UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
For annual and transitional reports pursuant to sections 13 or 15(d)
of the Securities Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-27352
HYBRIDON, INC.
(Exact name of Registrant as specified
in its certificate of incorporation)
Delaware 04-3072298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
155 Fortune Blvd
Milford, Massachusetts 01757
(Address of principal executive offices) (Zip Code)
(508) 482-7500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, $.001 par value
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant was $24,606,458 as of March 31, 2000. For
purposes of determining this number, 6,228,916 shares of common stock held by
affiliates are excluded.
As of March 31, 2000, the registrant had 16,323,873 shares of Common Stock
outstanding.
Documents Incorporated by Reference
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
For each member of the Board of Directors, including those who are
nominees for election as Class II Directors, there follows information given by
each concerning his name, age (as of March 31, 2000), length of service as a
director of the Company, principal occupation and business experience for at
least the past five years and the names of other publicly held companies of
which he serves as a director.
Name Age Since Position
- ---- --- ----- --------
Directors Whose Terms Expire in 2002 (Class I
Directors)
Arthur W. Berry...................... 58 1998 Director
Nasser Menhall....................... 44 1992 Director
C. Keith Hartley(1).................. 57 2000 Director
Nominees for Terms Expiring in 2003 (Class II
Directors)
Camille Chebeir...................... 61 1999 Director
James B. Wyngaarden, M.D. ........... 75 1990 Chairman of the Board
of Directors
Paul C. Zamecnik, M.D. .............. 87 1990 Director
Directors Whose Terms Expire in 2001 (Class III
Directors)
Sudhir Agrawal, D. Phil.......ad, III 46 1993 President and Acting
Chief Executive Officer,
Senior Vice President of
Discovery, Chief
Scientific Officer, and
Director
Youssef El-Zein ....................d 51 1992 Director
E. Andrews Grinstead, III ..........d 54 1991 Director and Chief
Executive Officer
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 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.
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.
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.
2
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.
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. Grinstead
had been replaced as President. 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.
C. Keith Hartley was appointed member of the Board of Directors of
Hybridon in 2000. Mr. Hartley has been Managing Partner of Forum Capital Markets
LLC since August, 1995. Effective January 1, 1998, Forum Capital Markets L.P.
converted from a limited partnership into a limited liability corporation. Mr.
Hartley was an independent financial consultant from May, 1991 to August, 1995.
Mr. Hartley also serves as a Director of Comdisco, Inc., Swisher International
Group, Inc. and U.S. Diagnostics, 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 Investment Limited, a private investment and management
consulting firm, since 1990; and President of Biomedical Associates, a private
investment firm, since 1990.
James B. Wyngaarden was appointed member of the Board of Directors of
Hybridon in 1990, was Vice Chairman of the Board of Directors from February 1997
to February 2000 at which time he was appointed Chairman of the Board of
Directors. 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 also a member of the board of directors of Human Genome Sciences,
Inc. and Magainin Pharmaceuticals, Inc.
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.
Hybridon's restated certificate of incorporation provides for a
staggered Board of Directors consisting of three classes, with each class having
approximately the same number of members. 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
directors in each class, as indicated 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.
For information relating to shares of Common Stock owned by each of the
directors, see Item 12 - "Security Ownership of Certain Beneficial Owners and
Management."
(1) Mr. Hartley replaced Mr. Harold L. Purkey as a director on May 12, 2000.
3
Executive Officers
The following table sets forth certain information regarding the
executive officers of Hybridon as of March 31, 2000.
Name Age Position
- ---- --- --------
E. Andrews Grinstead, III................. 54 Director and Chief
Executive Officer
Sudhir Agrawal, D. Phil................... 46 President and Acting
Chief Executive Officer,
Senior Vice
President of Discovery,
Chief Scientific Officer,
and Director
Robert G. Andersen........................ 49 Vice President of
Operations and Planning
and Chief Financial Officer
Robert G. Andersen joined Hybridon in November 1996 and served as Vice
President of Systems Engineering and Management Information Systems prior to
being appointed Vice President of Operations and Planning in 1997, Treasurer in
March 1998, and Chief Financial Officer of Hybridon in February 2000. Prior to
joining Hybridon, Mr. Andersen served in a variety of positions at Digital
Equipment Corporation, a computer company, from 1986 to 1996, most recently as
Group Manager of the Applied Objects Business Unit. From 1978 to 1986, Mr.
Andersen served in a variety of positions at United Technologies Corporation, an
aviation technology company, most recently as Director of Quality for Otis
Elevator Company's European Operations. Mr. Andersen received his B.E.E. in
Electrical Engineering from The City College of New York in 1972 and an M.S. in
Management from Northeastern University in 1978. He is also a graduate of the
United Technologies Advanced Studies Program.
ITEM 11..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:
4
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION
--------------------------------------- -----------------------
OTHER
ANNUAL SECURITIES
NAME AND PRINCIPAL COMPEN- UNDERLYING ALL OTHER
POSITION SALARY BONUS SATION OPTIONS COMPENSATION
- -------- ------ ----- ------ ---------- ------------
E. Andrews Grinstead, III........1999 $375,000 0 $ 93,750(1) 1,763,319(2) $ 42,548(3)
Chief Executive Officer 1998 $375,000 0 $ 93,750(1) 500,000 $ 44,832(3)
and Director 1997 $375,000 0 $ 93,750(1) 66,806 $ 53,784(3)
Sudhir Agrawal, D. Phil..........1999 $250,000 0 $50,000(1) 1,618,263(2) $ 25,962(3)
President and Acting Chief 1998 $250,000 0 $50,000(1) 500,000 $ 22,115(3)
Executive Officer, Senior 1997 $250,000 0 $50,000(1) 32,263 $ 13,462(3)
Vice President of Discovery,
Chief Scientific Officer and
Director
- ----------------
(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 13,847 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) 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."
(3) 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
======= ======= =======
5
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
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENTAGE ANNUAL RATES OF STOCK PRICE
NUMBER OF OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS EXERCISE OPTIONS TERM(2)
UNDERLYING GRANTED TO PRICE
OPTIONS EMPLOYEES PER EXPIRATION
GRANTED IN FISCAL YEAR SHARE DATE(1) 5% 10%
------- -------------- ------- ---------- --- ----
E. Andrews Grinstead, III
01/01/99 grant 500,000 7.7% $2.00 01/01/09 $323,477 $1,107,416
09/23/99 repricings 1,263,319 19.4% $0.50 Various $ 79,821 $ 423,299
---------
Total granted or repriced
in 1999 1,763,319
Less duplication for
options granted and repriced (500,000)
in 1999 ---------
Total options outstanding 1,263,319(3)
at 12/31/99 =========
Sudhir Agrawal, D.Phil.
01/01/99 grant 500,000 7.7% $2.00 01/01/09 $323,477 $1,107,416
09/23/99 repricings 1,118,263 17.2% $0.50 Various $ 82,267 $ 405,914
---------
Total granted or repriced
in 1999 1,618,263
Less duplication for options
granted and repriced (500,000)
in 1999 ---------
Total options outstanding at
12/31/99 1,118,263(3)
=========
- ---------------
(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 appreciation 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 May 9, 2000, the last sale
price of common stock of Hybridon was $1.50.
(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.
6
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:
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
Hybridon directors who are not full-time employees of the Company, i.e.
outside directors, are paid $1,500 for personal or telephonic attendance at
Board of Directors and committee meetings. Inside 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 October 1995, Hybridon adopted the 1995 Director Stock Option Plan
(the "Director Plan") which provides for the issuance of up to 400,000 shares of
common stock after giving effect to a 350,000 share increase approved by
stockholders at the Annual Meeting held on June 8, 1999 (the "1999 Annual
Meeting"). Only outside directors are eligible to receive options under the
Director Plan. Accordingly, Mr. Grinstead and Dr. Agrawal have not been granted
stock options under this plan.
The Director Plan provides that options to purchase 5,000 shares of
common stock will be granted to each new outside director upon his or her
initial election to the Board of Directors and for automatic annual grants to
each outside director of an option to purchase 5,000 shares of the Company's
common stock at the stock's closing price on the date of grant. As a result of
the one-for-five reverse stock split effected in December 1997, the number of
options to purchase the Company's common stock granted to each outside director
was adjusted so that each outside director received options to purchase 1,000
shares of common stock at the time of their initial election to the Board or on
their anniversary dates in 1998 and 1999 instead of the 5,000 per year provided
for in the Director Plan. At the 1999 Annual Meeting, stockholders approved a
one-time grant of options to purchase 8,000 shares of the Company's common stock
(which, in addition to the options to purchase 1,000 shares previously granted
in each of 1998 and 1999, as described above, gave each outside director options
to purchase a total of 10,000 shares, or 5,000 for each of 1998 and 1999, of the
Company's common stock).
Stockholders also approved an amendment to the Director Plan that
clarifies that options to purchase 5,000 shares of Common Stock be granted to
each outside director annually and upon appointment to the Board. Accordingly,
annual
7
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.
As of March 31, 2000, options to purchase an aggregate of 80,000 shares
of common stock were outstanding under the Director Plan. As described below,
some outside directors have also received options to purchase Hybridon common
stock under the Company's 1997 Stock Incentive Plan and 1995 Stock Option Plan.
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,
the agreements provide that they each of these directors will receive a
consulting fee of $1,500 per day for on-site consulting services that 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 he resigned from the Board of Directors in February 2000.
Hybridon is also a party to other consulting, advisory and other
arrangements with various directors and their affiliates. For a description of
these arrangements and certain other transactions between Hybridon and
affiliates of certain directors, see "Certain Transactions."
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 (a) a cash bonus each year
related to the attainment of management objectives specified by the Board of
Directors and (b) 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. In the case of
disability, employment can be terminated thirty days after ninety days of
disability, at which time he receives a prorated amount of bonus and salary
received up the time of termination. After such termination, Mr. Grinstead shall
receive long term disability.
On February 15, 2000, Hybridon announced that on January 1, 2000, Mr.
Grinstead had taken an unexpected medical leave of absence of indefinite
duration due to a serious illness. As of May 15, 2000, Mr. Grinstead's
employment status with Hybridon was under review by the Board of Directors.
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 in February 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
8
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 the following terms:
o 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
o 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. 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, 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 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. Mr. H.F.
Powell was also a member of the Compensation Committee during 1999. Mr. El-Zein
and Dr. Wyngaarden were elected Vice Chairmen of the Board in February 1997. Dr.
Wyngaarden became Chairman in February, 2000. 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 the following:
o Pillar S.A., and affiliate, entities of which Messrs. El-Zein and
Menhall are affiliates
o entities advised by Pecks, an entity of which Mr. Berry is a principal
o Forum, an entity of which Messrs. Hartley and Purkey are affiliates
o each of Drs. Wyngaarden and Zamecnik and Mr. Powell
For further details of these transactions, see "Certain Transactions" in Item 13
and "Director Compensation" in Item 11.
9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 2000
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.
Amount and Nature
of Beneficial Ownership(1)
Name and Address of Number of Percent of
Beneficial Owner Shares Class
5% STOCKHOLDERS
Pecks Management Partners Ltd............... 8,001,139(2) 32.89%
One Rockefeller Plaza
New York, New York 10022
Forum Capital Markets LLC................... 6,083,394(3) 28.15%
53 Forest Ave.
Old Greenwich, CT 06870
Michael A. Boyd............................. 6,083,394(4) 28.15%
c/o Forum Capital Markets LLC
53 Forest Ave.
Old Greenwich, CT 06870
General Motors Employees.................... 3,832,220(5) 19.01%
Domestic Group Trust
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10020
Guardian Life Insurance..................... 3,255,110(6) 16.63%
Company of America
201 Park Avenue South, 7A
New York, New York 10003
10
Amount and Nature
of Beneficial Ownership(1)
Name and Address of Number of Percent of
Beneficial Owner Shares Class
- ---------------- ------ -----
Delaware State Employees....................
Retirement Fund 2,549,934(7) 13.51%
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10020
Yahia M. A. Bin Laden....................... 2,373,977(8) 13.52%
2 rue Charles Bonnet
1206 Geneva, Switzerland
Nicris Limited.............................. 2,360,644(9) 13.44%
c/o Magnin Dunand & Associates
2 rue Charles Bonnet
1206 Geneva, Switzerland
Intercity Holdings Ltd...................... 2,216,666(10) 13.27%
C/o Cuson Milner House
18 Parliament Street
Hamilton, Bermuda
Abdelah Bin Mahfouz......................... 2,216,666(11) 13.27%
c/o SEDCO
P.O. Box 4384
Jeddah 21491
Saudi Arabia
Darrier Hentsch & Cie....................... 1,317,755(12) 7.69%
4, rue de Saussure
1204 Geneva, Switzerland
Lincoln National Life Insurance Co.......... 1,279,717(13) 7.27%
c/o Lynch & Mayer
520 Madison Avenue
New York, New York 10022
Faisal Finance Switzerland SA............... 1,043,112(14) 6.30%
84 Ave Louis Casi
1216 Geneva, Switzerland
Mohamed A. El-Khereiji 1,029,825(15) 6.06%
P.O. Box 8632
Jeddah 21492
Saudi Arabia
11
Amount and Nature
of Beneficial Ownership(1)
Name and Address of Number of Percent of
Beneficial Owner Shares Class
- ---------------- ------ -----
Finova Technology Finance Inc. ............. 896,875(16) 5.41%
10 Waterside Drive
Farmington, CT 06032
Declaration of Trust for the................ 924,456(17) 5.36%
Defined Benefit Plan of ICI
American Holdings, Inc.
c/o Pecks Management Partners Ltd.
One Rockefeller Plaza
New York, New York 10022
(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 March 31, 2000, 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 240,342 shares of Series A preferred stock owned by investment
advisory clients of Pecks, which clients would receive dividends and
the proceeds from the sale of such shares. Three of these clients are
General Motors Employees Domestic Group Trust, 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 5,655,106 shares of common stock of Hybridon. This
amount also includes a total of 701,678 shares issuable upon the
exercise of Class A warrants and a total of 394,355 shares issuable
upon the exercise of Class D warrants held by the foregoing entities.
This number also includes 1,250,000 shares issuable upon conversion of
a portion of the $6,000,000 bank loan to Hybridon owned by the
foregoing entities.
(3) Forum Capital Markets LLC holdings includes:
o 328,677 shares issuable upon exercise of Class B warrants
o 280,517 shares issuable upon the exercise of Class C warrants
o 468,859 shares issuable upon exercise of Class A warrants
o 25,812 shares issuable upon the exercise of Class D warrants
o 761,568 shares issuable upon exercise of other warrants
o 1,250,000 shares issuable upon conversion of Forum's portion of the
$6,000,000 bank loan to Hybridon,
o 1,755,035 shares issuable upon conversion of 74,589 shares of
Series A preferred stock owned by Forum and
o 416,667 shares issuable upon conversion of $250,000 in convertible
debt.
12
(4 ) Includes the following owned by Forum Capital Markets LLC:
o 796,259 shares of common stock
o 328,677 shares issuable upon exercise of Class B warrants
o 280,517 shares issuable upon the exercise of Class C warrants
o 468,859 shares issuable upon exercise of Class A warrants
o 25,812 shares issuable upon the exercise of Class D warrants
o 761,568 shares issuable upon exercise of other warrants
o 1,250,000 shares issuable upon conversion of Forum's portion of the
$6,000,000 bank loan to Hybridon
o 1,755,035 shares issuable upon conversion of 74,589 shares of
Series A preferred stock owned by Forum and
o 416,667 shares issuable upon conversion of $250,000 in convertible
debt.
Mr. Boyd is the sole director and shareholder of Michael A. Boyd, Inc.
which is the general partner of Founders Financial Group, L.P. which
owns a controlling interest of Forum Capital Markets LLC. Hence, Mr.
Boyd controls Forum Capital Markets LLC and may be considered a
beneficial owner of the shares beneficially owned by such entity.
(5) Includes 117,887 shares of Series A preferred stock which are
convertible into 2,773,812 shares of Hybridon common stock. 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.
(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 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, 270,272 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.
(8) 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
and 1,000,000 shares issuable upon the conversion of 600,000 in
convertible debt owed to Nicris Limited. Mr. Bin Laden, a controlling
stockholder of Nicris, may be considered a beneficial owner of the
shares beneficially owned by such entity.
(9) Includes 234,764 shares issuable upon the exercise of Class B warrants
held by Nicris Limited and 1,000,000 shares issuable upon the
conversion of 600,000 in convertible debt owed to Nicris Limited.
(10) Includes 375,000 shares issuable upon the exercise of Class B warrants
held by Intercity Holdings Ltd.
(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. Bin Mahfouz, a controlling stockholder of Intercity
Holdings Ltd., may be considered a beneficial owner of the shares
beneficially owned by such entity.
(12) 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.
(13) 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.
13
(14) Includes 233,026 shares issuable upon the exercise of Class B warrants
held by Faisal Finance Switzerland SA.
(15) Includes 228,345 shares beneficially owned by Solter Corporation;
45,242 shares issuable upon the exercise of warrants held by Solter
Corporation; 250,000 shares issuable upon the conversion of $150,000 in
convertible debt owed to Solter Corporation; 217,282 shares issuable
upon the exercise of warrants held by Mr. El-Khereiji; 9,000 shares
issuable upon the exercise of stock options held by Mr. El-Khereiji;
67,500 shares issuable upon the conversion of $40,500 in convertible
debt to be issued to Mr. El-Khereiji; and 75,000 shares issuable upon
the conversion of $45,000 in convertible debt that Mr. El-Khereiji has
the right to acquire upon exercise of warrants. Mr. El-Khereiji, an
affiliate of Solter Corporation, may be considered a beneficial owner
of the shares beneficially owned by such entity.
(16) Includes 259,375 shares issuable upon the exercise of Class C warrants
held by Finova Technology Finance Inc
(17) 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 March 31,
2000, with respect to the beneficial ownership of shares of common stock and
Series A preferred stock by the directors of Hybridon, the Chief Executive
Officer and other Named Executive Officers, and 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.
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
Arthur W. Berry....................... 8,336,472(2) 33.81% 240,342(3) 36.44%
Harold L. Purkey**.................... 6,252,061(4) 28.71% 74,589(5) 11.31%
Youssef El-Zein....................... 657,353(6) 3.89% 0 0
Nasser Menhall........................ 205,334(7) 1.24% 0 0
E. Andrews Grinstead, III ............ 3,414,204(8) 17.34% 0 0
Sudhir Agrawal........................ 794,714(9) 4.65% 0 0
Paul Z. Zamecnik...................... 445,163(10) 2.70% 0 0
James B. Wyngaarden................... 143,100(11) * 0 0
Camille A. Chebeir.................... 26,000 (12) * 0 0
All directors and executive officers as
a group (9 persons)................... 20,271,300(13) 57.55% 314,931 47.75%
* Less than 1%
** Replaced by Mr. C. Keith Hartley on May 12, 2000.
(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 shared voting power or
investment power and also any shares which the individual has the right
to acquire within 60 days after March 31, 2000 through the exercise of
any stock option or other right. The inclusion herein of such shares,
14
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 240,342 shares of Series A preferred stock owned by investment
advisory clients of Pecks, which clients would receive dividends and
the proceeds from the sale of such shares. Three of these clients are
General Motors Employees Domestic Group Trust, 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 5,655,106 shares of common stock of Hybridon. This
amount also includes a total of 701,678 shares issuable upon the
exercise of Class A warrants and a total of 394,355 shares issuable
upon the exercise of Class D warrants held by the foregoing entities.
This number also includes 1,250,000 shares issuable upon conversion of
a portion of the $6,000,000 bank loan to Hybridon owned by 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 240,342 shares of Series A preferred stock owned by 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) Harold L. Purkey's holdings include the following:
o 796,259 shares of common stock owned by Forum Capital Markets LLC
o 328,677 shares issuable upon the exercise of Class B warrants owned by Forum
o 280,517 shares issuable upon the exercise of Class C warrants owned by Forum
o 468,859 shares issuable upon the exercise of Class A warrants owned by Forum
o 25,812 shares issuable upon the exercise of Class D warrants owned by Forum
o 761,568 shares issuable upon the exercise of other warrants held by Forum
o 1,250,000 shares issuable upon conversion of Forum's portion of the
$6,000,000 bank loan to Hybridon
o 1,755,035 shares issuable upon conversion of 74,589 shares of Series A
preferred stock owned by Forum, and
o 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) Youssef El-Zein's holdings include:
o 343,959 shares issuable upon the exercise of warrants held by Mr. El-Zein
o 3,101 shares issuable upon the exercise of warrants held by Pillar
Investment Limited
o 10,000 shares issuable upon the exercise of stock options held by Mr.
El-Zein
o 48,032 shares issuable upon the conversion of $28,819 in convertible debt to
be issued to Mr. El-Zein
15
o 149,572 shares issuable upon the conversion of $89,743 in convertible debt
that Mr. El-Zein has the right to acquire upon exercise of warrants
Mr. El-Zein, an affiliate of Pillar Investment Limited, may be considered a
beneficial owner of the shares beneficially owned by such entity.
(7) Nasser Menhall's holdings include the following:
o 109,774 shares issuable upon the exercise of warrants held by Mr. Menhall
o 3,101 shares issuable upon the exercise of warrants held by Pillar
Investment Limited
o 10,000 shares issuable upon the exercise of stock options held by Mr.
Menhall
o 26,862 shares issuable upon the conversion of $16,117 in convertible debt to
be issued to Mr. Menhall
o 21,367 shares issuable upon the conversion of $12,820 in convertible debt
that Mr. Menhall has the right to acquire upon exercise of warrants
Mr. Menhall, an affiliate of Pillar Investment Limited, may be considered a
beneficial owner of the shares beneficially owned by such entity.
(8) Includes 799,957 shares subject to outstanding stock options which are
exercisable within the 60-day period following March 31,2000 as well as
2,566,667 shares issuable upon the conversion of $1,540,000 in
convertible debt owned by Mr. Grinstead.
(9) Includes 776,954 shares subject to outstanding stock options which are
exercisable within the 60-day period following March 31, 2000.
(10) Paul Zamecnik's holdings include the following:
o 109,200 shares subject to outstanding stock options which are
exercisable within the 60-day period following March 31, 2000
o 31,250 shares issuable upon the exercise of Class C warrants
o 43,333 shares issuable upon the conversion of $26,000 in
convertible debt owned by Dr. Zamecnik
(11) Includes 138,000 shares subject to outstanding stock options which are
exercisable within the 60-day period following March 31, 2000 and 700
shares held by Mr. Wyngaarden's children.
(12) Includes 1,000 shares subject to outstanding stock options which are
exercisable within the 60-day period following March 31, 2000.
(13) Securities owned by Pillar Investment Limited are included only once,
although such amounts were included above for both Messrs. El-Zein and
Menhall.
**replaced by Mr. C. Keith Hartley on May 12, 2000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires each director and each executive officer of the
Company and each holder of more than 10% of the outstanding shares of the
Company's Common Stock to file with the Commission an initial statement of
ownership and, as required, a statement of changes in ownership of equity
securities of the Company. Each such person is required by Commission
regulations to furnish the Company with a copy of each Section 16(a) statement
it files with respect to the Company.
16
Based solely on its review of copies of filed Section 16(a) statements, the
Company believes that during 1999 all directors and executive officers of the
Company and all holders of more than 10% of the outstanding shares of Common
Stock complied with the requirements of Section 16(a) of the Exchange Act,
except that each of the following persons failed to timely file (quantity)
Statements of Changes of Beneficial Ownership of Securities on Form 4 in
connection with transactions effected during 1999: Arthur W. Berry (1), Harold
L. Purkey (3), Youssef El-Zein (2), Nasser Menhall (2), E. Andrews Grinstead,
III (3), Sudhir Agrawal (2), Paul Z. Zamecnik (1), James B. Wyngaarden (1),
Camille A. Chebeir (2), H.F. Powell (3), Forum Capital Markets LLC (3), Michael
A. Boyd (3) and Pillar Investment Limited (1).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1999, 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 AFFILIATES
Hybridon has entered into certain transactions with Pillar S.A. and,
its affiliate, Pillar Investment Limited (collectively referred to as "Pillar").
Pillar is an affiliate of Messrs. El-Zein and Menhall, two directors of
Hybridon. Until it distributed substantially all of its holdings in Hybridon in
2000, Pillar beneficially owned over 5% of Hybridon's common stock.
The following is a summary of those transactions that relate to
Hybridon's 1999 fiscal year.
Prior to 1999, Hybridon has been a party to consulting agreements with
Pillar under which Pillar provided Hybridon with financial advisory and
managerial services including assistance with Hybridon's overseas operations, 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.
During 1998, Hybridon retained Pillar 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.
In connection with the 1998 Regulation S offerings, Hybridon and Pillar
entered into an advisory agreement dated May 5, 1998, under which Pillar acted
as Hybridon's non-exclusive financial advisor. This agreement required that
Hybridon pay Pillar a monthly retainer of $5,000, with a minimum engagement of
24 months beginning on May 5, 1998, and further provided that Pillar was
entitled to receive the following:
o out-of-pocket expenses,
o subject to Hybridon's receiving a fairness opinion on such matter, 300,000
shares of common stock in connection with Pillar's efforts in assisting
Hybridon in restructuring its balance sheet,
o certain cash and equity success fees in the event Pillar assisted Hybridon
in connection with certain financial and strategic transactions.
Pillar also received $1,635,400 in cash and warrants to purchase
1,111,630 shares of common stock pursuant to these arrangements. During 1999,
Hybridon issued the 300,000 shares of common stock to Pillar. Hybridon received
a fairness opinion in connection with such issuance.
Pursuant to a 1999 private placement offering, Hybridon sold 8% notes
to certain investors, including some investors that Pillar introduced to
Hybridon. In connection with this offering, and in lieu of any compensation due
under the financial advisory agreement between Hybridon and Pillar, Hybridon
agreed to pay Pillar's reasonable expenses and to issue to Pillar and its
designees additional 8% notes in an aggregate principal amount equal to 9% of
the aggregate principal
17
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 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. Hybridon received a fairness opinion in connection with such issuance.
As of March 31, 2000, Pillar Investment had earned the right to receive $366,685
in 8% notes and warrants to purchase an additional $407,428 in 8% notes.
TRANSACTIONS WITH FORUM CAPITAL MARKETS LLC AND PECKS MANAGEMENT PARTNERS LTD.
In 1998, Hybridon entered into certain transactions with Forum, which
is an affiliate of both Mr. Hartley, who became a director of Hybridon on May
12, 2000, and Mr. Purkey, who, at the time was a director of Hybridon, and
entities advised by Pecks Management Partners Ltd. Mr. Berry, a principal of
Pecks, is a director of Hybridon. One of the transactions was the November 1998
purchase of Hybridon's bank loan by Forum and entities advised by Pecks. 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 during 1999. In addition, Forum received warrants
exercisable until maturity of the Loan to purchase 133,333 shares of common
stock at $3.00 per share.
During 1999, Hybridon maintained an investment account at Forest
Investment Management LLC, an affiliate of Forum and Messrs. Hartley and Purkey.
Also see "1999 Convertible Notes Offering" section which follows:
1999 CONVERTIBLE NOTES OFFERING
Hybridon sold an aggregate of $1,500,000 principal amount of promissory
notes to E. Andrews Grinstead, III, Hybridon's Chief Executive Officer and
Director, at face value during September and November of 1999. These notes
accrued interest at 12% per annum, or at 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, 2000, were
intended to be converted into the debt sold in that financing. These notes,
together with $40,000 in accrued interest, have 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 amounts set forth below:
Nicris Limited (over 5% stockholder & affiliate of
Mr. Bin Ladin) $600,000
Darrier Hentsch & Cie (over 5% stockholder) $400,000
Forum Captial Markets LLC (over 5% stockholder &
affiliate of Messrs. Hartley and Purkey) $250,000
Harold L. Purkey (Former Director) $100,000
Arthur W. Berry (Director) $100,000
H.F. Powell (Former Director) $100,000
Paul Zamecnik (Director) $26,000
Two other principals of Forum Capital Markets LLC each purchased
$100,000 of the 8% notes.
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 8% notes, subject to
certain conditions. Also in connection
18
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.
Additional information on the 1999 Convertible Notes Offering is
included under the caption "Transactions with Pillar S.A. and Affiliates".
Hybridon believes that the terms of the transactions described above
were no less favorable than Hybridon could have obtained from unaffiliated third
parties.
OTHER TRANSACTIONS
Consulting arrangements with each of Mr. Powell, Dr. Zamecnik and Dr.
Wyngaarden are described under the caption "Director Compensation" in Item 11
which is incorporated herein by reference. Hybridon has a note receivable from
Mr. Grinstead which amounted to $270,050, including interest accrued at 6%, at
December 31, 1999.
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.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, on this
15th day of May 2000.
Hybridon, Inc.
/s/ Sudhir Agrawal
--------------------------
Sudhir Agrawal, D. Phil.
President, Director and
Acting Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signatures Titles Date
- ---------- ------ ----
* Chairman of the Board May 15, 2000
- ------------------------ of Directors
James B. Wyngaarden, M.D.
*
- ------------------------ Chief Financial Officer May 15, 2000
Robert G. Andersen and Vice President of
Operations and Planning
*
- ------------------------ Director May 15, 2000
Nasser Menhall
*
- ------------------------ Director May 15, 2000
Paul C. Zamencnik, M.D.
*
- ------------------------ Director May 15, 2000
Youssef El-Zein
*
- ------------------------ Director May 15, 2000
Arthur W. Berry
*
- ------------------------ Director May 15, 2000
Camille Chebeir
*By: /s/ Sudhir Agrawal
------------------
Sudhir Agrawal, D. Phil.
President, Director and Acting Chief Executive Officer
Attorney-in-Fact
20