As filed with the Securities and Exchange Commission on May 3, 1996
Registration No. 333-02253
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________________
NABI
(Exact name of registrant as specified in charter)
DELAWARE 59-1212264
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5800 PARK OF COMMERCE BOULEVARD, N.W.
BOCA RATON, FLORIDA 33487
(407) 989-5800
(Address, including zip code, and telephone number, including
area code of registrant's principal executive offices)
____________
ALFRED J. FERNANDEZ COPIES TO:
SENIOR VICE PRESIDENT AND CONSTANTINE ALEXANDER, ESQUIRE
CHIEF FINANCIAL OFFICER NUTTER, MCCLENNEN & FISH, LLP
NABI ONE INTERNATIONAL PLACE
5800 PARK OF COMMERCE BOULEVARD, N.W. BOSTON, MA 02110-2699
BOCA RATON, FLORIDA 33487 (617) 439-2000
(407) 989-5800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
____________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to time
after the effective date of this Registration Statement, as determined by market
conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If the Form is a post-effective amendment filed pursuant to Rule 426(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. [_]
____________
CALCULATION OF REGISTRATION FEE
=============================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER SHARE/(1)/ OFFERING PRICE/(1)/ FEE
- -------------------------------------------------------------------------------------------------------------
6 1/2% Convertible Sub- $80,500,000 100% $80,500,000 $27,759/(2)/
ordinated Notes due 2003
Shares of Common Stock,
$.10 par value 5,750,000 shares/(3)/ Not applicable/(3)/ Not applicable/(3)/ None/(3)/
=============================================================================================================
/(1)/ Determined pursuant to Rule 457(i) under the Securities Act of 1933, as
amended, solely for the purpose of calculating the registration fee.
/(2)/ Previously paid.
/(3)/ Includes the number of shares of Common Stock required at the initial
conversion price for conversion of the Notes being registered hereunder,
together with such additional indeterminate number of shares as may
become issuable upon conversion by reason of adjustments in the
conversion price. No registration fee is required for Common Stock
reserved for conversion, because such shares will be issued for no
additional consideration.
____________
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
PROSPECTUS
$80,500,000 Aggregate Principal Amount
6 1/2% Convertible Subordinated Notes due 2003
5,750,000 Shares of Common Stock, par value $.10 per share
NABI
This Prospectus relates to the resale of $80,500,000 aggregate principal
amount of 6 1/2% Convertible Subordinated Notes due 2003 (the "Notes") of NABI,
a Delaware corporation (sometimes referred to herein as the "Company"), issued
in private placements consummated on February 7 and March 6, 1996 (the "Debt
Offering"), and the resale of up to 5,750,000 shares of the Common Stock, par
value $.10 per share (the "Common Stock"), of the Company which are initially
issuable upon conversion of Notes by any holders of Notes that did not purchase
the Notes under the Registration Statement (of which this Prospectus is a part).
The Registration Statement (of which this Prospectus is a part) does not cover
the issuance of shares of Common Stock upon conversion of the Notes into shares
of Common Stock. The Notes and such shares of Common Stock issued upon
conversion of the Notes may be offered from time to time for the accounts of
holders of Notes named herein (the "Selling Securityholders"). See "Plan of
Distribution." Information concerning the Selling Securityholders may change
from time to time and will be set forth in Supplements to this Prospectus. The
Company will not receive any proceeds from the offering of the Notes or the
shares of Common Stock issuable upon conversion thereof.
The Notes will mature on February 1, 2003. The Notes are convertible at any
time after May 5, 1996 (60 days following the latest date of original issuance
thereof) and prior to maturity, unless previously redeemed or repurchased, into
Common Stock of NABI, at a conversion price of $14 per share, subject to
adjustment in certain events. See "Description of Notes--Conversion." The
Company's Common Stock is traded on the Nasdaq National Market ("Nasdaq") under
the symbol "NABI." The closing price of the Company's Common Stock as reported
on Nasdaq on April 1, 1996 was $12.56 per share.
Interest on the Notes is payable semi-annually on February 1 and August 1
of each year, commencing August 1, 1996. Prior to February 4, 1999, the Notes
are not redeemable at the option of the Company. Thereafter, the Notes are
redeemable at the option of the Company, in whole or in part, at 100% of the
principal amount thereof plus accrued and unpaid interest. See "Description of
Notes--Optional Redemption by the Company." In the event of a Designated Event
(as defined), each holder may require the Company to repurchase all or a portion
of such holder's Notes at 100% of the principal amount thereof plus accrued and
unpaid interest. See "Description of Notes--Repurchase at Option of Holders
Upon a Designated Event." The Notes will be subordinated to all existing and
future Senior Indebtedness (as defined) of the Company. The Indenture contains
no limitations on the incurrence of additional indebtedness or other liabilities
by the Company. At December 31, 1995, Senior Indebtedness was approximately
$43.0 million. See "Description of Notes."
All of the Notes were issued initially pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) thereof or Regulation D thereunder
and were transferred to the Selling Securityholders pursuant to Rule 144A(d)(4)
and Regulation S under the Securities Act and to institutional accredited
investors pursuant to Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
Notes resold pursuant to the Registration Statement (of which this Prospectus is
a part) will no longer be eligible for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") Market.
The Selling Securityholders, acting as principals for their own account,
directly, through agents designated from time to time, or through brokers,
dealers, agents or underwriters also to be designated, may sell all or a portion
of the Notes or shares of Common Stock which may be offered hereby by them from
time to time on terms to be determined at the time of sale. The aggregate
proceeds to the Selling Securityholders from the sale of Notes and Common Stock
which may be offered hereby by the Selling Securityholders will be the purchase
price of such Notes or Common Stock less commissions, if any. For information
concerning indemnification arrangements between the Company and the Selling
Securityholders, see "Plan of Distribution."
The Selling Securityholders and any brokers, dealers, agents or
underwriters that participate with the Selling Securityholders in the
distribution of the Notes or shares of Common Stock may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions received by such broker-dealers, agents or underwriters and any
profit on the resale of the Notes or shares of Common Stock purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
The Company will not receive any of the proceeds from the sale of the Notes
or Common Stock. The Company has agreed to bear certain expenses in connection
with the registration and sale of the Notes and Common Stock being offered by
the Selling Securityholders.
The Company intends that the Registration Statement of which this
Prospectus is a part will remain effective until March 5, 1999 (three years
after the last date of original issuance of Notes) or such earlier date as of
which such Registration Statement is no longer required for the transfer of the
subject securities.
_________________________
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.
_________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is May 3, 1996.
NO DEALER, SALESPERSON OR ANY OTHER 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 AND REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE
SECURITIES DESCRIBED HEREIN BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. UNDER NO CIRCUMSTANCES SHALL THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE MADE PURSUANT TO THIS PROSPECTUS CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
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TABLE OF CONTENTS
PAGE
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Available Information.................................................... 4
Documents Incorporated by Reference...................................... 4
Prospectus Summary....................................................... 6
Risk Factors............................................................. 10
Ratio of Earnings to Fixed Charges....................................... 23
Use of Proceeds.......................................................... 23
Selling Securityholders.................................................. 23
Plan of Distribution..................................................... 25
Description of Notes..................................................... 26
Description of Capital Stock............................................. 39
Certain Federal Income Tax Considerations................................ 41
Legal Matters............................................................ 44
Experts.................................................................. 44
Interests of Named Experts and Counsel................................... 44
_______________
NABI(R), WinRho SD(TM), H-BIG(R), HIV-IG(TM), HyperGAM+CF(TM),
StaphVAX(TM), StaphGAM(TM), H-BIG IV(TM), CMV NeutraGAM(TM), QS-21 Stimulon(TM),
H-CIG IV(TM), NeoGAM(TM), OmniGam(TM), NorMLCera-Plus(R), QC-HIV(R),
ViroSure(TM) and QC-Hepatitis(TM) are trademarks that are either owned or
licensed by the Company.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports and other information with the United States
Securities and Exchange Commission (the "Commission"). For further information
with respect to the Company, reference is hereby made to such reports and other
information which can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and the
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may also be obtained at prescribed rates from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549.
The Company's Common Stock is listed for trading on Nasdaq under the
trading symbol "NABI." Reports, proxy statements and other information about the
Company also may be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
covering the shares of Common Stock and Notes offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to the
Registration Statement, copies of which may be obtained upon payment of a fee
prescribed by the Commission, or may be examined free of charge at the principal
office of the Commission in Washington, D.C. Statements made in this Prospectus
as to the contents of any contract or other document referred to are not
necessarily complete, and reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The Company hereby incorporates by reference its Annual Report on Form 10-K
for the fiscal year ended December 31, 1995, its Current Report on Form 8-K
dated January 22, 1996 and its Report on Form 10-C dated January 23, 1996.
All reports filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to any
termination of the offering of the shares of Common Stock and the Notes covered
by this Prospectus are deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of filing. Any
statement contained in a document incorporated or deemed to be incorporated by
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reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document that is also incorporated herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Copies of all documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents) will be provided without charge to each person
who receives a copy of this Prospectus on written or oral request to NABI, 5800
Park of Commerce Boulevard, N.W., Boca Raton, Florida 33487, Attention: Investor
Relations, or by telephone at (407) 989-5800.
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PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information, including "Risk Factors,"
appearing elsewhere in this Prospectus or incorporated by reference herein. This
Prospectus contains certain forward-looking statements which involve risks and
uncertainties. The company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
THE COMPANY
NABI is a vertically integrated biopharmaceutical company that supplies
human blood plasma and develops and commercializes therapeutic products for the
prevention and treatment of infectious diseases and immunological disorders.
NABI is one of the world's largest suppliers of source plasma and specialty
plasma which are sold to pharmaceutical and diagnostic companies or used in
NABI's proprietary products. NABI collects plasma from an extensive donor base
through 78 collection centers in the United States and three collection centers
in Germany. NABI also is developing a broad product line that includes two
therapeutic products approved by the United States Food and Drug Administration
(the "FDA") and 12 therapeutic products that are in development, including four
products in clinical trials. NABI has completed construction, and has commenced
validation, of a new biopharmaceutical manufacturing facility designed to
process plasma into NABI's immunotherapeutic products. In addition, NABI
manufactures and markets human blood plasma-based control products and
diagnostic products and provides testing services on plasma and blood samples
supplied by third parties.
NABI historically has derived substantially all of its revenue from the
collection and sale of source and specialty plasma. Source plasma is used by
NABI's customers to manufacture products for the treatment of hemophilia, immune
disorders, shock, trauma, surgery and burns. Specialty plasma contains a rich
mixture of polyclonal antibodies produced by healthy donors naturally or in
response to exposure to a virus or bacteria and is the critical raw material
used by both NABI and its customers to manufacture certain immunotherapeutic
products. In recent years, NABI has increased its collection, processing and
sale of specialty plasma, which sells at higher prices and produces higher
profit margins than source plasma.
NABI is increasing its focus on developing and commercializing
immunotherapeutic products that are produced from specialty plasma. NABI
believes these immunotherapeutic products generally offer a number of clinical
and commercial advantages, including well-documented safety, applicability to a
wide spectrum of infections and conditions, the ability to treat a specific
disease without interfering with the body's immune system and a greater
likelihood of physician and market acceptance. NABI's plasma collection
capabilities provide it with a consistent source of revenues and raw materials
critical for the development and production of its immunotherapeutic products.
NABI believes that its plasma collection capabilities, combined with its broad
research and development and clinical and regulatory capabilities, experienced
sales and marketing organization and new biopharmaceutical
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manufacturing facility, will enable it to become a leader in the development and
marketing of plasma-based immunotherapeutic products. NABI's other
immunotherapeutic products under development are vaccines to be used primarily
as stimulating agents to produce its antibody-based products.
NABI markets and sells H-BIG, a proprietary product which provides passive
immunity to hepatitis B, and WinRho SD, a proprietary product for the treatment
of immune thrombocytopenic purpura ("ITP") and the suppression of Rh
isoimmunization. NABI's extensive development pipeline includes HIV-IG, a
product intended to prevent the transmission of HIV/AIDS from HIV-positive
mothers to their unborn offspring; HyperGAM+CF, a product intended to treat
chronic Pseudomonas infections in cystic fibrosis patients which is being
developed in collaboration with Genzyme Corporation ("Genzyme"); StaphGAM, a
product intended to prevent Staphylococcus aureus infections (staph infections)
in hospital patients; H-BIG IV, a product intended to treat hepatitis B
reinfection in liver transplant patients; and CMV NeutraGAM, a product intended
to treat cytomegalovirus ("CMV") in kidney transplant patients. NABI has an
agreement with Chiron Corporation ("Chiron") pursuant to which Chiron has agreed
to supply to NABI exclusively Chiron's CMV vaccine as an immunizing agent in
humans to produce immunotherapeutic products. NABI also has options or rights of
first negotiation for exclusive rights to 14 other Chiron vaccines for use in
humans to produce immunotherapeutic products and access to Chiron's MF 59 for
donor immunization. The lead product from this collaboration is expected to be
CMV NeutraGAM.
On November 29, 1995, Univax Biologics, Inc. ("Univax"), a publicly-traded
biopharmaceutical company that developed and marketed products for the
prevention and treatment of infectious diseases and their associated
complications through the activation and targeting of the human immune system,
was merged into NABI (the "Merger").
The Company was incorporated in 1969 under the laws of the State of
Delaware. The Company has its executive offices at 5800 Park of Commerce
Boulevard, N.W., Boca Raton, Florida 33487.
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THE OFFERING
Securities Offered.............. $80,500,000 aggregate principal amount of 6
1/2% Convertible Subordinated Notes due 2003
(the "Notes") and/or 5,750,000 shares of
Common Stock, $0.10 par value (the "Common
Stock") issuable upon conversion of the
Notes.
Note Interest Payment Dates..... February 1 and August 1, beginning August 1,
1996.
Maturity of Notes............... February 1, 2003.
Conversion...................... The Notes are convertible into Common Stock
of the Company at any time after May 5, 1996
(60 days following the latest date of
original issuance) through maturity, unless
previously redeemed or repurchased, at a
conversion price of $14 per share, subject to
adjustment under certain conditions. See
"Description of Notes--Conversion."
Optional Redemption............. The Notes are not redeemable at the option of
the Company prior to February 4, 1999.
Thereafter, the Notes will be redeemable at
the option of the Company, in whole or in
part at any time, at 100% of the principal
amount thereof, plus accrued and unpaid
interest to the redemption date. See
"Description of Notes--Optional Redemption by
the Company."
Repurchase at Option of Holders
Upon a Designated Event....... In the event of a Designated Event, each
holder of Notes may require the Company to
repurchase all or a portion of such holder's
Notes at 100% of the principal amount thereof
plus accrued and unpaid interest to the
repurchase date. See "Description of Notes--
Repurchase at Option of Holders Upon a
Designated Event."
Subordination................... The Notes are subordinate to all existing and
future Senior Indebtedness of the Company. As
of December 31, 1995, the Company had
approximately $43.0 million of Senior
Indebtedness. The Indenture contains no
limitations on the incurrence of additional
Senior Indebtedness or other indebtedness by
the
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Company. See "Description of Notes--
Subordination."
Use of Proceeds................. The Company will not receive any of the
proceeds from the sale of the Notes or the
Common Stock issuable upon conversion
thereof.
Trading......................... Prior to the resale thereof pursuant to this
Prospectus, each of the Notes was eligible
for trading in the Private Offerings, Resales
and Trading through Automated Linkages
("PORTAL") Market. Notes sold pursuant to
this Prospectus will no longer be eligible
for trading in the PORTAL Market. The Common
Stock is traded on Nasdaq under the symbol
"NABI."
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RISK FACTORS
In addition to other information in this Prospectus, the following risk
factors should be considered carefully in evaluating NABI and its business
before purchasing the Notes or shares of Common Stock offered hereby.
UNCERTAINTY ASSOCIATED WITH RAPID EXPANSION OF IMMUNOTHERAPEUTIC EFFORTS
Although NABI's objective has been to become a fully integrated developer,
manufacturer and marketer of immunotherapeutic products, NABI's historic
business primarily has been the collection and sale of plasma. Prior to the
Merger with Univax, NABI had four immunotherapeutic products (three of which are
under development). Two of these products (one of which is under development)
were acquired from Abbott Laboratories ("Abbott"). The Merger accelerated this
shift to immunotherapeutic products by adding 10 products (nine of which are
under development) to NABI's product portfolio as well as a large research and
development group and an expanded sales and marketing team. Independently, NABI
has completed construction, and has begun validation, of a new biopharmaceutical
manufacturing facility which is intended to enable NABI to manufacture for the
first time on a commercial scale certain of its immunotherapeutic products.
Although immunotherapeutic products offer higher margins than the collection and
sale of plasma, these products require significant product development
activities and expenditures, may not be successfully developed (or if
successfully developed, may not be successfully commercialized), require
rigorous manufacturing specifications and practices, and are exposed to
significant competition and the uncertainty of technological change. The effect
of these risks on NABI may be magnified by NABI's rapid expansion into the
immunotherapeutics business. There can be no assurance that NABI's
immunotherapeutic product activities will be successful, and to the extent they
are not, NABI's business, financial condition and results of operations will be
materially adversely affected.
IMPACT OF MERGER ON FINANCIAL RESULTS
Historically, without giving effect to the Merger, NABI's operations
generally were profitable. Although NABI believes that the Merger will enhance
NABI's long-term profitability and product development efforts, the Merger will
adversely affect NABI's profitability for the foreseeable future. The Merger
was consummated as a pooling of interests for financial accounting purposes and,
accordingly, the historical financial statements for both companies have been
combined for all historical periods. The transaction and related costs of the
Merger (approximately $6.0 million) were expensed in the fourth fiscal quarter
of 1995. As a result of the pooling of interests accounting treatment, NABI
reported a substantial loss for the fourth quarter and for 1995. On a combined
basis, after giving effect to the Merger, NABI also has had significant net
losses for the years ended December 31, 1993 and 1994. There can be no
assurance that, in order to return to profitability in future periods, NABI will
not be required to reduce research and development and other expenses associated
with the development and commercialization of higher margin immunotherapeutic
products. A significant reduction in such research, development and other
expenses could have a material adverse effect on the
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development and commercialization of immunotherapeutic products currently under
development and could have a material adverse effect on the ability of NABI to
realize the anticipated long-term benefits of the Merger.
NABI expects to incur significant expenses associated with its
immunotherapeutic product development activities, including the cost of clinical
trials relating to product development and marketing expenses relating to
product introduction. Any revenues generated from products under development
will not be realized for several years. Other material and unpredictable factors
which could adversely affect operating results include: the uncertainty of
clinical trial results; the uncertainty, timing and costs associated with
product approvals and commercialization; the issuance and use of patents and
proprietary technology by NABI or its competitors; the effect of technology and
other business acquisitions or transactions; the increasing emphasis on
controlling health care costs and potential legislation or regulation of health
care prices; and actions by collaborators, customers and competitors.
UNCERTAINTY OF NEW PRODUCT DEVELOPMENT
NABI's future success will depend on its ability to achieve scientific and
technological advances and to translate such advances into commercially
competitive products on a timely basis. NABI's immunotherapeutic products under
development are at various stages of research and development, and substantial
further development, preclinical testing and clinical trials will be required to
determine their technical feasibility and commercial viability. The proposed
development schedules for these products may be affected by a variety of
factors, including technological difficulties, proprietary technology of others,
reliance on third parties and changes in government regulation, many of which
factors are not within the control of NABI. Positive results for a product in a
clinical trial do not necessarily assure that positive results will be obtained
in future clinical trials or that government approval to commercialize the
product will be obtained. In addition, any delay in the development,
introduction or marketing of NABI's products under development could result
either in such products being marketed at a time when their cost and performance
characteristics would not be competitive in the marketplace or in a shortening
of their commercial lives. There can be no assurance that NABI's
immunotherapeutic products under development will prove to be technologically
feasible, commercially viable and able to obtain necessary regulatory approvals
and licenses on a timely basis, if at all. The failure of NABI to successfully
and timely develop and commercialize several of its immunotherapeutic products
and obtain necessary regulatory approvals could have a material adverse effect
on NABI's business, financial condition and results of operations.
LIMITED MARKETING EXPERIENCE WITH IMMUNOTHERAPEUTIC PRODUCTS
NABI currently markets and sells two immunotherapeutic products: WinRho SD
and H-BIG. No assurance can be given that the market for WinRho SD can be
addressed effectively by NABI's current sales force and distribution network.
NABI will lose its exclusive rights to market WinRho SD in the United States if
it does not meet specific sales goals or pay specified amounts to Cangene
Corporation, formerly Rh Pharmaceuticals, Inc. ("Cangene"). If NABI
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successfully develops additional immunotherapeutic products, significant
additional expenditures, management resources and time may be required to
develop a larger sales force, unless NABI elects to have a third party market
any or all of such products. If NABI so elects, there can be no assurance that
NABI will be able to find a partner on acceptable terms or at all, or that any
such partner will be successful in its efforts. If NABI succeeds in bringing
one or more products to market, it will compete with many other companies that
currently have extensive and well-funded marketing and sales operations. There
can be no assurance that NABI's marketing and sales efforts will be able to
compete successfully against such other companies. The failure of NABI to
effectively and efficiently market existing and new immunotherapeutic products
or the loss of exclusive rights to market WinRho SD in the United States would
have a material adverse effect on NABI's business, financial condition and
results of operations.
UNCERTAINTY ASSOCIATED WITH INTEGRATION
The Merger has created risks typically associated with the merger of two
large independent organizations, including the possibility that the combined
financial, research, personnel and other resources may not be adequate to deal
with the needs of NABI following the Merger. To the extent any such resources
are inadequate to deal with NABI's needs, NABI's business, financial condition
and results of operations could be materially adversely affected.
UNCERTAINTY OF MARKET ACCEPTANCE
One of NABI's existing immunotherapeutic products, WinRho SD, has been
marketed in the United States only since mid-1995, and no assurance can be given
that physicians, patients or third-party payors will accept and utilize this
product to a significant extent. Further, there can be no assurance that, if
approved for marketing, any of NABI's other products in development will achieve
market acceptance. The degree of market acceptance will depend upon a number of
factors, including the receipt of regulatory approvals, the establishment and
demonstration in the medical community of the clinical efficacy and safety of
NABI's products and their potential advantages over existing treatment methods,
the prices of such products, and reimbursement policies of government and third-
party payors. The failure of WinRho SD or any immunotherapeutic product under
development to gain market acceptance could have a material adverse effect on
NABI's business, financial condition and results of operations.
FLUCTUATIONS IN PLASMA SUPPLY AND DEMAND
The basic raw material essential to NABI's business is human blood plasma.
NABI has historically derived substantially all of its revenues from the
collection and sale of plasma components and will continue to depend on plasma
revenues until such time, if ever, that the revenues generated by the
manufacture and sale of immunotherapeutic products increase significantly. As a
result of factors affecting both the demand for and supply of plasma, worldwide
demand for human blood plasma has exceeded supply since 1991. The demand for
plasma has increased primarily as a result of an increase in both the number and
use of products
-12-
which require plasma components for their manufacture. Concern over the safety
of blood products, including plasma, has resulted in the adoption of more
rigorous screening procedures by regulatory authorities and manufacturers of
plasma-based products. These procedures, which include a more extensive
investigation into a donor's background and new tests, have disqualified
numerous potential donors and discouraged other donors who may be reluctant to
undergo the screening procedures. Future changes in government regulation
relating to the collection and use of plasma or any negative public perception
about the plasma collection process could further adversely affect the number
and type of available donors and, consequently, the overall plasma supply.
Future fluctuations in the demand for or supply of plasma could have a material
adverse effect on NABI's business, financial condition and results of
operations.
GOVERNMENT REGULATION; UNCERTAINTY OF REGULATORY APPROVALS
NABI's research, preclinical development, clinical trials, manufacturing
and marketing of its products are subject to extensive regulation by numerous
government authorities in the United States. The process of obtaining FDA and
other required regulatory approvals is lengthy and expensive, and the time
required for such approvals is uncertain. The approval process is affected by
several factors, including the severity of the disease, the availability of
alternative treatments, and the risks and benefits demonstrated in clinical
trials. The FDA also may require post-marketing surveillance to monitor
potential adverse effects of the product. The regulatory process can be
modified by Congress or the FDA in specific situations. Most of NABI's clinical
trials are at a relatively early stage and, except for H-BIG and WinRho SD, no
approval from the FDA or any other government agency for the manufacturing or
marketing of any of its products under development has been granted. There can
be no assurance that NABI will be able to obtain the necessary approvals for
manufacturing or marketing of any of its products under development. Failure to
obtain additional FDA approvals of products under development would have a
material adverse effect on NABI's business, financial condition and results of
operations. If approved, failure to comply with applicable regulatory
requirements could, among other things, result in fines, suspension or
revocation of regulatory approvals, product recalls or seizures, operating
restrictions, injunctions and criminal prosecutions.
Among the requirements for product license approval is the requirement that
the prospective manufacturer's methods conform to the FDA's current Good
Manufacturing Practice regulations, which must be followed at all times. In
complying with standards set forth in these regulations, manufacturers must
continue to expend time, money and effort in the area of production and quality
control to ensure full technical compliance.
Distribution of NABI's products outside the United States is subject to
extensive government regulation. These regulations, including the requirements
for approvals or clearance to market, the time required for regulatory review
and the sanctions imposed for violations, vary from country to country. There
can be no assurance that NABI will obtain regulatory approvals in such countries
or that it will not be required to incur significant costs in obtaining or
maintaining its foreign regulatory approvals. In addition, the export by NABI
of certain of its
-13-
products which have not yet been cleared for domestic commercial distribution
may be subject to FDA export restrictions. Failure to obtain necessary
regulatory approvals, the restriction, suspension or revocation of existing
approvals or any other failure to comply with regulatory requirements would have
a material adverse effect on NABI's business, financial condition and results of
operations.
NABI's United States plasma collection, storage, labeling and distribution
activities also are subject to strict regulation and licensing by the FDA.
NABI's plasma collection centers in the United States are subject to periodic
inspection by the FDA, and from time to time NABI receives notices of
deficiencies from the FDA as a result of such inspections. The failure of NABI
or its plasma collection centers to continue to meet regulatory standards or to
remedy any such deficiencies could result in corrective action by the FDA,
including closure of one or more collection centers and fines or penalties. In
addition, before new plasma collection centers are opened, the collection
centers and their procedures and personnel must meet certain regulatory
standards to obtain necessary licenses. New regulations may be enacted and
existing regulations or their interpretation or enforcement are subject to
change. Therefore, there can be no assurance that NABI will be able to continue
to comply with any regulations or that the costs of such compliance will not
have a material adverse effect on NABI's business, financial condition and
results of operations.
The current process for producing H-BIG does not contain a viral
inactivation step. Consequently, the FDA requires lots of H-BIG to be tested for
viral contamination before the lots can be released for commercial sale. To
date, there is no commonly accepted test to determine the presence of such
contamination, and different tests may produce different results. Although NABI
believes that H-BIG poses no significant risk of viral contamination, and has
each lot of H-BIG independently tested to determine safety, rejection of lots of
H-BIG by the FDA or delay by the FDA in the release of lots for commercial sale
could have a material adverse effect on NABI's business, financial condition and
results of operation. NABI is pursuing the development of a manufacturing
process for H-BIG which includes viral inactivation. There can be no assurance
that NABI will be successful in these efforts.
NABI has received permission from the FDA to conduct donor stimulation
programs using the HyperGAM+CF immunizing agent and the staph A immunizing
agent. No assurance can be given, however, that the FDA will permit NABI to
begin donor stimulation using other immunizing agents before obtaining
regulatory approval of the immunizing agents as vaccine products. If the FDA
were to require NABI to secure such regulatory approvals for the immunizing
agents to be used in donor stimulation before commencing clinical trials on the
immunotherapeutic products to be produced using such immunizing agents, the
overall regulatory approval process for NABI's immunotherapeutic products would
be significantly delayed, which could have a material adverse effect on NABI's
business, financial condition and results of operations.
-14-
DEPENDENCE UPON THIRD PARTIES TO MANUFACTURE PRODUCTS
Although NABI collects and supplies the specialty plasma necessary for the
manufacture of H-BIG, at the present time it is dependent on a single
manufacturer to process this raw material for H-BIG and on Abbott to formulate
and package the product. NABI's contract with the manufacturer will expire in
1996. Abbott may terminate its formulation and packaging activities on 30 days'
notice, and Abbott has advised NABI that it expects to discontinue these
activities during 1996. In August 1995, NABI entered into an agreement with the
Michigan Biologic Products Institute (formerly Michigan Department of Public
Health) ("MBPI") pursuant to which MBPI, subject to receiving FDA approval, will
also process, formulate and package quantities of the raw material for H-BIG.
NABI anticipates receiving product from MBPI by mid-1996, although there can be
no assurance that product will be available at that time. After NABI begins to
receive product from MBPI, NABI anticipates that it will terminate production,
formulation and packaging of the product with Abbott and its manufacturer and
that MBPI will become NABI's sole producer of H-BIG. NABI's agreement with MBPI
has a five-year term commencing upon the date MBPI receives FDA approval,
although either party may terminate the agreement upon 12 months' notice. NABI
is required to purchase its requirements of WinRho SD from Cangene, which has
granted to NABI exclusive marketing rights to the product in the United States.
NABI does not have manufacturing rights for WinRho SD. The failure by any of
NABI's current or future manufacturers to meet NABI's needs for products or
delays in the receipt of deliveries could have a material adverse effect on
NABI's business, financial condition and results of operations. NABI has
constructed a biopharmaceutical manufacturing facility which is designed to
allow NABI to formulate, process and package H-BIG. Although NABI has commenced
validation of this facility, because the facility will require complete
validation and licensure by the FDA, NABI does not anticipate that the facility
will be able to produce H-BIG for commercial sale until 1998. Moreover,
manufacturing products at a single site may present risks if a disaster (such as
a fire or hurricane) causes interruption of manufacturing capability. In such
an event, NABI will have to resort to alternative sources of manufacturing which
could increase its costs as well as result in significant delays while required
regulatory approvals are obtained. Any such delays or increased costs could
have a material adverse effect on NABI's business, financial condition and
results of operations.
LIMITED MANUFACTURING CAPABILITY AND EXPERIENCE
NABI has completed construction and has commenced validation of a new
biopharmaceutical manufacturing facility in Boca Raton, Florida. NABI
anticipates that it will validate in 1996 and receive FDA licensure for this
facility in 1998. No assurance can be given that NABI will be able to validate
and obtain such licensure. Failure to validate and obtain such licensure on a
timely basis or at all would have a material adverse effect on NABI's business,
financial condition and results of operations. The new facility is designed to
process specialty plasma into NABI's immunotherapeutic products. However, NABI
has not previously owned or operated such a facility and has no direct
experience in commercial, large-scale manufacturing of immunotherapeutic
products. The failure of NABI to successfully operate its new
-15-
manufacturing facility would have a material adverse effect on NABI's business,
financial condition and results of operations.
POTENTIAL ADVERSE EFFECT OF LITIGATION
NABI is currently one of several defendants in numerous suits generally
based upon claims that the plaintiffs became infected with HIV as a result of
using HIV-contaminated products made by various defendants other than NABI or as
a result of family relations with those so infected. These suits allege, among
other things, that NABI or its predecessors supplied HIV-contaminated plasma to
the defendants who produced the products in question. One of the suits purports
to be a class action. NABI denies all claims made against it and intends to
vigorously defend the cases. No assurance can be given that additional lawsuits
relating to infection with HIV will not be brought against NABI by persons who
have become infected with HIV or plasma fractionators or that cross-complaints
will not be filed in existing lawsuits. In addition, there can be no assurance
that lawsuits based on other causes of action will not be filed or that NABI
will be successful in the defense of any or all existing or potential future
lawsuits. Defense of suits can be expensive and time-consuming, regardless of
the outcome, and an adverse result in one or more suits, particularly those
related to HIV, could have a material adverse effect on NABI's business,
financial condition and results of operations.
RISK OF PRODUCT LIABILITY; LIMITED INSURANCE
The processing and sale of NABI's plasma and plasma-based products,
including immunotherapeutic products, involve a risk of product liability
claims, and NABI currently is a party to litigation involving such claims. In
addition, there can be no assurance that infectious diseases will not be
transmitted by NABI's products and therefore create additional product liability
claims. Product liability insurance for the biopharmaceutical industry
generally is expensive to the extent it is available at all. While NABI
currently maintains product liability insurance, there can be no assurance that
it will be able to maintain such insurance on acceptable terms or that it will
be able to secure increased coverage if the commercialization of its products
progresses. Moreover, there can be no assurance that the existing coverage of
NABI's insurance policy and/or any rights of indemnification and contribution
that NABI may have will offset existing or future claims. A successful claim
against NABI with respect to uninsured liabilities or in excess of insurance
coverage and not subject to any indemnification or contribution could have a
material adverse effect on NABI's business, financial condition and results of
operations.
DEPENDENCE ON STRATEGIC ALLIANCES
NABI currently has strategic alliances with Cangene, Genzyme, Chiron and
others for the manufacturing, development, marketing and sale of
immunotherapeutic products. NABI intends to pursue strategic alliances with
third parties for the development, marketing and sale of certain of its other
immunotherapeutic products. No assurance can be given that NABI will be
successful in these efforts or, if successful, that the collaborators will
conduct their activities in a timely manner. Certain of NABI's collaborators,
including Genzyme and Chiron, have the
-16-
right to terminate their collaborative agreements with NABI. If any of NABI's
existing or future collaborative partners breach or terminate their agreements
with NABI or otherwise fail to conduct their collaborative activities in a
timely manner, the preclinical or clinical development or commercialization of
products could be delayed, and NABI may be required to devote significant
additional resources to product development and commercialization, or terminate
certain development programs. Failure to enter into successful strategic
alliances or the termination of existing alliances could have a material adverse
effect on NABI's business, financial condition and results of operations. In
addition, there can be no assurance that disputes will not arise in the future
with respect to the ownership of rights to any technology developed with third
parties. These and other possible disagreements between collaborators and NABI
could lead to delays in the collaborative research, development or
commercialization of certain products or could require or result in litigation
or arbitration, which would be time-consuming and expensive, and could have a
material adverse effect on NABI's business, financial condition and results of
operations.
NABI's collaborative partners may develop, either alone or with others,
products that compete with the development and marketing of the Company's
products. Competing products, either developed by the collaborative partners or
to which the collaborative partners have rights, may result in those partners'
withdrawal of support with respect to certain of NABI's products, which could
have a material adverse effect on NABI's business, financial condition and
results of operations.
FOREIGN RESTRICTIONS ON IMPORTATION OF PLASMA
Export sales of plasma for the 1993, 1994 and 1995 fiscal years represented
approximately 48%, 36% and 35%, respectively, of NABI's consolidated sales for
those periods. NABI's export sales primarily are to European customers. Concern
over blood safety has led to movements in a number of European and other
countries to restrict the importation of plasma and plasma components collected
outside such countries' borders or, in the case of certain European countries,
outside Europe. NABI believes that, to date, these efforts have not led to any
meaningful restriction on the importation of plasma and plasma components and
have not adversely affected NABI. Such restrictions, however, continue to be
debated and there can be no assurance that such restrictions will not be imposed
in the future. If imposed, such restrictions could have a material adverse
effect on the demand for NABI's plasma and on NABI's business, financial
condition and results of operations.
UNCERTAINTY OF LEGAL PROTECTION AFFORDED BY PATENTS AND PROPRIETARY RIGHTS
The patent positions of biotechnology firms generally are highly uncertain
and involve complex legal and factual questions. There can be no assurance that
existing patent applications will mature into issued patents, that NABI will be
able to obtain additional licenses to patents of others or that NABI will be
able to develop additional patentable technology of its own. Because patent
applications in the United States are not disclosed by the Patent and Trademark
Office until patents issue, and because publication of discoveries in the
scientific or patent
-17-
literature often lags behind actual discoveries, NABI cannot be certain that it
was the first creator of inventions covered by its pending patent applications
or that it was the first to file patent applications for such inventions. There
can be no assurances that any patents issued to NABI will provide it with
competitive advantages or will not be challenged by others. Furthermore, there
can be no assurance that others will not independently develop similar products,
or, if patents are issued to NABI, design around such patents.
A number of pharmaceutical companies, biotechnology companies, universities
and research institutions have filed patent applications or received patents
relating to products or processes competitive with or similar to those of NABI.
Some of these applications or patents may conflict in certain respects with
claims made under NABI's applications. Such a conflict could result in a
significant reduction of the coverage of NABI's patents, if issued. In
addition, if patents that contain competitive or conflicting claims are issued
to others and such claims are ultimately determined to be valid, NABI may be
required to obtain licenses to these patents or to develop or obtain alternative
technology. If any licenses are required, there can be no assurance that NABI
will be able to obtain any such licenses on commercially favorable terms, if at
all. NABI's failure to obtain a license to any technology that it may require
to commercialize its products could have a material adverse effect on NABI's
business, financial condition and results of operations. Litigation, which
could result in substantial cost to NABI, may also be necessary to enforce any
patents issued to NABI or to determine the scope and validity of third-party
proprietary rights.
NABI has been notified by the European Patent Office that NABI has been
allowed a patent for HIV-IG, giving NABI commercial protection in 12 European
countries until the year 2008. NABI also has patents for HIV-IG in Australia
and New Zealand, and has patent applications for HIV-IG pending in various other
foreign countries. NABI jointly owns these HIV-IG patents and applications with
the University of Minnesota, which is entitled to practice the technology
contained in HIV-IG and sell HIV-IG product to the same extent as NABI. NABI has
no pending patent application for HIV-IG in the United States. An unrelated
third party which currently holds a United States patent may claim that its
patent is infringed by HIV-IG. If such patent withstands any challenge by NABI
or others, NABI will be required to obtain a license from the patent holder in
order to market HIV-IG in the United States. While NABI believes that, if
necessary, it will be able to obtain such a license on commercially acceptable
terms, there can be no assurance that NABI will be successful.
NABI also relies on secrecy to protect its technology, especially where
patent protection is not believed to be appropriate or obtainable. NABI
maintains strict controls and procedures regarding access to and use of its
proprietary technology and processes. However, there can be no assurance that
these controls or procedures will not be violated, that NABI would have adequate
remedies for any violation, or that NABI's trade secrets will not otherwise
become known or be independently discovered by competitors.
-18-
UNCERTAINTY OF ORPHAN DRUG DESIGNATION
Under the Orphan Drug Act, the FDA may designate a product or products as
having Orphan Drug status to treat a "rare disease or condition," which
currently is defined as a disease or condition that affects populations of less
than 200,000 individuals in the United States, or, if victims of a disease
number more than 200,000, for which the sponsor establishes that it does not
realistically anticipate its product sales in the United States will be
sufficient to recover its costs. If a product is designated an Orphan Drug,
then the sponsor is entitled to receive certain incentives to undertake the
development and marketing of the product. In addition, the sponsor that obtains
the first marketing approval for a designated Orphan Drug for a given indication
effectively has marketing exclusivity for a period of seven years. There may be
multiple designations of Orphan Drug status for a given drug and for different
indications. However, only the sponsor of the first approved product license
application ("PLA") for a given drug for its use in treating a given rare
disease may receive marketing exclusivity. While it may be advantageous to
obtain Orphan Drug status for eligible products, there can be no assurance that
the precise scope of protection that is currently afforded by Orphan Drug status
will be available in the future or that the current level of exclusivity will
remain in effect. Recently, Congress has considered legislation that would
amend the Orphan Drug Act to limit the scope of marketing exclusivity granted to
Orphan Drug products. WinRho SD has received Orphan Drug marketing exclusivity
for the treatment of ITP (and has obtained Orphan Drug status for certain other
indications) and certain other of NABI's products under development have Orphan
Drug status. There can be no assurance that NABI will succeed in obtaining
Orphan Drug marketing exclusivity for products that have Orphan Drug status or
that Orphan Drug marketing exclusivity with respect to WinRho SD or other
products, if obtained, will be of material benefit to NABI. Furthermore, another
manufacturer could obtain an Orphan Drug designation as well as approval for the
same product for a different indication or a different product for the same
indication.
INTENSE COMPETITION; UNCERTAINTY OF TECHNOLOGICAL CHANGE
Competition in the development of biopharmaceutical products is intense,
both from biotechnology and pharmaceutical companies, and is expected to
increase. Many of NABI's competitors have greater financial resources and
larger research and development staffs than NABI, as well as substantially
greater experience in developing products, obtaining regulatory approvals, and
manufacturing and marketing pharmaceutical products. Competition with these
companies involves not only product development, but also acquisition of
products and technologies from universities and other institutions. NABI also
competes with universities and other institutions in the development of
immunotherapeutic products, technologies and processes and for qualified
scientific personnel. There can be no assurance that NABI's competitors will
not succeed in developing technologies and products that are more effective or
affordable than those being developed by NABI. In addition, one or more of
NABI's competitors may achieve product commercialization of or patent protection
for competitive products earlier than NABI, which would preclude or
substantially limit sales of the Company's products. Further, several companies
are attempting to develop and market products to treat certain diseases based
upon technology which would lessen or eliminate the need for human blood plasma.
The successful
-19-
development and commercialization by any competitor of NABI of any such product
could have a material adverse effect on NABI's business, financial condition and
results of operations.
NABI competes for plasma donors with pharmaceutical companies which may
obtain plasma for their own use, other commercial plasma collection companies
and non-profit organizations such as the American Red Cross and community blood
banks which solicit the donation of blood. A number of these competitors have
access to greater financial, marketing and other resources than NABI. NABI
competes for donors by means of offering financial incentives to donors to
compensate them for their time and inconvenience, providing outstanding customer
service to its donors, implementing programs designed to attract donors through
education as to the uses for collected plasma, encouraging groups to have their
members become plasma donors and improving the attractiveness of NABI's plasma
collection facilities. NABI also competes with other independent plasma
suppliers that sell plasma principally to pharmaceutical companies that process
plasma into finished products. If NABI is unable to maintain and expand its
donor base, its business, financial condition and results of operations will be
materially and adversely affected.
DEPENDENCE ON SMALL NUMBER OF CUSTOMERS FOR PLASMA SALES
NABI sells its source and specialty plasma to approximately 20
pharmaceutical and diagnostic product manufacturers. These customers constitute
most of the worldwide purchasers of human blood plasma. During the 1993, 1994
and 1995 fiscal years, plasma sales to customers purchasing more than 10% of
NABI's consolidated sales (which did not exceed four customers in any such
period), accounted for approximately 34%, 48% and 46%, respectively, of NABI's
consolidated sales for each period. The loss of any major customer or a
material reduction in a major customer's purchases of plasma could have a
material adverse effect upon NABI's business, financial condition and results of
operations.
UNCERTAINTY OF PRODUCT PRICING AND REIMBURSEMENT
NABI's ability to commercialize its immunotherapeutic products and related
treatments will be dependent in part upon the availability of, and NABI's
ability to obtain, adequate levels of reimbursement from government health
administration authorities, private health care insurers and other
organizations. Significant uncertainty exists as to the reimbursement status of
newly approved health care products, and there can be no assurance that adequate
third-party coverage will be available, if at all. Inadequate levels of
reimbursement may prohibit NABI from maintaining price levels sufficient for
realization of an adequate return on its investment in developing new
immunotherapeutic products and could result in the termination of production of
otherwise commercially viable products. Government and other third-party payors
are increasingly attempting to contain health care costs by limiting both the
coverage and level of reimbursement for new products approved for marketing by
the FDA and by refusing, in some cases, to provide any coverage for disease
indications for which the FDA has not granted marketing approval. Also, the
trend towards managed health care in the United States and the concurrent growth
of organizations such as HMOs, which could control or significantly influence
-20-
the purchase of health care services and products, as well as legislative
proposals to reform health care or reduce government insurance programs, may all
result in lower prices for NABI's products. The cost containment measures that
health care providers are instituting and the impact of any health care reform
could have an adverse effect on NABI's ability to sell its products and may have
a material adverse effect on NABI's business, financial condition and results of
operations.
There can be no assurance that reimbursement in the United States or
foreign countries will be available for NABI's products, or, if available, will
not be decreased in the future, or that reimbursement amounts will not reduce
the demand for, or the price of, NABI's products. The unavailability of third-
party reimbursement or the inadequacy of the reimbursement for medical
procedures using NABI's products could have a material adverse effect on NABI's
business, financial condition and results of operations. Moreover, NABI is
unable to forecast what additional legislation or regulation, if any, relating
to the health care industry or third-party coverage and reimbursement may be
enacted in the future or what effect such legislation or regulation would have
on NABI's business.
Most of NABI's plasma sales are made pursuant to contracts having terms
ranging from one to five years. These contracts generally provide for annual
pricing renegotiations. Once established, the pricing generally remains fixed
for the year subject to price changes to reflect changes in customer
specifications or price adjustments to compensate NABI for increased costs
associated with new governmental testing requirements. As a result, NABI's
business, financial condition and results of operations would be adversely
affected if, due to changes in government regulation or other factors, its costs
of collecting and selling plasma rise during a given year and NABI is not able
to pass on the increased costs until the next annual pricing renegotiation.
SUBORDINATION
The Notes are unsecured and subordinated in right of payment in full to all
existing and future Senior Indebtedness of NABI. As a result of such
subordination, in the event of any insolvency, liquidation or reorganization of
NABI, or payment default on Senior Indebtedness, the assets of NABI will be
available to pay obligations on the Notes only after all Senior Indebtedness has
been paid in full, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. The Indenture does not
prohibit or limit the incurrence of Senior Indebtedness or the incurrence of
other indebtedness and other liabilities by NABI, and the incurrence of
additional indebtedness and other liabilities by NABI could adversely affect
NABI's ability to pay its obligations on the Notes. As of December 31, 1995,
NABI had approximately $43.0 million of outstanding indebtedness which would
have constituted Senior Indebtedness. NABI anticipates that from time to time
it will incur additional indebtedness, including Senior Indebtedness. Moreover,
the cash flow and consequent ability of NABI to service debt, including the
Notes, may become dependent in part upon the earnings from the business
conducted by NABI through its subsidiaries and the distribution of those
earnings, or upon loans or other payments of funds by those subsidiaries to
NABI. See "Description of Notes--Subordination."
-21-
LIMITATIONS ON REPURCHASE UPON A DESIGNATED EVENT
In the event of a Designated Event, each holder may require NABI to
repurchase all or a portion of such holder's Notes at 100% of the principal
amount thereof plus accrued and unpaid interest to the repurchase date. If a
Designated Event were to occur, there can be no assurance that NABI would have
sufficient funds to pay the repurchase price for all Notes tendered by the
holders thereof. NABI's repurchase of Notes, absent a waiver, would constitute
a default under the terms of NABI's credit facility. In addition, NABI's
repurchase of Notes as a result of the occurrence of a Designated Event may be
prohibited or limited by the subordination provisions applicable to the Notes,
or be prohibited or limited by, or create an event of default under, the terms
of other agreements relating to borrowings which constitute Senior Indebtedness
as may be entered into, amended, supplemented or replaced from time to time.
Failure of NABI to repurchase Notes at the option of the holder upon a
Designated Event would result in an Event of Default under the Indenture. The
Notes may not be repurchased at the option of holders following a Designated
Event if there has occurred and is continuing an Event of Default (other than a
default in the payment of the repurchase price with respect to such Notes on the
repurchase date). See "Description of Notes--Repurchase at Option of Holders
Upon a Designated Event."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
Prior to this offering, there has been no public trading market for the
Notes. Prior to the resale thereof pursuant to this Prospectus, each of the
Notes was eligible for trading in the PORTAL Market. Notes sold pursuant to
this Prospectus will no longer be eligible for trading in the PORTAL Market.
There can be no assurance that any public market for the Notes will develop or,
if one does develop, that it will be maintained. If an active market for the
Notes fails to develop or be sustained, the trading price of such Notes could be
adversely affected.
POSSIBLE VOLATILITY OF NOTES AND STOCK PRICE
The market prices for securities of biotechnology companies have been
volatile. Announcements of clinical trial results or technological innovations
for new commercial products by NABI or its competitors, developments concerning
proprietary rights, public concern as to the safety or ethics of biotechnology,
and economic or other external factors may have a significant impact on NABI's
business and on the market price of the Notes and the shares of Common Stock.
Fluctuations in financial performance from period to period also may have a
significant impact on the market price of the Notes and the Common Stock. As a
result of the Merger, NABI's stock price may become more volatile.
ANTI-TAKEOVER PROVISIONS
NABI's Certificate of Incorporation includes provisions that may discourage
or prevent certain types of transactions involving an actual or potential change
in control of NABI, including transactions in which the stockholders might
otherwise receive a premium for their
-22-
shares over then-current market prices, and may limit the ability of the
stockholders to approve transactions that they may deem to be in their best
interests. For example, NABI's Restated Certificate of Incorporation enables
the Board of Directors to fix the rights and preferences of and to issue shares
of preferred stock. The Board of Directors could avail itself of this authority
to discourage or to prevent certain types of transactions involving an actual or
potential change of control of NABI, which could have an adverse effect on the
price of the Common Stock. In addition, NABI's Certificate of Incorporation and
Section 203 of the Delaware General Corporation Law (the "DGCL") each have
differing provisions which prohibit NABI from engaging in certain business
combinations with interested stockholders unless special supermajority
stockholder votes are obtained. These provisions may have the effect of
delaying or preventing a change in control of NABI and therefore could adversely
affect the price of the Common Stock. See "Description of Capital Stock."
RATIO OF EARNINGS TO FIXED CHARGES
For purposes of computing the ratio of earnings to fixed charges, earnings
include earnings before income taxes, amortization of deferred debt acquisition
costs and interest expense, including that portion of rental expense attributed
to interest costs. Fixed charges consist of amortization of deferred debt
acquisition costs, interest expense, including that portion of rental expense
attributable to interest costs and interest capitalized during the period.
NABI's earnings were inadequate to cover its fixed charges for the years ended
December 31, 1991, 1992, 1993, 1994 and 1995. For these years, the deficiencies
of earnings to fixed charges were approximately $1.3 million, $13.6 million,
$14.9 million, $7.5 million and $11.8 million, respectively.
USE OF PROCEEDS
The Notes and the shares of Common Stock offered by the Selling
Securityholders are not being sold by the Company, and the Company will not
receive any proceeds from the sale thereof.
SELLING SECURITYHOLDERS
The following table sets forth information concerning the principal amount
of Notes beneficially owned by each Selling Securityholder and the number of
shares of Common Stock issuable upon conversion of the Notes (the "Conversion
Shares") which may be offered from time to time pursuant to this Prospectus.
Other than their ownership of NABI's securities, none of the Selling
Securityholders has had any material relationship with the Company within the
past three years, other than Raymond James & Associates, Inc., which during such
period has acted as an Initial Purchaser (as defined herein with respect to the
Notes), financial advisor and underwriter for the Company. The table has been
prepared based upon the information furnished to the Company by State Street
Bank and Trust Company, as trustee (the "Trustee") for the Notes, by the
Depository Trust Company and by or on behalf of the Selling Securityholders.
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Principal
Amount of
Notes Number of
Beneficially Conversion Percentage
Owned Percentage Shares of Common
That May of Notes That May Stock
Name(1) Be Sold(1) Outstanding Be Sold(2) Outstanding(3)
- ------- ---------- ----------- ---------- --------------
Alpine Associates $4,235,000 5.3% 302,500 *
Bank of New York 11,060,000 13.7 790,000 2.2%
Bankers Trust Co. 10,820,000 13.4 772,857 2.2
Bear Stearns Securities Corp. 5,450,000 6.8 389,285 1.1
Bank of Bermuda 250,000 * 17,857 *
Bank of America Personal Trust 200,000 * 14,285 *
Boatmen's Trust Company 150,000 * 10,714 *
Boston Safe Deposit & Trust Co. 11,895,000 14.8 849,642 2.4
Brown Brothers Harriman & Co. 750,000 * 53,571 *
CFW-C, L. P. 2,500,000 3.1 178,571 *
Chase Manhattan Bank 160,000 * 11,428 *
Chemical Bank 200,000 * 14,285 *
Custodial Trust Co. 5,000,000 6.2 357,142 1.0
First Interstate Bank of California 2,600,000 3.2 185,714 *
Fleet Bank of Massachusetts 100,000 * 7,142 *
First National Bank of Boston 135,000 * 9,642 *
First National Bank of Maryland 155,000 * 11,071 *
Harris Trust and Savings Bank 1,540,000 1.9 110,000 *
Lehman Brothers International (Europe) - Prime Broker (LBI) 250,000 * 17,857 *
Mercantile Safe Deposit and Trust Company 3,250,000 4.0 232,142 *
Merrill Lynch Debt Securities 500,000 * 35,714 *
Morgan (JP) Securities Inc. 100,000 * 7,142 *
NBD Bank, NA 1,145,000 1.4 81,785 *
Nomura International Trust Company Incorporated 250,000 * 17,857 *
Northern Trust - Trust 1,365,000 1.7 97,500 *
PNC National Association 1,020,000 1.3 72,857 *
Raymond James & Associates, Inc. 50,000 * 3,571 *
Sanwa Bank 1,775,000 2.2 126,785 *
SBC Capital Markets, Inc. 700,000 * 50,000 *
State Street Bank and Trust Company - Custodian 12,635,000 15.7 902,500 2.6
Wachovia Bank North Carolina 260,000 * 18,571 *
______________________
*Less than 1%.
(1) The information set forth herein is as of April 29, 1996 and will be
updated as required.
(2) Assumes conversion of the full amount of Notes held by such holder at the
initial rate of $14.00 in principal amount of Notes per share of Common
Stock. Under the terms of the Indenture, fractional shares will not be
issued upon conversion of the Notes; cash will be paid in lieu of
fractional shares, if any.
(3) Based upon the 34,352,461 shares of Common Stock outstanding as of April
29, 1996, treating as outstanding the number of Conversion Shares shown as
being issuable upon the assumed conversion by the named holder of the full
amount of such holder's Notes but not assuming the conversion of the Notes
of any other holder.
-24-
The information concerning the Selling Securityholders may change from time
to time and will be set forth in Supplements to this Prospectus. In addition,
the per share conversion price and, therefore, the number of shares of Common
Stock issuable upon conversion of the Notes is subject to adjustment under
certain circumstances as specified in the Indenture. Accordingly, the aggregate
principal amount of Notes and the number of shares of Common Stock issuable upon
conversion of the Notes may change. As of the date of this Prospectus, the
aggregate principal amount of Notes outstanding is $80,500,000, which may be
converted into 5,750,000 shares of Common Stock.
Because the Selling Securityholders may offer all or some of the Notes and
shares of Common Stock issued upon conversion thereof pursuant to the offering
contemplated by this Prospectus, and to the Company's knowledge there are
currently no agreements, arrangements or understandings with respect to the sale
of any of the Notes or shares of Common Stock that may be held by the Selling
Securityholders after completion of this offering, no estimate can be given as
to the principal amount of Notes or shares of Common Stock that will be held by
the Selling Securityholders after completion of this offering. See "Plan of
Distribution."
PLAN OF DISTRIBUTION
The Selling Securityholders may sell all or a portion of the Notes and
shares of Common Stock beneficially owned by them and which may be offered
hereby from time to time on any exchange or market on which the securities are
listed or quoted, as applicable, on terms to be determined at the times of such
sales. The Selling Securityholders may also make private sales directly or
through a broker or brokers. Alternatively, any of the Selling Securityholders
may from time to time offer the Notes or shares of Common Stock which may be
offered hereby and beneficially owned by them through underwriters, dealers or
agents, who may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Securityholders and the purchasers
of the Notes or shares of Common Stock for whom they may act as agent. Such
dealers may include the Initial Purchasers (as defined) of the Notes, which may
perform investment banking or other services for or engage in other transactions
with the Company from time to time in the future.
To the extent required, the aggregate principal amount of Notes and number
of shares of Common Stock to be sold hereby, the names of the Selling
Securityholders, the purchase price, the name of any such agent, dealer or
underwriter and any applicable commissions, discounts or other terms
constituting compensation with respect to a particular offer will be set forth
in an accompanying Prospectus Supplement. The aggregate proceeds to the Selling
Securityholders from the sale of the Notes or shares of Common Stock offered by
them hereby will be the purchase price of such Notes or shares of Common Stock
less discounts and commissions, if any.
-25-
The Notes and the shares of Common Stock which may be offered hereby may be
sold from time to time in one or more transactions at fixed offering prices,
which may be changed, or at varying prices determined at the time of sale or at
negotiated prices. Such prices will be determined by the holders of such
securities or by agreement between such holders and underwriters or dealers who
may receive fees or commissions in connection therewith.
The outstanding Common Stock is listed for trading on Nasdaq, and the
shares of Common Stock issuable upon conversion of the Notes have been
authorized for listing on Nasdaq. There is no assurance as to the development
or liquidity of any trading market that may develop for the Notes.
In order to comply with the securities laws of certain states, if
applicable, the Notes and shares of Common Stock offered hereby will be sold in
such jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the Notes and shares of Common Stock offered hereby
may not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and compliance with same is effected.
The Selling Securityholders and any broker-dealers, agents or underwriters
that participate with the Selling Securityholders in the distribution of the
Notes or shares of Common Stock offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
commissions or discounts received by such broker-dealers, agents or underwriters
and any profit on the resale of the Notes or shares of Common Stock offered
hereby and purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Company and the Selling Securityholders have agreed to indemnify each
other against certain liabilities arising under the Securities Act. The Company
has agreed to pay all expenses incident to the offer and sale of the Notes and
Common Stock offered hereby by the Selling Securityholders to the public, other
than selling commissions and fees.
The Registration Statement does not cover the issuance of shares of Common
Stock upon conversion of the Notes into shares of Common Stock.
DESCRIPTION OF NOTES
The Notes initially were issued under an indenture dated as of February 1,
1996 (the "Indenture"), between the Company and State Street Bank and Trust
Company, as trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those stated in the Registration Rights Agreement
(the "Registration Rights Agreement") entered into as of February 1, 1996
between the Company and the initial purchasers named therein (the "Initial
Purchasers"). The following summaries of certain provisions of the Notes, the
Indenture and the Registration Rights Agreement do not purport to be complete
and are subject to, and are
-26-
qualified in their entirety by reference to, all the provisions of the Notes,
the Indenture and the Registration Rights Agreement, including the definitions
therein of certain terms which are not otherwise defined in this Prospectus.
Wherever particular provisions or defined terms of the Indenture (or of the form
of Note which is a part thereof) or the Registration Rights Agreement are
referred to, such provisions or defined terms are incorporated herein by
reference. Copies of the Indenture, form of Note and Registration Rights
Agreement are available from the Company upon request. As used in this
Description of Notes, the "Company" refers only to NABI and does not, unless the
context otherwise indicates, include any of its subsidiaries.
GENERAL
The Notes represent unsecured general obligations of the Company
subordinate in right of payment to certain other obligations of the Company as
described under "--Subordination," and convertible into Common Stock as
described under "--Conversion." The Notes will be limited to $80,500,000
aggregate principal amount, will be issued in fully registered form only in
denominations of $1,000 or any multiple thereof and will mature on February 1,
2003, unless earlier redeemed at the option of the Company or repurchased by the
Company at the option of the holder upon a Designated Event (as defined).
The Notes will bear interest from February 7, 1996 at the annual rate set
forth on the cover page hereof, payable semiannually on February 1 and August 1
commencing on August 1, 1996, to holders of record at the close of business on
the preceding January 15 and July 15, respectively (other than with respect to a
Note or portion thereof called for redemption on a redemption date, or
repurchased in connection with a Designated Event on a repurchase date, during
the period from a record date to (but excluding) the next succeeding interest
payment date (in which case accrued interest shall be payable to the extent
required to the holder of the Note or portion thereof redeemed or repurchased)
or converted after the record date and before the next succeeding interest
payment date except to the extent that at the time such Note or portion thereof
is submitted for conversion, such Note or portion thereof was required to be
accompanied by funds equal to interest payable on such succeeding interest
payment date on the principal amount so converted; see "--Conversion" below).
Interest may, at the Company's option, be paid by check mailed to such holders;
provided that a holder of Notes with an aggregate principal amount in excess of
$5,000,000 will be paid by wire transfer in immediately available funds at the
election of such holder. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
Principal and premium, if any, will be payable, and the Notes may be
presented for conversion, registration of transfer and exchange, without service
charge, at the office of the Company maintained by the Company for such purposes
in New York, New York, which shall initially be an office or agency of the
Trustee.
The Indenture does not contain any financial covenants or any restrictions
on the payment of dividends, the repurchase of securities of the Company or the
incurrence of Senior Indebtedness. The Indenture contains no covenants or other
provisions to afford protection to
-27-
holders of Notes in the event of a highly leveraged transaction or a change in
control of the Company except to the limited extent described under "--
Repurchase at Option of Holders Upon a Designated Event" below.
CONVERSION
The holders of Notes will be entitled at any time after May 5, 1996 (60
days following the latest date of original issuance thereof) through the close
of business on the final maturity date of the Notes, subject to prior redemption
or repurchase, to convert any Notes or portions thereof (in denominations of
$1,000 or multiples thereof) into Common Stock of the Company, at the conversion
price of $14 per share of Common Stock, subject to adjustment as described
below. Except as described below, no adjustment will be made on conversion of
any Notes for interest accrued thereon or for dividends on any Common Stock
issued. If Notes are converted after a record date for the payment of interest
and prior to (but excluding) the next succeeding interest payment date, such
Notes, other than Notes called for redemption during such period, must be
accompanied by funds equal to the interest payable on such succeeding interest
payment date on the principal amount so converted. No such payment will be
required if the Company exercises its right to redeem such Notes on a redemption
date that is an interest payment date. The Company is not required to issue
fractional shares of Common Stock upon conversion of Notes and, in lieu thereof,
will pay a cash adjustment based upon the market price of the Common Stock on
the last business day prior to the date of conversion. In the case of Notes
called for redemption, conversion rights will expire at the close of business on
the business day preceding the date fixed for redemption, unless the Company
defaults in payment of the redemption price.
The right of conversion attaching to any Note may be exercised by the
holder by delivering the Note at the specified office of a conversion agent,
accompanied by a duly signed and completed notice of conversion, together with
any funds that may be required as described in the preceding paragraph. The
conversion date shall be the date on which the Note, the duly signed and
completed notice of conversion and any funds that may be required as described
in the preceding paragraph shall have been so delivered. A holder delivering a
Note for conversion will not be required to pay any taxes or duties payable in
respect of the issue or delivery of Common Stock on conversion, but will be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issue or delivery of the Common Stock in a name other than the
holder of the Note. Certificates representing shares of Common Stock will not
be issued or delivered unless all taxes and duties, if any, payable by the
holder have been paid.
The initial conversion price of $14 per share of Common Stock is subject to
adjustment (under formulae set forth in the Indenture) in certain events,
including: (i) the issuance of Common Stock as a dividend or distribution on
Common Stock of the Company; (ii) certain subdivisions and combinations of the
Common Stock; (iii) the issuance to all holders of Common Stock of certain
rights or warrants to purchase Common Stock at less than the current market
price of the Common Stock; (iv) the dividend or other distribution to all
holders of Common Stock of shares of capital stock of the Company (other than
Common Stock) or evidence of
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indebtedness of the Company or assets (including securities, but excluding those
rights, warrants, dividends and distributions referred to above or paid
exclusively in cash); (v) dividends or other distributions consisting
exclusively of cash (excluding any cash portion of distributions referred to in
clause (iv)) to all holders of Common Stock to the extent that such
distributions, combined together with (A) all other such all-cash distributions
made within the preceding 12 months in respect of which no adjustment has been
made plus (B) any cash and the fair market value of other consideration payable
in respect of any tender offers by the Company or any of its subsidiaries for
Common Stock concluded within the preceding 12 months in respect of which no
adjustment has been made, exceeds 10% of the Company's market capitalization
(being the product of the then current market price of the Common Stock times
the number of shares of Common Stock then outstanding) on the record date for
such distribution; (vi) the purchase of Common Stock pursuant to a tender offer
made by the Company or any of its subsidiaries to the extent that the same
involves an aggregate consideration that, together with (X) any cash and the
fair market value of any other consideration payable in any other tender offer
by the Company or any of its subsidiaries for Common Stock expiring within the
12 months preceding such tender offer in respect of which no adjustment has been
made plus (Y) the aggregate amount of any such all-cash distributions referred
to in clause (v) above to all holders of Common Stock within the 12 months
preceding the expiration of such tender offer in respect of which no adjustments
have been made, exceeds 10% of the Company's market capitalization on the
expiration of such tender offer; and (vii) payment in respect of a tender offer
or exchange offer by a person other than the Company or any subsidiary of the
Company in which, as of the closing of the offer, the Board of Directors is not
recommending rejection of the offer. The adjustment referred to in clause (vii)
above will only be made if the tender offer or exchange offer is for an amount
which increases that person's ownership of Common Stock to more than 25% of the
total shares of Common Stock outstanding, and only if the cash and value of any
other consideration included in such payment per share of Common Stock exceeds
the current market price per share of Common Stock on the business day next
succeeding the last date on which tenders or exchanges may be made pursuant to
such tender or exchange. The adjustment referred to in clause (vii) above will
not be made, however, if, as of the closing of the offer, the offering documents
with respect to such offer disclose a plan or an intention to cause the Company
to engage in a consolidation or merger of the Company or a sale of all or
substantially all of the Company's assets.
The Indenture provides that if the Company implements a stockholders'
rights plan, such rights plan must provide that upon conversion of the Notes the
holders will receive, in addition to the Common Stock issuable upon such
conversion, such rights whether or not such rights have separated from the
Common Stock at the time of such conversion.
In the case of (i) any reclassification or change of the Common Stock
(other than changes in par value or resulting from a subdivision or combination)
or (ii) a consolidation, merger, or combination involving the Company or a sale
or conveyance to another corporation of the property and assets of the Company
as an entirety or substantially as an entirety, in each case as a result of
which holders of Common Stock shall be entitled to receive stock, other
securities, other property or assets (including cash) with respect to or in
exchange for such Common Stock,
-29-
the holders of the Notes then outstanding will be entitled thereafter to convert
such Notes into the kind and amount of shares of stock, other securities or
other property or assets which they would have owned or been entitled to receive
upon such reclassification, change, consolidation, merger, combination, sale or
conveyance had such Notes been converted into Common Stock immediately prior to
such reclassification, change, consolidation, merger, combination, sale or
conveyance (assuming, in a case in which the Company's stockholders may exercise
rights of election, that a holder of Notes would not have exercised any rights
of election as to the stock, other securities or other property or assets
receivable in connection therewith and received per share the kind and amount
received per share by a plurality of non-electing shares).
In the event of a taxable distribution to holders of Common Stock (or other
transaction) which results in any adjustment of the conversion price, the
holders of Notes may, in certain circumstances, be deemed to have received a
distribution subject to United States income tax as a dividend; in certain other
circumstances, the absence of such an adjustment may result in a taxable
dividend to the holders of Common Stock. See "Certain Federal Income Tax
Considerations."
The Company from time to time may, to the extent permitted by law, reduce
the conversion price of the Notes by any amount for any period of at least 20
days, in which case the Company shall give at least 15 days' notice of such
decrease, if the Board of Directors has made a determination that such decrease
would be in the best interests of the Company, which determination shall be
conclusive. See "Certain Federal Income Tax Considerations." The Company may,
at its option, make such reductions in the conversion price, in addition to
those set forth above, as the Board of Directors deems advisable to avoid or
diminish any income tax to holders of Common Stock resulting from any dividend
or distribution of stock (or rights to acquire stock) or from any event treated
as such for income tax purposes.
No adjustment in the conversion price will be required unless such
adjustment would require a change of at least 1% in the conversion price then in
effect; provided that any adjustment that would otherwise be required to be made
shall be carried forward and taken into account in any subsequent adjustment.
Except as stated above, the conversion price will not be adjusted for the
issuance of Common Stock or any securities convertible into or exchangeable for
Common Stock or carrying the right to purchase any of the foregoing.
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are not redeemable at the option of the Company prior to February
4, 1999. At any time on or after that date the Notes may be redeemed at the
Company's option on at least 20 but not more than 60 days' notice, as a whole or
from time to time in part, at 100% of the principal amount thereof, together
with accrued interest to (but excluding) the date fixed for redemption; provided
that if a redemption date is an interest payment date, the semi-annual payment
of interest becoming due on such date shall be payable to the holder of record
as of the relevant record date.
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If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed in principal amounts of $1,000 or multiples thereof by lot
or, in its discretion, on a pro rata basis. If any Note is to be redeemed in
part only, a new Note or Notes in principal amount equal to the unredeemed
principal portion thereof will be issued. If a portion of a holder's Notes is
selected for partial redemption and such holder converts a portion of such
Notes, such converted portion shall be deemed to be taken from the portion
selected for redemption.
No sinking fund is provided for the Notes.
REPURCHASE AT OPTION OF HOLDERS UPON A DESIGNATED EVENT
The Indenture provides that if a Designated Event (as defined) occurs, each
holder of Notes shall have the right, at the holder's option, to require the
Company to repurchase all of such holder's Notes, or any portion thereof that is
an integral multiple of $1,000, on the date (the "repurchase date") that is 40
calendar days after the date of the Company Notice (as defined below), for cash
at a price equal to 100% of the principal amount of the Notes, together with
accrued interest, if any, to (but excluding) the repurchase date (the
"repurchase price").
Within 15 calendar days after the occurrence of a Designated Event, the
Company is obligated to mail to all holders of record of the Notes a notice (the
"Company Notice") of the occurrence of such Designated Event and of the
repurchase right arising as a result thereof. The Company must deliver a copy
of the Company Notice to the Trustee and cause a copy or a summary of such
notice to be published in a newspaper of general circulation in the city of New
York. To exercise the repurchase right, a holder of such Notes must deliver, on
or before the 40th day after the Company Notice, written notice to the Company
(or an agent designated by the Company for such purpose) and the Trustee of the
holder's exercise of such right, together with the Notes with respect to which
the right is being exercised, duly endorsed for transfer.
"Designated Event" means a Change in Control (as defined below) or a
Termination of Trading (as defined below).
"Change in Control" means an event or series of events as a result of which
(i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act) of shares representing more than 50% of
the combined voting power of the then outstanding securities entitled to vote
generally in elections of directors of the Company ("Voting Stock"); (ii)
approval by stockholders of the Company of any plan or proposal for the
liquidation, dissolution or winding up of the Company; (iii) the Company
consolidates with or merges into any other corporation, or conveys, transfers or
leases all or substantially all of its assets to any person, or any other
corporation merges into the Company, and in the case of any such transaction,
the outstanding Common Stock of the Company is changed or exchanged into or for
other assets or securities as a result, unless the stockholders of the Company
immediately before such transaction own, directly or indirectly immediately
following such transaction, at least 51%
-31-
of the combined voting power of the outstanding voting securities of the
corporation resulting from such transaction in substantially the same proportion
as their ownership of the Voting Stock immediately before such transaction; or
(iv) any time Continuing Directors (as defined below) do not constitute a
majority of the Board of Directors of the Company (or, if applicable, a
successor corporation to the Company); provided that a Change in Control shall
not be deemed to have occurred if either (x) the last sale price of the Common
Stock for any five trading days during the ten trading days immediately
preceding the Change in Control is at least equal to 105% of the conversion
price in effect on such day or (y) in the case of a merger or consolidation, at
least 90% of the consideration (excluding cash payments for fractional shares)
in such merger or consolidation constituting the Change in Control consists of
common stock traded on a United States national securities exchange or quoted on
Nasdaq (or which will be so traded or quoted when issued or exchanged in
connection with such Change in Control) and as a result of such transaction or
transactions such Notes become convertible solely into such common stock.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such board on February 7, 1996 or (ii) who was
nominated or elected by at least a majority of the directors who were Continuing
Directors at the time of such nomination or election or whose election to the
Company's Board of Directors was recommended or endorsed by at least a majority
of the directors who were Continuing Directors at the time of such nomination or
election. (Under this definition, if the current Board of Directors of the
Company were to approve a new director or directors and then resign, no Change
in Control would occur even though the current Board of Directors would
thereafter cease to be in office.)
No quantitative or other established meaning has been given to the phrase
"all or substantially all" (which appears in the definition of Change in
Control) by courts which have interpreted this phrase in various contexts. In
interpreting this phrase, courts, among other things, make a subjective
determination as to the portion of assets conveyed, considering such factors as
the value of assets conveyed, the proportion of an entity's income derived from
the assets conveyed and the significance of those assets to the ongoing business
of the entity. To the extent the meaning of such phrase is uncertain,
uncertainty will exist as to whether or not a Change in Control may have
occurred (and, accordingly, as to whether or not the holders of Notes will have
the right to require the Company to repurchase their Notes).
A "Termination of Trading" shall have occurred if the Common Stock (or
other common stock into which the Notes are then convertible) is neither listed
or trading on a United States national securities exchange nor approved for
trading on an established automated over-the-counter trading market in the
United States.
The foregoing provisions would not necessarily afford holders of the Notes
protection in the event of a highly leveraged transaction, a change in control
of the Company or other transactions involving the Company that may adversely
affect holders.
-32-
The Company's ability to repurchase Notes upon the occurrence of a
Designated Event is subject to limitations. If a Designated Event were to
occur, there can be no assurance that the Company would have sufficient
financial resources, or would be able to arrange financing, to pay the
repurchase price for all Notes tendered by holders thereof. In addition, the
terms of certain of the Company's existing debt agreements prohibit the Company
from repurchasing any Notes and also identify certain events that would
constitute Designated Events, as well as certain other change in control events
with respect to the Company or certain of its subsidiaries, which would
constitute an event of default under such debt agreements. Any future credit
agreements or other agreements relating to other indebtedness (including other
Senior Indebtedness) to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Designated Event occurs at a time
when the Company is prohibited from repurchasing Notes, the Company could seek
the consent of its lenders to the repurchase of the Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company would remain
prohibited from repurchasing Notes. Any failure by the Company to repurchase
the Notes when required following a Designated Event would result in an Event of
Default under the Indenture whether or not such repurchase is permitted by the
subordination provisions of the Indenture. Any such default may, in turn, cause
a default under Senior Indebtedness of the Company. Moreover, the occurrence of
a Designated Event may cause an event of default under Senior Indebtedness of
the Company. As a result, in each case, any repurchase of the Notes would,
absent a waiver, be prohibited under the subordination provisions of the
Indenture until the Senior Indebtedness is paid in full. See "--Subordination"
below. No Notes may be repurchased at the option of holders upon a Designated
Event if there has occurred and is continuing an Event of Default described
under "--Events of Default and Remedies" below (other than a default in the
payment of the repurchase price with respect to such Notes on the repurchase
date).
Certain leveraged transactions sponsored by the Company's management or an
affiliate of the Company could constitute a Change in Control that would give
rise to the repurchase right. The Indenture does not provide the Company's
Board of Directors with the right to limit or waive the repurchase right in the
event of any such leveraged transaction.
The right to require the Company to repurchase Notes as a result of a
Designated Event could have the effect of delaying, deferring or preventing a
Change in Control or other attempts to acquire control of the Company unless
arrangements have been made to enable the Company to repurchase all of the Notes
at the repurchase date. Consequently, the right may render more difficult or
discourage a merger, consolidation or tender offer (even if such transaction is
supported by the Company's Board of Directors or is favorable to the
stockholders), the assumption of control by a holder of a large block of the
Company's shares and the removal of incumbent management.
SUBORDINATION
The indebtedness evidenced by the Notes is, to the extent provided in the
Indenture, subordinate to the prior payment in full of all Senior Indebtedness
(as defined). During the
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continuance beyond any applicable grace period of any default in the payment of
principal, premium, interest or any other payment due on any Senior
Indebtedness, no payment of principal of, or premium, if any, or interest on the
Notes (including, but not limited to, the redemption price or repurchase price
with respect to the Notes) shall be made by the Company. In addition, upon any
distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization of the Company, the payment of the principal of,
or premium, if any, and interest on the Notes is to be subordinated to the
extent provided in the Indenture in right of payment to the prior payment in
full of all Senior Indebtedness.
By reason of the subordination, in the event of the Company's bankruptcy,
dissolution or reorganization, holders of Senior Indebtedness may receive more,
ratably, and holders of the Notes may receive less, ratably, than the other
creditors of the Company. Such subordination will not prevent the occurrence of
an Event of Default under the Indenture.
The term "Senior Indebtedness" means the principal of, premium, if any,
interest on (including any interest accruing after the filing of a petition by
or against the Company under any bankruptcy law, whether or not allowed as a
claim after such filing in any proceeding under such bankruptcy law), and any
other payment due pursuant to, any of the following, whether outstanding on the
date of the Indenture or thereafter incurred or created: (a) all indebtedness of
the Company for money borrowed or evidenced by notes, debentures, bonds or other
securities (including, but not limited to, those which are convertible or
exchangeable for securities of the Company); (b) all indebtedness of the Company
due and owing with respect to letters of credit (including, but not limited to,
reimbursement obligations with respect thereto); (c) all indebtedness or other
obligations of the Company due and owing with respect to interest rate and
currency swap agreements, cap, floor and collar agreements, currency spot and
forward contracts and other similar agreements and arrangements; (d) all
indebtedness consisting of commitment or standby fees due and payable to lending
institutions with respect to credit facilities or letters of credit available to
the Company; (e) all obligations of the Company under leases required or
permitted to be capitalized under generally accepted accounting principles; (f)
all indebtedness or obligations of others of the kinds described in any of the
preceding clauses (a), (b), (c), (d) or (e) assumed by or guaranteed in any
manner by the Company or in effect guaranteed (directly or indirectly) by the
Company through an agreement to purchase, contingent or otherwise, and all
obligations of the Company under any such guarantee or other arrangements; and
(g) all renewals, extensions, refundings, deferrals, amendments or modifications
of indebtedness or obligations of the kinds described in any of the preceding
clauses (a), (b), (c), (d), (e) or (f); unless in the case of any particular
indebtedness, obligation, renewal, extension, refunding, amendment, modification
or supplement, the instrument or other document creating or evidencing the same
or the assumption or guarantee of the same expressly provides that such
indebtedness, obligation, renewal, extension, refunding, amendment, modification
or supplement is subordinate to, or is not superior to, or is pari passu with,
the Notes; provided that Senior Indebtedness shall not include (i) any
indebtedness of any kind of the Company to any subsidiary of the Company, a
majority of the voting stock of which is owned, directly or indirectly, by the
Company or (ii) indebtedness for trade payables or
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constituting the deferred purchase price of assets or services incurred in the
ordinary course of business.
In the event that, notwithstanding the foregoing, the Trustee or any holder
of Notes receives any payment or distribution of assets of the Company of any
kind in contravention of any of the terms of the Indenture, whether in cash,
property or securities, including, without limitation, by way of set-off or
otherwise, in respect of the Notes before all Senior Indebtedness is paid in
full, then such payment or distribution will be held by the recipient in trust
for the benefit of the holders of Senior Indebtedness of the Company, and will
be immediately paid over or delivered to the holders of Senior Indebtedness of
the Company or their representative or representatives to the extent necessary
to make payment in full of all Senior Indebtedness of the Company remaining
unpaid, after giving effect to any concurrent payment or distribution, or
provision therefor, to or for the holders of Senior Indebtedness of the Company.
The Notes are obligations exclusively of the Company. Although the Company
does not currently have significant operations through its subsidiaries, to the
extent the Company were to commence conducting certain operations or increase
the level of existing operations through subsidiaries, the cash flow and the
consequent ability to service debt, including the Notes, of the Company would be
partially dependent upon the earnings of any such subsidiaries and the
distribution of those earnings, or upon loans or other payments of funds by
those subsidiaries, to the Company. Such subsidiaries would be separate and
distinct legal entities, and would have no obligations, contingent or otherwise,
to pay any amounts due pursuant to the Notes or to make any funds available
therefor, whether by dividends, distributions, loans or other payments. In
addition, the payment of dividends or distributions and the making of loans and
advances to the Company by any such subsidiaries could be subject to statutory
or contractual restrictions, and could be contingent upon the earnings of those
subsidiaries and subject to various business considerations.
Any right of the Company to receive assets of subsidiaries upon their
liquidation or reorganization (and the consequent right of the holders of the
Notes to participate in these assets) will be effectively subordinated to the
claims of that subsidiary's creditors (including trade creditors), except to the
extent that the Company is itself recognized as a creditor of such subsidiary,
in which case the claims of the Company would still be subordinate to any
security interests in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by the Company.
As of December 31, 1995, the Company had approximately $43.0 million of
indebtedness outstanding that constituted Senior Indebtedness. The Indenture
will not limit the amount of additional indebtedness, including Senior
Indebtedness, which the Company can create, incur, assume or guarantee, nor will
the Indenture limit the amount of indebtedness which any subsidiary of the
Company can create, incur, assume or guarantee.
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EVENTS OF DEFAULT AND REMEDIES
An Event of Default is defined in the Indenture as being: (i) a default in
payment of the principal of, or premium, if any, on the Notes (whether or not
such payment is prohibited by the subordination provisions of the Indenture);
(ii) default for 30 days in payment of any installment of interest on the Notes
(whether or not such payment is prohibited by the subordination provisions of
the Indenture); (iii) default by the Company for 45 days after notice given in
accordance with the Indenture in the observance or performance of any other
covenants in the Indenture; (iv) default in the payment of the repurchase price
in respect of the Note on the repurchase date therefor (whether or not such
payment is prohibited by the subordination provisions of the Indenture); (v)
failure to provide timely notice of a Designated Event; (vi) failure of the
Company or any Significant Subsidiary (as defined in the Indenture) to make any
payment at maturity, including any applicable grace period, in respect of
Indebtedness (which term as used in the Indenture means obligations (other than
non-recourse obligations) of, or guaranteed or assumed by, the Company or any
Significant Subsidiary for borrowed money or evidenced by bonds, notes or
similar instruments) in an amount in excess of $10,000,000 and continuance of
such failure for 30 days after notice given in accordance with the Indenture;
(vii) default by the Company or any Significant Subsidiary with respect to any
Indebtedness, which default results in the acceleration of Indebtedness in an
amount in excess of $10,000,000 without such Indebtedness having been discharged
or such acceleration having been cured, waived, rescinded, or annulled for 30
days after notice given in accordance with the Indenture; or (viii) certain
events involving bankruptcy, insolvency or reorganization of the Company or any
Significant Subsidiary.
The Indenture provides that the Trustee shall, within 90 days after the
occurrence of a default, give to the registered holders of the Notes notice of
all uncured defaults known to it, but the Trustee shall be protected in
withholding such notice if it in good faith determines that the withholding of
such notice is in the best interest to such registered holders, except in the
case of a default in the payment of the principal of, or premium, if any, or
interest on, any of the Notes when due or in the payment of any redemption or
repurchase obligation.
The Indenture provides that if any Event of Default shall have occurred and
be continuing, the Trustee or the holders of not less than 25% in principal
amount of the Notes then outstanding may declare the principal of and premium,
if any, on the Notes to be due and payable immediately, but if the Company shall
cure all defaults (except the nonpayment of interest on, premium, if any, and
principal of any Notes which shall have become due by acceleration) and certain
other conditions are met, such declaration may be canceled and past defaults may
be waived by the holders of a majority in principal amount of Notes then
outstanding. If an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization were to occur, all unpaid principal of
and accrued interest on the outstanding Notes will become due and payable
immediately without any declaration or other act on the part of the Trustee or
any holders of Notes, subject to certain limitations.
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The Indenture provides that the holders of a majority in principal amount
of the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee, subject to certain limitations specified in the
Indenture. Before proceeding to exercise any right or power under the Indenture
at the direction of such holders, the Trustee shall be entitled to receive from
such holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with any such direction.
The right of a holder to institute a proceeding with respect to the Indenture is
subject to certain conditions precedent, including the written notice by such
holder of an Event of Default and an offer to indemnify to the Trustee, along
with the written request by the holders of not less than 25% in principal amount
of the outstanding Notes that such a proceeding be instituted, but the holder
has an absolute right to institute suit for the enforcement of payment of the
principal of, and premium, if any, and interest on, such holder's Notes when due
and to convert such Notes.
The holders of not less than a majority in principal amount of the
outstanding Notes may on behalf of the holders of all Notes waive any past
defaults, except (i) a default in payment of the principal of, or premium, if
any, or interest on, any Note when due, (ii) a failure by the Company to convert
any Notes into Common Stock or (iii) in respect of certain provisions of the
Indenture which cannot be modified or amended without the consent of the holder
of each outstanding Note affected thereby.
The Company is required to furnish to the Trustee annually a statement of
certain officers of the Company stating whether or not to the best of their
knowledge the Company is in default in the performance and observation of
certain terms of the Indenture and, if they have knowledge that the Company is
in default, specifying such default.
CONSOLIDATION, MERGER OR ASSUMPTION
The Company may, without the consent of the holders of Notes, consolidate
with, merge into, or transfer all or substantially all of its properties to any
other corporation organized under the laws of the United States or any political
subdivision thereof or therein, provided that the successor corporation assumes
all obligations of the Company under the Indenture and the Notes and that
certain other conditions are met.
MODIFICATIONS OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of not less than a majority in principal amount
of the Notes at the time outstanding, to modify the Indenture or any
supplemental indenture or the rights of the holders of the Notes, except that no
such modification shall (i) extend the fixed maturity of any Note, reduce the
rate or extend the time or payment of interest thereon, reduce the principal
amount thereof or premium, if any, thereon, reduce any amount payable upon
redemption or repurchase thereof, impair or change in any respect adverse to the
holders of Notes the obligation of the Company to make repurchase of any Note
upon the happening of a Designated Event, impair
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or adversely affect the right of a holder to institute suit for the payment
thereof, change the currency in which the Notes are payable, or impair or change
in any respect adverse to the holder of the Notes the right to convert the Notes
into Common Stock subject to the terms set forth in the Indenture or modify the
provisions of the Indenture with respect to the subordination of the Notes in a
manner adverse to the holders of the Notes, without the consent of the holder of
each Note so affected, or (ii) reduce the aforesaid percentage of Notes, without
the consent of the holders of all of the Notes then outstanding.
REGISTRATION RIGHTS
The Company has filed a Shelf Registration Statement on Form S-3 of which
this Prospectus is a part (the "Shelf Registration Statement") pursuant to the
terms of the Registration Rights Agreement. Under the Registration Rights
Agreement, the Company agreed to use its best efforts to cause the Shelf
Registration Statement to become effective as promptly as is practicable and to
keep such Shelf Registration Statement effective until the earlier of such date
that is three years after the latest date of original issuance of any of the
Notes or until the Shelf Registration Statement is no longer required for the
transfer of any Notes or shares of Common Stock issuable upon conversion of the
Notes (the "Securities"). The Registration Rights Agreement provides that the
Company will cause the Shelf Registration Statement to be declared effective by
the Commission on or prior to June 6, 1996. If the Shelf Registration Statement
has not been declared effective by the Commission on or prior to June 6, 1996,
or the Shelf Registration Statement is filed and declared effective but shall
thereafter cease to be effective (without being succeeded immediately by an
additional Shelf Registration Statement filed and declared effective) for a
period of time which shall exceed 90 days in the aggregate per year (either such
event constituting a "Registration Default"), the Company will pay liquidated
damages to each holder of Securities during the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to
$0.05 per week per $1,000 principal amount of Notes and, if applicable, $0.01
per week per share (subject to adjustment in the event of stock splits, stock
recombinations, stock dividends and the like) of Common Stock issued upon
conversion of the Notes held by such holder. The amount of the liquidated
damages will increase by an additional $0.05 per week per $1,000 principal
amount of Notes or $0.01 per week per share (subject to adjustment as set forth
above) of Common Stock issued upon conversion of the Notes for each subsequent
90-day period until the applicable Registration Statement is filed, the
applicable Registration Statement is declared effective and becomes available
for effecting sales of securities, or the Shelf Registration Statement again
becomes effective and becomes available for effecting sales of securities, as
the case may be, up to a maximum amount of liquidated damages of $0.25 per week
per $1,000 principal amount of Notes or $0.05 per week per share (subject to
adjustment as set forth above) of Common Stock. Following the cure of a
Registration Default, liquidated damages will cease to accrue with respect to
such Registration Default. The Company will provide to each registered holder
of Securities copies of this Prospectus, notify each registered holder when the
Shelf Registration Statement of which this Prospectus is a part has become
effective, and take certain other actions as are required to permit unrestricted
resales of the Securities. A holder who sells the Securities pursuant to the
Shelf Registration Statement generally will be required to be named as a Selling
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Securityholder in this Prospectus (or in a supplement thereto) and to deliver
this Prospectus (containing such supplement, if applicable) to purchasers, and
each such holder will be bound by the provisions of the Registration Rights
Agreement which are applicable to such holder (including certain indemnification
provisions).
The specific provisions relating to the registrations described above are
contained in the Registration Rights Agreement.
TAXATION OF NOTES
See "Certain Federal Income Tax Considerations" for a discussion of certain
federal tax aspects which will apply to holders of Notes.
CONCERNING THE TRUSTEE
State Street Bank and Trust Company, the Trustee under the Indenture, has
been appointed by the Company as the initial paying agent, conversion agent,
registrar and custodian with regard to the Notes. The Company may maintain
deposit accounts and conduct other banking transactions with the Trustee or its
affiliates in the ordinary course of business, and the Trustee and its
affiliates may from time to time in the future provide banking and other
services to the Company in the ordinary course of their business.
During the existence of an Event of Default, the Trustee will exercise such
rights and powers vested in it under the Indenture and use the same degree and
care and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs. The Indenture
contains limitations of the rights of the Trustee, should it become a creditor
of the Company, to obtain payment of claims in certain cases or to realize on
certain property received by it in respect of any such claim or otherwise.
DESCRIPTION OF CAPITAL STOCK
The Company has authorized capital stock consisting of 75,000,000 shares of
Common Stock, par value $0.10 per share, of which 34,352,461 shares were
outstanding as of April 29, 1996, and 5,000,000 shares of Preferred Stock, par
value $0.10 per share, none of which were outstanding as of March 29, 1996. The
Company also has outstanding from time to time options and/or warrants to
purchase shares of Common Stock. See the Notes to the Consolidated Financial
Statements incorporated by reference herein.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held of
record and is entitled to dividends as declared from time to time by the Board
of Directors out of assets legally available therefor. Outstanding shares of
Common Stock are not subject to redemption
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and are non-assessable. Upon any liquidation of the Company, the owners of
Common Stock are entitled to receive on a pro-rata basis all assets then legally
available for distribution after satisfaction of any liquidation preference to
which holders of outstanding shares of preferred stock may be entitled. The
holders of Common Stock do not have any conversion, cumulative voting,
subscription or preemptive rights.
PREFERRED STOCK
Of the 5,000,000 shares of preferred stock which are authorized, 1,538,462
shares have been designated "Series A Convertible Preferred Stock" with certain
conversion rights, liquidation preferences and voting rights. So long as at
least 769,231 shares of the Series A Convertible Preferred Stock are
outstanding, the holders thereof are entitled to elect a majority of the
Company's Board of Directors. The remaining authorized shares of preferred
stock may be issued from time to time in one or more series with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions as may be fixed by the Company's Board of Directors. The Board of
Directors, without obtaining shareholder approval, could issue the preferred
stock with voting and/or conversion rights and thereby dilute the voting power
and equity of the holders of Common Stock and adversely affect the market price
of such stock. The Company has no present plans to issue any shares of
preferred stock.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the DGCL. In
general, this statute prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder." An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within the prior three years did own) 15% or more of the
corporation's voting stock. The Company in the future may elect not to be
governed by Section 203 by means of an amendment to the Company's Restated
Certificate of Incorporation or By-laws that has been approved by stockholders
holding a majority of its outstanding voting securities.
The Company's Restated Certificate of Incorporation provides that a merger,
consolidation or sale of all or substantially all of the assets of the Company
or any sale by the Company of its securities having a fair market value of at
least $250,000 requires the approval of the holders of at least 75% of the
outstanding shares of the Company's Common Stock and 50% of any outstanding
shares of NABI Series A Convertible Preferred Stock (so long as the holders of
the Series A shares have the right to elect a majority of the Board of
Directors), unless the transaction is approved by the Board of Directors and
provided that, if the transaction is with a person which owns at the time five
percent or more of the outstanding shares of Common Stock, a majority of the
members of the Board of Directors voting for the approval of the transaction
have been duly elected and acting members of the Board of Directors prior to the
time such person became the holder of five percent or more of the outstanding
shares of Common Stock.
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The Company's Board of Directors believes that the provisions described
above will help assure that all the Company's stockholders will be treated
similarly if certain kinds of business combinations are proposed. However,
these provisions also may have the effect of deterring a hostile takeover or
delaying or preventing changes in control or management of the Company, and may
make it more difficult to accomplish certain transactions that are opposed by
the incumbent Board of Directors and that could be beneficial to stockholders.
LIMITATION OF LIABILITY
As permitted by the DGCL, the Company's Restated Certificate of
Incorporation provides that directors of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, relating to prohibited
dividends or distributions or the repurchase or redemption of stock, or (iv) for
any transaction from which the director derives an improper personal benefit.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Registrar and
Transfer Company, Cranford, New Jersey.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income tax considerations relevant to holders of the Notes. This discussion is
based upon the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now
in effect, all of which are subject to change (possibly with retroactive effect)
or different interpretations. This discussion does not purport to deal with all
aspects of federal income taxation that may be relevant to a particular
investor's decision to purchase the Notes, and it is not intended to be wholly
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations and non-United
States persons, may be subject to special rules. In addition, this discussion
is limited to persons that purchase the Notes in this offering and hold the
Notes as a "capital asset" within the meaning of Section 1221 of the Code.
ALL PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES AND THE COMMON STOCK.
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CONVERSION OF NOTES INTO COMMON STOCK
In general, no gain or loss will be recognized for federal income tax
purposes on a conversion of the Notes into shares of Common Stock. However,
cash paid in lieu of a fractional share of Common Stock will likely result in
taxable gain (or loss), which will be capital gain (or loss), to the extent that
the amount of such cash exceeds (or is exceeded by) the portion of the adjusted
basis of the Note allocable to such fractional share. The adjusted basis of
shares of Common Stock received on conversion will equal the adjusted basis of
the Note converted, reduced by the portion of adjusted basis allocated to any
fractional share of Common Stock exchanged for cash. The holding period of an
investor in the Common Stock received on conversion will include the period
during which the converted Notes were held.
The conversion price of the Notes is subject to adjustment under certain
circumstances. See "Description of Notes--Conversion." Section 305 of the Code
and the Treasury Regulations issued thereunder may treat the holders of the
Notes as having received a constructive distribution, resulting in ordinary
income (subject to a possible dividends received deduction in the case of
corporate holders) to the extent of NABI's current earnings and profits as of
the end of the taxable year to which the constructive distribution relates
and/or accumulated earnings and profits, if and to the extent that certain
adjustments in the conversion price that may occur in limited circumstances
(particularly an adjustment to reflect a taxable dividend to holders of Common
Stock) increase the proportionate interest of a holder of Notes in the fully
diluted Common Stock, whether or not such holder ever exercises its conversion
privilege. Moreover, if there is not a full adjustment to the conversion price
of the Notes to reflect a stock dividend or other event increasing the
proportionate interest of the holders of outstanding Common Stock in the assets
or earnings and profits of NABI, then such increase in the proportionate
interest of the holders of the Common Stock generally will be treated as a
distribution to such holders, taxable as ordinary income (subject to a possible
dividends received deduction in the case of corporate holders) to the extent of
NABI's current earnings and profits as of the end of the taxable year to which
the constructive distribution relates and/or accumulated earnings and profits.
MARKET DISCOUNT
Investors acquiring Notes pursuant to this Prospectus should note that the
resale of those Notes may be adversely affected by the market discount
provisions of sections 1276 through 1278 of the Code. Under the market discount
rules, if a holder of a Note purchases it at market discount (i.e., at a price
below its stated redemption price at maturity) in excess of a statutorily-
defined de minimis amount and thereafter recognizes gain upon a disposition or
retirement of the Note, then the lesser of the gain recognized or the portion of
the market discount that accrued on a ratable basis (or, if elected, on a
constant interest rate basis) generally will be treated as ordinary income at
the time of the disposition. Moreover, any market discount on a Note may be
taxable to an investor to the extent of appreciation at the time of certain
otherwise non-taxable transactions (e.g., gifts). Any accrued market discount
not previously taken into income prior to a conversion of a Note, however, is
likely to carry over to the Common Stock received on
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conversion and be treated as ordinary income upon a subsequent disposition of
such Common Stock to the extent of any gain recognized on such disposition. In
addition, absent an election to include market discount in income as it accrues,
a holder of a market discount debt instrument may be required to defer a portion
of any interest expense that otherwise may be deductible on any indebtedness
incurred or maintained to purchase or carry such debt instrument until the
holder disposes of the debt instrument in a taxable transaction.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Each holder of Notes generally will recognize gain or loss upon the sale,
exchange, redemption, repurchase, retirement or other disposition of those Notes
measured by the difference (if any) between (i) the amount of cash and the fair
market value of any property received (except to the extent that such cash or
other property is attributable to the payment of accrued interest not previously
included in income, which amount will be taxable as ordinary income) and (ii)
the holder's adjusted tax basis in those Notes (including any market discount
previously included in income by the holder). Each holder of Common Stock into
which the Notes are converted, in general, will recognize gain or loss upon the
sale, exchange, redemption, or other disposition of the Common Stock measured
under rules similar to those described in the preceding sentence for the Notes.
Special rules may apply to redemptions of Common Stock which may result in
different treatment. Any such gain or loss recognized on the sale, exchange,
redemption, repurchase, retirement or other disposition of a Note or share of
Common Stock should be capital gain or loss (except as discussed under "--Market
Discount" above), and would be long-term capital gain or loss if the Note or the
Common Stock had been held for more than one year at the time of the sale or
exchange. An investor's initial basis in a Note will be the cash price paid
therefor.
BACK-UP WITHHOLDING
A holder of Notes or Common Stock may be subject to "back-up withholding"
from a reportable payment at a rate of 31 percent if, among other things, (i)
the holder fails to furnish a social security number or other taxpayer
identification number ("TIN") to NABI certified under penalties of perjury
within a reasonable time after the request therefor; (ii) the IRS notifies NABI
that the TIN furnished by the holder is incorrect; (iii) the IRS notifies NABI
that backup withholding should be commenced because the holder has failed to
properly report interest or dividends; or (iv) when required to do so, the
holder fails to certify under penalties of perjury that such holder is not
subject to backup withholding or that the TIN provided to NABI is correct.
Reportable payments include interest payments, dividend payments and, under
certain circumstances, principal payments on the Notes. A holder who does not
provide NABI with its correct TIN also may be subject to penalties imposed by
the IRS. Any amount withheld from a payment to a holder under the back-up
withholding rules is creditable against the holder's federal income tax
liability, provided the required information is furnished to the IRS. Back-up
withholding will not apply, however, with respect to payments made to certain
holders, including corporations, tax-exempt organizations and certain foreign
persons, provided their exemption from back-up withholding is properly
established.
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NABI will report to the holders of Notes and Common Stock and to the IRS
the amount of any "reportable payments" for each calendar year and the amount of
tax withheld, if any, with respect to such payments.
LEGAL MATTERS
Certain legal matters in connection with the Notes and the shares of Common
Stock being offered hereby will be passed upon by Nutter, McClennen & Fish, LLP,
Boston, Massachusetts, counsel to the Company.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of NABI for the year ended December
31, 1995 have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Constantine Alexander, a partner in the law firm Nutter, McClennen & Fish,
LLP, also serves as Secretary of the Company.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the offering to which this Registration
Statement relates, other than commissions, are to be borne by the Company and
are estimated as follows:
Securities and Exchange Commission
Registration Fee......................................... $27,759.00
Accounting Fees.......................................... 5,000.00
Legal Fees............................................... 10,000.00
Printing Expenses........................................ 3,000.00
Miscellaneous Expenses................................... 4,241.00
Total.................................................... $50,000.00
=========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-laws, as amended and restated, provide for indemnification
of officers and directors to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law. The provisions of Article VII of the
Company's By-laws constitute a contract of indemnification between the Company
and its officers and directors. Article 7.08 of the Company's By-laws permits
the Company to purchase and maintain officers' and directors' liability
insurance in order to insure against the liabilities for which such officers and
directors are indemnified pursuant to Article 7.01. The Company provides
officers' and directors' liability insurance for its officers and directors.
The Company has entered into indemnification agreements with each of its
directors and executive officers providing contractual indemnification by the
Company to the fullest extent permissible under Delaware law.
The Company and the Selling Securityholders have agreed to indemnify each
other and each other's controlling persons, as applicable, against certain
liabilities under the Securities Act in connection with this Registration
Statement.
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ITEM 16. LIST OF EXHIBITS.
Exhibit No.
- -----------
4.1 - Indenture dated as of February 1, 1996, between NABI and
State Street Bank and Trust Company, as trustee
(Incorporated by reference to NABI's Annual Report on Form
10-K for the year ended December 31, 1995).
4.2 - Registration Rights Agreement dated as of February 1, 1996,
between NABI and Robertson, Stephens & Company LLC and
Raymond James & Associates, Inc. (Incorporated by reference
to NABI's Annual Report on Form 10-K for the year ended
December 31, 1995).
+5 - Opinion Letter of Nutter, McClennen & Fish, LLP.
+12 - Statements Concerning Computation of Ratios.
+23.1 - Consent of Price Waterhouse LLP.
+23.2 - Consent of Nutter, McClennen & Fish, LLP (contained in
Exhibit 5 hereto).
+24 - Power of Attorney (contained on Page II-4 of the
Registration Statement).
+25 - Statement of Eligibility of Trustee.
_____________________
+ Filed previously.
ITEM 17. UNDERTAKINGS.
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 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;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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;
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(3) 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; and
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement 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;
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, 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 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 against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boca Raton, State of Florida, on this 3rd day of
May, 1996.
NABI
By: /s/ Alfred J. Fernandez
----------------------------------
Alfred J. Fernandez
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons on
behalf of the registrant in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ David J. Gury * Chairman of the Board, President, May 3, 1996
- -----------------------------
David J. Gury Chief Executive Officer
/s/ Alfred J. Fernandez Senior Vice President, May 3, 1996
- -----------------------------
Alfred J. Fernandez Chief Financial Officer
/s/ Lorraine M. Breece * Chief Accounting Officer May 3, 1996
- -----------------------------
Lorraine M. Breece
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/s/ John C. Carlisle* Executive Vice President, May 3, 1996
- ----------------------------- Chief Operating Officer,
John C. Carlisle Director
/s/ Joseph C. Cook, Jr.* Director May 3, 1996
- -----------------------------
Joseph C. Cook, Jr.
/s/ Richard A. Harvey, Jr.* Director May 3, 1996
- -----------------------------
Richard A. Harvey, Jr.
/s/ David L. Castaldi* Director May 3, 1996
- -----------------------------
David L. Castaldi
Director May __, 1996
- -----------------------------
David A. Thompson
/s/ Paul Bogikes* Director May 3, 1996
- -----------------------------
Paul Bogikes
/s/ George W. Ebright* Director May 3, 1996
- -----------------------------
George W. Ebright
/s/ Brian H. Dovey* Director May 3, 1996
- -----------------------------
Brian H. Dovey
* By: /s/ Alfred J. Fernandez
------------------------
Alfred J. Fernandez
Attorney-in-fact
Powers of attorney have been filed
with this Registration Statement
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