
In December 1994, the Company and Pharmacia Biotech, Inc. (Pharmacia)
entered into a collaboration involving the design and development of a
large-scale oligonucleotide synthesis machine. Following completion of
the machine in December 1996, the collaboration expired, and Pharmacia
retained the right to sell the machine to third parties, subject to an
obligation to pay the Company royalties on such third-party sales. During
1996 and 1997, the Company received $62,321 and $48,000, respectively, of
royalty income related to such third-party sales. The Company recognized
no royalty income related to this collaboration for 1998.
(13) PERKIN-ELMER CORPORATION SALES AND SUPPLY AGREEMENT
In September 1996, the Company and the Applied Biosystems Division of
Perkin-Elmer Corporation (Perkin-Elmer) signed a four-year sales and
supply agreement under which Perkin-Elmer agreed to refer potential
customers to HSP for the manufacture of custom oligonucleotides and the
Company agreed that amidites for the manufacture of these
oligonucleotides would be purchased from Perkin-Elmer and a percentage of
the sales price will be paid to Perkin-Elmer. In addition, Perkin-Elmer
licensed to the Company its oligonucleotide synthesis patents.
(14) INVESTMENT IN METHYLGENE, INC.
In January 1996, the Company and three Canadian institutional investors
formed a Quebec company, MethylGene, Inc. (MethylGene) to develop and
market certain compounds and procedures to be agreed upon by the Company
and MethylGene.
The Company has granted to MethylGene exclusive worldwide licenses and
sublicenses in respect of certain technology relating to the MethylGene
fields. These fields, as amended, are defined as (i) antisense compounds
to inhibit DNA methyltransferase for the treatment of any disease; (ii)
other methods of inhibiting DNA methyltransferase for the treatment of
any disease; and (iii) antisense compounds to inhibit up to two
additional molecular targets for the treatment of cancers, to be agreed
upon by the Company and MethylGene. In addition, the Company and
MethylGene have entered into a supply agreement pursuant to which
MethylGene is obligated to purchase from the Company all required
formulated bulk oligonucleotides at specified transfer prices.
The Company acquired a 49% interest in MethylGene for approximately
$734,000, and the Canadian investors acquired a 51% interest in
MethylGene for a total of approximately $5,500,000. The institutional
investors have the right to exchange all (but not less than all) of their
shares of stock in MethylGene for an aggregate of 100,000 shares of
Hybridon common stock (subject to adjustment for stock splits, stock
dividends and the like). This option is exercisable only during a
F-16
<PAGE>
90-day period commencing on the earlier of the date five years after the
closing of the institutional investors' investment in MethylGene or the
date on which MethylGene ceases operations. This option terminates sooner
if MethylGene raises certain additional amounts of equity or debt
financing or if MethylGene enters into a corporate collaboration that
meets certain requirements. During 1998, MethylGene raised additional
proceeds from outside investors that decreased the Company's interest to
30%. The Company is accounting for its investment in MethylGene under the
equity method and, due to the existence of the investors exchange rights,
the Company has recorded, up to its original investment, 100% of
MethylGene's losses in the accompanying consolidated statements of
operations.
In May 1998, this agreement was amended to grant MethylGene a
non-exclusive right to use any and all antisense chemistries discovered
by the Company or any of its affiliates for a period commencing on May 5,
1998 and ending on the earlier of (i) the effective date of termination
by MethylGene of its contract for development services to be provided by
the Company; (ii) May 5, 1999, unless MethylGene exercises its option to
continue contracting for development services provided by the Company; or
(iii) May 5, 2000. As additional consideration for this nonexclusive
right, MethylGene is required to pay the Company certain milestone
amounts, as defined, and transferred 300,000 shares of MethylGene's Class
B shares to the Company. The Company has placed no value on these shares.
During 1996, 1997, 1998 and the nine months ended September 30, 1998 and
1999, the Company recognized $49,565, $101,894, $1,685,932, $1,552,381
and $920,814 respectively, of product and service revenue related to this
agreement.
(15) STOCKHOLDERS' EQUITY (DEFICIT)
(a) Common Stock
The Company has 100,000,000 authorized shares of common stock,
$.001 par value, of which 15,304,825 shares were issued and
outstanding at December 31, 1998.
(b) Initial Public Offering (IPO)
On February 2, 1996, the Company completed its IPO of 1,150,000
shares of common stock at $50.00 per share. The sale of common
stock resulted in net proceeds to the Company of $52,231,244 after
deducting expenses related to the offering.
(c) 1998 Unit Financing
On May 5, 1998, the Company completed a private offering of equity
securities raising total gross proceeds of $26,681,164 from the
issuance of 9,597,476 shares of common stock, 114,285 shares of
Series A convertible preferred stock and warrants to purchase
3,329,486 shares of common stock at $2.40 per share. The gross
proceeds include the conversion of $5,934,558 of accounts payable,
capital lease obligations and other obligations into common stock.
The Company incurred $1,636,137 of cash expenses related to the
private offering and issued 597,699 shares of common stock and
warrants to purchase 1,720,825 shares of common stock at $2.40 per
share to the placement agents. The compensation received by
Pillar, a company affiliated with certain directors of the
Company, with respect to the offshore component of the private
offering (Offshore Offering) consisted of (i) 9% of gross proceeds
of such Offshore Offerings and (ii) a nonaccountable expense
allowance equal to 4% of gross proceeds of such Offshore Offering.
Pillar received $1,636,137 and warrants to purchase 1,111,630
shares of common stock at $2.40 per share.
In addition, Pillar is entitled to receive 300,000 shares of
common stock in connection with its efforts in assisting the
Company in restructuring its balance sheet. The Company has
recorded $600,000 of general and administrative expense in the
accompanying consolidated
F-17
<PAGE>
statement of operations during 1998, which represents the value of
this common stock on May 5, 1998 with an offsetting amount to
accrued expenses for the shares to be issued. These shares will be
issued in 1999.
(d) Units Issued to Primedica Corporation
In connection with the unit financing (see Note 15(c)) the Company
issued 250,000 shares of common stock and 62,500 warrants to
purchase common stock to Primedica Corporation (Primedica) for
future services to be provided. The services shall commence upon
the Company's request after (i) the Company's securities are
listed on a nationally recognized exchange, and (ii) the average
closing price of the Company's common stock is at least $2.00 per
share for the twenty-day trading period preceding the contract
commencement date. In the event that the Company does not use
these services as a result of the failure to meet the contract
conditions, Primedica shall forfeit to the Company all or part of
the common stock and warrants held by Primedica. The Company has
recorded these shares as issued and outstanding at December 31,
1998 at par value. The Company will record the value of these
services as the services are rendered.
(e) Stock Split
On December 10, 1997, the Board of Directors declared a
one-for-five reverse split of its common stock. Share quantities
and related per share amounts have been retroactively restated to
reflect the reverse stock split.
(f) Warrants
The Company has the following warrants outstanding and exercisable
for the purchase of common stock at December 31, 1998:
<TABLE>
<CAPTION>
Expiration Date Outstanding Exercise Price Exercisable Exercise Price
Warrants per Share Warrants per Share
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
February 4, 1999-October 25, 2000 551,201 $ 50.00 551,201 $50.00
February 28, 2000 20,000 37.50 20,000 37.50
December 31, 2001 13,000 34.49 13,000 34.49
May 4, 2003 8,641,503 2.40- 4,378,044 2.40
------------ --------- ---------- -------
4.25
9,225,704 4,962,245
============ =========
Weighted average exercise price $5.48 $7.91
per share ===== =====
</TABLE>
Five-year warrants to purchase 368,620 shares of common stock at
$50.00 per share were issued in 1994 and 1995 as a component of
the compensation for services of several placement agents of the
Company's convertible preferred stock. Of these warrants, 304,335
were issued to a company that is controlled by two directors of
the Company (see Note 16(b)). The remaining 64,285 warrants were
issued to various other companies that acted as placement agents.
See Note 15(c) for information relating to warrants issued to
placement agents in connection with the 1998 Unit Financing.
As consideration of the agreements made by Forum consenting to the
Company's 1998 private placements and waiving certain obligations
of the Company to Forum, the Company agreed to amend the warrant
to purchase 71,301 shares of common stock at an exercise price
F-18
<PAGE>
of $35.06 per share, issued to Forum in connection with 9% notes
so that the exercise price will be equal to $4.25 per share, and
the number of shares of common stock purchasable upon exercise
thereof will be increased to 588,235, in each case subject to
adjustment; provided, however, that such warrant will also be
amended to provide that such warrant may not be exercised until
May 5, 1999 and the transactions contemplated by such private
placements and by the exchange offer will not trigger any
anti-dilution adjustments to the exercise price thereof or the
number of shares of common stock subject thereto.
(g) Stock Options
In 1990 and 1995, the Company established the 1990 Stock Option
Plan (the 1990 Option Plan) and the 1995 Stock Option Plan (the
1995 Option Plan), respectively, which provide for the grant of
incentive stock options and nonqualified stock options. Options
granted under these plans vest over various periods and expire no
later than 10 years from the date of grant. However, under the
1990 Option Plan, in the event of a change in control (as defined
in the 1990 Plan), the exercise dates of all options then
outstanding shall be accelerated in full and any restrictions on
exercising outstanding options issued pursuant to the 1990 Option
Plan shall terminate. In October 1995, the Company terminated the
issuance of additional options under the 1990 Option Plan. As of
December 31, 1998, options to purchase a total of 525,638 shares
of common stock remained outstanding under the 1990 Option Plan.
A total of 700,000 shares of common stock may be issued upon the
exercise of options granted under the 1995 Option Plan. The
maximum number of shares with respect to which options may be
granted to any employee under the 1995 Option Plan shall not
exceed 500,000 shares of common stock during any calendar year.
The Compensation Committee of the Board of Directors has the
authority to select the employees to whom options are granted and
determine the terms of each option, including (i) the number of
shares of common stock subject to the option; (ii) when the option
becomes exercisable; (iii) the option exercise price, which, in
the case of incentive stock options, must be at least 100% (110%
in the case of incentive stock options granted to a stockholder
owning in excess of 10% of the Company's common stock) of the fair
market value of the common stock as of the date of grant; and (iv)
the duration of the option (which, in the case of incentive stock
options, may not exceed 10 years). As of December 31, 1998,
options to purchase a total of 550,534 shares of common stock
remained outstanding under the 1995 Option Plan.
In October 1995, the Company adopted the 1995 Director Stock
Option Plan (the Director Plan). A total of 50,000 shares of
common stock may be issued upon the exercise of options granted
under the Director Plan. Under the terms of the Director Plan,
options to purchase 1,000 shares of common stock were granted to
eligible directors upon the closing of the Company's initial
public offering at the fair market value of the common stock on
the date of the closing. Thereafter, options to purchase 1,000
shares of common stock will be granted to each eligible director
on May 1 of each year commencing in 1997. All options will vest on
the first anniversary of the date of grant or, in the case of
annual options, on April 30 of each year with respect to options
granted in the previous year. As of December 31, 1998, options to
purchase a total of 21,000 shares of common stock remained
outstanding under the Director Plan.
In May 1997, the Company adopted the 1997 Stock Option Plan (the
1997 Option Plan) and has reserved and may issue up to 4,500,000
shares for the grant of incentive and nonqualified stock options.
The maximum number of shares with respect to which options may be
granted to any employee under the 1997 Option Plan shall not
exceed 500,000 shares of common stock during any calendar year.
The Compensation Committee of the Board of Directors has the
authority to select the employees to whom options are granted and
determine the terms of each option, including (i) the number of
shares of common stock subject to the option; (ii)
F-19
<PAGE>
when the option becomes exercisable; (iii) the option exercise
price, which, in the case of incentive stock options, must be at
least 100% (110% in the case of incentive stock) of the fair
market value of the common stock as of the date of grant; and (iv)
the duration of the option (which, in the case of incentive stock
options, may not exceed ten years). As of December 31, 1998,
options to purchase a total of 2,363,560 shares of common stock
remained outstanding under the 1997 Option Plan. See Note 22(g).
Stock option activity for the three years ended December 31, 1998
is summarized as follows:
<TABLE>
<CAPTION>
Number Exercise Price Weighted
of Shares per Share Average Price
per Share
--------------- --------------- ---------------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1995 738,208 $.01-$50.00 $29.15
Granted 476,020 25.00-65.60 49.55
Exercised (57,740) .01-37.50 18.85
Terminated (20,100) 25.00-57.85 40.20
-------
Outstanding, December 31, 1996 1,136,388 1.25-65.60 38.05
Granted 315,675 27.50-32.50 30.75
Exercised (25,005) 1.25-40.00 12.60
Terminated (236,561) 2.50-65.60 40.35
--------
Outstanding, December 31, 1997 1,190,497 1.25-65.60 36.18
Granted 2,513,000 2.00-3.13 2.00
Terminated (242,765) 2.50-57.85 37.79
--------
Outstanding, December 31, 1998 3,460,732 $1.25-$65.60 $11.25
========= ============ ======
Exercisable, December 31, 1996 622,930 $1.25-$65.60 $32.55
======= ============ ======
Exercisable, December 31, 1997 740,780 $1.25-$65.50 $34.40
======= ============ ======
Exercisable, December 31, 1998 1,650,021 $1.25-$65.60 $17.13
========= ============ ======
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Range of Exercise Number Weighted Weighted Number Weighted
Prices Outstanding Average Average Outstanding Average
Remaining Exercise Exercise
Contractual Price per Price per
Life Share Share
- ----------------------- --------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$1.25 10,000 3.10 $ 1.25 10,000 $ 1.25
2.00-2.37 2,505,000 9.56 2.00 901,562 2.00
2.44-3.13 18,800 6.03 2.61 10,800 2.50
4.25-5.00 1,200 3.75 5.00 1,200 3.75
17.50-2.00 197,330 3.54 23.21 191,331 23.15
27.50-31.66 168,974 7.45 30.50 76,017 30.28
35.00-36.25 30,000 6.73 35.71 30,000 35.71
37.50 316,048 4.72 37.50 282,583 37.50
38.13-43.75 47,900 7.81 40.64 24,648 40.73
50.00 17,700 6.35 50.00 11,700 50.00
57.85-65.60 147,780 6.08 58.22 110,180 58.34
------- -------
3,460,732 $11.25 1,650,021 $17.13
========= ====== ========= ======
</TABLE>
In October 1995, the Financial Accounting Standards Board issued
SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No.
123 requires the measurement of the fair value of stock options or
warrants granted to employees to be included in the statement of
F-20
<PAGE>
operations or disclosed in the notes to financial statements. The
Company has determined that it will continue to account for
stock-based compensation for employees under Accounting Principles
Board Opinion No. 25 and elect the disclosure-only alternative
under SFAS No. 123. In 1996, 1997 and 1998, the Company recorded
$1,967,116, $205,978 and $109,734, respectively, of deferred
compensation related to grants to nonemployees, net of
terminations. Deferred compensation will be amortized over the
vesting period of the options. The Company has recorded
compensation expense of $763,190, $316,067 and $246,444 in 1996,
1997 and 1998, respectively, related to these grants to
nonemployees.
The Company has computed the pro forma disclosures require by SFAS
No. 123 for all stock options granted after January 1, 1995 using
the Black-Scholes option pricing model. The assumptions used for
the three years ended December 31, 1998 are as follows:
1996 1997 1998
---- ---- ----
Risk free interest rate 6.14% 6.22% 5.15%
Expected dividend yield - - -
Expected lives 6 years 6 years 6 years
Expected volatility 60% 60% 60%
The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
pricing models require the input of highly subjective assumptions
including expected stock price volatility. Because the Company's
employee stock options have characteristics significantly
different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of
its employee stock options.
The effect of applying SFAS No. 123 for the three years ended
December 31, 1998 would be as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C> <C>
Net loss applicable to common
stockholders-
As reported $ (46,852,600) $ (69,461,326) $ (19,792,736)
================ ================ ================
Pro forma $ (52,890,455) $ (73,402,170) $ (23,131,304)
================ ================ ================
Basic and Diluted net loss per
common shares-
As reported $(10.24) $(13.76) $(1.67)
======= ======== =======
Pro forma $(11.56) $(14.54) $(1.95)
======= ======== ======
</TABLE>
(h) Employee Stock Purchase Plan
In October 1995, the Company adopted the 1995 Employee Stock
Purchase Plan (the Purchase Plan), under which up to 100,000
shares of common stock may be issued to participating employees of
the Company, as defined, or its subsidiaries.
On the first day of a designated payroll deduction period (the
Offering Period), the Company will grant to each eligible employee
who has elected to participate in the Purchase Plan an option to
purchase shares of common stock as follows: the employee may
authorize an amount (a whole percentage from 1% to 10% of such
employee's regular pay) to be deducted
F-21
<PAGE>
by the Company from such pay during the Offering Period. On the
last day of the Offering Period, the employee is deemed to have
exercised the option, at the option exercise price, to the extent
of accumulated payroll deductions. Under the terms of the Purchase
Plan, the option price is an amount equal to 85% of the fair
market value per share of the common stock on either the first day
or the last day of the Offering Period, whichever is lower. In no
event may an employee purchase in any one Offering Period a number
of shares which is more than 15% of the employee's annualized base
pay divided by 85% of the market value of a share of common stock
on the commencement date of the Offering Period. The Compensation
Committee may, in its discretion, choose an Offering Period of 12
months or less for each of the Offerings and choose a different
Offering Period for each Offering. No shares have been issued
under the Plan.
(i) Preferred Stock
The restated Certificate of Incorporation of the Company permits
its Board of Directors to issue up to 5,000,000 shares of
preferred stock, par value $.01 per share (the Preferred Stock),
in one or more series, to designate the number of shares
constituting such series, and fix by resolution, the powers,
privileges, preferences and relative, optional or special rights
thereof, including liquidation preferences and dividends, and
conversion and redemption rights of each such series. During 1998,
the Company designated 1,500,000 shares as Series A convertible
preferred stock.
(j) Series A Convertible Preferred Stock
The rights and preferences of the Series A convertible preferred
stock are as follows:
Dividends
The holders of the Series A convertible preferred stock, as of
March 15 or September 15, are entitled to receive dividends
payable at the rate of 6.5% per annum, payable semi-annually in
arrears. 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. Such dividends shall be paid, at the election of
the Company, either in cash or additional duly authorized, fully
paid and non assessable shares of Series A convertible preferred
stock. In calculating the number of shares of Series A convertible
preferred stock to be paid with respect to each dividend, the
Series A convertible preferred stock shall be valued at $100.00
per share. During 1998, the Company recorded a total accretion of
$2,689,048 for the dividend on Series A preferred stock and issued
16,470 shares of Series A convertible preferred stock as a
dividend.
Liquidation
In the event of a liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, after payment or
provision for payment of debts and other liabilities of the
Company, the holder of the Series A convertible preferred stock
then outstanding shall be entitled to be paid out of the assets of
the Company available for distribution to its stockholders, an
amount equal to $100.00 per share plus all accrued but unpaid
dividends. If the assets to be distributed to the holders of the
Series A convertible preferred stock shall be insufficient to
permit the payment of the full preferential amounts, then the
assets of the Company shall be distributed ratably to the holders
of the Series A convertible preferred stock on the basis of the
number of shares of Series A convertible preferred stock held. All
shares of Series A convertible preferred stock shall rank as to
payment upon the occurrence of any liquidation event senior to the
common stock.
Conversion
F-22
<PAGE>
Commencing after May 6, 1999, but not prior thereto, the shares of
Series A convertible preferred stock shall be convertible, in
whole or in part, at the option of the holder into fully paid and
nonassessable shares of common stock at $4.25 per share, subject
to adjustment as defined.
Mandatory Conversion
At any time after May 6, 1998, the Company may at its option,
cause the Series A convertible 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 $4.00 if the closing bid price, as defined, of the common
stock shall have equaled or exceeded 250% of the conversion price,
$4.25, subject to adjustment as defined, 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).
At any time after April 1, 2000, the Company, at its option, may
redeem the Series A convertible preferred stock for cash equal to
$100.00 per share plus all accrued and unpaid dividends at such
time, if the Market Trigger has occurred in the period ending
three days prior to the date of notice of redemption.
(16) COMMITMENTS AND CONTINGENCIES
(a) Facilities
The Company leases its facility in Milford, Massachusetts, under a
lease which has a 10-year term, which commenced on July 1, 1994,
with certain extension options.
On February 4, 1994, the Company entered into the Cambridge Lease
with a partnership that is affiliated with certain directors of
the Company. As compensation for arranging this lease, the Company
issued Pillar Limited five-year warrants for the purchase of
100,000 shares of the Company's common stock at an exercise price
of $50.00 per share. These warrants expired subsequent to December
31, 1998. The Company vacated the Cambridge, Massachusetts
facility in June 1998 and moved its corporate facilities to
Milford, Massachusetts (see Note 3).
Future approximate minimum rent payments as of December 31, 1998,
under existing lease agreements through 2007, net of sublease
agreements are as follows:
December 31, Amount
------------ ------
1999 $ 614,000
2000 784,000
2001 1,213,000
2002 1,209,000
2003 1,213,000
Thereafter 2,338,000
-------------
$ 7,371,000
During 1996, 1997 and 1998, facility rent expense net of sublease
revenue was approximately $2,352,000, $4,613,000 and $3,871,000,
respectively.
(b) Related-Party Agreements with Affiliates of Stockholders and
Directors
F-23
<PAGE>
The Company has entered into consulting agreements, stock
placement agreements and an advisory agreement with several
companies that are controlled by two shareholders and directors of
the Company including Forum, S.A. Pillar Investment N.V. (Pillar
Investment), Pillar S.A. (formerly Commerce Consult S.A.) and
Pillar Investment Limited (formerly Ash Properties Limited)
(Pillar Limited). During 1996, 1997 and 1998, the Company had
expensed $1,106,000, $998,000 and $1,300,000, respectively, under
consulting and advisory agreements with related parties.
(c) Other Research and Development Agreements
The Company has entered into consulting and research agreements
with the universities, research and testing organizations and
individuals, under which consulting and research support is
provided to the Company. These agreements are for varying terms
and provide for certain minimum annual or per diem fees plus
reimbursable expenses to be paid during the contract periods.
Future minimum fees payable under these contracts as of December
31, 1998 are approximately as follows:
December 31, Amount
------------ ------
1999 $ 582,000
2000 392,000
2001 279,000
-------------
$ 1,253,000
Total fees and expenses under these contracts were approximately
$7,171,000, $9,372,000 and $2,011,000 during 1996, 1997 and 1998,
respectively.
(d) Employment Agreements
The Company has entered into employment agreements with its
executive officers which provide for, among other things, each
officer's annual salary, cash bonus, fringe benefits, and vacation
and severance arrangements. Under the agreements, the officers are
generally entitled to receive severance payments of two to three
years' base salary.
(e) Contingencies
From time to time, the Company may be exposed to various types of
litigation. The Company is not engaged in any legal proceedings
that are expected, individually or in the aggregate, to have a
material adverse effect on the Company's financial condition or
results of operations.
(17) INCOME TAXES
The Company applies SFAS No. 109, Accounting for Income Taxes. At
December 31, 1998, the Company had net operating loss and tax credit
carryforwards for federal income tax purposes of approximately
$219,993,000 and $3,936,000, respectively, available to reduce federal
taxable income and federal income taxes, respectively. The Tax Reform Act
of 1986 (the Act), enacted in October 1986, limits the amount of net
operating loss and credit carryforwards that companies may utilize in any
one year in the event of cumulative changes in ownership over a
three-year period in excess of 50%. The Company has completed several
financings since the effective date of the Act, which, as of December 31,
1998, have resulted in ownership changes in excess of 50%, as defined
under the Act and which will limit the Company's ability to utilize its
net operating loss
F-24
<PAGE>
carryforwards. Ownership changes in future periods may place additional
limits on the Company's ability to utilize net operating loss and tax
credit carryforwards.
The federal net operating loss carryforwards and tax credit carryforwards
expire approximately as follows:
F-25
<PAGE>
Net
Operating Loss Tax Credit
Expiration Date Carryforwards Carryforwards
December 31,
2005 $ 666,000 $ 15,000
2006 3,040,000 88,000
2007 7,897,000 278,000
2008 18,300,000 627,000
2009 25,670,000 689,000
2010 36,134,000 496,000
2011 44,947,000 493,000
2012 60,087,000 750,000
2018 23,252,000 500,000
---------- -------
$219,993,000 $3,936,000
At December 31, 1997 and 1998, the components of the deferred tax assets
are approximately as follows:
1997 1998
---- ----
Operating loss carryforwards $ 78,696,000 $ 87,997,000
Temporary differences 5,137,000 2,677,000
Tax credit carryforwards 3,436,000 3,936,000
--------- ---------
87,269,000 94,610,000
Valuation allowance (87,269,000) (94,610,000)
----------- -----------
$ -- $ --
============ ============
A valuation allowance has been provided, as it is more likely than not
the Company will not realize the deferred tax asset. The net change in
the total valuation allowance during 1998 was an increase of
approximately $7,341,000.
(18) EMPLOYEE BENEFIT PLAN
On October 10, 1991, the Company adopted an employee benefit plan under
Section 401(k) of the Internal Revenue Code. The plan allows employees to
make contributions up to a specified percentage of their compensation.
Under the plan, the Company may, but is not obligated to, match a portion
of the employees' contributions up to a defined maximum. The Company is
currently matching 50% of employee contributions to the plan, up to 6% of
the employee's annual base salary, and charged to operations
approximately $224,000, $253,000 and $253,000 during 1996, 1997 and 1998,
respectively.
(19) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental disclosure of cash flow information for the three years in
the period ended December 31, 1998 are as follows:
F-26
<PAGE>
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Cash paid during the period for interest $ 124,052 $ 3,264,596 $ 1,666,127
=========== ============== ===========
Purchase of property and equipment under capital leases $ 1,722,333 $ 2,374,502 $ --
=========== ============== ===========
Conversion of preferred stock into common stock $ 159,822 $ -- $ --
=========== ============== ===========
Deferred compensation related to grants of stock options to $ 1,967,116 $ 205,978 $ 109,734
nonemployees, net of terminations =========== ============== ===========
Issuance of Series A convertible preferred stock and $ -- $ -- $51,055,850
attached warrants in exchange for conversion of 9% =========== ============== ===========
convertible subordinated notes payable and accrued
interest
Accretion of Series A convertible preferred stock dividends $ -- $ -- $ 2,689,048
=========== ============== ===========
Issuance of common stock and attached warrants in exchange $ -- $ -- $ 4,800,000
for conversion of convertible promissory notes payable =========== ============== ===========
Issuance of common stock and attached warrants in exchange $ -- $ -- $ 5,934,558
for conversion of accounts payable and other obligations =========== ============== ===========
</TABLE>
(20) RESTATEMENT
In March 1999, the Company restated its June 30, 1998 and September 30,
1998 financial statements to reflect the accretion on the Series A
convertible preferred stock, and record $600,000 of general and
administrative expense for the 300,000 shares of common stock that
Pillar is entitled to receive in connection with its efforts in
assisting the Company in restructuring its balance sheet.
(21) ORIGENIX TECHNOLOGIES, INC.
In January 1999, the Company and certain institutional investors formed
a Montreal company, OriGenix Technologies Inc. (OriGenix), to develop
and market drugs for the treatment of infectious diseases.
The Company received a 49% interest in OriGenix in consideration of
certain research and development efforts previously undertaken by the
Company which were made available to OriGenix. The Company has also
licensed certain antisense compounds and other technology to OriGenix.
If certain conditions are satisfied by OriGenix, the institutional
investors are committed to make an additional investment, at which time
the Company's ownership interest in OriGenix will be reduced to 40%.
The institutional investors acquired a 51% interest in OriGenix for a
total of approximately $4.0 million. The Company will account for its
investment in OriGenix under the equity method.
(22) INTERIM PERIOD AND SUBSEQUENT EVENTS (Unaudited)
(a) Unaudited Interim Financial Statements
The accompanying consolidated balance sheet as of September 30,
1999, and the consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the three and
nine months ended September 30, 1998 and 1999 are unaudited, but,
in the opinion of management, have been prepared on a basis
substantially consistent with audited financial statements and
include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of the results of
these interim periods. The
F-27
<PAGE>
results for the period ended September 30, 1999 are not
necessarily indicative of results to be expected for the full
fiscal year.
In October 1999, the Company obtained approximately $525,000
under a loan agreement (the Loan) from new and existing investors
(the New Investors). As of December 13, 1999, the Company sold an
aggregate of $5.1 million principal amount of 8% notes (the
"Notes") to purchasers in a private placement transaction.
Including the Notes issued upon conversion of the debt issued to
the Company's Chief Executive Officer and President (Note 22(f))
and the Loan issued to New Investors, there is $7.1 million
principal amount of Notes outstanding. These Notes earn interest
semi-annually at 8% per annum, mature on November 30, 2002 and
are convertible into the Company's common stock at an initial
conversion price of $.60 per share.
In connection with the offering of the Notes, Forum and the
entities advised by Pecks entered into a Subordination and
Intercreditor Agreement with the Company and the representative
of the purchasers of the Notes whereby, among other things, they
agreed to subordinate their loan (Note 22(e)) to the Notes,
subject to certain conditions. Also in connection with this
offering, the Company agreed to issue warrants to purchase an
aggregate of 2.75 million shares of the Company's common stock to
designees of Pecks and Forum. These warrants are exercisable from
December 31, 2000 until December 31, 2002 at $.60 per share.
The Notes permit the noteholders' representative to declare an
event default, among other things, if the Company fails to
maintain, as of the last day of any calendar month, consolidated
cash on hand (and cash equivalents and marketable securities) of
at least $1.5 million. As of January 31, 2000, the Company met
this requirement. If an event of default under the Notes were
declared and not cured in the requisite time period, then the
respective representatives of the Notes, Forum and the entities
advised by Pecks could declare their debt securities immediately
due and payable, in which case the Company may be required to
sell substantial assets to raise funds for this repayment and, if
the proceeds of those sales together with any other funds
available are insufficient, the Company could be forced to
declare bankruptcy.
(b) Net Loss per Common Share
The Company applies SFAS No. 128, Earnings per Share, in
calculating earnings per share. Basic net loss per share is
computed by dividing net loss applicable to common stockholders
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. Antidilutive securities which consist of stock
options, warrants and convertible preferred stock (on an
as-converted basis) that are not included in diluted net loss per
common share were 12,568,143 and 29,510,050 for the nine-month
periods ended September 30, 1998 and 1999, respectively.
(c) Comprehensive Loss
The Company follows the provisions of SFAS No. 130, Reporting
Comprehensive Income. Comprehensive loss is defined as the change
in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner
sources. The Company's comprehensive loss is the same as the
reported net loss for all periods presented.
F-28
<PAGE>
(d) Cash Equivalents
The Company considers all highly liquid investments with
maturities of three months or less to be cash equivalents. Cash
and cash equivalents at September 30, 1999 consisted of the
following (at amortized cost, which approximates fair market
value):
September 30, 1999
Cash and cash equivalents-
Cash and money market funds $407,966
Corporate bond 92,213
$500,179
(e) Note Payable to Lenders
During November 1998, the Company entered into a $6,000,000 note
payable with Forum Capital Markets, LLC (Forum) and certain
investors associated with Pecks Management Partners Ltd.
(collectively, the Lenders). The terms of the note payable are as
follows: (i) the maturity is November 30, 2003; (ii) the interest
rate is 6%; (iii) interest is payable monthly in arrears, with
the principal due in full at maturity of the loan; (iv) the note
payable is convertible, at the Lender's option, in whole or in
part, into shares of common stock at a rate equal to $2.40 per
share; (v) the note includes a minimum liquidity covenant of
$2,000,000; and (vi) the note payable may not be prepaid, in
whole or in part, at any time prior to December 1, 2000. The
Company has received waivers of noncompliance with the minimum
tangible net worth covenant and for the minimum liquidity
covenant through November 30, 1999. The Company has classified
the outstanding balance of $6,000,000 at September 30, 1999 and
December 31, 1998 as a current liability in the accompanying
consolidated balance sheet as it does not expect to remain in
compliance with the financial covenants. In connection with
refinancing the note payable to a bank, Forum received $400,000,
which was reinvested by Forum to purchase 160,000 shares of
common stock with 40,000 attached warrants at an exercise price
of $3.00 per share. The Company has recorded the $400,000 as a
deferred financing cost, which will be amortized to interest
expense over the term of the note. In addition, Forum received
warrants to purchase 133,333 shares of common stock of the
Company at $3.00 per share. The Company computed the value of the
warrants to be $85,433, by using the Black-Scholes option pricing
model. The Company has recorded this $85,433 as a deferred
financing cost, which will be amortized to interest expense over
the term of the note.
(f) Related Party Promissory Notes Payable
During September 1999, the Company entered into two $500,000
promissory notes payable with the Company's Chief Executive
Officer and President (the Lender). The terms of the promissory
notes payable are as follows: (i) the maturity is March 1, 2000,
subject to certain conditions, as defined; (ii) interest is
payable at the option of the Lender at either (a) 12% payable in
cash; or (b) 15% payable in common stock of the Company at $.50
per share; (iii) interest is payable monthly in arrears,
beginning October 1, 1999; and (iv) the term note may be prepaid
in whole or in part, at any time without penalty. The promissory
notes payable are secured by substantially all tangible and
intangible assets of the Company.
In November 1999, the Company entered into an additional $500,000
promissory note payable with the Lender. This promissory note
payable had the same terms as the two promissory notes payable
entered into in September 1999. In December 1999, all of the
F-29
<PAGE>
promissory notes payable, together with $40,000 in accrued
interest, were converted into 8% notes of the Company due 2002
(Note 22(a)).
(g) Stock Option Repricing
In September 1999, the Company's Board of Directors authorized a
repricing of all outstanding stock options. Under the terms of
the repricing, all current option holders (5,251,827 shares) had
their options repriced to an exercise price of $.50 per share.
Under Accounting Principles Board Opinion No. 25, the Company is
required to use variable plan accounting for these options until
their expiration or exercise.
(h) Accrued Expenses
Accrued expenses as of September 30, 1999 consist of the
following:
Interest $ 58,770
Payroll and related costs 987,235
Outside research and clinical costs 181,375
Professional fees 212,812
Research and development costs 200,000
Sales taxes 125,000
Other 624,612
--------
$2,389,804
(i) Supplemental Disclosure of Cash Flow Information
Supplemental disclosure of cash flow information for the nine
month periods ended September 30, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1999
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 1,494,323 $ --
Supplemental Disclosure of Noncash Activities:
Accretion of Series A convertible preferred stock dividends $ 1,026,500 $3,193,851
$ -- $1,000,000
Issuance of common stock in lieu of services
Issuance of Series A convertible preferred stock and attached
warrants in exchange for conversion of 9% convertible
subordinated notes payable and accrued interest $ 51,055,850 $ --
Issuance of common stock and attached warrants in exchange for
conversion of convertible promissory notes payable $ 4,800,000 $ --
Issuance of common stock and attached warrants in exchange for
conversion of accounts payable and other obligations $ 5,934,558 $ --
Conversion of Series A convertible preferred stock into shares
of common stock $ -- $ 496
</TABLE>
F-30
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of Hybridon since the date hereof or that the information contained
herein is correct as of any time subsequent to its date. ---------------
HYBRIDON, INC.
662,167 SHARES
SERIES A CONVERTIBLE PREFERRED STOCK
($.01 par value per share)
34,727,717 SHARES
COMMON STOCK
($.001 par value per share)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the shares of Series A convertible
preferred stock, $.01 par value per share (the "Convertible Preferred Stock")
and shares of common stock, $.001 par value per share (the "Common Stock" and,
together with the Convertible Preferred Stock, the "Securities") offered hereby
are as follows:
SEC Registration fee................................
Printing and engraving expenses.....................
Legal fees and expenses.............................
Accounting fees and expenses........................
Blue Sky fees and expenses
(including legal fees)............................
Transfer agent and registrar fees
and expenses......................................
Miscellaneous.......................................
Total.....................................
The Registrant will bear all expenses shown above.
Item 14. Indemnification of Directors and Officers.
Article EIGHTH of the Registrant's Restated Certificate of
Incorporation provides that no director of the Registrant shall be personally
liable for any monetary damages for any breach of fiduciary duty as a director,
except to the extent that the Delaware General Corporation Law prohibits the
elimination or limitation of liability of directors for breach of fiduciary
duty.
Article NINTH of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any litigation
or other legal proceeding (other than an action by or in the right of the
Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount advanced
if it is ultimately determined that he is not entitled to indemnification for
such expenses.
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<PAGE>
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article NINTH of the Registrant's Restated Certificate of Incorporation
further provides that the indemnification provided therein is not exclusive, and
provides that in the event that the Delaware General Corporation Law is amended
to expand the indemnification permitted to directors or officers the Registrant
must indemnify those persons to the full extent permitted by such law as so
amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Hybridon is a party to an indemnification agreement with Mr. Grinstead.
Such agreement provides that Mr. Grinstead shall be indemnified by the
Registrant (a) against all expenses (as defined in the agreement), judgments,
fines, penalties and amounts paid in settlement actually and reasonably incurred
in connection with any legal proceeding (other than one brought by or on behalf
of the Registrant) if Mr. Grinstead acted in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal proceeding, had no reasonable
cause to believe that his conduct was unlawful and (b) against all expenses and
amounts paid in settlement actually and reasonably incurred in connection with a
legal proceeding brought by or on behalf of the Registrant if he acted in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interests of the Registrant, except that no indemnification shall be
made in respect of any claim, issue or matter as to which Mr. Grinstead has been
adjudged to be liable. If, with respect to such proceedings, Mr. Grinstead is
successful on the merits or otherwise, he shall be reimbursed for all expenses.
Mr. Grinstead is required to provide notice to the Registrant of any threatened
or pending litigation, and the Registrant has the right to participate in such
action or assume the defense thereof.
Hybridon has obtained directors and officers insurance for the benefit
of its directors and its officers.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this registration statement,
Hybridon has issued and sold its Common Stock, warrants to purchase its Common
Stock, Convertible Subordinated Notes and Series A Convertible Preferred Stock,
to certain investors in transactions that were not registered under the
Securities Act of 1933, as amended (the "Securities Act"):
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<PAGE>
Unregistered Offerings Pursuant to Section 4(2) Under the 1933 Act
The securities issued in each of the following transactions (items (1)
through (10)) were offered and sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act, relating to sales by an
issuer not involving a public offering. The securities issued in each of the
following transactions were offered and sold solely to persons who were
"accredited investors" as that term is defined in Regulation D promulgated under
the Securities Act.
(1) On January 20, 1997, Hybridon issued 25,000 shares of Common Stock
to an investment bank as compensation under a financial advisory services
agreement dated that date. These shares were offered and sold to an "accredited
investor" (as that term is defined in Regulation D promulgated under the
Securities Act) in reliance upon the exemption from registration under Section
4(2) of the Securities Act relating to sales by an issuer not involving any
public offering.
(2) On January 25, 1997, Hybridon sold 1,650 shares of Common Stock to
one investor upon exercise by such investor of warrants to purchase Common Stock
for an aggregate purchase price of $9,075. These shares were offered and sold to
an "accredited investor" (as that term is defined in Regulation D promulgated
under the Securities Act) in reliance upon the exemption from registration under
Section 4(2) of the Securities Act relating to sales by an issuer not involving
any public offering.
(3) On April 2, 1997, Hybridon issued to an investment bank $50,000,000
of its 9% Notes. These 9% Notes were offered and sold to an "accredited
investor" (as that term is defined in Regulation D promulgated under the
Securities Act) in reliance upon the exemption from registration under Section
4(2) of the Securities Act relating to sales by an issuer not involving any
public offering.
(4) On April 2, 1997, Hybridon issued to an investment bank warrants to
purchase 71,301 shares of Common Stock at an exercise price of $35.0625 per
share. These warrants were offered and sold to an "accredited investor" (as that
term is defined in Regulation D promulgated under the Securities Act) in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act relating to sales by an issuer not involving any public offering.
(5) On December 10, 1997, Hybridon issued to Dr. Paul Zamecnik, a
Director of Hybridon, 50,000 shares of Common Stock of Hybridon.
(6) On May 5, 1998, Hybridon accepted $48,694,000 principal amount of
its 9% Notes tendered to Hybridon in exchange for 510,505 shares of Series A
preferred stock (the "Series A Preferred Stock") and warrants (the "Class A
Warrants") to purchase 3,002,958 shares of common stock, par value $.001 per
share (the "Common Stock"), of Hybridon (the "Exchange Offer"). As a result of
the Exchange Offer, there is approximately $1.3 million principal amount of the
9% Notes outstanding.
Pursuant to the Exchange Offer, which commenced on February 6, 1998,
all tendering Noteholders received per $1,000 principal amount of the 9% Notes
(including accrued but unpaid interest on the 9% Notes) (i) 10 shares of Series
A Preferred Stock and (ii) Class A Warrants to purchase such number of shares of
Common Stock equal to 25% of the number of shares of Hybridon's Common Stock
into which the Series A Preferred Stock issued to such Noteholder pursuant to
the Exchange Offer would be convertible.
The Convertible Preferred Stock ranks, as to dividends and liquidation
preference, senior to Hybridon's Common Stock. The Convertible Preferred Stock
issued in the Exchange Offer and in the Regulation D Offering, as defined below,
as well as the Convertible Preferred Stock that was issued as a dividend on
September 30, 1998, will be convertible into an aggregate of 15,088,200 shares
of Common Stock, subject to adjustment, beginning May 5, 1999.
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<PAGE>
The Class A Warrants will be exercisable commencing on May 5, 1999 for
a period of four years thereafter at $4.25 per share of Common Stock, subject to
adjustment. The Class A Warrants are not subject to redemption at the option of
Hybridon under any circumstances.
The Exchange Offer was undertaken by Hybridon as part of Hybridon's new
business plan contemplating a restructuring of its capital structure to reduce
debt service obligations, a significant reduction in its burn rate and an
infusion of additional equity capital.
(7) On May 5, 1998, Hybridon closed a private placement (the
"Regulation D Offering") of (i) 114,285 shares of Series A Preferred Stock,
which sold at $70 per share, and (ii) Class D warrants (the "Class D Warrants")
to purchase 672,273 shares of Hybridon's Common Stock, subject to adjustment,
for an aggregate amount of approximately $8 million.
The Class D Warrants will be exercisable commencing on May 5, 1999
until May 4, 2003 at $2.40 per share of Common Stock, subject to adjustment.
The net proceeds to Hybridon from the Regulation D Offering are
presently used for general corporate purposes, primarily research and product
development activities, including costs of preparing investigational new drug
applications and conducting preclinical studies and clinical trials, the payment
of payroll and other accounts payable and for debt service required under
Hybridon's debt obligations. The amounts actually expended by Hybridon and the
purposes of such expenditures may vary significantly depending upon numerous
factors, including the progress of Hybridon's research, drug discovery and
development programs, the results of preclinical studies and clinical trials,
the timing of regulatory approvals, sales of DNA products and reagents to third
parties manufactured on a custom contract basis by the HSP Division and margins
on such sales, technological advances, determinations as to the commercial
potential of Hybridon's compounds and the status of competitive products. In
addition, expenditures will also depend upon the establishment of collaborative
research arrangements with other companies, the availability of other financing
and other factors. Under certain circumstances, Hybridon may be required to use
net proceeds to repay indebtedness under its bank credit facility.
(8) On May 5, 1998, Hybridon closed a private placement of units (the
"Unit Offering") consisting of (i) 2,754,654 shares of Common Stock, and (ii)
Class C warrants (the "Class C Warrants") to purchase 788,649 shares of Common
Stock, subject to adjustment, which securities were issued in consideration of
the cancellation (or reduction) of accounts payable, capital lease and other
obligations aggregating $5,509,308.
The Class C Warrants are exercisable at $2.40 per share, subject to
adjustment from time to time, until May 4, 2003.
The Common Stock issued pursuant to the Unit Offering and the Common
Stock underlying the Class C Warrants are subject to a "lock-up" period ending
on May 5, 1999, except to the extent such securities are sold or transferred
pursuant to a Registration Statement. After Hybridon files a Registration
Statement under the Securities Act, 75% of each holder's Units and the
underlying securities will be subject to an additional "lock-up" for the first
three months following the effective date of the Registration Statement (the
"Effective Date"); thereafter, 50% of such securities will be subject to an
additional "lock-up" until six months following the Effective Date; and the
remaining 25% of such securities will be "locked-up" until nine months following
the Effective Date.
(9) On May 5, 1998, Hybridon sold to Dr. Paul Zamecnik 100,000 shares
of Common Stock and Class C Warrants to purchase 25,000 shares of Common Stock,
subject to adjustment, for a purchase price of $200,000.
The net proceeds of this offering were used to reduce accounts payable,
capital lease and other obligations.
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<PAGE>
(10) On May 5, 1998, Hybridon issued to certain suppliers a total of
362,500 shares of Common Stock and Class C Warrants to purchase a total of
90,625 shares of Common Stock. These issuances were in consideration of (i)
payment to Hybridon of a total of $362.50, the par value of all such issued
Common Stock, and (ii) the subsequent furnishing of specified services to
Hybridon by each supplier. The extent to which the suppliers have completed
performing the specified services varies.
(11) On December 12, 1998, Hybridon issued to Dr. Paul Zamecnik 50,000
shares of Common Stock in recognition of Dr. Zamecnik's extraordinary
contribution to Hybridon.
(12) On April 16, 1999, Hybridon issued to Pillar Investments Limited
300,000 shares of Common Stock in connection with Pillar's efforts in assisting
Hybridon with restructuring its balance sheet.
(13) On May 1, 1999, Hybridon issued to Forum Capital Markets LLC
160,000 shares of Common Stock and warrants to purchase 173,333 shares of Common
Stock, as a reinvestment by Forum of a $400,000 fee paid to Forum in connection
with the purchase of a bank loan to Hybridon.
The Common Stock issued to Dr. Paul Zamecnik and to the certain
suppliers and the Common Stock underlying the Class C Warrants issued to such
persons are subject to a "lock-up" period ending on May 5, 1999, except to the
extent such securities are sold or transferred pursuant to a Registration
Statement. After Hybridon files a Registration Statement under the Securities
Act, 75% of each holder's Units and the underlying securities will be subject to
an additional "lock-up" for the first three months following the Effective Date;
thereafter, 50% of such securities will be subject to an additional "lock-up"
until six months following the Effective Date; and the remaining 25% of such
securities will be "locked-up" until nine months following the Effective Date.
(14) In October 1999, Hybridon sold approximately $455,000 principal
amount of promissory notes at face value to certain "accredited investors," in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act relating to sales by an issuer not involving any public offering.
(15) In September and November 1999, Hybridon sold an aggregate of $1.5
million principal amount of promissory notes at face value to E. Andrews
Grinstead, III, Hybridon's Chief Executive Officer, in reliance upon the
exemption from registration under Section 4(2) of the Securities Act relating to
sales by an issuer not involving any public offering.
(16) On December 13, 1999, Hybridon sold an aggregate of $5.1 million
principal amount of 8% Notes to purchasers in a private placement transaction.
These 8% Notes were offered and sold to "accredited investors" in reliance upon
the exemption from registration under Section 4(2) of the Securities Act
relating to sales by an issuer not involving any public offering.
(17) As of December 31, 1999, the $455,000 indebtedness under the
October 1999 loan agreement were converted into 8% Notes, in reliance upon the
exemption from registration under Section 4(2) of the Securities Act relating to
sales by an issuer not involving any public offering.
(18) As of December 31, 1999, the $1.5 million principal amount of
promissory notes held by Mr. Grinstead, automatically converted into 8% Notes,
in reliance upon the exemption from registration under Section 4(2) of the
Securities Act relating to sales by an issuer not involving any public offering.
(19) As of December 7, 1999, in connection with the Subordination and
Intercreditor Agreement by and among Hybridon, the representative of the
purchasers of the 8% Notes, Forum and the entities advised by Pecks, whereby,
among other things, the $6,000,000 Forum loan was subordinated to the 8% Notes,
Hybridon issued warrants to purchase an aggregate of 2.75 million shares of
Hybridon common stock to designees of Pecks and Forum. These warrants were
offered
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<PAGE>
and sold to "accredited investors" in reliance upon the exemption from
registration under Section 4(2) of the Securities Act relating to sales by an
issuer not involving any public offering.
(20) In connection with the December 13, 1999 private placement of 8%
Notes, Hybridon agreed, subject to certain conditions, to issue to Pillar
Investment Limited or its designees, 8% Notes in an aggregate principal amount
equal to 9% of the aggregate principal amount of 8% Notes sold to investors
introduced to Hybridon by Pillar and warrants to purchase an aggregate principal
amount of 8% Notes equal to 10% of the 8% Notes sold to investors introduced to
Hybridon by Pillar. These notes and warrants were offered and sold to
"accredited investors" in reliance upon the exemption from registration under
Section 4(2) of the Securities Act relating to sales by an issuer not involving
any public offering.
Unregistered Offerings Pursuant to Regulation S Under the Securities Act
The securities issued by Hybridon in each of the following transactions
were offered and sold in reliance upon an exemption from registration under
Regulation S promulgated under the Securities Act, relating to sales by an
issuer in offshore transactions (the "Regulation S Offerings"). The securities
issued in each of the following Regulation S Offerings were offered and sold
solely to persons who were "accredited investors" as that term is defined in
Regulation D promulgated under the Securities Act.
(21) On January 15, 1998, Hybridon commenced a private placement of
units (the "Units"), each Unit consisting of 14% Convertible Subordinated Notes
Due 2007 (the "14% Notes") and warrants (the "Equity Warrants") to purchase
shares of Hybridon's Common Stock (the "14% Note Offering"). The 14% Notes were
subject to both mandatory and optional conversion into shares of Series B
preferred stock, under certain circumstances which, in turn, were convertible
into Common Stock (the "Series B Preferred Stock").
On January 23, 1998, as part of the 14% Note Offering, Hybridon sold
$2,230,000 in principal amount of 14% Notes and Equity Warrants.
On February 9, 1998, as part of the 14% Note Offering, Hybridon sold
$2,384,000 in principal amount of 14% Notes and Equity Warrants.
On March 27, 1998, as part of the 14% Note Offering, Hybridon sold
$200,000 in principal amount of 14% Notes and Equity Warrants.
On April 21, 1998, as part of the 14% Note Offering, Hybridon sold
$300,000 in principal amount of 14% Notes and Equity Warrants.
On April 24, 1998, as part of the 14% Note Offering, Hybridon sold
$1,020,000 in principal amount of 14% Notes and Equity Warrants.
In each of the above closings, the 14% Notes were issued at face value.
(22) On May 5, 1998, Hybridon closed a private placement of 3,223,000
shares of Common Stock and Class B warrants to purchase 805,750 shares of
Hybridon's Common Stock, subject to adjustment, for aggregate gross proceeds of
$6,446,000.
The Class B warrants are exercisable for a period of five years at
$2.40 per share of Common Stock, subject to adjustment from time to time.
The Common Stock underlying the Class B Warrants issued in such private
placement are subject to a "lock-up" for a period ending on May 5, 1999, except
to the extent such securities are sold or transferred pursuant to a Registration
Statement filed by Hybridon under the Securities Act. After Hybridon files a
Registration Statement under the Securities, 75% of each holder's Common Stock
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<PAGE>
underlying the Class B and Class C warrants will be subject to an additional
"lock-up" for the first three months following the Effective Date; thereafter,
50% of such securities will be subject to an additional "lock-up" until six
months following the Effective Date; and the remaining 25% of such securities
will be "locked-up" until nine months following the Effective Date.
(23) Hybridon has exchanged all of the 14% Notes issued, including any
right to interest thereon, and all Equity Warrants issued together with the 14%
Notes, for 3,157,322 shares of Common Stock and Class B Warrants to purchase
947,195 shares of Common Stock.
The net proceeds to Hybridon from these offerings were used and
continue to be used for general corporate purposes, primarily research and
product development activities, including costs of preparing investigational new
drug applications and conducting preclinical studies and clinical trials, the
payment of payroll and other accounts payable and for debt service required
under Hybridon's debt obligations. The amounts actually expended by Hybridon and
the purposes of such expenditures may vary significantly depending upon numerous
factors, including the progress of Hybridon's research, drug discovery and
development programs, the results of preclinical studies and clinical trials,
the timing of regulatory approvals, sales of DNA products and reagents to third
parties manufactured on a custom contract basis by the HSP Division and margins
on such sales, technological advances, determinations as to the commercial
potential of Hybridon's compounds and the status of competitive products. In
addition, expenditures will also depend upon the establishment of collaborative
research arrangements with other companies, the availability of other financing
and other factors. Under certain circumstances, Hybridon may be required to use
net proceeds to repay indebtedness under its bank credit facility.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
EXHIBIT INDEX
Exhibit No. Description
3.1(1) Restated Certificate of Incorporation of the Registrant, as amended.
3.2(2) Amended and Restated Bylaws of the Registrant.
3.3(3) Form of Certificate of Designation of Series A Preferred Stock.
3.4(3) Form of Certificate of Designation of Series B Preferred Stock.
4.1(2) Specimen Certificate for shares of Common Stock, $.001 par value, of
the Registrant.
4.2(4) Indenture dated as of March 26, 1997 between Forum Capital Markets LLC
and the Registrant.
4.3(7) Certificate of Designation of Series A Preferred Stock, par value $.01
per share, dated May 5, 1998.
4.4(7) Class A Warrant Agreement dated May 5, 1998.
4.5(7) Class B Warrant Agreement dated May 5, 1998.
4.6(7) Class C Warrant Agreement dated May 5, 1998.
4.7(7) Class D Warrant Agreement dated May 5, 1998.
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<PAGE>
4.8 Form of Class F Warrant to purchase shares of Common Stock of
Hybridon.
4.9 Form of Notes due 2002 of Hybridon.
4.10 Form of Class G Warrant for the purchase of Notes due 2002 of
Hybridon.
+10.1(2) License Agreement dated February 21, 1990 and restated as of
September 8, 1993 between the Registrant and the Worcester
Foundation for Biomedical Research, Inc., as amended.
+10.2(2) Patent License Agreement dated September 21, 1995 between the
Registrant and National Institutes of Health.
+10.3(2) Patent License Agreement effective as of October 13, 1994 between
the Registrant and McGill University.
+10.4(2) License Agreement effective as of October 25, 1995 between the
Registrant and the General Hospital Corporation.
+10.5(2) License Agreement dated as of October 30, 1995 between the
Registrant and Yoon S. Cho-Chung.
+10.6(2) Collaborative Study Agreement effective as of December 30, 1992
between the Registrant and Medtronic, Inc.
+10.7(2) System Design and Procurement Agreement dated as of December 16,
1994 between the Registrant and Pharmacia Biotech, Inc.
10.8(2) Lease dated March 10, 1994 between the Registrant and Laborer's
Pension/Milford Investment Corporation for space located at 155
Fortune Boulevard, Milford, Massachusetts, including Note in the
original principal amount of $750,000.
10.9(2) Registration Rights Agreement dated as of February 21, 1990 between
the Registrant, the Worcester Foundation for Biomedical Research,
Inc. and Paul C. Zamecnik.
10.10(2) Registration Rights Agreement dated as of June 25, 1990 between the
Registrant and Nigel L. Webb.
10.11(2) Registration Rights Agreement dated as of February 6, 1992 between
the Registrant and E. Andrews Grinstead, III.
10.12(2) Registration Rights Agreement dated as of February 6, 1992 between
the Registrant and Anthony J. Payne.
++10.13(2) 1990 Stock Option Plan, as amended.
++10.14(2) 1995 Stock Option Plan.
++10.15(2) 1995 Director Stock Plan.
++10.16(2) 1995 Employee Stock Purchase Plan.
10.17(2) Form of Warrant originally issued to Pillar Investment Limited to
purchase shares of Common Stock issued as placement commissions in
connection with the sale of shares of
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<PAGE>
Series F Convertible Preferred Stock and in consideration of
financial advisory service, as amended.
10.18(2) Warrant issued to Pillar S.A. to purchase 100,000 shares of Common
Stock dated as of March 1, 1994, as amended.
10.19(2) Warrant issued to Pillar S.A. to purchase 100,000 shares of Common
Stock dated as of March 1, 1995.
10.20(2) Form of Warrant issued to Pillar Investment Limited to purchase
shares of Common Stock issued as placement commissions in connection
with the sale of Units pursuant to the Series G Agreement.
++10.21(5) Employment Agreement dated as of March 1, 1997 between the
Registrant and E. Andrews Grinstead, III.
10.22(2) Indemnification Agreement dated as of February 6, 1992 between the
Registrant and E. Andrews Grinstead, III.
++10.23(6) Employment Agreement dated March 1, 1997 between the Registrant and
Dr. Sudhir Agrawal.
++10.24(2) Consulting Agreement dated as of February 21, 1990 between the
Registrant and Dr. Paul C. Zamecnik.
10.25(2) Master Lease Agreement dated as of March 1, 1994 between the
Registrant and General Electric Capital Corporation.
+10.26(6) Research, Development and License Agreement dated as of January 24,
1996 between the Registrant and G.D. Searle & Co.
+10.27(6) Manufacturing and Supply Agreement dated as of January 24, 1996
between the Registrant and G.D. Searle & Co.
10.28(6) Registration Rights Agreement dated as of January 24, 1996 between
the Registrant and G.D. Searle & Co.
10.29(5) Loan and Security Agreement dated as of December 31, 1996 between
the Registrant and Silicon Valley Bank.
10.30(7) First Amendment to Loan and Security Agreement dated March 30, 1998
between Hybridon, Inc. and Silicon Valley Bank.
10.31(8) Second Amendment to Loan and Security Agreement dated May 19, 1998,
effective as of April 30, 1998, between Hybridon, Inc. and Silicon
Valley Bank.
10.32(9) Third Amendment to Loan and Security Agreement dated September 18,
1998 between Hybridon, Inc. and Silicon Valley Bank.
10.33(9) Fourth Amendment to Loan and Security Agreement dated October 30,
1998, effective as of September 29, 1998 between Hybridon, Inc. and
Silicon Valley Bank.
10.34(12) Fifth Amendment to Loan and Security Agreement dated December 4,
1998 between Hybridon, Inc. and Silicon Valley Bank.
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<PAGE>
10.35(5) Warrant issued to Silicon Valley Bank to purchase 65,000 shares of
Common Stock dated as of December 31, 1996.
10.36(5) Registration Rights Agreement dated as of December 31, 1996 between
the Registrant and Silicon Valley Bank.
+10.37(5) Supply and Sales Agreement dated as of September 1, 1996 between the
Registrant and P.E. Applied Biosystems.
10.38(2) Registration Rights Agreement dated as of March 26, 1997 between
Forum Capital Markets LLC and the Registrant.
10.39(2) Warrant Agreement dated as of March 26, 1997 between Forum Capital
Markets LLC and the Registrant.
+10.40(6) Amendment No. 1 to License Agreement, dated as of February 21, 1990
and restated as of September 8, 1993, by and between the Worcester
Foundation for Biomedical Research, Inc. and the Registrant, dated
as of November 26, 1996.
10.41(10) Letter Agreement dated May 12, 1997 between the Registrant and
Pillar S.A. amending the Consulting Agreement dated as of March 1,
1994 between the Registrant and Pillar S.A.
10.42(10) Amendment dated July 15, 1997 to the Series G Convertible Preferred
Stock and Warrant Purchase Agreement dated as of September 9, 1994
among the Registrant and certain purchasers, as amended.
10.43(1) Consent Agreement dated January 15, 1998 between Silicon Valley Bank
and the Registrant relating to the Silicon Agreement.
10.44(11) Letter Agreement between the Registrant and Forum Capital Markets
LLC and Pecks Management Partners Ltd. for the purchase of the Loan
and Security Agreement with Silicon Valley Bank.
10.45(7) Financial Advisory Agreement between Registrant and Pillar
Investments Ltd. dated May 5, 1998.
10.46(7) Placement Agency Agreement between Registrant and Pillar Investments
Ltd. dated as of January 15, 1998.
+++10.47(12) Licensing Agreement dated March 12, 1999 by and between Hybridon,
Inc. and Integrated DNA Technologies, Inc.
+++10.48(13) Licensing Agreement dated September 7, 1999 by and between
Hybridon, Inc. and Genzyme Corporation.
10.49(13) Form of loan agreement relating to a loan in the amount of $454,901
made to Hybridon, Inc. in October 1999 by various parties.
10.50(13) Form of promissory note relating to a loan in the amount of $454,901
made to Hybridon, Inc. in October 1999 by various parties.
10.51(13) Loan Agreement dated as of September 1, 1999, between Hybridon, Inc.
and E. Andrews Grinstead, III.
II-10
<PAGE>
10.52(13) Term promissory note in the amount of $500,000 dated September 1,
1999, by Hybridon, Inc. in favor of E. Andrews Grinstead, III.
10.53(13) Term promissory note in the amount of $500,000 dated September 27,
1999, by Hybridon, Inc. in favor of E. Andrews Grinstead, III.
10.54 Subordination and Intercreditor Agreement by and among Hybridon, the
holders of Notes due 2002, Forum and entities advised by Pecks,
dated as of December 7, 1999.
10.55 Letter Agreement between Hybridon and Pillar Investments dated
December 10, 1999.
10.56 Form of Subscription Agreements dated as of December 13, 1999, by
and among Hybridon and the purchasers of Notes due 2002.
21.1(2) Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2(11) Consent of McDonnell Boehnen Hulbert & Berghoff.
- ------------------------------------------------
(1) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
(2) Incorporated by reference to Exhibits to the Registrant's
Registration Statement on Form S-1 (File No. 33-99024).
(3) Incorporated by reference to Exhibit 9(a)(1) to the Registrant's
Schedule 13E-4 dated February 6, 1998.
(4) Incorporated by reference to Exhibits to the Registrant's Current
Report on Form 8-K dated April 2, 1997.
(5) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996.
(6) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995.
(7) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1998.
(8) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998.
(9) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1998.
(10) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1997.
II-11
<PAGE>
(11) Incorporated by reference to Exhibits to the Registrant's
Registration Statement on Form S-1 (File No. 333-69649).
(12) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998.
(13) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.
+ Confidential treatment granted as to certain portions, which
portions are omitted and filed separately with the Commission.
++ Management contract or compensatory plan or arrangement required to
be filed as an Exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1997.
+++ Confidential treatment requested as to certain portions, which
portions are omitted and filed separately with the Commission.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to provisions described in Item 14 above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(2) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(3) To reflect in the Prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of Securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(4) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
II-12
<PAGE>
(5) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the Securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(6) To remove from registration by means of a post-effective amendment any
of the Securities being registered which remain unsold at the
termination of the offering.
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 15, 2000.
HYBRIDON, INC.
By: /s/ SUDHIR AGRAWAL
----------------------------------------
Sudhir Agrawal
President and Acting Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title(s) Date
---------- -------- ----
President, Acting Chief
- ---------------------------- Executive Officer February , 2000
Dr. Sudhir Agrawal and Director
* Chairman and Director February , 2000
- ----------------------------
Dr. James B. Wyngaarden
* Chief Executive Officer February , 2000
- ---------------------------- and Director
E. Andrews Grinstead, III
/s/ ROBERT G. ANDERSEN Chief Financial Officer February , 2000
- ----------------------------- Vice President of
Mr. Robert G. Andersen Operations and Planning
* Director February , 2000
- -----------------------------
Mr. Nasser Menhall
* Director February , 2000
- -----------------------------
Dr. Paul C. Zamecnik
* Director February , 2000
- -----------------------------
Mr. Youssef El-Zein
- ----------------------------- Director February , 2000
Mr. Arthur W. Berry
II-14
<PAGE>
* Director February , 2000
- -----------------------------
Mr. Harold L. Purkey
Director February , 2000
Mr. Camille Chebeir
* By: /s/ ROBERT G. ANDERSEN
Robert G. Andersen
Attorney-in-fact
II-15
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1(1) Restated Certificate of Incorporation of the Registrant, as amended.
3.2(2) Amended and Restated Bylaws of the Registrant.
3.3(3) Form of Certificate of Designation of Series A Preferred Stock.
3.4(3) Form of Certificate of Designation of Series B Preferred Stock.
4.1(2) Specimen Certificate for shares of Common Stock, $.001 par value, of
the Registrant.
4.2(4) Indenture dated as of March 26, 1997 between Forum Capital Markets
LLC and the Registrant.
4.3(7) Certificate of Designation of Series A Preferred Stock, par value
$.01 per share, dated May 5, 1998.
4.4(7) Class A Warrant Agreement dated May 5, 1998.
4.5(7) Class B Warrant Agreement dated May 5, 1998.
4.6(7) Class C Warrant Agreement dated May 5, 1998.
4.7(7) Class D Warrant Agreement dated May 5, 1998.
4.8 Form of Class F Warrant to purchase shares of Common Stock of
Hybridon.
4.9 Form of Notes due 2002 of Hybridon.
4.10 Form of Class G Warrant for the purchase of Notes due 2002 of
Hybridon.
+10.1(2) License Agreement dated February 21, 1990 and restated as of
September 8, 1993 between the Registrant and the Worcester
Foundation for Biomedical Research, Inc., as amended.
+10.2(2) Patent License Agreement dated September 21, 1995 between the
Registrant and National Institutes of Health.
+10.3(2) Patent License Agreement effective as of October 13, 1994 between
the Registrant and McGill University.
+10.4(2) License Agreement effective as of October 25, 1995 between the
Registrant and the General Hospital Corporation.
+10.5(2) License Agreement dated as of October 30, 1995 between the
Registrant and Yoon S. Cho-Chung.
+10.6(2) Collaborative Study Agreement effective as of December 30, 1992
between the Registrant and Medtronic, Inc.
+10.7(2) System Design and Procurement Agreement dated as of December 16,
1994 between the Registrant and Pharmacia Biotech, Inc.
II-16
<PAGE>
10.8(2) Lease dated March 10, 1994 between the Registrant and Laborer's
Pension/Milford Investment Corporation for space located at 155
Fortune Boulevard, Milford, Massachusetts, including Note in the
original principal amount of $750,000.
10.9(2) Registration Rights Agreement dated as of February 21, 1990 between
the Registrant, the Worcester Foundation for Biomedical Research,
Inc. and Paul C. Zamecnik.
10.10(2) Registration Rights Agreement dated as of June 25, 1990 between the
Registrant and Nigel L. Webb.
10.11 (2) Registration Rights Agreement dated as of February 6, 1992
between the Registrant and E. Andrews Grinstead, III.
10.12(2) Registration Rights Agreement dated as of February 6, 1992 between
the Registrant and Anthony J. Payne.
++10.13(2) 1990 Stock Option Plan, as amended.
++10.14(2) 1995 Stock Option Plan.
++10.15(2) 1995 Director Stock Plan.
++10.16(2) 1995 Employee Stock Purchase Plan.
10.17(2) Form of Warrant originally issued to Pillar Investment Limited to
purchase shares of Common Stock issued as placement commissions in
connection with the sale of shares of Series F Convertible Preferred
Stock and in consideration of financial advisory service, as
amended.
10.18(2) Warrant issued to Pillar S.A. to purchase 100,000 shares of Common
Stock dated as of March 1, 1994, as amended.
10.19(2) Warrant issued to Pillar S.A. to purchase 100,000 shares of Common
Stock dated as of March 1, 1995.
10.20(2) Form of Warrant issued to Pillar Investment Limited to purchase
shares of Common Stock issued as placement commissions in connection
with the sale of Units pursuant to the Series G Agreement.
++10.21(5) Employment Agreement dated as of March 1, 1997 between the
Registrant and E. Andrews Grinstead, III.
10.22(2) Indemnification Agreement dated as of February 6, 1992 between the
Registrant and E. Andrews Grinstead, III.
++10.23(6) Employment Agreement dated March 1, 1997 between the Registrant and
Dr. Sudhir Agrawal.
++10.24(2) Consulting Agreement dated as of February 21, 1990 between the
Registrant and Dr. Paul C. Zamecnik.
10.25(2) Master Lease Agreement dated as of March 1, 1994 between the
Registrant and General Electric Capital Corporation.
+10.26(6) Research, Development and License Agreement dated as of January 24,
1996 between the Registrant and G.D. Searle & Co.
+10.27(6) Manufacturing and Supply Agreement dated as of January 24, 1996
between the Registrant and G.D. Searle & Co.
II-17
<PAGE>
10.28(6) Registration Rights Agreement dated as of January 24, 1996 between
the Registrant and G.D. Searle & Co.
10.29(5) Loan and Security Agreement dated as of December 31, 1996 between
the Registrant and Silicon Valley Bank.
10.30(7) First Amendment to Loan and Security Agreement dated March 30, 1998
between Hybridon, Inc. and Silicon Valley Bank.
10.31(8) Second Amendment to Loan and Security Agreement dated May 19, 1998,
effective as of April 30, 1998, between Hybridon, Inc. and Silicon
Valley Bank.
10.32(9) Third Amendment to Loan and Security Agreement dated September 18,
1998 between Hybridon, Inc. and Silicon Valley Bank.
10.33(9) Fourth Amendment to Loan and Security Agreement dated October 30,
1998, effective as of September 29, 1998 between Hybridon, Inc. and
Silicon Valley Bank.
10.34(12) Fifth Amendment to Loan and Security Agreement dated December 4,
1998 between Hybridon, Inc. and Silicon Valley Bank.
10.35(5) Warrant issued to Silicon Valley Bank to purchase 65,000 shares of
Common Stock dated as of December 31, 1996.
10.36(5) Registration Rights Agreement dated as of December 31, 1996 between
the Registrant and Silicon Valley Bank.
+10.37(5) Supply and Sales Agreement dated as of September 1, 1996 between the
Registrant and P.E. Applied Biosystems.
10.38(2) Registration Rights Agreement dated as of March 26, 1997 between
Forum Capital Markets LLC and the Registrant.
10.39(2) Warrant Agreement dated as of March 26, 1997 between Forum Capital
Markets LLC and the Registrant.
+10.40(6) Amendment No. 1 to License Agreement, dated as of February 21, 1990
and restated as of September 8, 1993, by and between the Worcester
Foundation for Biomedical Research, Inc. and the Registrant, dated
as of November 26, 1996.
10.41(10) Letter Agreement dated May 12, 1997 between the Registrant and
Pillar S.A. amending the Consulting Agreement dated as of March 1,
1994 between the Registrant and Pillar S.A.
10.42(10) Amendment dated July 15, 1997 to the Series G Convertible Preferred
Stock and Warrant Purchase Agreement dated as of September 9, 1994
among the Registrant and certain purchasers, as amended.
10.43(1) Consent Agreement dated January 15, 1998 between Silicon Valley Bank
and the Registrant relating to the Silicon Agreement.
10.44(11) Letter Agreement between the Registrant and Forum Capital Markets
LLC and Pecks Management Partners Ltd. for the purchase of the Loan
and Security Agreement with Silicon Valley Bank.
10.45(7) Financial Advisory Agreement between Registrant and Pillar
Investments Ltd. dated May 5, 1998.
10.46(7) Placement Agency Agreement between Registrant and Pillar Investments
Ltd. dated as of January 15, 1998.
II-18
<PAGE>
+++10.47(12) Licensing Agreement dated March 12, 1999 by and between Hybridon,
Inc. and Integrated DNA Technologies, Inc.
+++10.48(13) Licensing Agreement dated September 7, 1999 by and between
Hybridon, Inc. and Genzyme Corporation.
10.49(13) Form of loan agreement relating to a loan in the amount of $454,901
made to Hybridon, Inc. in October 1999 by various parties.
10.50(13) Form of promissory note relating to a loan in the amount of $454,901
made to Hybridon, Inc. in October 1999 by various parties.
10.51(13) Loan Agreement dated as of September 1, 1999, between Hybridon, Inc.
and E. Andrews Grinstead,III.
10.52(13) Term promissory note in the amount of $500,000 dated September 1,
1999, by Hybridon, Inc. in favor of E. Andrews Grinstead, III.
10.53(13) Term promissory note in the amount of $500,000 dated September 27,
1999, by Hybridon, Inc. in favor of E. Andrews Grinstead, III.
10.54 Subordination and Intercreditor Agreement by and among Hybridon, the
holders of Notes due 2002, Forum and entities advised by Pecks,
dated as of December 7, 1999.
10.55 Letter Agreement between Hybridon and Pillar Investments dated
December 10, 1999.
10.56 Form of Subscription Agreements dated as of December 13, 1999, by
and among Hybridon and the purchasers of Notes due 2002.
21.1(2) Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2(11) Consent of McDonnell Boehnen Hulbert & Berghoff.
- -----------------------------------------------
(1) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
(2) Incorporated by reference to Exhibits to the Registrant's
Registration Statement on Form S-1 (File No. 33-99024).
(3) Incorporated by reference to Exhibit 9(a)(1) to the Registrant's
Schedule 13E-4 dated February 6, 1998.
(4) Incorporated by reference to Exhibits to the Registrant's Current
Report on Form 8-K dated April 2, 1997.
(5) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996.
(6) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995.
(7) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1998.
II-19
<PAGE>
(8) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1998.
(9) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1998.
(10) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended June 30, 1997.
(11) Incorporated by reference to Exhibits to the Registrant's
Registration Statement on Form S-1 (File No. 333-69649).
(12) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998. =
(13) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30, 1999.
+ Confidential treatment granted as to certain portions, which
portions are omitted and filed separately with the Commission.
++ Management contract or compensatory plan or arrangement required to
be filed as an Exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1997.
+++ Confidential treatment requested as to certain portions, which
portions are omitted and filed separately with the Commission.
II-20
<PAGE>
NEITHER THESE SECURITIES NOR THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE
SECURITIES LAWS. THEY 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 SUCH ACT OR AN EXEMPTION THEREFROM. ANY
SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.
HYBRIDON, INC.
Class F Warrant for the Purchase of Shares of
Common Stock
No. F-2 [2,750,000 in total] Shares
FOR VALUE RECEIVED, HYBRIDON, INC., a Delaware corporation
(the "Company"), hereby certifies that _______________ or its registered assigns
(the "Holder") is entitled to purchase from the Company, subject to the
provisions of this Warrant (the "Warrant"), at any time on or after December 31,
2000 (the "Initial Exercise Date"), and prior to 5:00 P.M., New York City time,
on December 31, 2002 (the "Termination Date"), [2,750,000] fully paid and
non-assessable shares of the Common Stock, $.001 par value, of the Company
("Common Stock"), at an exercise price of $0.60 per share of Common Stock for an
aggregate exercise price of [one million six hundred fifty thousand dollars
($1,650,000)] (the aggregate purchase price payable for the Warrant Shares
hereunder is hereinafter sometimes referred to as the "Aggregate Exercise
Price"). The number of shares of Common Stock to be received upon exercise of
this Warrant and the price to be paid for each share of Common Stock are subject
to possible adjustment from time to time as hereinafter set forth. The shares of
Common Stock or other securities or property deliverable upon such exercise as
adjusted from time to time is hereinafter sometimes referred to as the "Warrant
Shares." The exercise price of a share of Common Stock in effect at any time and
as adjusted from time to time is hereinafter sometimes referred to as the "Per
Share Exercise Price." The Per Share Exercise Price is subject to adjustment as
hereinafter provided; in the event of any such adjustment, the number of Warrant
Shares shall also be adjusted, by dividing the Aggregate Exercise Price by the
Per Share Exercise Price in effect immediately after such adjustment. The
Aggregate Exercise Price is not subject to adjustment.
1. Exercise of Warrant.
(a) This Warrant may be exercised in whole or in part, at any
time by its holder commencing on the Initial Exercise Date and prior to the
Termination Date:
<PAGE>
(i) by presentation and surrender of this Warrant,
together with the duly executed subscription form attached at
the end hereof, at the address set forth in Subsection 8(a)
hereof, together with payment, by certified or official bank
check or wire transfer payable to the order of the Company, of
the Aggregate Exercise Price or the proportionate part thereof
if exercised in part; or
(ii) by presentation and surrender of this Warrant,
together with the duly executed cashless exercise form
attached at the end hereof (a "Cashless Exercise") at the
address set forth in Subsection 8(a) hereof. The exchange of
Common Stock for the Warrant shall take place on the date
specified in the Cashless Exercise Form or, if later, the date
the Cashless Exercise Form is surrendered to the Company (the
"Exchange Date"). Such presentation and surrender shall be
deemed a waiver of the Holder's obligation to pay the
Aggregate Exercise Price, or the proportionate part thereof if
this Warrant is exercised in part. In the event of a Cashless
Exercise, this Warrant shall represent the right to subscribe
for and to acquire the number of shares of Common Stock
(rounded to the next highest integer) equal to (x) the number
of shares of Common Stock specified by the Holder in its
Cashless Exercise Form (the "Total Number") (such number not
to exceed the maximum number of shares of Common Stock subject
to this Warrant, as may be adjusted from time to time) less
(y) the number of shares of Common Stock equal to the quotient
obtained by dividing (A) the product of the Total Number and
the existing Per Share Exercise Price by (B) the Current
Market Price (as defined in Subsection 3(h)).
(b) If this Warrant is exercised in part only, the Company
shall, upon presentation of this Warrant upon such exercise, execute and deliver
(along with the certificate for the Warrant Shares purchased) a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the
Warrant Shares purchasable hereunder upon the same terms and conditions as
herein set forth. Upon proper exercise of this Warrant, the Company promptly
shall deliver certificates for the Warrant Shares to the Holder duly legended as
authorized by the subscription form. No fractional shares or scrip representing
fractional shares shall be issued upon exercise of this Warrant; provided that
the Company shall pay to the holder of the Warrant cash in lieu of such
fractional shares.
2. Reservation of Warrant Shares; Fully Paid Shares; Taxes.
The Company hereby represents that it has, and until expiration of this Warrant
agrees that it shall, reserve for issuance or delivery upon exercise of this
Warrant, such number of shares of the Common Stock as shall be required for
issuance and/or delivery upon exercise of this Warrant in full, and agrees that
all Warrant Shares so issued and/or delivered will be validly issued, fully paid
and non-assessable, and further agrees to pay all taxes and charges that may be
imposed upon such issuance and/or delivery.
3. Protection Against Dilution.
(a) In case the Company shall hereafter (i) pay a dividend or
make a distribution on its Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of shares
or (iii) combine its outstanding shares
2
<PAGE>
of Common Stock into a smaller number of shares (each of (i) through (iii) an
"Action"), the Per Share Exercise Price shall be adjusted to be equal to a
fraction, the numerator of which shall be the Aggregate Exercise Price and the
denominator of which shall be the number of shares of Common Stock or other
capital stock of the Company that the Holder would have held (solely as a result
of the exercise of this Warrant and the operation of such Action) immediately
following such Action if this Warrant had been exercised immediately prior to
such Action. An adjustment made pursuant to this Subsection 3(a) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.
(b) In the event of any capital reorganization or
reclassification, or any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another entity of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to receive on the exercise of this Warrant the kind and amount of
securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
Subsection 3(b) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The issuer of any shares of stock or other securities or property
thereafter deliverable on the exercise of this Warrant shall be responsible for
all of the agreements and obligations of the Company hereunder. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(c) Whenever the Per Share Exercise Price payable upon
exercise of each Warrant is adjusted pursuant to this Section 3, the number of
shares of Common Stock underlying a Warrant shall simultaneously be adjusted to
equal the number obtained by dividing the Aggregate Exercise Price by the
adjusted Per Share Exercise Price.
(d) No adjustment in the Per Share Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least $0.05 per share of Common Stock; provided, however, that any adjustments
which by reason of this Subsection 3(d) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 3 shall be made to the nearest cent or to the
nearest 1/100th of a share, as the case may be. Anything in this Section 3 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Per Share Exercise Price, in addition to those required by
this Section 3, as it in its discretion shall deem to
3
<PAGE>
be advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its stockholders shall
not be taxable.
(e) Whenever the Per Share Exercise Price is adjusted as
provided in this Section 3 and upon any modification of the rights of a Holder
of Warrants in accordance with this Section 3, the Chief Financial Officer, or
equivalent officer, of the Company shall promptly prepare a certificate setting
forth the Per Share Exercise Price and the number of Warrant Shares after such
adjustment or the effect of such modification, a brief statement of the facts
requiring such adjustment or modification and the manner of computing the same
and cause copies of such certificate to be mailed to the Holder.
(f) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common Stock, the Company
shall mail notice thereof to the Holder no fewer than 30 days prior to the
record date fixed for determining stockholders entitled to participate in such
dividend or other distribution.
(g) If, as a result of an adjustment made pursuant to this
Section 3, the Holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Company, the Board of
Directors (whose determination shall be conclusive and shall be described in a
written notice to the Holder of any Warrant promptly after such adjustment)
shall determine the allocation of the adjusted Per Share Exercise Price between
or among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
(h) For the purpose of any computation under Section 3 above,
the then Current Market Price per share (the "Current Market Price") shall be
deemed to be the last sale price of the Common Stock on the trading day prior to
such date or, in case no such reported sales take place on such day, the average
of the last reported bid and asked prices of the Common Stock on such day, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on any such exchange, the representative closing bid price of the Common Stock
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ"), or other similar organization if NASDAQ is no
longer reporting such information, or if not so available, the fair market value
of the Common Stock as determined by the Company's Board of Directors in good
faith.
4. Limited Transferability. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
holders of Warrants. All Warrants issued
4
<PAGE>
upon the transfer or assignment of this Warrant will be dated the same date as
this Warrant, and all rights of the holder thereof shall be identical to those
of the Holder.
5. Loss, etc., of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and cancellation of this Warrant, if
mutilated, the Company shall execute and deliver to the Holder a new Warrant of
like date, tenor and denomination.
6. Investment Intent.
(a) The Holder represents, by accepting this Warrant, that it
understands that this Warrant and any securities obtainable upon exercise of
this Warrant have not been registered for sale under Federal or state securities
laws and are being offered and sold to the Holder pursuant to one or more
exemptions from the registration requirements of such securities laws. The
Holder is an "accredited investor" within the meaning of Regulation D under the
Securities Act of 1933, as amended (the "Act"). In the absence of an effective
registration of such securities or an exemption therefrom, any certificates for
such securities shall bear the legend set forth on the first page hereof. The
Holder understands that it must bear the economic risk of its investment in this
Warrant and any securities obtainable upon exercise of this Warrant for an
indefinite period of time, as this Warrant and such securities have not been
registered under Federal or state securities laws and therefore cannot be sold
unless subsequently registered under such laws, unless as exemption from such
registration is available.
(b) The Holder, by his acceptance of its Warrant, represents
to the Company that it is acquiring this Warrant and will acquire any securities
obtainable upon exercise of this Warrant for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof in
violation of the Act. The Holder agrees that this Warrant and any such
securities will not be sold or otherwise transferred unless (i) a registration
statement with respect to such transfer is effective under the Act and any
applicable state securities laws or (ii) such sale or transfer is made pursuant
to one or more exemptions from the Act.
7. Status of Holder. This Warrant does not confer upon the
Holder any right to vote or to consent to or receive notice as a stockholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a stockholder, prior to the exercise hereof.
8. Notices. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 155 Fortune Boulevard, Milford,
Massachusetts, 01757 Attention: E. Andrews Grinstead, III, or such
other address as the Company has designated in writing to the Holder;
or
(b) the Holder at [___________________________________] or
such other address as the Holder has designated in writing to the
Company.
5
<PAGE>
9. Headings. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction hereof.
10. Applicable Law. This Warrant shall be governed by and
construed in accordance with the law of the Commonwealth of Massachusetts
without giving effect to principles of conflicts of law thereof.
6
<PAGE>
IN WITNESS WHEREOF, E. Andrews Grinstead, III, acting for and
on behalf of the Company, has executed this Warrant and caused the Company's
corporate seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary as of December __, 1999.
HYBRIDON, INC.
By:____________________________________
Name: E. Andrews Grinstead, III
Title: President and Chief Executive
Officer
ATTEST:
- --------------------------------
Secretary or Assistant Secretary
[Corporate Seal]
7
<PAGE>
SUBSCRIPTION
The undersigned, ____________________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exercise the within
Warrant to the extent of purchasing _____________________ shares of Common Stock
of Hybridon, Inc. thereunder and hereby makes payment of $_______________ by
certified or official bank check in payment of the exercise price therefor.
Dated:_______________ Signature:__________________________
Address:_______________________________
CASHLESS EXERCISE
The undersigned, ____________________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exchange the within
Warrant for ______________ shares of Common Stock of Hybridon, Inc. pursuant to
the cashless exercise provisions of the Warrant. The undersigned hereby confirms
the representations and warranties made by it in the Warrant.
Dated:_______________ Signature:__________________________
Address:_______________________________
8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED _______________________________________
hereby sells, assigns and transfers unto _____________________________________
the foregoing Warrant and all rights evidenced thereby, and does irrevocably
constitute and appoint _____________________________, attorney, to transfer said
Warrant on the books of Hybridon, Inc.
Dated:_______________ Signature:___________________________
Address:______________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED __________________________ hereby assigns
and transfers unto _________________________ the right to purchase __________
shares of the Common Stock, no par value per share, of Hybridon, Inc. covered by
the foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced thereby, and does irrevocably constitute and appoint
__________________________, attorney, to transfer that part of said Warrant on
the books of Hybridon, Inc.
Dated:_______________ Signature:__________________________
Address:_____________________________
9
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No.___
Note due 2002
$___________
[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 eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
of the Company. The Notes are secured by the Collateral pursuant to the
Subscription Agreement, and the security interests granted therein are subject
to any prior security interest in the Collateral granted by the Company except
as modified by the Intercreditor Agreement.
SECTION 1. 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. 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 2. Prepayment.
(a) This Note (including interest accrued on the principal
hereof) may be prepaid by the Company, at any time, in whole or in part, without
penalty or premium except as provided in Subsection 2(b).
(b) If this Note (or any portion hereof) is prepaid by the
Company, then the Company shall simultaneously issue to the Holder hereof Class
E Warrants ("Warrants") to purchase a number of shares of Common Stock equal to
the number of shares of Common Stock then issuable upon conversion of this Note
(or the prepaid portion hereof, if prepaid in part). Such Warrants shall
initially be exercisable at $.60 per share of Common Stock and shall be governed
by a Warrant Agreement by and among the Company, ChaseMellon Shareholder
Services, L.L.C. and the Secured Party in substantially the form attached to the
Subscription Agreement as Exhibit B (the "Warrant Agreement").
SECTION 3. Conversion
(a) Conversion. The Holder may elect, at any time prior to the
Maturity Date, to convert this Note and all accrued interest hereon into a
number of shares of Common Stock equal to Liquidation Amount (as defined below)
divided by the then current Conversion Price (as defined below). The
"Liquidation Amount" shall be the aggregate principal amount of, plus any
accrued but unpaid interest on, this Note. The "Conversion Price" shall
initially be $0.60, subject to adjustment as provided below, representing an
initial conversion rate (subject to
<PAGE>
adjustment) of 1,666-2/3 shares of Common Stock per $1,000 of Liquidation Amount
(the "Conversion Rate").
(b) Conversion Procedures. (i) Any Holder of a Note desiring
to convert such Note into Common Stock shall surrender such Note at the
Company's principal executive office, accompanied by proper instruments of
transfer to the Company or in blank, accompanied by irrevocable written notice
to the Company that the Holder elects so to convert such Note (the "Notice of
Conversion") and specifying the name or names (with address) in which a
certificate or certificates evidencing shares of Common Stock are to be issued.
(ii) The Company need not deem a Notice of Conversion to be
received unless the Holder complies with all the provisions hereof. The Company
will 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.
(iii) The Company shall, as soon as practicable after such
deposit of any Note accompanied by a Notice of Conversion and compliance with
any other conditions herein contained, deliver to the person for whose account
such Note was 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.
(iv) Subject to the following provisions of this Paragraph
3(b)(iv), such conversion shall be deemed to have been made as of the date of
such surrender of the Note to be converted, and the person or persons entitled
to receive the Common Stock deliverable upon conversion of such Note shall be
treated for all purposes as the record holder or holders of such Common Stock on
such date and the Note shall no longer be deemed outstanding and all rights
whatsoever in respect thereof (including the right to receive interest thereon)
shall terminate except the right to receive the number of full shares of Common
Stock to which such person shall be entitled hereunder; provided, however, that
the Company shall not be required to convert any Note while the stock transfer
books of the Company are closed for any purpose, but the surrender of a Note 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 applied to the Liquidation
Amount calculated through such date of reopening.
(c) Adjustments to Conversion Price. (i) In case the Company
shall hereafter (A) pay a dividend or make a distribution on its Common Stock in
shares of Common Stock, (B) subdivide its outstanding shares of Common Stock
into a greater number of shares or (C) combine its outstanding shares of Common
Stock into a smaller number of shares (each of (A) through (C) an "Action"), the
Conversion Price shall be adjusted to equal the product of the Conversion Price
in effect immediately prior to such Action multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Action and the denominator of which shall be the
number of shares of Common Stock outstanding immediately following such Action.
An adjustment made pursuant to this Subsection 3(b) shall become effective
immediately after the record date in the case of a
<PAGE>
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(ii) In case the Company shall hereafter issue by
reclassification of its Common Stock any shares of capital stock of the Company
(a "Reclassification"), provision shall be made so that, immediately following
such Reclassification, the Notes shall be convertible into the kind and quantity
of securities to which the Holders of such Notes would have been entitled
pursuant to such Reclassification, had such Holders converted such Notes
immediately prior to such Reclassification.
(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 Common Stock, solely for the purpose of effecting the
conversion of the Notes, such number of shares of its Common Stock 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 Common Stock if at any time the number of shares
of Common Stock 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 Common Stock 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 Common Stock (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 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 4. Fractional Shares.
No fractional shares or scrip representing fractional shares
of Common Stock shall be issued upon conversion of this Note. If more than one
certificate evidencing Notes shall be surrendered for conversion at one time by
the same Holder, the number of full shares issuable
<PAGE>
upon conversion thereof shall be computed on the basis of the aggregate
Liquidation Amount of the Notes so surrendered. Instead of any fractional share
of Common Stock which would otherwise be issuable upon conversion of this Note
(or of such aggregate number of Notes), 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 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 Conversion
Price as of the close of business on the day of conversion.
SECTION 5. 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;
(b) the failure of the Company to observe or perform any
covenant in this Note or in the Subscription 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 (as defined below) 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,
(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;
<PAGE>
(e) a court of competent jurisdiction enters an 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 S-X 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.
(f) the failure of the Company to maintain, as of the last day
of any calendar month, consolidated cash on hand (and cash equivalents and
marketable securties) of at least $1.5 million.
A Default under Subsection (b), (c) or (f) of this Section 5 shall not be an
Event of Default until (i) the Secured Party 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, under such
Subsection (c) within 10 days after receipt of the notice or under Subsection
(f) within 30 days after receipt of the notice. Any such notice must (x) specify
the Default, (y) demand that it be remedied and (z) state that the notice is a
"Notice of Default."
SECTION 6. Remedies upon Event of Default.
Except as limited by the Intercreditor Agreement:
(a) If an Event of Default occurs and is continuing, the
Secured Party (by notice to the Company) may declare the unpaid principal of and
accrued interest on all the Notes then outstanding to be due and payable (an
"Acceleration"). Upon any such declaration, such principal and accrued interest
shall be due and payable immediately. The Secured Party 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
<PAGE>
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 Secured Party 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 Subscription 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, then, in lieu of this Note's ordinary 8% interest, the Company shall pay
defaulted interest at a rate of 12% (or, during the first six months immediately
following any Acceleration, 16%, and thereafter 24%) per annum. 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 fewer 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) Upon the occurrence and during the continuance of an Event
of Default, the Secured Party may, at its election, without notice of its
election and without demand, take any action permitted by law, including the
exercise of any rights accorded a secured creditor under the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts at such time.
(e) To the extent permitted by law, the remedies provided
herein shall be exclusive of any other remedies now or hereafter existing at law
or in equity or by statute or otherwise.
(f) In any suit for the enforcement of any right or remedy
under this Note or the Subscription 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.
SECTION 7 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
<PAGE>
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 or bond 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 8 Miscellaneous.
(a) Amendments and Waivers. 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 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 Subscription 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.
(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 Secured Party joins 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 Subscription
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 Subscription Agreement, to the prior payment in
full of all obligations in respect of Operating Indebtedness of the Company,
whether outstanding on the date of the Subscription Agreement or thereafter
incurred.
<PAGE>
(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 Massachusetts, 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.
155 Fortune Boulevard
Milford, Massachusetts 01757
Attention: E. Andrews Grinstead, III
(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) Subscription Agreement. This Note is subject to the terms
contained in the Subscription Agreement and the registered Holder of this Note
is entitled to the benefits of such Subscription Agreement to the extent
provided therein.
(m) No Adverse Interpretation of Other Agreements. This Note
and the Subscription 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
Subscription Agreement.
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. __ 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>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 1
Note due 2002
$60,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Essam A. J. Alamdar (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 1 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
Essam A. J. Alamdar Riyadh-11431
Saudi Arabia
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 2
Note due 2002
$25,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Mansour S. M. A. Al-Sharif (the
"Holder"), or registered assigns, the principal sum set forth above, with
accrued but unpaid interest thereon at a rate equal to eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 2 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
Mansour S. M. A. Al-Sharif
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 3
Note due 2002
$75,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to H.K. Properties Limited (the
"Holder"), or registered assigns, the principal sum set forth above, with
accrued but unpaid interest thereon at a rate equal to eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 3 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
H.K. Properties Limited
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 4
Note due 2002
$75,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Kincroft Limited (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 4 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
Kincroft Limited Ridgeway House, Ridgeway St.
Douglas, Isle of Man
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 5
Note due 2002
$100,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Fouad M. O. Tawfig (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 5 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
Fouad M. O. Tawfig
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 6
Note due 2002
$50,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Fouad M. O. Tawfig (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 6 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
Fouad M. O. Tawfig
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 7
Note due 2002
$20,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Fouad M. O. Tawfig (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 7 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
Fouad M. O. Tawfig
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 8
Note due 2002
$120,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Seif Foundation (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 8 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
Seif Foundation
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 9
Note due 2002
$250,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Bajrai Int'l Group Ltd. (the
"Holder"), or registered assigns, the principal sum set forth above, with
accrued but unpaid interest thereon at a rate equal to eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 9 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
Bajrai Int'l Group Ltd.
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 10
Note due 2002
$400,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Darier, Hentsch & Cie (the "Holder"),
or registered assigns, the principal sum set forth above, with accrued but
unpaid interest thereon at a rate equal to eight percent (8%) per annum, on
November 30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 10 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
Darier, Hentsch & Cie
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 11
Note due 2002
$150,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Solter Corporation (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 11 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
Solter Corporation
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 12
Note due 2002
$75,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Malek Salam and Oussama Salam
(jointly, the "Holder"), or registered assigns, the principal sum set forth
above, with accrued but unpaid interest thereon at a rate equal to eight percent
(8%) per annum, on November 30, 2002 (the "Maturity Date"). Payment shall be
made at such place as designated by the Company upon surrender of this Note (as
defined below), 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 2002 (individually a "Note" and collectively the
"Notes") issued pursuant to a Subscription Agreement which is available from the
Company (the "Subscription Agreement") and similar agreements. Capitalized terms
used herein without definition have the respective meanings specified therefor
in the Subscription Agreement. The Notes shall be subordinated in right of
payment to all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 12 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
Malek Salam and Oussama Salam
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 13
Note due 2002
$40,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Mohamad Khaled Omari (the "Holder"),
or registered assigns, the principal sum set forth above, with accrued but
unpaid interest thereon at a rate equal to eight percent (8%) per annum, on
November 30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 13 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
Mohamad Khaled Omari
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 14
Note due 2002
$300,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Khaled M. K. Abdulghani (the
"Holder"), or registered assigns, the principal sum set forth above, with
accrued but unpaid interest thereon at a rate equal to eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 14 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
Khaled M. K. Abdulghani
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 15
Note due 2002
$200,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Sylvione Abu Haidar (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 15 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
Sylvigne Abu Haidar
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 16
Note due 2002
$600,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Nicris Limited (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 16 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
Nicris Limited
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 17
Note due 2002
$200,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Clapham Investments Limited (the
"Holder"), or registered assigns, the principal sum set forth above, with
accrued but unpaid interest thereon at a rate equal to eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 17 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
Clapham Investments Limited
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 18
Note due 2002
$60,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Torben Duer (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 18 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
Torben Duer
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 19
Note due 2002
$30,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Nafez M. M. Al-Jindi (the "Holder"),
or registered assigns, the principal sum set forth above, with accrued but
unpaid interest thereon at a rate equal to eight percent (8%) per annum, on
November 30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 19 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
Nafez M. M. Al-Jindi
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 20
Note due 2002
$300,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Alain Mallart (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 20 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
Alain Mallart
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 21
Note due 2002
$100,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Imad Moustapha Mansour (the "Holder"),
or registered assigns, the principal sum set forth above, with accrued but
unpaid interest thereon at a rate equal to eight percent (8%) per annum, on
November 30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 21 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
Imad Moustapha Mansour
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 22
Note due 2002
$100,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Oussama M. Salam (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 22 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
Oussama M. Salam
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 23
Note due 2002
$100,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to LGT Bank in Liechtenstein AG (the
"Holder"), or registered assigns, the principal sum set forth above, with
accrued but unpaid interest thereon at a rate equal to eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 23 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
LGT Bank in Liechtenstein AG
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 24
Note due 2002
$60,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Investeringsselskabet af 1/12 1997
Ap.S (the "Holder"), or registered assigns, the principal sum set forth above,
with accrued but unpaid interest thereon at a rate equal to eight percent (8%)
per annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at
such place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 24 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
Investeringsselskabet af 1/12 1997 Ap.S
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 25
Note due 2002
$15,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to MicroTech Software A/S (the "Holder"),
or registered assigns, the principal sum set forth above, with accrued but
unpaid interest thereon at a rate equal to eight percent (8%) per annum, on
November 30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 25 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
MicroTech Software A/S
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 26
Note due 2002
$6,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to JSP Holding Ap.S (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 26 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
JSP Holding Ap.S
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 27
Note due 2002
$50,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Motasim F. Hajaj (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 27 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
Motasim F. Hajaj
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 28
Note due 2002
$250,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Mohamad A. Bajria (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 28 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
Mohamad A. Bajria
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 29
Note due 2002
$1,500,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to E. Andrews Grinstead, III (the
"Holder"), or registered assigns, the principal sum set forth above, with
accrued but unpaid interest thereon at a rate equal to eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 29 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
E. Andrews Grinstead, III
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 30
Note due 2002
$60,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Essam A. J. Alamdar (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 30 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
Essam A. J. Alamdar
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 31
Note due 2002
$[366,390]
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Pillar Investments Ltd. (the
"Holder"), or registered assigns, the principal sum set forth above, with
accrued but unpaid interest thereon at a rate equal to eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 31 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
Pillar Investments Ltd. 28 Avenue de Messine
Paris, France 75008
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 32
Note due 2002
$250,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Christopher S. Gaffney (the "Holder"),
or registered assigns, the principal sum set forth above, with accrued but
unpaid interest thereon at a rate equal to eight percent (8%) per annum, on
November 30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 32 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
Christopher S. Gaffney 3 Winthrop Street
West Newton, MA 02465
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 33
Note due 2002
$10,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Jonathan P. Raymond (the "Holder"), or
registered assigns, the principal sum set forth above, with accrued but unpaid
interest thereon at a rate equal to eight percent (8%) per annum, on November
30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 33 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
Jonathan P. Raymond 133 Park St., #1207
Brookline, MA 02446
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 34
Note due 2002
$250,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Forum Capital Markets LLC (the
"Holder"), or registered assigns, the principal sum set forth above, with
accrued but unpaid interest thereon at a rate equal to eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 34 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
Forum Capital Markets LLC 53 Forest Ave.
Old Greenwich, CT 06870
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. 35
Note due 2002
$105,000
December 13, 1999
Hybridon, Inc., a Delaware corporation, (the "Company"), for
value received, hereby promises to pay to Samuel Morrill Robbins (the "Holder"),
or registered assigns, the principal sum set forth above, with accrued but
unpaid interest thereon at a rate equal to eight percent (8%) per annum, on
November 30, 2002 (the "Maturity Date"). Payment shall be made at such place as
designated by the Company upon surrender of this Note (as defined below), 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 2002
(individually a "Note" and collectively the "Notes") issued pursuant to a
Subscription Agreement which is available from the Company (the "Subscription
Agreement") and similar agreements. Capitalized terms used herein without
definition have the respective meanings specified therefor in the Subscription
Agreement. The Notes shall be subordinated in right of payment to all existing
and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. 35 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
Samuel Morrill Robbins 300 Prince Street
West Newton, MA 02465
<PAGE>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. _
Note due 2002
$__________
December 13, 1999
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 eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. __ 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>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. _
Note due 2002
$__________
December 13, 1999
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 eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. __ 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>
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION AGREEMENT AND
AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE EXCLUSIVE
AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN ACTIONS HEREUNDER AND
UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY
TAKE OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER THE
SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
No. _
Note due 2002
$_________
December 13, 1999
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 eight percent (8%) per
annum, on November 30, 2002 (the "Maturity Date"). Payment shall be made at such
place as designated by the Company upon surrender of this Note (as defined
below), 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 2002 (individually a "Note" and collectively the "Notes") issued
pursuant to a Subscription Agreement which is available from the Company (the
"Subscription Agreement") and similar agreements. Capitalized terms used herein
without definition have the respective meanings specified therefor in the
Subscription Agreement. The Notes shall be subordinated in right of payment to
all existing and future Operating Indebtedness
<PAGE>
IN WITNESS WHEREOF, this Note due 2002 No. __ 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
THE TERMS OF THE NOTES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO THE TERMS OF
A SUBSCRIPTION AGREEMENT AND AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE
AVAILABLE FROM HYBRIDON, INC. (THE "COMPANY"). NEITHER THESE SECURITIES NOR THE
NOTES ISSUABLE UPON EXERCISE HEREOF NOR THE COMMON STOCK ISSUABLE UPON
CONVERSION THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE SECURITIES LAWS. THEY 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 SUCH ACT
OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE
STATE SECURITIES LAWS.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) SHALL BE THE
EXCLUSIVE AGENT OF THE HOLDER OF THE NOTES ISSUABLE UPON EXERCISE HEREOF WITH
RESPECT TO CERTAIN ACTIONS UNDER SUCH NOTES AND UNDER THE SUBSCRIPTION
AGREEMENT; THE SECURED PARTY, IN ITS SOLE DISCRETION, MAY TAKE OR FOREBEAR FROM
TAKING CERTAIN ACTIONS UNDER THE NOTES AND UNDER THE SUBSCRIPTION AGREEMENT ON
BEHALF OF THE HOLDERS OF NOTES.
HYBRIDON, INC.
Class G Warrant for the Purchase of
Notes due 2002
No. G-1 $387,100 principal amount
of Notes due 2002
FOR VALUE RECEIVED, HYBRIDON, INC., a Delaware corporation
(the "Company"), hereby certifies that Pillar Investments Ltd. or its registered
assigns (the "Holder") is entitled to purchase from the Company, subject to the
provisions of this Warrant (the "Warrant"), at any time on or after December 13,
1999 (the "Initial Exercise Date"), and prior to 5:00 P.M., New York City time,
on November 30, 2006 (the "Termination Date"), three hundred eighty-seven
thousand one hundred dollars ($387,100) principal amount of Notes due 2002
("Notes") of the Company, at an exercise price of one hundred ten percent (110%)
of such Notes' principal amount, for an aggregate exercise price of four hundred
twenty-five thousand eight hundred ten dollars ($425,810) (the aggregate
purchase price payable for the Warrant Notes hereunder is hereinafter sometimes
referred to as the "Aggregate Exercise Price"). The Notes deliverable upon such
exercise are hereinafter sometimes referred to as the "Warrant Notes." The
exercise price per dollar principal amount of Notes (i.e. one dollar and ten
cents ($1.10)) is hereinafter sometimes referred to as the "Per Dollar Exercise
Price."
24
<PAGE>
1. Exercise of Warrant.
(a) This Warrant may be exercised in whole or in part, at any
time by its Holder commencing on the Initial Exercise Date and prior to the
Termination Date by presentation and surrender of this Warrant, together with
the duly executed subscription form attached at the end hereof, at the address
set forth in Subsection 8(a) hereof, together with payment, by certified or
official bank check or wire transfer payable to the order of the Company, of the
Aggregate Exercise Price or the proportionate part thereof if exercised in part.
(b) If this Warrant is exercised in part only, the Company
shall, upon presentation of this Warrant upon such exercise, execute and deliver
(along with the certificate for the Warrant Notes purchased) a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the
Warrant Notes purchasable hereunder upon the same terms and conditions as herein
set forth. Upon proper exercise of this Warrant, the Company promptly shall
deliver the Warrant Notes to the Holder duly legended as authorized by the
subscription form.
(c) The execution of this Warrant shall also constitute the
Holder's agreement to be bound by the terms of a Subscription Agreement and a
Subordination and Intercreditor Agreement, copies of which are available from
the Company.
2. Reservation of Warrant Shares; Fully Paid Shares; Taxes.
The Company hereby represents that it has, and until expiration of this Warrant
agrees that it shall, reserve for issuance or delivery upon exercise of this
Warrant, such number of Notes and such number of shares of Common Stock as shall
be required for issuance and/or delivery upon exercise of this Warrant and
conversion of the Notes issuable upon exercise hereof in full, and agrees that
all Warrant Notes and shares of Common Stock so issued and/or delivered will be
validly issued, fully paid and non-assessable, and further agrees to pay all
taxes and charges that may be imposed upon such issuance and/or delivery.
3. [Reserved.]
4. Limited Transferability. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except in compliance with
the provisions of the Act and the applicable state securities "blue sky" laws,
and is so transferable only upon the books of the Company which it shall cause
to be maintained for such purpose. The Company may treat the registered Holder
of this Warrant as he or it appears on the Company's books at any time as the
Holder for all purposes. The Company shall permit any Holder of a Warrant or his
duly authorized attorney, upon written request during ordinary business hours,
to inspect and copy or make extracts from its books showing the registered
holders of Warrants. All Warrants issued upon the transfer or assignment of this
Warrant will be dated the same date as this Warrant, and all rights of the
holder thereof shall be identical to those of the Holder.
5. Loss, etc., of Warrant. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen or destroyed, and upon surrender and
2
<PAGE>
cancellation of this Warrant, if mutilated, the Company shall execute and
deliver to the Holder a new Warrant of like date, tenor and denomination.
6. Investment Intent.
(a) The Holder represents, by accepting this Warrant, that it
understands that this Warrant and any securities obtainable upon exercise of
this Warrant have not been registered for sale under Federal or state securities
laws and are being offered and sold to the Holder pursuant to one or more
exemptions from the registration requirements of such securities laws. The
Holder is an "accredited investor" within the meaning of Regulation D under the
Securities Act of 1933, as amended (the "Act"). In the absence of an effective
registration of such securities or an exemption therefrom, any certificates for
such securities shall bear the legend set forth on the subscription form hereof.
The Holder understands that it must bear the economic risk of its investment in
this Warrant and any securities obtainable upon exercise of this Warrant for an
indefinite period of time, as this Warrant and such securities have not been
registered under Federal or state securities laws and therefore cannot be sold
unless subsequently registered under such laws, unless as exemption from such
registration is available.
(b) The Holder, by his acceptance of this Warrant, represents
to the Company that it is acquiring this Warrant and will acquire any Notes
obtainable upon exercise of this Warrant and any shares of Common Stock
obtainable upon conversion of such Notes for its own account for investment and
not with a view to, or for sale in connection with, any distribution thereof in
violation of the Act. The Holder agrees that this Warrant and any such Notes and
Common Stock will not be sold or otherwise transferred unless (i) a registration
statement with respect to such transfer is effective under the Act and any
applicable state securities laws or (ii) such sale or transfer is made pursuant
to one or more exemptions from the Act.
7. Status of Holder. This Warrant does not confer upon the
Holder any right to vote or to consent to or receive notice as a stockholder of
the Company, as such, in respect of any matters whatsoever, or any other rights
or liabilities as a stockholder, prior to the exercise hereof.
8. Notices. No notice or other communication under this
Warrant shall be effective unless, but any notice or other communication shall
be effective and shall be deemed to have been given if, the same is in writing
and is mailed by first-class mail, postage prepaid, addressed to:
(a) the Company at 155 Fortune Boulevard, Milford,
Massachusetts, 01757 Attention: E. Andrews Grinstead, III, or such
other address as the Company has designated in writing to the Holder;
or
(b) the Holder at Pillar Investments Ltd., 28 Avenue de
Messine, Paris, France 75008 or such other address as the Holder has
designated in writing to the Company.
9. Headings. The headings of this Warrant have been inserted
as a matter of convenience and shall not affect the construction hereof.
3
<PAGE>
10. Applicable Law. This Warrant shall be governed by and
construed in accordance with the law of the Commonwealth of Massachusetts
without giving effect to principles of conflicts of law thereof.
4
<PAGE>
IN WITNESS WHEREOF, E. Andrews Grinstead, III, acting for and
on behalf of the Company, has executed this Warrant and caused the Company's
corporate seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary as of December __, 1999.
HYBRIDON, INC.
By:____________________________________
Name: E. Andrews Grinstead, III
Title: President and Chief Executive
Officer
ATTEST:
- --------------------------------
Secretary or Assistant Secretary
[Corporate Seal]
5
<PAGE>
SUBSCRIPTION
The undersigned, ____________________________, pursuant to the
provisions of the foregoing Warrant, hereby elects to exercise the within
Warrant to the extent of purchasing $_________________ principal amount of Notes
due 2002 thereunder and hereby makes payment of $_______________ by certified or
official bank check in payment of the exercise price therefor. The undersigned
further consents to the placement of the following legends on such Notes:
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A SUBSCRIPTION
AGREEMENT AND AN INTERCREDITOR AGREEMENT, COPIES OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT) IS THE
EXCLUSIVE AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT TO CERTAIN
ACTIONS HEREUNDER AND UNDER THE SUBSCRIPTION AGREEMENT; THE SECURED
PARTY, IN ITS SOLE DISCRETION, MAY TAKE OR FOREBEAR FROM TAKING CERTAIN
ACTIONS HEREUNDER AND UNDER THE SUBSCRIPTION AGREEMENT ON BEHALF OF THE
HOLDERS OF NOTES.
Dated:_______________ Signature:_____________________________
Address:_______________________________
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ASSIGNMENT
FOR VALUE RECEIVED _______________________________________
hereby sells, assigns and transfers unto _____________________________________
the foregoing Warrant and all rights evidenced thereby, and does irrevocably
constitute and appoint _____________________________, attorney, to transfer said
Warrant on the books of Hybridon, Inc.
Dated:_______________ Signature:_____________________________
Address:______________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED __________________________ hereby assigns
and transfers unto _________________________ the right to purchase $__________
principal amount of Notes due 2002 of Hybridon, Inc. covered by the foregoing
Warrant, and a proportionate part of said Warrant and the rights evidenced
thereby, and does irrevocably constitute and appoint __________________________,
attorney, to transfer that part of said Warrant on the books of Hybridon, Inc.
Dated:_______________ Signature:___________________________
Address:_____________________________
7
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement") is
effective as of December 7, 1999 (the "Effective Date") by and among Hybridon,
Inc., a Delaware corporation ("Borrower"), those persons who from time to time
hold the 8% senior notes (described herein) of the Borrower due November 30,
2002 (collectively, the "Senior Lenders"), and Forum Capital Markets, LLC
("Forum"), Delaware State Employees Retirement Fund, Declaration of Trust for
the Defined Benefit Plans of ICI American Holdings Inc., Declaration of Trust
for the Defined Benefit Plans of Zeneca Holdings Inc., The J.W. McConnell Family
Foundation and General Motors Employees Domestic Group Trust (said trusts,
foundation and fund being referred to collectively as the "Pecks Parties"; Forum
and the Pecks Parties are collectively referred to as the "Subordinate
Lenders").
RECITALS:
A. Senior Lenders have agreed to extend financial accommodations to
Borrower pursuant to the terms of the Senior Loan Documents (defined below).
B. Subordinate Lenders are also shareholders of Borrower and have
representatives on Borrower's Board of Directors.
C. As of December 31, 1996, Borrower entered into a non-revolving term
loan with Silicon Valley Bank (the "Bank") which was evidenced, in part, by that
certain Loan and Security Agreement dated as of December 31, 1996 (the
"Subordinate Loan Agreement")
D. As security for the financial accommodations made pursuant to the
Subordinate Loan Agreement, Borrower granted to Bank a security interest in
certain assets of Borrower described more fully in the Subordinate Loan
Agreement and herein.
E. On or about November 20, 1998, Subordinate Lenders purchased the
interests of Bank in credit facility evidenced and secured by the Subordinate
Loan Agreement and the Subordinate Loan Documents (defined herein).
F. As a condition to making their new financial accommodations. Senior
Lenders have required, and the Borrower and Subordinate Lenders have agreed,
that certain obligations of Borrower to Subordinate Lenders be subordinated, and
other processes be agreed to, as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements set forth herein, and for other good and
valuable consideration, the mutuality, receipt and sufficiency of which hereby
are acknowledged, and intending to be legally bound the parties hereto agree as
follows:
1. DEFINITIONS.
Certain terms used herein and not otherwise defined (including capitalized terms
used in the foregoing Recitals) shall have the following meanings:
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An "Acceleration" shall mean the occurrence of any acceleration of the
principal and interest under any of the Borrower Obligations.
"Borrower's Public Filings" shall mean the periodic filings on Forms
10-K, 10-Q and 8-K, as filed from time to time with the U.S. Securities and
Exchange Commission.
Borrower Obligations" means the Senior Obligations or the Subordinate
Obligations, as the context requires.
"Committee Event" shall have the meaning set forth in Section 2.2(a).
"Default" shall mean any Default or "default" under and as defined in
the Senior Loan Agreement or the Subordinate Loan Documents, as the context
requires.
"Event of Default" means any Senior Event of Default or Subordinate
Event of Default, as the context requires.
"Forum Representative" means Harold L. Purkey, or a successor chosen by
Forum.
"Lenders Committee" shall have the meaning set forth in Section 2.2(a).
"Payment in Full" or "Paid in Full" or any similar term) with respect
to any Borrower Obligation means (a) the indefeasible satisfaction and final
payment in full of such Borrower Obligation in cash or cash equivalents
reasonably acceptable to the payee and the termination of any obligation on the
part of the holder of such Borrower Obligation to make any loans or to afford
any financial accommodation to Borrower and the full and timely performance of
all other obligations to the holder of such Borrower Obligation or (b) in the
case of any Borrower Obligation consisting of contingent obligations (including
without limitation contingent obligations in respect of letters of credit or
other indemnifications under the Subordinate Loan Documents), the setting apart
of cash sufficient to discharge such portion of such Borrower Obligation in an
account for the exclusive benefit of the holders thereof, in which account such
holders shall be granted by Borrower a first priority perfected security
interest in a manner acceptable to such holders, which payment or perfected
security interest shall have been retained by the holders, in the case of each
of (a) and (b) above, for a period of time in excess of all applicable
preference or other similar periods under applicable bankruptcy, insolvency or
creditors' rights laws.
"Pecks Representative" means Arthur W. Berry or a successor chosen by
the holders of a majority of the interests held by the Pecks Parties.
"Remedy Notification" means the written notification by Subordinate
Lenders to Senior Lenders or by Senior Lenders to Subordinate Lenders of such
party's desire to exercise a Remedy following the occurrence of an Event of
Default.
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"Remedy" means any the following actions by either Senior Lenders or
Subordinate Lenders:
(i) the exercise of any right or remedies they may have under the
Subordinate Loan Documents or otherwise (other than a declaration of an
Acceleration);
(ii) the commencement or joinder with any other creditors of Borrower in
commencing any bankruptcy, reorganization, receivership or insolvency
proceeding against Borrower; or
(iii) the commencement of any action or proceeding against Borrower to
enforce or collect any Borrower Obligation, to obtain possession of property
of Borrower, to exercise control over property of Borrower or to create,
perfect or enforce any lien against property of Borrower.
"Senior Event of Default" means any Event of Default under and as
defined in the Senior Loan Documents.
"Senior Lenders' Representative" means Youssef El-Zein (a
representative designated by Pillar Investments Ltd.) or a successor
representative chosen by the holders of a majority (measured by dollar amount)
of the Senior Obligations, outstanding from time to time.
"Senior Loan Documents" means the Borrower's 8% notes, due November 30,
2002, issued to Senior Lenders, the Subscription Agreements between Borrower and
each Senior Lender, the Warrant Agreements between Borrower and the Senior
Lenders and all other instruments, agreements and documents which create,
evidence or secure the Senior Obligations from time to time (including but not
limited to any promissory notes, security agreements, pledge agreements,
hypothecation agreements, mortgages, financing statements, and all other
agreements of any type whatsoever), delivered by Borrower to Senior Lenders, as
such may be amended, modified, supplemented, restated, replaced or refinanced
(in any such case with any Senior Lender) from time to time, including all such
extensions, renewals, refinancings or refundings thereof, whether or not the
principal amount is increased.
"Senior Obligations" means all obligations of the Borrower under the
Senior Loan Documents including but not limited to principal, interest, fees and
all other amounts owing to Senior Lenders under the Senior Loan Documents, from
time to time. Notwithstanding the foregoing, the Senior Obligations shall not
include any principal owed by the Borrower to the Senior Lenders in excess of
$10,000,000 except with the consent of the Senior Lenders' Representative and
the Subordinate Lenders' Representatives.
"Subordinate Debt" means all principal, interest, fees and other
amounts owing to Subordinate Lenders under the Subordinate Loan Documents from
time to time, whether in respect of principal interest or otherwise.
"Subordinate Event of Default" means any Event of Default under and as
defined in the Subordinate Loan Documents.
"Subordinate Lenders' Representatives" shall mean the Pecks
Representative and the Forum Representative.
"Subordinate Loan Agreement" shall have the meaning set forth in the
Recitals.
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"Subordinate Loan Documents" means Subordinate Loan Agreement and all
other instruments, agreements and documents which create, evidence or secure the
Subordinate Obligations from time to time.
"Subordinate Obligations" means all obligations of Borrower under the
Subordinate Loan Documents including but not limited to principal, interest,
fees and all other amounts owing to Subordinate Lenders under the Subordinate
Loan Documents, from time to time.
2. SUBORDINATION AND INTERCREDITOR PROVISIONS.
2.1 Subordination.
(a) Subordinate Lenders hereby consent to Borrower obtaining certain
financial accommodations from Senior Lenders, all on a senior secured basis.
(b) Senior Lenders hereby acknowledge that Subordinate Lenders have
been previously granted a security interest in certain of the assets of
Borrower. Subordinate Lenders hereby acknowledge and agree that they are willing
to and hereby do subordinate the Subordinate Obligations and the collateral
securing such obligations to the Senior Obligations.
(c) Borrower and Subordinate Lenders each hereby represents and
warrants to Senior Lenders that a true, accurate and complete copy of all
Subordinate Loan Documents has been either filed as an inhibit to Borrower's
Public Filings or otherwise provided to Senior Lenders' Representative or its
counsel in writing, and that none of the Subordinate Loan Documents has been
amended or modified in any way from the versions so filed or provided.
(d) Subordinate Lenders agree, for themselves and each future holder of
the Subordinate Obligations, that: (i) subject to the terms hereof, the
Subordinate Debt is and shall be expressly subordinate and junior in right of
payment to all Senior Obligations until the Senior Obligations have been Paid in
Full; (ii) Subordinate Lenders shall not accept additional security or further
collateral to support the payment or performance of the Subordinate Debt, unless
the Senior Lender is granted a lien or security interest in such additional
collateral, and such lien or security interest in favor of Senior Lenders is
senior to the lien of the Subordinate Lenders; and (iii) Senior Lenders have
advanced funds in reliance upon the subordination of the Subordinate Debt and
the collateral securing such debt to the Senior Obligations.
2.2 Lenders Committee.
(a) Senior Lenders and Subordinate Lenders hereby agree to constitute a
"Lenders Committee" immediately upon the first to occur of the following: (i)
the occurrence of an Acceleration, or (ii) the occurrence of a Remedy
Notification (a "Committee Event").
(b) The Lenders Committee shall have three members which shall be
comprised of the Senior Lenders' Representative and the two Subordinate Lenders'
Representatives. Any matter which, under the terms of this Agreement or
otherwise, requires a vote or action by the Lenders Committee, shall require the
affirmative votes of a majority of the members of the Lenders Committee.
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(c) From and after its formation following a Committee Event, the
Lenders Committee shall be charged solely with liquidating any collateral held
by any of the Senior Lenders or Subordinate Lenders by obtaining possession of
or exerting control over such collateral, and perfecting or enforcing liens of
the Senior Lenders and the Subordinate Lenders against such collateral. Borrower
and the Lenders Committee shall disburse any proceeds of such liquidation
according to the priorities set by this Agreement.
(d) From and after any Event of Default, neither Senior Lenders nor
Subordinate Lenders may exercise a Remedy without first providing not less that
ten (10) days advance written notice to the other Lenders of its desire to so
exercise a Remedy (the "Remedy Notification"). Subsequent to the delivery of the
Remedy Notification and the resulting formation of the Lenders Committee, then,
until the date the Senior Obligations are Paid in Full, Subordinate Lenders
shall not exercise any Remedy without either (a) direction or approval by the
Lenders Committee or (b) express approval provided herein. Similarly, at any
time prior to the date the Subordinate Obligations are Paid in Full, Senior
Lenders shall not exercise any Remedy, without either (a) direction or approval
by the Lenders Committee or (b) express approval provided herein.
(e) If any insolvency, bankruptcy, receivership, liquidation,
reorganization or other similar proceedings are commenced by or against Borrower
or its property, if any proceedings for involuntary liquidation, dissolution or
other winding up of Borrower whether or not involving insolvency or bankruptcy
are commenced by or against Borrower (collectively, any "Reorganization
Proceedings"), then Senior Lenders shall be entitled in any such Reorganization
Proceedings to receive Payment in Full of all Senior Obligations before
Subordinate Lenders are entitled in any the Reorganization Proceedings to
receive any payment on account of the Subordinate Obligations. In any
Reorganization Proceedings, any payment or distribution of any kind or
character, whether in cash or in property to which Subordinate Lenders would be
entitled on account of the Subordinate Obligations but for the provisions of
this Agreement, shall be delivered to Senior Lender to the extent necessary to
make Payment in Full of all Senior Obligations remaining unpaid, after giving
effect to any concurrent payment or distribution to or for Senior Lender in
respect thereof. Subject to the Payment-in-Full of all Senior Obligations, the
holders of Subordinate Obligations shall be subrogated to the rights of the
holders of the Senior Obligations (to the extent of payments or distributions
made to holders of Senior Obligations pursuant to the foregoing sentence or
Section 2.3(b)) to receive payments or distributions of the assets of Borrower
applicable to the Senior Obligations. No such payments or distributions
applicable to the Senior Obligations shall, as between Borrower and its
creditors, other than the holders of Borrower Obligations, be deemed to be a
payment by Borrower to or on account of the Subordinate Obligations; and for the
purposes of such subrogation, no payments or distributions to the holders of
Senior Obligations to which the holders of Subordinate Obligations would be
entitled except for the provisions of this section shall, as between Borrower
and its creditors, other than the holders of Borrower Obligations, be deemed to
be a payment by Borrower to or on account of the Senior Obligations.
(f) Notwithstanding anything to the contrary contained herein,
Subordinate Lenders may, in any proceedings described in Section 2.2 (e), in the
name of Subordinate Lenders, file claims, proofs of claims and other instruments
of similar character necessary to enforce the obligations of Borrower in respect
of the Subordinate Obligations. Notwithstanding anything to
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the contrary contained herein, Senior Lenders may, in any proceedings described
in Section 2.2 (e), in the name of Senior Lenders, file claims, proofs of claims
and other instruments of similar character necessary to enforce the obligations
of Borrower in respect of the Senior Obligations. Neither this Section 2.2(f)
nor any other provision hereof shall be construed to give Subordinate Lenders
any right to vote any Borrower Obligation held by Senior Lenders, any related
claim or any portion of such claim, whether in connection with any resolution,
arrangement, plan or reorganization, compromise, settlement, election of
trustees or otherwise, all such votes, as to Senior Obligations to be made
solely on the direction of the Senior Lenders. Neither this Section 2.2(f) nor
any other provision hereof shall be construed to give Senior Lenders any right
to vote any Borrower Obligation held by Subordinate Lenders, any related claim
or any portion of such claim, whether in connection with any resolution,
arrangement, plan or reorganization, compromise, settlement, election of
trustees or otherwise, all such votes, as to Subordinate Obligations to be made
solely on the direction of the Subordinate Lenders.
2.3 Payments of Borrower Obligations.
(a) The following provisions shall govern Subordinate Lenders' right to
receive and Borrower's right and obligation to pay any amount due and owing
under the Subordinate Loan Documents:
(i) Provided that the Subordinate Lenders' Representatives shall not
have been notified that an Acceleration shall have occurred and be
continuing or would be created thereby under the terms of the Senior Loan
Documents, Subordinate Lenders may receive and Borrower may pay interest
only at the interest rate set forth in the Subordinate Loan Documents as of
the Effective Date, when due and owing on an unaccelerated basis and not at
a rate applicable upon default.
(ii) Except as expressly permitted pursuant to Section 2.3(a)(i),
Subordinate Lenders shall not be entitled to receive or retain any direct or
indirect payment (in cash, cash-equivalents, property, by set-off or
otherwise) of or on account of any Subordinate Obligation at any time prior
to Payment in Full of the Senior Obligations; provided, however, Borrower
may deliver to Subordinate Lenders' Representatives, at any time (including
during the occurrence of an Event of Default under the Senior Loan Documents
and/or the Subordinate Loan Documents), the proceeds from the sale of
Subordinate Lender's Collateral, which sale shall be made in a manner
directed or approved by the Lenders Committee. Except as expressly permitted
pursuant to Section 2.3(a)(i) and (ii), at any time that any of the Senior
Obligations is outstanding, Borrower shall not make and Subordinate Lenders
shall not receive or accept any payment (in cash, cash equivalents,
property, by set-off, "bid in" of debt in a disposition of collateral or
otherwise) of any kind or nature with respect to the Subordinate
Obligations.
(b) If Subordinate Lenders receive any payment with respect to the
Subordinate Obligations which Subordinate Lenders are not permitted to receive
and retain pursuant to this Agreement, then such payment shall be held in trust
for the benefit of, and shall be paid over promptly to Senior Lenders, for
application to the payment of the Senior Obligations, in such order of priority
as Senior Lenders' Representative shall determine. If Subordinate Lenders pay
over any payment or distribution as provided above, then such payment or
distribution shall be
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deemed to have been made by Borrower directly to Senior Lenders and not to
Subordinate Lenders and no Subordinate Obligation shall be discharged by reason
of its receipt of any payment or distribution which is so paid over to Senior
Lenders.
(c) To the extent necessary for Senior Lenders to realize the benefits
of the subordination of the Subordinate Obligations provided for herein,
Subordinate Lenders shall execute and deliver to Senior Lenders' Representative
such instruments or documents (together with such assignments or endorsements as
Senior Lender shall deem necessary), as are consistent with the terms of this
Agreement and are reasonably requested by Senior Lenders' Representative.
(d) In the event Subordinate Lenders at any time incur any obligation
to pay money to Borrower, Subordinate Lenders hereby irrevocably agree that they
shall pay such obligation in cash or cash equivalents in accordance with the
terms of the document or instrument governing such obligation without deduction
or set-off against the Subordinate Obligations.
2.4 Borrower's Obligations Absolute. The provisions of this Agreement
are solely for the benefit of Borrower, Senior Lenders and Subordinate Lenders
for the purpose of defining the relative rights of the parties thereto. Nothing
herein shall impair, as between Borrower and any other party hereto, the
obligations of Borrower, which are unconditional and absolute, to Senior Lenders
and to Subordinate Lenders, respectively.
2.5 Transfers. Any Senior Lender or any Subordinate Lender may sell,
assign or otherwise transfer, in whole or in part, any of the Borrower
Obligations or any interest therein to any other person or entity, but only on
the express condition that the transferee of the Borrower Obligations shall
expressly acknowledge to the other parties to this agreement, in writing, that
it agrees to be bound by all of the terms hereof. Senior Lenders and Subordinate
Lenders each hereby represents and warrants to the others that as of the
execution date hereof neither Senior Lenders nor Subordinate Lenders has
transferred or entered into any agreement or understanding with a proposed
transferee that they will transfer any of the Borrower Obligations.
2.6 Liens Subordinate. (a) Subordinate Lenders agree that any liens
upon Borrower's assets securing payment of the Subordinated Debt, now or
hereafter existing, are and shall be and remain inferior and subordinate to any
liens securing payment of the Senior Obligations regardless of whether such
encumbrances in favor of the Subordinated Lenders or Senior Lenders presently
exist or are hereafter created or attach.
(b) Senior Lenders and Subordinate Lenders hereby agree that, after the
Lenders Committee is constituted, the Lenders Committee may file any or all lien
releases, UCC releases, and termination statements on behalf of the Senior
Lenders and the Subordinate Lenders at any time Borrower, or any successor,
assign or agent of Borrower, proposes a sale of any asset that is approved by
the Lenders Committee. In furtherance thereof, the Senior Lenders and the
Subordinate Lenders agree to execute, acknowledge and deliver any lien releases,
UCC-3 termination statements or such additional instruments or documents as may
be reasonably necessary to confirm the foregoing within three (3) business days
of the request therefor by Lenders Committee.
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2.7 Additional Representations and Warranties. Subordinate Lenders and
Borrower represent and warrant to Senior Lenders that:
(a) as of the date hereof, the total principal amount of the
Subordinate Obligations is $6,000,000.00 plus accrued but unpaid interest;
(b) except as indicated in Borrower's Public Filings or disclosed in
writing to the Senior Lenders' Representative and its counsel, which writing is
hereby made a part hereof, as of the date hereof, to the best of their
knowledge, after due inquiry, no default or Event of Default, or event which the
notice or passage of time or both would constitute an Event of Default exists or
has occurred under the Subordinate Loan Documents;
(c) Subordinate Lenders are collectively the exclusive legal and
beneficial owner of all of the Subordinate Obligations;
(d) except as indicated in Borrower's Public Filings or disclosed in
writing to the Senior Lenders' Representative and its counsel, which writing is
hereby made a part of this Agreement, none of the Subordinate Obligations is
subject to any lien, security interest (other than Subordinate Lender's
Collateral), financing statements, subordination, assignment or other claim; and
(e) this Agreement constitutes the legal, valid and binding obligations
of Subordinate: Lenders, enforceable in accordance with its terms.
2.8 Legends. Subordinate Lenders agree that any instrument at any time
evidencing the Subordinate Obligations, or any portion thereof, shall be
permanently marked on its face with a legend conspicuously indicating that
payment thereof is subordinate in right of payment to the Senior Obligations and
subject to the terms and conditions of this Agreement, and after being so marked
certified copies thereof shall be delivered to Senior Lenders. In the event any
legend or endorsement is omitted, Senior Lenders or any of their
representatives, officers or employees are hereby irrevocably authorized on
behalf of Subordinate Lenders to make the same. No specific legend, further
assignment or endorsement or delivery of notes, guarantees or instruments shall
be necessary to subject any Subordinate Obligations to the subordination thereof
contained in this Agreement.
2.9 Waiver of Covenant. Subordinate Lenders hereby waive any breaches
or defaults arising from Borrower's failure to maintain compliance with Section
6.9 of the Subordinate Loan Agreement, entitled "Minimum Liquidity", such waiver
to remain in effect so long as any amounts of Senior Obligations remain
outstanding,
3. AGREEMENT BY BORROWER.
(a) Borrower hereby acknowledges and agrees to the foregoing terms and
provisions, and agrees that the provisions hereof will bind Borrower, together
with its successors and assigns.
(b) Borrower acknowledges and agrees that: (i) in the event of a breach
by Borrower or Subordinate Lenders of any of the terms and provisions contained
in this Agreement, such a
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breach shall constitute an Event of Default, as defined in and under the Senior
Loan Documents; and (ii) it will execute and deliver such additional documents
and take such additional action as may be necessary or desirable in the opinion
of either Subordinate Lenders or Senior Lenders to effectuate the provisions and
purposes of this Agreement.
4. MISCELLANEOUS.
4.1 Notices. Any and all notices given in connection with this
Agreement shall be deemed adequately given only if in writing and addressed to
the party for whom such notices are intended at the address set forth below. All
notices shall be sent by personal delivery, Federal Express or other over-night
messenger service, first class registered or certified mail, postage prepaid,
return receipt requested or by other means at least as fast and reliable as
first class mail. A written notice shall be deemed to have been given to the
recipient party on the earlier of (a) the date it shall be delivered to the
address required by this Agreement; (b) the date delivery shall have been
refused at the address required by this Agreement; or (c) with respect to
notices sent by mail, the date as of which the postal service shall have
indicated such notice to be undeliverable at the address required by this
Agreement. Any and all notices referred to in this Agreement, or which either
party desires to give to the other, shall be addressed as follows:
if to Borrower: Hybridon. Inc.
155 Fortune Blvd.
Milford, MA 01757
Attn.: President
with a copy to: Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attn.: Monica C. Lord. Esq.
if to Senior Lenders: Pillar Investments Ltd. Representative
28 Avenue de Messine
Paris, FRANCE 75008
Attn: Youssef El-Zein
with a copy to: Sachnoff & Weaver, Ltd.
30 South Wacker Drive
Suite 2900
Chicago, Illinois 60606
Attn: Lance R. Rodgers, Esq.
if to Subordinate Lenders: Pecks Management
1 Rockefeller Plaza,
Suite 900
New York, NY 10020
Attn: Arthur W. Berry
and
Forum Capital Markets
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53 Forest Avenue
Old Greenwich, CT 06870
Ann: Harold L. Purkey
with copies to:
The above addresses may be changed by notice of such change, mailed as provided
herein, to the last address designated.
4.2 No Fiduciary Duty. Nothing in this Agreement shall be construed to
create or impose upon any Senior Lender any fiduciary duty to any Subordinate
Lender, or any other implied obligation to act or refrain from acting with
respect to Borrower or the Senior Obligations or the collateral security
securing the Senior Obligations in any manner contrary to what any Senior Lender
may determine is in its own best interests. Similarly, nothing in this Agreement
shall be construed to create or impose upon any Subordinate Lender any fiduciary
duty to any Senior Lender, or any other implied obligation to act or refrain
from acting with respect to Borrower or the Subordinate Obligations or the
collateral security securing the Subordinate Obligations in any manner contrary
to what any Subordinate Lender may determine is in its own best interests.
4.3 Notice of Default. In addition to any other notices which may be
required hereunder, Subordinate Lenders shall give written notice to Senior
Lender Representative, promptly after they become aware of the occurrence of:
(a) an Event of Default under the terms of the Subordinate Loan Documents; (b)
the cure of any such Event of Default: (c) the payment in full of the
Subordinate Debt; (d) any Acceleration of the Subordinate Debt; and (e) any
action or proceeding instituted against Borrower on account of any Event of
Default.
4.4 Successors; Continuing Effect.
(a) This Agreement is being entered into for the benefit of, and shall
be binding upon, Borrower, each Senior Lender and each Subordinate Lender and
their respective successors and assigns, including each subsequent or additional
holder of Senior Obligations or Subordinate Debt, and any participant (whether
now existing or hereafter arising) in the Senior Obligations. The terms "Senior
Lenders" and "Subordinate Lenders" shall include, respectively, any such
subsequent or additional holder of or participant in Senior Obligations or
Subordinate Obligations whenever the context permits. This Agreement shall inure
to the benefit of and be enforceable by any future holder or holders of the
Borrower Obligations or any part of any of the same; provided that, nothing
contained in this Section 4.3 shall be deemed to permit the transfer of the
Subordinate Obligations in violation of the provisions of Section 2.5.
(b) Senior Lenders reserve the right to grant participations in, or
otherwise sell, assign, transfer or negotiate all or any part of, or any
interest in, the Senior Obligations and the Collateral securing same. In
connection with any participation or other transfer or assignment, Senior
Lenders (i) may disclose to such assignee, participant or other transferee or
assignee all documents and information which Senior Lender now or hereafter may
have relating to the Senior Obligations or the Collateral, and (ii) shall
disclose to such participant or other transferee or assignee the existence and
terms and conditions of this Agreement.
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4.5 Amendments. This Agreement may be amended only by a written
instrument executed by holders of a majorities in interest of each of the Senior
Obligations and the Subordinate Obligations and, if such amendment affects
Borrower, by Borrower.
4.6 Term. This Agreement shall remain in full force and effect until
the Payment in Full of the Senior Obligations.
4.7 Waivers. No waiver shall be deemed to be made by any party of any
of its rights hereunder unless the same shall be in writing and then only with
respect to the specific instance involved, and no such waiver shall impair or
offset the rights of the waiving party or the obligations of the party benefited
by such waiver in any other respect or at any other time.
4.8 Governing Law. This Agreement, including the validity hereof and
the rights and obligations of the parties hereunder, shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts.
4.9 The Borrower May Not Impair Subordination. No right of Senior
Lenders or Subordinate Lenders to enforce the subordination created hereby shall
be impaired by any act or failure to act by Borrower or by the failure by
Borrower to comply with this Agreement, regardless of any knowledge which any
Senior Lender or any Subordinate Lender may have or be otherwise charged with.
4.10 Specific Performance. The parties hereto acknowledge that legal
remedies maybe inadequate and therefore Senior Lenders and Subordinate Lenders
are hereby authorized to demand specific performance of the provisions of this
Agreement at any time when Borrower. Senior Lenders or Subordinate Lenders shall
have failed to comply with any provision hereof. Each party hereto hereby
irrevocably waives any defense based on the adequacy of a remedy at law that
might be asserted as a bar to such remedy of specific performance.
4.11 Further Actions. After the execution of this Agreement each party
will execute and deliver all such documents and instruments and do all such
other acts and things as may be reasonably necessary to carry out the provisions
of this Agreement.
4.12 Agreement to Control. If any provision in any document or
instrument relating to the Senior Obligations or the Subordinate Debt differs
with the terms of this Agreement regarding the same or any similar matter, the
provisions of this Agreement shall control and each other provision shall be
interpreted so as to give effect to the provisions of this Agreement.
4.13 Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to the subject matter hereof and supersedes all prior
written and oral agreements, and all contemporaneous oral agreements, relating
to such matters.
4.14 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
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<PAGE>
4.15 Facsimile. For purposes of negotiating and finalizing this
Agreement (including any subsequent amendments thereto), any signed document
transmitted by facsimile machine ("Fax") shall be treated in all manner and
respects as an original document. The signature of any party by Fax shall be
considered for these purposes as an original signature. Any such Fax document
shall be considered to have the same binding legal effect as an original
document, provided that an original of the faxed document was mailed by first
class U.S. Mail or personally delivered to the recipient, on the date of its
transmission with proof of the fax transmission. At the request of any party,
any Fax document subject to this Agreement shall be re-executed by both parties
in an original form. The undersigned parties hereby agree that neither shall
raise the use of the Fax or the fact that any signature or document was
transmitted or communicated through the use of a Fax as a defense to the
formation of this Agreement. This agreement may be signed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one agreement. binding on all of the parties hereto
notwithstanding that all of the parties hereto are not signatories to the same
counterpart. Each of the undersigned parties authorizes the assembly of one or
more original copies of this Agreement through the combination of the several
executed counterpart signature pages with one or more copies of this Agreement.
including the Schedules and Exhibits, if any to this Agreement. Each such
compilation of this Agreement shall constitute one original of this Agreement.
4.16 Consent to Jurisdiction; Waiver of Jury Trial.
(a) BORROWER, SUBORDINATE LENDERS AND SENIOR LENDER EACH HEREBY (i) TO
THE EXTENT PERMITTED BY APPLICABLE LAW, IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY STATE OR FEDERAL COURT LOCATED IN BOSTON, MASSACHUSETTS, OVER ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO THIS
AGREEMENT; (ii) IRREVOCABLY WANES, TO THE FULLEST EXTENT BORROWER, SUBORDINATE
LENDERS AND SENIOR LENDERS MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT;
(iii) AGREES THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE CONCLUSIVE AND MAY
BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW; AND (iv) TO THE EXTENT PERMITTED BY APPLICABLE LAW,
AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST ANY PARTY HERETO
OR ANY OF PARTY'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY, CONCERNING
ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT 1N ANY COURT OTHER THAN
ONE LOCATED IN BOSTON, MASSACHUSETTS.
(b) NOTHING IN THIS SECTION SHALL AFFECT OR IMPAIR SENIOR OR
SUBORDINATE LENDERS' RIGHT TO SERVE LEGAL PROCESS ON BORROWER IN ANY MANNER
PERMITTED BY LAW OR SENIOR OR SUBORDINATE LENDERS' RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
12
<PAGE>
(c) BORROWER, SENIOR LENDERS AND SUBORDINATE LENDERS EACH HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY COURSE OF CONDUCT, COURSE
OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.
EACH PARTY HERETO HEREBY EXPRESSLY ACKNOWLEDGES THIS WAIVER IS A MATERIAL
INDUCEMENT FOR SENIOR LENDER TO ENTER INTO THIS AGREEMENT AND TO MAKE THE LOAN
EVIDENCED BY THE SENIOR LOAN DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Subordination Agreement as of the day, month and year first above written.
HYBRIDON, INC.
By:_______________________________
Name: ____________________________
Title:____________________________
SENIOR LENDERS
By: Pillar Investments Ltd,
Their Representative
By:_______________________________
Name:_____________________________
FORUM CAPITAL MARKETS. LLC
By:_______________________________
Name:_____________________________
Title:____________________________
DELAWARE STATE EMPLOYEES RETIREMENT
FUND DECLARATION OF TRUST FOR THE
DEFINED BENEFIT PLANS OF ICI
AMERICAN HOLDINGS INC DECLARATION
OF TRUST FOR THE DEFINED BENEFIT
PLANS OF ZENECA HOLDINGS INC. THE
J.W. MCCONNELL FAMILY FOUNDATION
GENERAL MOTORS EMPLOYEES DOMESTIC
GROUP TRUST
By: PECKS MANAGEMENT PARTNERS, LTD.
By:_______________________________
[LETTERHEAD OF PILLAR INVESTMENTS]
December __, 1999
Hybridon, Inc.
155 Fortune Boulevard
Milford, MA 01757
Attn: Mr. E. Andrews Grinstead, III.
Ladies and Gentlemen:
This letter agreement (this "Agreement") is to confirm our
understanding regarding the compensation to be paid by Hybridon, Inc. (the
"Company") to Pillar Investments Ltd. and its affiliates and designees
(collectively "Pillar") in connection with the Company's private placement
offering (the "Offering") of Notes due 2002 ("Notes").
The Company shall issue to Pillar additional Notes (the "In-Kind Fee")
in an aggregate principal amount equal to nine percent (9%) of the aggregate
principal amount of Notes purchased in the Offering by investors introduced to
the Company by Pillar.
The Company shall issue to Pillar warrants (the "Unit Purchase
Warrants") to purchase additional Notes in an aggregate principal amount equal
to ten percent (10%) of the aggregate principal amount of Notes purchased in the
Offering by investors introduced to the Company by Pillar. The Unit Purchase
Warrants shall be exercisable until and including November 30, 2006 at an
exercise price equal to 110 percent (110%) of the Notes' principal amount.
The Company shall pay in cash all reasonable out-of-pocket expenses
incurred by Pillar in providing services with respect to the Offering, including
reasonable fees and disbursements of Pillar's counsel, within thirty (30) days
of submission of a bill or bills accompanied by reasonably detailed
documentation by Pillar.
Notwithstanding the foregoing, the Company's obligations to issue the
In-Kind Fee and the Unit Purchase Warrants and to reimburse Pillar's Placement
Expenses pursuant to this Agreement shall be subject to the condition precedent
that the Company will have had delivered to it a fairness opinion in form and
substance deemed by the Company, in its sole discretion, to satisfy the
requirements of that certain Indenture, relating to the 9% Convertible
Subordinated Notes Due 2004 of the Company, between the Company and State Street
Bank and Trust Company, dated as of March 26, 1997, as amended.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflicts of
law. The parties hereto
<PAGE>
Hybridon, Inc.
December __, 1999
Page 2
irrevocably consent to the jurisdiction of the courts of the State of New York
and of any federal court located in such State in connection with any action or
proceeding arising out of or relating to this Agreement, any document or
instrument delivered pursuant to, in connection with or simultaneously with this
Agreement, or a breach of this Agreement or any such document or instrument. In
any such action or proceeding, each party hereto waives personal service of any
summons, complaint or other process and agrees that service thereof may be made
in accordance with this Paragraph. Within thirty (30) days after such service,
or such other time as may be mutually agreed upon in writing by the attorneys
for the parties to such action or proceeding, the party so served shall appear
or answer such summons, complaint or other process. Pillar hereby appoints
Sachnoff & Weaver Ltd. as its agent for purposes of notice hereunder and to
receive on behalf of Pillar service of copies of summons and complaints and
other process which may be served in any such action or proceeding. All such
notices to Pillar shall be sent to Sachnoff & Weaver, Ltd., 30 South Wacker
Drive, Suite 2900, Chicago, Illinois 60606, Attn: Lance R. Rodgers, Esq.
This Agreement shall be binding upon Pillar and the Company and the
successors and assigns of Pillar.
This Agreement is intended, and for all purposes shall be construed, to
supersede any existing agreements, whether written, oral or otherwise, between
the parties hereto regarding Pillar's rights to compensation in connection with
the Offering.
Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
Agreement.
Sincerely yours,
PILLAR INVESTMENTS LTD.
By:___________________________
Name:
Title:
Confirmed as of the date hereof:
HYBRIDON, INC.
By:__________________________________
Name: E. Andrews Grinstead, III.
Title: President and CEO
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT (this "Agreement"),
dated as of December 13, 1999, by and among HYBRIDON, INC., a
Delaware corporation (the "Company"), and the Persons listed
on the signature pages hereof (the "Current Purchasers") and
such other Persons that from time to time hereafter may become
party hereto pursuant to Section 13.10 (the "Additional
Purchasers" and, collectively with the Current Purchasers, the
"Purchasers").
The Company desires to issue and sell to Purchasers, and
Purchasers desire to purchase from the Company, Notes due 2002 (the "Notes") in
substantially the form attached hereto as Exhibit A, upon and subject to the
terms and conditions hereinafter set forth. As used herein, the term "Offering"
shall mean the offering of Notes by the Company during the Offering Period
hereinafter referred to pursuant to this Agreement and substantially similar
agreements.
Accordingly, in consideration of the premises and the mutual
agreements contained herein, Purchasers and the Company hereby agree as follows:
1. Purchase and Sale of the Notes. Subject to the terms and
conditions set forth herein, the Company hereby agrees to issue and sell to
Purchasers, and Purchasers, severally and not jointly, hereby agree to purchase
from the Company Notes. The aggregate purchase price for the respective Notes
sold to each Purchaser pursuant to this Agreement shall be one hundred percent
(100%) of the aggregate principal amount of such Notes. "Operative Documents" as
used herein shall mean this Agreement, the Notes, the Subordination and
Intercreditor Agreement of even date herewith (the "Intercreditor Agreement")
and the form of Warrant Agreement attached hereto as Exhibit B (the "Warrant
Agreement").
2. Delivery of Notes.
2.1. Delivery of Notes. (a) The Company shall offer the Notes
for sale. Upon receipt of subscriptions for Notes pursuant to the Offering, the
Company may conduct an initial closing (any closing hereunder, a "Closing" and
the date thereof, a "Closing Date") and may conduct subsequent Closings on an
interim basis during the Offering Period. The Offering Period shall terminate at
12:00 noon (New York Time) on December 31, 1999, subject to extension at the
sole option of the Company, for an additional 60 days (the "Termination Date").
(b) Contemporaneously with the execution and delivery of this
Agreement by a Purchaser and pending the sale of Notes at a Closing, such
Purchaser will be required to deposit the Purchase Price in escrow with the
Escrow Agent (as defined in the Escrow Agreement hereinafter referred to) by
wire transfer of immediately available funds for the account of the Escrow Agent
made payable to Sachnoff & Weaver, 30 South Wacker Drive, 29th Floor, Chicago,
Illinois, 60606, Attention Douglas Newkirk, pursuant to the terms of an escrow
agreement in substantially the form attached hereto as Exhibit C (the "Escrow
Agreement").
(c) At a Closing, the funds required for the purchase of the
Notes by respective Purchasers will be released by the Escrow Agent net of any
Required Deductions (as
<PAGE>
defined in the Escrow Agreement) from the escrow account in accordance with the
terms of the Escrow Agreement. The Company will promptly deliver to Purchasers
the Notes to be purchased on the date of a Closing as set forth in Article 1
hereof against the receipt by the Company of the Purchase Price net of any
Required Deductions from escrow in accordance with the Escrow Agreement. Each
Purchaser hereby authorizes the Secured Party (as defined below) to accept
delivery of Notes on such Purchaser's behalf unless the Purchaser is in
attendance at such Closing. The Notes shall be registered in the Purchasers'
respective names or the name of the nominee(s) of such Purchasers in
denominations of $1,000 and integral multiples thereof pursuant to instructions
delivered to the Company not less than two days prior to a Closing. Interest on
each Note sold in the Offering shall accrue only from the date of issuance of
such Note.
2.2. Warrants. Pursuant to the Notes, if the Company prepays
the Notes (or any portions thereof), then the Company shall simultaneously issue
to the holders of such prepaid Notes (or portions) warrants ("Warrants") to
purchase a number of shares of Common Stock equal to the number of shares of
Common Stock then issuable upon conversion of such prepaid Notes (or the prepaid
portions thereof, if prepaid in part). The terms of the Warrants shall be as
more fully described in the Warrant Agreement between the Company ChaseMellon
Shareholder Services LLC, as Warrant Agent and the Secured Party (the "Warrant
Agreement"), a form of which is attached hereto as Exhibit B.
3. Conditions to the Obligations of Purchasers at a Closing.
The obligation of Purchasers to purchase and pay for the Notes to be purchased
by Purchasers at a Closing is subject to the satisfaction on or prior to the
relevant Closing Date of the following conditions, which may only be waived by
written consent of the Secured Party.
3.1. Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects when made, and shall be true and correct in all
material respects at and as of the date of such Closing as if they had been made
on and as of such Closing.
3.2. Performance of Covenants. All of the covenants and
agreements of the Company contained in this Agreement and required to be
performed on or prior to the relevant Closing Date shall have been performed in
a manner reasonably satisfactory to the Secured Party.
3.3. Closing Documents. The Company shall have delivered to
the Secured Party the following:
(a) a certificate executed by the President or Chief Executive
Officer of the Company dated the relevant Closing Date stating that the
conditions set forth in Sections 3.1 and 3.2 have been satisfied; and
(b) a certificate of the Secretary or Assistant Secretary of
the Company, dated the relevant Closing Date, certifying the attached copy of
the By-laws of the Company, the authorization of the execution, delivery and
performance of the Operative Documents, and the resolutions authorizing the
actions to be taken by the Company under the Operative Documents.
2
<PAGE>
3.4. No Legal Order Pending. There shall not then be in effect
any legal or other order enjoining or restraining the transactions contemplated
by this Agreement.
3.5. No Law Prohibiting or Restricting Such Sale. There shall
not be in effect any law, rule or regulation prohibiting or restricting such
sale or requiring any consent or approval of any person which shall not have
been obtained to issue the Notes (except as otherwise provided in this
Agreement).
3.6. Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby to be
consummated at each Closing and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Secured Party, including
but not limited to the authorization of the issuance of the Notes, Warrants and
the Note-Underlying Common Stock (as defined below).
4. Conditions to the Obligations of the Company at a Closing.
The obligation of the Company to issue and sell Notes to Purchasers at a Closing
is subject to the satisfaction of the following conditions, each of which may be
waived by the Company:
4.1. Representations and Warranties. The representations and
warranties of each Purchaser contained in this Agreement shall be true and
correct when made, and shall be true and correct at and as of the date of such
Closing as if they had been made on and as of such Closing.
4.2. No Law Prohibiting or Restricting Such Sale. There shall
not be in effect any law, rule or regulation prohibiting or restricting such
sale or requiring any consent or approval of any person which shall not have
been obtained to issue the Notes (except as otherwise provided in this
Agreement).
5. Creation of Security Interest.
5.1. Grant of Security Interest. The Company hereby grants and
pledges to Youssef El-Zein (a representative designated by Pillar Investments
Ltd.) or a successor representative chosen, at any time, by the holders of a
majority (measured by dollar amount) of the Notes outstanding from time to time
(the "Secured Party"), solely as agent for Purchasers and not in his individual
capacity, a continuing security interest in all presently existing and hereafter
acquired or arising assets and property of the Company described on Exhibit D
hereto (the "Collateral") in order to secure prompt payment of the principal sum
and interest evidenced by the Notes, and the performance by the Company of each
of its obligations under this Agreement and the Notes. Such security interest
shall automatically terminate upon the earlier of (i) the payment of principal
and interest on the Notes and (ii) such time as the Notes are no longer
outstanding (the "Security Interest Termination Date"). Purchasers hereby
acknowledge and agree that the security interests granted hereby are subordinate
and subject to any prior security interest in the Collateral granted by the
Company, except as modified by the Intercreditor Agreement, and are subordinate
and subject to any lien granted in the future to secure Operating Indebtedness
of the Company. Purchasers and the Secured Party hereby agree not to exercise
any of their rights with respect to the Collateral under this Agreement, at law,
in equity or otherwise until the holders of Operating Indebtedness have been
paid in full.
3
<PAGE>
5.2. Designation of Secured Party as Agent. Purchasers, by
their acceptance of the benefits of this Agreement and the Notes, hereby
irrevocably designate the Secured Party to act as Secured Party with respect to
this Agreement and as specified in the other Operative Documents. Each Purchaser
hereby irrevocably authorizes, and each holder of any Note, by such holder's
acceptance of such Note, shall be deemed irrevocably to authorize, the Secured
Party to take such action on its behalf under the provisions of this Agreement
and the other Operative Documents and any other instruments and agreements
referred to herein or therein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to, or required
of, the Secured Party by the terms hereof or thereof and such other powers as
are reasonably incidental thereto. Each Purchaser, on behalf of itself and
future holders of the Notes issued to such Purchaser, hereby authorizes and
directs the Secured Party, from time to time in the Secured Party's discretion
to take any action and promptly to execute and deliver on its behalf any
document or instrument that the Company may reasonably request to effect,
confirm or evidence the provisions of this Article 5, including, without
limitation, the occurrence of the Security Interest Termination Date, any
subordination agreement, or otherwise. In addition, Purchasers and Secured Party
hereby covenant and agree promptly to execute and deliver any such document or
instrument in respect of such subordination, and in respect of the occurrence of
the Security Interest Termination Date, as the Company may reasonably request.
5.3. Delivery of Additional Documentation Required. The
Company shall from time to time execute and deliver to Secured Party, at the
request of Secured Party, all financing statements and other documents that
Secured Party may reasonably request to perfect and continue perfected Secured
Party's security interests in the Collateral and in order fully to consummate
all of the transactions contemplated under this Agreement, it being understood
and agreed by the Purchasers and the Secured Party that the Company need not
deliver possession of any Collateral to the Secured Party, take any action to
perfect the security interest granted hereby other than the filing of financing
statements under the Uniform Commercial Code or take any other action that
would, in its sole judgment, conflict with the terms of or pertaining to any
Operating Indebtedness.
6. Representations and Warranties of Purchasers. Purchasers
hereby severally represent and warrant to the Company as follows:
6.1. Investment Intent. Each Purchaser recognizes that the
purchase of the Notes involves a high degree of risk including, but not limited
to, the following: (i) the Company remains a development stage business with
limited operating history and requires substantial funds in addition to the
proceeds of the Offering; (ii) an investment in the Company is highly
speculative, and only investors who can afford the loss of their entire
investment should consider investing in the Company, the Notes, the Warrants, or
the shares of Note-Underlying Common Stock, (iii) such Purchaser may not be able
to liquidate his investment; (iv) transferability of the Notes, the Warrants and
the Note-Underlying Common Stock is extremely limited; (v) in the event of a
disposition of the Notes, the Warrants and the Note-Underlying Common Stock,
such Purchaser could sustain the loss of his entire investment and (vi) the
Company has not paid any dividends since inception and does not anticipate the
payment of dividends on the Common Stock in the foreseeable future. Such risks
are more fully set forth in the SEC Reports (as hereinafter defined).
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<PAGE>
6.2. Lack of Liquidity. Each Purchaser confirms that he or it
is able (i) to bear the economic risk of this investment, (ii) to hold the
Notes, the Warrants and any shares of Note-Underlying Common Stock for an
indefinite period of time, and (iii) presently to afford a complete loss of his
or its investment; and represents that he or it has sufficient liquid assets so
that the illiquidity associated with this investment will not cause any undue
financial difficulties or affect such Purchaser's ability to provide for his or
its current needs and possible financial contingencies, and that his or its
commitment to all speculative investments is reasonable in relation to his or
its net worth and annual income. Furthermore, each Purchaser acknowledges that
the Warrants contain certain restrictions on exercise, voting, conversion and
certain other rights, as more particularly set forth in the Warrant Agreement
attached hereto as Exhibit B.
6.3. Knowledge and Experience. Each Purchaser hereby
acknowledges and represents that such Purchaser has prior investment experience,
including investment in securities that are non-listed, unregistered and are not
traded on the Nasdaq National or SmallCap Market, nor on the National
Association of Securities Dealers, Inc.'s (the "NASD") automated quotation
system, or such Purchaser has employed at its own expense the services of an
investment advisor, attorney and/or accountant to request documents from the
Company pursuant to Section 6.5 hereof and to read all of the documents
furnished or made available by the Company to such Purchaser and to evaluate the
investment, tax and legal merits and the consequences and risks of such a
transaction on such Purchaser's behalf, that such Purchaser or such professional
advisor has such knowledge and experience in financial and business matters and
that such Purchaser or such professional advisor is capable of evaluating the
merits and risks of the prospective investment and, if applicable, satisfies the
conditions set out in Rule 501(h) under the Securities Act.
6.4. Purchaser Capacity. Each Purchaser hereby represents that
such Purchaser either by reason of such Purchaser's business or financial
experience, or the business or financial experience of such Purchaser's
professional advisors (who are unaffiliated with, and who are not compensated
by, the Company or any affiliate or selling agent of the Company, directly or
indirectly), has the capacity to protect such Purchaser's own interests in
connection with the transaction contemplated hereby.
6.5. Receipt of Information. Each Purchaser hereby
acknowledges that such Purchaser has carefully reviewed (a) the SEC Reports and
(b) this Agreement and all attachments to it, and hereby represents that such
Purchaser has been furnished by the Company during the course of this
transaction with all information regarding the Company which such Purchaser or
its representative has requested or desired to know, has been afforded the
opportunity to ask questions of, and to receive answers from, duly authorized
officers or other representatives of the Company concerning the terms and
conditions of the Offering, the Notes, the Warrants and the Note-Underlying
Common Stock and the affairs of the Company and has received any additional
information which such Purchaser or its representative has requested.
6.6. Reliance on Information. Each Purchaser has relied solely
upon the information provided by the Company in the SEC Reports and in this
Agreement in making the decision to invest in the Notes. To the extent
necessary, each Purchaser has retained, at the sole expense of such Purchaser,
and relied upon, appropriate professional advice regarding the investment, tax
and legal merits and consequences of this Agreement and its purchase of the
5
<PAGE>
Notes, its potential acquisition of the Warrants and the conversion of the Notes
into, or exercise of the Warrants for, Note-Underlying Common Stock.
6.7. No Solicitation. Each Purchaser represents that (i) such
Purchaser was contacted regarding the sale of the Notes by the Company (or an
authorized agent or representative thereof) with whom such Purchaser had a prior
substantial pre-existing relationship and (ii) no Notes were offered or sold to
such Purchaser by means of any form of general solicitation or general
advertising, and in connection therewith no Purchaser (A) received or reviewed
any advertisement, article, notice or other communication published in a
newspaper or magazine or similar media or broadcast over television or radio
whether closed circuit, or generally available; or (B) attended any seminar
meeting or industry investor conference whose attendees were invited by any
general solicitation or general advertising.
6.8. Registration. Each Purchaser hereby acknowledges that the
Offering has not been reviewed by the Securities and Exchange Commission or any
state regulatory authority, since the Offering is intended to be exempt from the
registration requirements of Section 5 of the Securities Act pursuant to
Regulation D. No Purchaser shall sell or otherwise transfer the Notes, the
Warrants or any Note-Underlying Common Stock unless such securities are
registered under the Securities Act or unless an exemption from such
registration is available.
6.9. Purchase for own Account. Each Purchaser understands that
neither the Notes nor the Warrants nor any shares of Note-Underlying Common
Stock have been registered under the Securities Act by reason of a claimed
exemption under the provisions of the Securities Act which depends, in part,
upon such Purchaser's investment intention. In this connection, each Purchaser
hereby represents that such Purchaser is purchasing Notes for such Purchaser's
own account for investment and not with a view toward the resale or distribution
to others or for resale in connection with, any distribution or public offering
(within the meaning of the Securities Act), nor with any present intention of
distributing or selling the same and such Purchaser has no present or
contemplated agreement, undertaking, arrangement, obligation or commitment
providing for the disposition thereof. No Purchaser, if an entity, was formed
for the purpose of purchasing the Notes.
6.10. Holding Period. Nothing in this Section 6.10 shall be
construed to relieve the Company of its registration obligations pursuant to
Section 12, hereof. Each Purchaser understands that there is no public market
for the Notes or the Warrants and that no market is expected to develop for any
such Notes or Warrants. Each Purchaser understands that even if a public market
develops for such Notes or Warrants, reliance upon Rule 144 under the Securities
Act for resales requires, among other conditions, a one-year holding period
prior to the resale (in limited amounts) of securities acquired in a non-public
offering without having to satisfy the registration requirements under the
Securities Act. Each Purchaser understands and hereby acknowledges that the
Company is under no obligation to register any of the Notes or any Warrants
under the Securities Act or any applicable non-United States, state securities
or "blue sky" laws. Each Purchaser shall hold the Company and its directors,
officers, employees, controlling persons and agents and the Secured Party and
their respective heirs, representatives, successors and assigns harmless from,
and shall indemnify them against, all liabilities, costs and expenses incurred
by them as a result of (i) any misrepresentation made by such Purchaser
contained in this Agreement (including in Article 14 hereof), (ii) any sale or
distribution by such
6
<PAGE>
Purchaser in violation of the Securities Act or any applicable non-United
States, state securities or "blue sky" laws or (iii) any untrue statement made
by such Purchaser.
6.11. Legends. Each Purchaser consents to the placement of the
legend set forth below on any certificate or other document evidencing the
Notes:
THE TERMS OF THIS NOTE ARE SUBJECT TO THE TERMS OF A
SUBSCRIPTION AGREEMENT AND AN INTERCREDITOR AGREEMENT, COPIES
OF WHICH ARE 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.
THE SECURED PARTY (AS DEFINED IN THE SUBSCRIPTION AGREEMENT)
IS THE EXCLUSIVE AGENT OF THE HOLDER OF THIS NOTE WITH RESPECT
TO CERTAIN ACTIONS HEREUNDER AND UNDER THE SUBSCRIPTION
AGREEMENT; THE SECURED PARTY, IN HIS SOLE DISCRETION, MAY TAKE
OR FOREBEAR FROM TAKING CERTAIN ACTIONS HEREUNDER AND UNDER
THE SUBSCRIPTION AGREEMENT ON BEHALF OF THE HOLDERS OF NOTES.
Each Purchaser further consents to the placement of one or more restrictive
legends on the Warrants and the Note-Underlying Common Stock as required by
applicable securities laws. Each Purchaser is aware that the Company will make a
notation in its appropriate records with respect to the restrictions on the
transferability of such Notes, Warrants and Note-Underlying Common Stock.
6.12. Financial Review. Each Purchaser understands that the
Company will review this Agreement and is hereby given authority by each
Purchaser to call such Purchaser's bank or place of employment or otherwise
review the financial standing of such Purchaser; and it is further agreed that
the Company, at its sole discretion, reserves the unrestricted right, without
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further documentation or agreement on the part of such Purchaser, to reject or
limit any purchase, and to close the Offering to such Purchaser at any time.
6.13. Residence of Purchaser. Each Purchaser hereby represents
that the address of such Purchaser furnished by such Purchaser on the signature
page hereof is such Purchaser's principal residence if such Purchaser is an
individual or its principal business address if it is a corporation or other
entity.
6.14. Power and Authority. Each Purchaser represents that such
Purchaser has full power and authority (corporate, statutory and otherwise) to
execute and deliver this Agreement and to purchase the Notes, the Warrants and
any shares of Note-Underlying Common Stock. This Agreement constitutes the
legal, valid and binding obligation of each Purchaser, enforceable against such
Purchaser in accordance with its terms.
6.15. Plans. If a Purchaser is a corporation, partnership,
limited liability company, trust, employee benefit plan, individual retirement
account or other entity, then subject to the terms contained in this Agreement
(a) it is authorized and qualified to become an investor in the Company and the
person signing this Agreement on behalf of such entity has been duly authorized
by such entity to do so, and (b) it is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization.
6.16. NASD. Each Purchaser acknowledges that if he or she is a
registered representative of an NASD member firm, he or she must give such firm
the notice required by the NASD's Rules of Fair Practice, receipt of which must
be acknowledged by such firm in Section 14.3 below.
6.17. Securities Laws. Each Purchaser acknowledges that at
such time, if ever, as the Notes, the Warrants or Note-Underlying Common Stock
are registered, sales of the Notes, the Warrants and Note-Underlying Common
Stock will be subject to applicable non-United States and state securities laws,
including, without limitation, those of the State of New Jersey which require
any securities sold in New Jersey to be sold through a registered broker-dealer
or in reliance upon an exemption from registration.
6.18. Brokers. Each Purchaser represents and warrants that it
has not engaged, consented to nor authorized any broker, finder or intermediary
to act on its behalf, directly or indirectly, as a broker, finder or
intermediary in connection with the transactions contemplated by this Agreement.
Each Purchaser shall indemnify and hold harmless the Company from and against
all fees, commissions or other payments owing to any such person or firm acting
on behalf of such Purchaser hereunder.
6.19. Recent Financing Activities. Each Purchaser acknowledges
that it is aware of the following recent financing activities of the Company
that have not yet been disclosed in the SEC Reports, and that such Purchaser has
had the opportunity to review the agreements and instruments relating thereto,
and to ask questions of the Company regarding the same: (a) an aggregate of
$1,000,000 principal amount of promissory notes were sold to E. Andrews
Grinstead III, who is the Company's President and Chief Executive Officer, at
face value during September 1999; (b) an additional $500,000 principal amount of
promissory notes
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were sold to E. Andrews Grinstead III, at face value during November 1999; and
(c) an aggregate of approximately $455,000 of debt was sold to purchasers in a
private placement transaction in October 1999, which debt will, on December 31,
1999, automatically convert into either Notes or preferred stock of the Company
having the terms set forth in the term sheet attached hereto as Exhibit E.
6.20. Beneficial Owner. Each Purchaser, whose name appears on
the signature line below, will be the beneficial owner of the Notes that such
Purchaser acquires.
6.21. Accredited Investor. Each Purchaser represents that it
is an "accredited investor" as such term is defined in Rule 501 of Regulation D.
6.22. Reliance on Representation and Warranties. Each
Purchaser understands that the Notes are being offered and sold to the
undersigned in reliance on specific exemptions from the registration
requirements of United States Federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the undersigned
set forth herein in order to determine the applicability of such exemptions and
the suitability of the undersigned to acquire the Notes, the Warrants and the
Note-Underlying Common Stock.
6.23. Reserved.
6.24. Abdication of Rights to Secured Party. Each Purchaser
acknowledges that such Purchaser has irrevocably designated Secured Party to act
on such Purchaser's behalf with respect to the Notes, the Warrants and the
Collateral, under the Notes, the Warrant Agreement and this Agreement. Each
Purchaser further acknowledges and accepts that the actions of Secured Party on
such Purchaser's behalf may be materially different than how such Purchaser
would have acted in such Purchaser's own capacity, and that such Purchaser may
be materially and adversely affected thereby.
7. [Reserved]
8. Representation, Warranties and Covenants of the Company.
The Company hereby represents, warrants and covenants to each Purchaser that all
reports required to be filed by the Company since and including the most recent
filing of the Company's Annual Report on Form 10-K, to and including the
relevant Closing Date (collectively, the "SEC Reports") have been duly filed
with the Securities and Exchange Commission, complied at the time of filing in
all material respects with the requirements of their respective forms and were
complete and correct in all material respects as of the dates at which the
information was furnished, and contained (as of such dates) no untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements contained therein, in light of the circumstances under which
they were made, not misleading.
9. [Reserved]
10. Secured Party's Rights and Remedies
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10.1. Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default (as defined in the Note), the Secured Party
may, in addition to the remedies pursuant to Section 6 of the Notes, at its
election, without notice of its election and without demand, take any action
permitted by law, including the exercise of any rights accorded a secured
creditor under the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts at such time.
11. Certain Definitions. For the purposes of this Agreement
the following terms have the respective meanings set forth below:
11.1. "Business Day" means a Monday through Friday on which
banks are generally open for business in New York, Massachusetts and California.
11.2. "Common Stock" means the Company's common stock, par
value $.001 per share.
11.3. "Note-Underlying Common Stock" shall mean the Common
Stock issuable upon conversion of, or in lieu of cash interest on, the Notes and
any Common Stock issuable upon exercise of any Warrants that may be issued upon
prepayment of Notes.
11.4. "Offering" shall have the meaning ascribed to such terms
in the first paragraph of this Agreement.
11.5. "Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
11.6. "Regulation D" means Regulation D promulgated under the
Securities Act.
11.7. "Secured Party" shall have the meaning ascribed to such
term in Section 5.1.
11.8. "Securities Act" means, as of any given time, the
Securities Act of 1933, as amended, or any similar federal law then in force.
11.9. "Securities and Exchange Commission" includes any
governmental body or agency succeeding to the functions thereof.
11.10. "Operating Indebtedness" means the principal of (and
premium, if any) and accrued interest on (including all interest accruing
subsequent to the commencement of any bankruptcy or similar proceeding, whether
or not a claim for post-petition interest is allowable as a claim in any such
proceeding) all reimbursement obligations and other liabilities (contingent or
otherwise) with respect to letters of credit, bank guarantees or bankers'
acceptances, and any amendments, renewals, extensions, modifications and
refundings of any such indebtedness or obligation. Notwithstanding the
foregoing, the Operating Indebtedness shall not include any
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<PAGE>
such obligations or liabilities to the extent they exceed $1,000,000 in the
aggregate at any time outstanding.
11.11. "SEC Reports" shall have the meaning ascribed thereto
in Article 8.
11.12. "Transfer Restricted Securities" means each Warrant,
each Note and, if any Note has been converted or any Warrant has been exercised,
the Note-Underlying Common Stock issued upon such conversion or exercise, until
the earlier of (a) the date on which such Note, Warrant or Note-Underlying
Common Stock, as applicable, has been effectively registered under the
Securities Act and disposed of pursuant to, and in accordance with, an effective
registration statement under the Securities Act, (b) the date on which such
Note, Warrant or Note-Underlying Common Stock, as applicable, is distributed to
the public pursuant to Rule 144 or any other applicable exemption under the
Securities Act without additional restriction upon public resale or (c) at such
time as such Note, Warrant or Note-Underlying Common Stock, as applicable, may
be sold by a Holder under Rule 144(k).
12. Registration Rights.
12.1 As used in this Article 12, the following terms shall
have the following meanings:
(a) "Affiliate" shall mean, with respect to any Person (as
defined below), any other Person controlling, controlled by, or under direct or
indirect common control with, such Person (for the purposes of this definition
"control," when used with respect to any specified Person, shall mean the power
to direct the management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" shall have meanings correlative to the
foregoing).
(b) [Reserved].
(c) "Holders" shall mean the Purchasers and any person holding
Registrable Securities or any person to whom the rights under Article 12 have
been transferred in accordance with Section 12.10 hereof.
(d) [Reserved]
(e) The terms "register," "registered" and "registration"
refer to the registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
(f) "Registrable Securities" shall mean the shares of Common
Stock issuable upon conversion of the Notes; provided, however, that securities
shall only be treated as Registrable Securities if and only for so long as they
(A) have not been disposed of pursuant to a registration statement declared
effective by the Securities and Exchange Commission, (B) have not been sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale, (C) are
held by a Holder or a permitted
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transferee pursuant to Section 12.10 or (D) are not freely tradeable without
limitations as to volume or filing requirements under applicable federal
securities laws.
(g) "Registration Expenses" shall mean all expenses incurred
by the Company in complying with Section 12.2 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and expenses of counsel for the Company, blue sky fees and
expenses and the expense of any special audits incident to, or required by, any
such registration (but excluding the fees of legal counsel for any Holder).
(h) "Registration Statement" shall have the meaning ascribed
to such term in Section 12.2.
(i) "Registration Period" shall have the meaning ascribed to
such term in Section 12.4.
(j) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and all
fees and expenses of legal counsel for any Holder.
12.2. The Company shall use its reasonable best efforts to
file a "shelf" registration statement on the appropriate form (the "Registration
Statement") with the Securities and Exchange Commission, by ninety (90) days
after the Termination Date and shall use its reasonable best efforts to effect
the registration, qualifications or compliances (including, without limitation,
the execution of any required undertaking to file post-effective amendments,
appropriate qualifications or exemptions under applicable blue sky or other
state securities laws and appropriate compliance with applicable securities
laws, requirements or regulations) prior to the date which is two hundred ten
(210) days after the Termination Date. Notwithstanding the foregoing, the
Company shall not be obligated to enter into any underwriting agreement for the
sale of any of the Registrable Securities.
12.3. All Registration Expenses incurred in connection with
any registration, qualification or compliance pursuant to Section 12.2 shall be
borne by the Company. All Selling Expenses relating to the sale of securities
registered by or on behalf of Holders shall be borne by such Holders pro rata on
the basis of the number of securities so registered; provided that if a Holder
uses its own legal counsel in addition to one counsel for all of the Holders of
securities registered on behalf of the Holders, such Holder shall bear the cost
of such counsel.
12.4. In the case of the registration, qualification or
compliance effected by the Company pursuant to this Agreement, the Company
shall, upon reasonable request, inform each Holder as to the status of such
registration, qualification and compliance. At its expense the Company shall:
(a) use its reasonable best efforts to keep such registration,
and any qualification, exemption or compliance under state securities laws which
the Company determines to obtain, continuously effective until the Holders have
completed the distribution described in the registration statement relating
thereto. Notwithstanding the foregoing, at the Company's election, the Company
may cease to keep such registration, qualification or compliance effective with
respect to any Registrable Securities, and the registration rights of a
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Holder shall expire, upon the earlier of (i) such time as the Holder may sell
under Rule 144(k) under the Securities Act (or other exemption from registration
acceptable to the Company) in a three-month period all Registrable Securities
then held by such Holder and (ii) November 30, 2002. The period of time during
which the Company is required hereunder to keep the Registration Statement
effective is referred to herein as the "Registration Period."; and
(b) advise the Holders:
(i) when the Registration Statement or any amendment thereto
has been filed with the Securities and Exchange Commission and when the
Registration Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Securities and Exchange Commission
for amendments or supplements to the Registration Statement or the prospectus
included therein or for additional information;
(iii) of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for such purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Securities
included therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
(v) of the happening of any event that requires the making of
any changes in the Registration Statement or the prospectus included therein so
that, as of such date, the statements therein are not misleading and do not omit
to state a material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in the light of the
circumstances under which they were made) not misleading;
(vi) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of any Registration Statement at the
earliest possible time;
(vii) furnish to each Holder, without charge, at least one
copy of such Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so requests in
writing, all exhibits (including those incorporated by reference) in the form
filed with the Securities and Exchange Commission;
(viii) during the Registration Period, deliver to each Holder,
without charge, as many copies of the prospectus included in such Registration
Statement and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use, consistent with the provisions
hereof, of the prospectus or any amendment or supplement thereto by each of the
selling Holders of Registrable Securities in connection with the offering and
sale of the Registrable Securities covered by the prospectus and any amendment
or supplement thereto. In addition, upon the reasonable request of the Holder
and subject in all cases to confidentiality protections reasonably acceptable to
the Company, the Company will meet with a Holder or a representative thereof at
the Company's headquarters to discuss all information relevant for disclosure in
the Registration Statement covering the Registrable
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Securities, and will otherwise cooperate with any Holder conducting an
investigation for the purpose of reducing or eliminating such Holder's exposure
to liability under the Securities Act, including the reasonable production of
information at the Company's headquarters;
(ix) during the Registration Period, deliver to each Holder,
without charge, (i) as soon as practicable (but in the case of the annual report
of the Company to its stockholders, within 120 days after the end of each fiscal
year of the Company) one copy of: (A) its annual report to its stockholders, if
any (which annual report shall contain financial statements audited in
accordance with generally accepted accounting principles in the United States of
America by a firm of certified public accountants of recognized standing); (B)
if not included in substance in its annual report to stockholders, its annual
report on Form 10-K (or similar form); (C) each of its quarterly reports to its
stockholders, and, if not included in substance in its quarterly reports to
stockholders, its quarterly report on Form 10-Q (or similar form), and (D) a
copy of the full Registration Statement (the foregoing, in each case, excluding
exhibits); and (ii) upon reasonable request, all exhibits excluded by the
parenthetical to the immediately preceding clause (D), and all other information
that is generally available to the public;
(x) prior to any public offering of Registrable Securities
pursuant to any Registration Statement, register or qualify for offer and sale
under the securities or blue sky laws of such jurisdictions as any such Holders
reasonably request in writing, provided that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction, and do any and all other
acts or things reasonably necessary or advisable to enable the offer and sale in
such jurisdictions of the Registrable Securities covered by such Registration
Statement;
(xi) cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to any Registration Statement free of any restrictive legends
to the extent not required at such time and in such denominations and registered
in such names as Holders may request at least three (3) business days prior to
sales of Registrable Securities pursuant to such Registration Statement;
(xii) upon the occurrence of any event contemplated by Section
12.4(b)(v) above, the Company shall promptly prepare a post-effective amendment
to the Registration Statement or a supplement to the related prospectus, or file
any other required document so that, as thereafter delivered to purchasers of
the Registrable Securities included therein, the prospectus will not include any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; and
(xiii) use its reasonable best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
will make generally available to the Holders not later than 45 days (or 90 days
if the fiscal quarter is the fourth fiscal quarter) after the end of its fiscal
quarter in which the first anniversary date of the effective date of the
Registration Statement occurs, an earnings statement satisfying the provisions
of Section 11(a) of the Securities Act.
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12.5. Delay Periods; Suspension of Sales. Each Holder shall
suspend, upon request of the Company, any disposition of Registrable Securities
pursuant to the Registration Statement and prospectus contemplated by Section
12.2 during (i) any period not to exceed two 30-day periods within any one
12-month period the Company requires in connection with a primary underwritten
offering of equity securities and (ii) any period, not to exceed one 45-day
period per circumstance or development, when the Company determines in good
faith that offers and sales pursuant thereto should not be made by reason of the
presence of material undisclosed circumstances or developments with respect to
which the disclosure that would be required in such a prospectus is premature,
would have an adverse effect on the Company or is otherwise inadvisable;
provided that the Company makes such determination and applies such halts of
offers and sales uniformly and universally to all Persons then offering shares
of Common Stock pursuant to effective Registration Statements (including
Registration Statements on Forms S-4 and S-8).
12.6. The Holders shall have no right to take any action to
restrain, enjoin or otherwise delay any registration pursuant to Section 12.2
hereof as a result of any controversy that may arise with respect to the
interpretation or implementation of this Agreement.
12.7. (a) To the extent permitted by law, the Company shall
indemnify each Holder, each underwriter of the Registrable Securities and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which any registration, qualification or
compliance has been effected pursuant to this Agreement, against all claims,
losses, damages and liabilities (or action in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened
(subject to Subsection 12.7(c) below), arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus or offering circular, or any amendment or
supplement thereof, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances in which they were made,
and shall reimburse each Holder, each underwriter of the Registrable Securities
and each person controlling such Holder, for legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred; provided that the Company shall not be
liable in any such case to the extent that any untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with information
furnished to the Company by or on behalf of such Holder and stated to be
specifically for use in preparation of such registration statement, prospectus
or offering circular; provided that the Company shall not be liable in any such
case where the claim, loss, damage or liability arises out of or is related to
the failure of the Holder to comply with the covenants and agreements contained
in this Agreement respecting sales of Registrable Securities, and except that
the foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any such untrue statement or alleged untrue statement or omission
or alleged omission made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Securities and Exchange
Commission at the time the registration statement becomes effective or in the
amended prospectus filed with the Securities and Exchange Commission pursuant to
Rule 424(b) of the Securities Act or in the prospectus subject to completion and
term sheet under Rule 434 of the Securities Act, which together meet the
requirements of Section 10(a) of the Securities Act (the "Final Prospectus"),
such indemnity agreement shall not inure to
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the benefit of any such Holder, any such underwriter or any such controlling
person, if a copy of the Final Prospectus furnished by the Company to the Holder
for delivery was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act and the Final Prospectus would have cured the defect
giving rise to such loss, liability, claim or damage.
(b) Each Holder will severally, if Registrable Securities held
by such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter of the Registrable Securities and
each person who controls the Company within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened (subject to Subsection 12.7(c) below),
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus or offering
circular, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, and will reimburse the Company, such
directors and officers, each underwriter of the Registrable Securities and each
person controlling the Company for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Holder and stated to
be specifically for use in preparation of such registration statement,
prospectus or offering circular; provided that the indemnity shall not apply to
the extent that such claim, loss, damage or liability results from the fact that
a current copy of the prospectus was not made available to the Holder and such
current copy of the prospectus would have cured the defect giving rise to such
loss, claim, damage or liability. Notwithstanding the foregoing, in no event
shall a Holder be liable for any such claims, losses, damages or liabilities in
excess of the proceeds received by such Holder in the offering, except in the
event of fraud by such Holder.
(c) Each party entitled to indemnification under this Section
12.7 (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such Indemnified Party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement, unless
such failure is materially prejudicial to the Indemnifying Party in defending
such claim or litigation. An Indemnifying Party shall not be liable for any
settlement of an action or claim effected without its written consent (which
consent will not be unreasonably withheld).
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(d) If the indemnification provided for in this Section 12.7
is held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
12.8. (a) Each Holder agrees that, upon receipt of any notice
from the Company of the happening of any event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable Securities so
that, as thereafter delivered to the Holders, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, each Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement contemplated by Section 12.2
until its receipt of copies of the supplemented or amended prospectus from the
Company and, if so directed by the Company, each Holder shall deliver to the
Company all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.
(b) As a condition to the inclusion of its Registrable
Securities, each Holder shall furnish to the Company such information regarding
such Holder and the distribution proposed by such Holder as the Company may
request in writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article 12.
(c) Each Holder hereby covenants with the Company (i) not to
make any sale of the Registrable Securities without effectively causing the
prospectus delivery requirements under the Securities Act to be satisfied, and
(ii) if such Registrable Securities are to be sold by any method or in any
transaction other than on a national securities exchange, the Nasdaq National
Market, Nasdaq SmallCap Market or in the over-the-counter market, in privately
negotiated transactions, or in a combination of such methods, to notify the
Company at least five (5) business days prior to the date on which the Holder
first offers to sell any such Registrable Securities.
(d) Each Holder acknowledges and agrees that the Registrable
Securities sold pursuant to the Registration Statement described in this Article
12 are not transferable on the books of the Company unless the stock certificate
submitted to the transfer agent evidencing such Registrable Securities is
accompanied by a certificate reasonably satisfactory to the Company to the
effect that (i) the Registrable Securities have been sold in accordance with
such
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Registration Statement and (ii) the requirement of delivering a current
prospectus has been satisfied.
(e) Each Holder shall not take any action with respect to any
distribution deemed to be made pursuant to such registration statement, which
would constitute a violation of Regulation M under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") or any other applicable rule,
regulation or law.
(f) At the end of the Registration Period, the Holders of
Registrable Securities included in the Registration Statement shall discontinue
sales of shares pursuant to such Registration Statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such Registration Statement which remain unsold, and such Holders shall
notify the Company of the number of shares registered which remain unsold
immediately upon receipt of such notice from the Company.
12.9. With a view to making available to the Holders the
benefits of certain rules and regulations of the Securities and Exchange
Commission which at any time permit the sale of the Registrable Securities to
the public without registration, the Company shall use its reasonable best
efforts:
(a) to make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times;
(b) to file with the Securities and Exchange Commission in a
timely manner all reports and other documents required of the Company under the
Exchange Act; and
(c) so long as a Holder owns any unregistered Registrable
Securities, to furnish to such Holder upon any reasonable request a written
statement by the Company as to its compliance with Rule 144 under the Securities
Act, and of the Exchange Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents of the Company as
such Holder may reasonably request in availing itself of any rule or regulation
of the Securities and Exchange Commission allowing a Holder to sell any such
securities without registration.
12.10. The rights to cause the Company to register Registrable
Securities granted to the Holders by the Company under Section 12.2 may be
assigned in full by a Holder in connection with a transfer by such Holder of its
Registrable Securities, provided that (i) such transfer may otherwise be
effected in accordance with applicable securities laws; (ii) such transfer
involves not fewer than the fewer of all or 20,000 shares of such Holder's
Registrable Securities, (iii) such Holder gives prior written notice to the
Company; and (iv) such transferee agrees to comply with the terms and provisions
of this Agreement, and such transfer is otherwise in compliance with this
Agreement. Except as specifically permitted by this Section 12.10, the rights of
a Holder with respect to Registrable Securities as set out herein shall not be
transferable to any other Person, and any attempted transfer shall cause all
rights of such Holder therein to be forfeited.
12.11. With the written consent of the Company and the Secured
Party, any provision of this Article 12 may be waived (either
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generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely) or amended. Upon the
effectuation of each such waiver or amendment, the Company shall promptly give
written notice thereof to the Holders, if any, who have not previously received
notice thereof.
13. Miscellaneous.
13.1. Amendments and Waivers. (a) This Agreement and all
exhibits and schedules hereto set forth the entire agreement and understanding
among the parties as to the subject matter hereof and merges and supersedes all
prior discussions, agreements and understandings of any and every nature among
them. This Agreement may be amended only by mutual written agreement of the
Company and the Secured Party, and the Company may take any action herein
prohibited or omit to take any action herein required to be performed by it, and
any breach of any covenant, agreement, warranty or representation may be waived,
only if the Company has obtained the written consent or waiver of the Secured
Party. No course of dealing between or among any persons having any interest in
this Agreement will be deemed effective to modify, amend or discharge any part
of this Agreement or any rights or obligations of any person under or by reason
of this Agreement.
(b) After an amendment or waiver becomes effective it shall
bind every holder of a Note regardless of whether such holder held such Note at
the time such amendment or waiver became effective, or subsequently acquired
such Note.
13.2. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Company and its successors and assigns and
Purchasers and their successors and registered assigns. The provisions hereof
which are for Purchasers' benefit as purchasers or holders of the Notes are also
for the benefit of, and enforceable by, any subsequent registered holder of such
Notes.
13.3. Notices. All notices, demands and other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given personally or when
mailed by certified or registered mail, return receipt requested and postage
prepaid, and addressed to the addresses of the respective parties set forth
below or to such changed addresses as such parties may have fixed by notice;
provided, however, that any notice of change of address shall be effective only
upon receipt:
If to the Company:
Hybridon, Inc.
155 Fortune Boulevard
Milford, MA 01757
Attn: E. Andrews Grinstead, III
If to Secured Party or Purchasers:
c/o Pillar
28 Avenue de Messine
75008 Paris, France; and
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c/o Pecks Management
1 Rockefeller Plaza, Suite 900
Attn: Art Berry
New York, NY 10020; and
c/o Forum Capital Markets
53 Forest Avenue
Old Greenwich, CT 06870
Attn: Hal Purkey
13.4. Governing Law. The validity, performance, construction
and effect of this Agreement shall be governed by the internal laws of the State
of Massachusetts without giving effect to such State's principles of conflict of
laws.
13.5. Counterparts. This Agreement may be executed in any
number of counterparts and, notwithstanding that any of the parties did not
execute the same counterpart, each of such counterparts (or facsimile copies
thereof) shall, for all purposes, be deemed an original, and all such
counterparts shall constitute one and the same instrument binding on all of the
parties hereto. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be as effective as delivery of a manually executed
counterpart of a signature page of this Agreement.
13.6. Headings. The headings of the Sections hereof are
inserted as a matter of convenience and for reference only and in no way define,
limit or describe the scope of this Agreement or the meaning of any provision
hereof.
13.7. Severability. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall not be affected except to the extent necessary
to delete such illegal, invalid or unenforceable provision unless the provision
held invalid shall substantially impair the benefit of the remaining portion of
this Agreement.
13.8. Exculpation Among Purchasers. Each Purchaser
acknowledges and agrees that it is not relying upon any other Purchaser, or any
officer, director, employee partner or affiliate of any such other Purchaser, in
making its investment or decision to invest in the Company or in monitoring such
investment. Each Purchaser agrees that no Purchaser nor any controlling person,
officer, director, stockholder, partner, agent or employee of any Purchaser
shall be liable for any action heretofore or hereafter taken or omitted to be
taken by any of them relating to or in connection with the Company or the
securities, or both.
13.9. Actions by Purchasers. Any actions permitted to be taken
by the Secured Party and any consents required to be obtained from the same
under this Agreement, may be taken or given only by the Secured Party and if the
Secured Party takes any action or grants any consent, such action or consent
shall be deemed given or taken by all holders or Purchasers' who
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shall be bound by the decision or action taken by the Secured Party without any
liability on the part of the Secured Party to any holder or Purchasers of
securities hereunder.
13.10. Additional Purchasers. Upon the execution and delivery
by any Person of this Agreement after the date hereof with the written consent
of the Company, such Person shall be referred to as an Additional Purchaser and
shall become a Purchaser, and each reference in this Agreement to "Purchaser"
shall also mean and be a reference to such Additional Purchaser.
14. Confidential Investor Questionnaire.
14.1. Each Purchaser represents and warrants that he, she or
it comes within one of category A through H below. ALL INFORMATION IN RESPONSE
TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned agrees to
furnish any additional information which the Company deems necessary in order to
verify the answers set forth below.
Category A: The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or joint
net worth with his or her spouse, presently exceeds
$1,000,000.
Explanation. In calculating net worth you
may include equity in personal property and
real estate, including your principal
residence, cash, short-term investments,
stock and securities. Equity in personal
property and real estate should be based on
the fair market value of such property less
debt secured by such property.
Category B: The undersigned is an individual (not a partnership,
corporation, etc.) who had an individual income in
excess of $200,000 in each of the two most recent
years, or joint income with his or her spouse in excess
of $300,000 in each of those years (in each case
including foreign income, tax exempt income and full
amount of capital gains and losses but excluding any
income of other family members and any unrealized
capital appreciation) and has a reasonable expectation
of reaching the same income level in the current year.
Category C: The undersigned is a director or executive officer of
the Company which is issuing and selling the Notes.
Category D: The undersigned is a bank; a savings and loan
association; insurance company; registered investment
company; registered business development company;
licensed small business investment company ("SBIC"); or
employee benefit plan within the meaning of Title 1 of
ERISA and (a) the investment decision is made by a plan
fiduciary which is either a bank, savings and loan
association, insurance company or registered investment
advisor, or (b) the plan has total assets in excess of
$5,000,000 or is a self directed plan with investment
decisions made solely by persons that are accredited
investors.
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Category E: The undersigned is a private business development
company as defined in section 202(a)(22) of the
Investment Advisors Act of 1940.
Category F: The undersigned is either a corporation,
partnership, Massachusetts business trust, or
non-profit organization within the meaning of Section
501(c)(3) of the Internal Revenue Code, in each case
not formed for the specific purpose of acquiring the
Notes and with total assets in excess of $5,000,000.
Category G: The undersigned is a trust with total assets in
excess of $5,000,000, not formed for the specific
purpose of acquiring the Notes, where the purchase is
directed by a "sophisticated person" as defined in
Regulation 506(b)(2)(ii) under the Securities Act.
Category H: The undersigned is an entity (other than a trust)
all the equity owners of which are "accredited
investors" within one or more of the above categories.
If relying upon this Category alone, each equity owner
must complete a separate copy of this Agreement.
The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Final Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.
14.2. Manner in Which Title Is To Be Held. (circle one)
(a) Individual Ownership
(b) Community Property
(c) Joint Tenant with Right of
Survivorship (both parties
must sign)
(d) Partnership*
(e) Tenants in Common
(f) Company*
(g) Trust*
(h) Other
*If Notes are being subscribed for by an entity, the attached
Certificate of Signatory must also be completed.
14.3. NASD Affiliation.
Are you affiliated or associated with an NASD member firm (please check one):
Yes _________ No __________
If Yes, please describe:
_______________________________________________
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<PAGE>
_______________________________________________
_______________________________________________
*If Purchaser is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:
The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.
__________________________________
Name of NASD Member Firm
By: ______________________________
Authorized Officer
Date: ____________________________
14.4. Reliance on Confidential Investor Questionnaire. The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained in this Article 14 and such answers have been provided under the
assumption that the Company will rely on them.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year indicated.
[Signature Page for each Purchaser]
$_____________ principal amount of Notes, at face value, for an aggregate of
$___________ (the "Purchase Price")
By its execution and delivery of this signature page, the undersigned Purchaser
hereby joins in and agrees to be bound by the terms and conditions of the
Subscription Agreement (the "Purchase Agreement") by and among Hybridon, Inc.
(the "Company") and the Purchasers (as defined therein), as to the aggregate
principal amount of Notes set forth above and authorizes this signature page to
be attached to the Purchase Agreement or counterparts thereof.
- -------------------------------- ---------------------------------
Signature Signature (if purchasing jointly)
- -------------------------------- ---------------------------------
Name Typed or Printed Name Typed or Printed
- -------------------------------- ---------------------------------
Entity Name Entity Name
- -------------------------------- ---------------------------------
Address Address
- -------------------------------- ---------------------------------
City, State and Zip Code City, State and Zip Code
- -------------------------------- ---------------------------------
Telephone-Business Telephone--Business
- -------------------------------- ---------------------------------
Telephone-Residence Telephone--Residence
- -------------------------------- ---------------------------------
Facsimile-Business Facsimile--Business
- -------------------------------- ---------------------------------
Facsimile-Residence Facsimile--Residence
- -------------------------------- ---------------------------------
Tax ID # or Social Security # Tax ID # or Social Security #
Dated: ___________ _____, ___
This Agreement is agreed to and accepted as of
___________________, ____.
HYBRIDON, INC.
By:__________________________
Name:
Title:
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CERTIFICATE OF SIGNATORY
(To be completed if Notes are
being subscribed for by an entity)
I, ___________________, am the ________________ (the
"Entity"). I certify that I am empowered and duly authorized by the Entity to
execute and carry out the terms of the Subscription Agreement, dated as of , and
to purchase and hold the Notes, and certify further that the Subscription
Agreement has been duly and validly executed on behalf of the Entity and
constitutes a legal and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand this ____ day of
_________________, ____.
______________________________
(Signature)
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 15, 2000
