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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
From the transition period from _________________ to _________________
Commission file number 0-4829-03
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NABI
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(Name of Registrant)
Delaware 59-1212264
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(State or Jurisdiction of Incorporation I.R.S. Employer
or Organization) Identification Number
5800 Park of Commerce Boulevard N.W., Boca Raton, Florida 33487
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Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 25, 1998, 34,893,934 shares of common stock were
outstanding, of which 33,324,917 shares were held of record by non-affiliates.
The aggregate market value of shares held by non affiliates was approximately
$108,305,980 based on the closing price per share of such common stock on such
date as reported by the Nasdaq National Market.
Documents Incorporated by Reference
Portions of Nabi's definitive Proxy Statement for its annual meeting of
shareholders which Nabi intends to file within 120 days after the end of Nabi's
fiscal year ended December 31, 1997 are incorporated by reference into Part III
hereof as provided therein.
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PART I
ITEM 1. BUSINESS
OVERVIEW
Nabi is a research and development driven biopharmaceutical company making and
marketing unique products for people with life threatening conditions. Nabi
possesses a broad portfolio of therapeutic products and vaccines to treat and
prevent infectious diseases and immune disorders. Nabi's product portfolio
includes three products approved by the United States Food and Drug
Administration (the "FDA") and nine main products across four classes in
development, including four products in clinical trials. Nabi has completed
construction and is in the process of validating a new biopharmaceutical
manufacturing facility designed to process plasma into therapeutic products. In
addition, Nabi is one of the world's largest suppliers of source plasma and
specialty plasmas which are sold to pharmaceutical and diagnostic companies.
Some of the plasma that Nabi collects also is used to manufacture Nabi's
proprietary products. Nabi collects plasma from an extensive donor base through
71 collection centers in the United States and four collection centers in
Germany. During 1996 and 1997 Nabi collected and processed approximately
2,322,000 and 2,274,000 liters of plasma, respectively. In addition, Nabi
manufactures and markets human-blood and plasma-based diagnostic products and
provides testing services on plasma and blood samples for third parties.
Nabi intends to achieve its objective of becoming a leader in the development
and marketing of proprietary therapeutic products and vaccines by expanding its
therapeutics franchise to include new antiviral and antibacterial products,
developing unique vaccines targeted to significant niche markets, developing its
own manufacturing capabilities, and continuing to optimize its plasma business
through sales of higher-margin specialty products. Nabi has combined its
expertise in the plasma business and the revenues and critical raw materials
generated by that business with a research and development team of more than 100
people capable of developing multiple product opportunities simultaneously and
bringing products through the clinical development and FDA approval processes.
Nabi has a diverse portfolio of plasma-based therapeutic products, such as
H-BIG(R), H-BIG(R) IV, WinRho SDF(TM), Autoplex(R)T, Nabi-Altastaph(TM)
(formerly StaphGAM), Nabi-Altastaph(TM)+ and, Nabi-Civacir(TM) (formerly H-CIG)
for immediate short-term protection against autoimmune and infectious diseases
and their associated complications. Nabi is also developing vaccines, such as
Nabi-StaphVAX(TM) and Nabi-StaphVAX(TM)+, to be used both as stand-alone
vaccines and as immunizing agents in plasma donors to produce purified human
antibodies for its antibody-based therapeutic products. The therapeutics
franchise has further diversified with the addition of small molecule nucleoside
analogs, such as Nabi-Cytera(TM).
MARKETED PRODUCTS
THERAPEUTIC PRODUCTS
Revenue generated by Nabi's therapeutic products has almost doubled since 1995.
Sales of these products grew 31% from $26.4 million in 1996 to $34.5 million in
1997. Nabi is currently marketing three therapeutic products approved by the
FDA: H-BIG(R), WinRho SDF(TM) and Autoplex(R)T. These products are described
below:
H-BIG(R)
Despite the availability of hepatitis B vaccines, hepatitis B infection has
spread rapidly and now affects an estimated 300 million people worldwide. The
Centers for Disease Control and Prevention (the "CDC")
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recommends that newborn infants of mothers who are hepatitis B-positive be
inoculated with both hepatitis B immune globulin and a hepatitis B vaccine.
H-BIG(R) is an intramuscular, human polyconal antibody product used following
exposure by blood transfusion, accidental ingestion, transmission from a
hepatitis B antigen-positive mother or sexual exposure. H-BIG(R), which has been
marketed since 1977, was the first hepatitis B plasma-based therapeutic product
to be licensed by the FDA. Nabi has marketed H-BIG(R) since September 1992 when
it acquired the product from Abbott Laboratories ("Abbott"). See "-Strategic
Alliances, Licenses and Royalty Obligations".
WinRho SDF(TM)
WinRho SDF(TM) is a human polyconal antibody product approved for the treatment
of Idiopathic Thrombocytopenia Purpura ("ITP") and for the suppression of Rh
isoimmunization. ITP is an autoimmune blood disorder characterized by abnormally
low platelet levels due to platelet destruction by the patient's own immune
system. Because platelets are required for blood clotting, the disorder can
result in uncontrolled bleeding, either spontaneously or in response to trauma.
In certain cases, such as severe trauma or spontaneous intracranial hemorrhage,
the bleeding can be life-threatening. ITP can occur as either a primary disease,
with no other associated condition, or secondary to another underlying disease,
such as HIV infection or lupus. Unless associated with HIV infection, ITP in
children is generally an acute condition which does not generally become
chronic. In adults, whether primary or secondary to HIV infection, the disease
is usually chronic in nature.
Nabi began exclusive marketing of WinRho SDF(TM) in the United States in
mid-1995 under a license and distribution agreement with Cangene Corporation.
WinRho SDF(TM) for the treatment of ITP has been designated an Orphan Drug. In
1997, Nabi initiated two Phase IV clinical trials for WinRho SDF(TM) and will
add another Phase IV trial in 1998 for the following indications: acute
pediatric ITP, splenectomy sparing in chronic ITP of adults and refractory
platelet alloimmunization. See "-Strategic Alliances, Licenses and Royalty
Obligations" and "-Government and Industry Regulation-Orphan Drug Act".
AutoPlex(R)T
AutoPlex(R)T is a complex of blood coagulation factors derived from plasma and
used to treat hemophilia A patients who have developed antibodies (inhibitors)
to Factor VIII, the standard therapy for people suffering from hemophilia A. In
May 1997, Nabi acquired certain assets associated with the product sales of
AutoPlex(R)T and obtained exclusive marketing rights for this product in the
United States, Canada and Mexico from Baxter Healthcare Corporation ("Baxter").
PLASMA PRODUCTS
Source Plasma
Nabi is one of the world's largest suppliers of human blood plasma to the
pharmaceutical and diagnostic industries. During 1996 and 1997, Nabi derived
revenues of $121.0 million and $135.3 million, respectively, from the sale of
source plasma, representing 58.2% and 71.3%, respectively, of Nabi's total
revenues from the sale of plasma.
Plasma is the liquid portion of blood which contains various proteins, as
distinguished from formed elements of the blood such as red blood cells, white
blood cells and platelets. Plasma is composed of several primary proteins
including: albumin, anti-hemophilic factor ("AHF") VIII and IX, and immune
globulin. After collection from donors, plasma is fractionated into these
purified proteins. The therapeutic market for these proteins drives overall
demand for plasma. The primary uses of these proteins are as follows:
o Albumin is the protein used to restore plasma volume subsequent to shock,
trauma, surgery and burns.
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o AHF VIII and IX are the clotting factors in plasma used to treat hemophilia
A and B as well as other clotting disorders.
o Immune globulin is the component of plasma, also known as antibodies, which
helps the body to fight or prevent disease. Therapeutic uses of standard
immune globulin from source plasma include the treatment of pediatric HIV,
bone marrow transplantation, B cell chronic lymphocytic leukemia,
hypogammaglobulinemia, Kawasaki syndrome and other chronic immune
deficiencies.
Specialty Plasma
During 1996 and 1997, Nabi derived revenues of $86.8 million and $54.3 million,
respectively, from the sale of specialty plasma, representing 41.8% and 28.7%,
respectively, of Nabi's total revenues from the sale of plasma.
Plasma which contains high concentrations of specific antibodies is known as
specialty plasma and is distinguished from source plasma, which has normal
concentrations of antibodies. Specialty plasma is used primarily to manufacture
hyperimmune globulins which are used to bolster the immunity of patients to help
fight a particular infection or to treat certain immune system disorders.
Following advances in intravenous immune globulin therapy in the mid-1980s, use
of specialty plasmas to generate therapeutic immune globulin products
significantly increased. Among the current uses for specialty plasmas are the
production of hyperimmune globulins to prevent or treat exposure to hepatitis A
and B, cytomegalovirus ("CMV"), tetanus and rabies and production of products to
treat ITP and Rh incompatibility in newborns. Specialty plasmas and hyperimmune
globulins derived from them are also used for diagnostic and tissue culture
purposes. Like source plasma, specialty plasma is fractionated into its
component proteins and the resulting hyperimmune globulin fraction is used to
manufacture therapeutic products.
Nabi identifies potential specialty plasma donors through internal screening and
testing procedures. Nabi also has developed FDA-licensed programs to vaccinate
potential donors to stimulate their production of specific antibodies. Through
Nabi's nationwide operations and access to its large and diverse donor base of
approximately 300,000 individuals, Nabi believes it has a strategic advantage in
its ability to collect specialty plasmas.
Nabi's principal specialty plasmas include:
o ANTI-D PLASMA. Specialty plasma containing anti-D antibodies has long been
used when there is a mismatch between a mother's Rh factor and that of her
fetus. Plasma collected from donors who have natural levels of anti-D or
who have been vaccinated to raise their anti-D levels is used to make
products to protect the infant. Nabi has proprietary donor stimulation and
management programs which enhance its ability to increase collection of
anti-D plasma. WinRho SDF(TM), a therapeutic product that Nabi markets in
the U.S. for the treatment of ITP, is also produced from anti-D plasma.
o ANTI-HEPATITIS B PLASMA. Nabi provides specialty plasma containing high
levels of antibodies to hepatitis B virus to manufacturers of hepatitis B
immune globulin therapeutic products which provide passive immunity against
hepatitis B virus. This specialty plasma collected by Nabi is also used to
produce H-BIG(R), Nabi's propriety hepatitis B therapeutic product. Nabi
believes that its proprietary donor stimulation and donor management
programs generally allow Nabi to produce anti-hepatitis B plasma having a
higher concentration and broader specificity than competing products.
o CMV PLASMA. Many individuals have been exposed to CMV. By screening its
large donor population, Nabi can identify individuals with high
concentrations of CMV antibodies in their plasma, and can supply the plasma
to product manufacturers to enhance intravenous products and to produce
CMV-specific immune globulin therapeutic products.
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o RABIES PLASMA. Nabi is a major supplier of specialty plasma enriched in
antibodies to rabies virus. Rabies plasma is used by manufacturers to make
therapeutic products which provide a short-term protective antibody
immunity to patients exposed to the rabies virus.
o RESPIRATORY SYNCYTIAL VIRUS ("RSV") PLASMA. Many individuals have been
exposed to RSV during childhood. By screening its large donor population,
Nabi can identify individuals with high concentrations of RSV-specific
antibodies in their plasma. This plasma is supplied to the major
manufacturers of RSV immune globulin therapeutic product. RSV is the
leading cause of lower respiratory tract infections in infants and young
children.
o TETANUS PLASMA. Nabi is a major supplier of specialty plasma enriched with
antibodies to tetanus toxin. Manufacturers use tetanus plasma to produce
therapeutic products which provide short-term protective immunity to
patients exposed to tetanus.
DIAGNOSTIC PRODUCTS AND SERVICES
Nabi is a supplier of infectious disease quality assurance and specialty
plasma-based products to in-vitro diagnostic ("IVD") manufacturers, regulatory
agencies and testing laboratories. Nabi's seroconverter panels and
reactive/disease-state plasmas are utilized by IVD manufacturers in the
development and production of blood screening assays. Nabi also offers a
clinical trial service to assist IVD manufacturers with regulatory submissions.
Regulatory agencies in the U.S. and Europe also use Nabi's diagnostic products
to evaluate test kits for licensure. Once test kits reach the end-user testing
laboratory, Nabi's ViroSure external run controls and proficiency panels are
used to assure accurate testing for blood screening and infectious disease
diagnostics.
THERAPEUTIC PRODUCTS UNDER DEVELOPMENT
Nabi is developing products for the prevention and treatment of infectious
diseases and their associated complications through activation and targeting of
the human immune system. Nabi is focusing a portion of its efforts on
hyperimmune globulin products which are produced from specialty plasma and which
contain a rich mixture of specific antibodies produced by healthy donors
naturally or in response to exposure to immunization. These highly purified,
human polyconal antibodies are administered to provide passive immunity against
infection in immune-compromised patients who cannot respond to a vaccine or
patients who are immediately at risk and therefore do not have time to mount
their own antibody response to vaccination. The use of plasma-derived antibody
products increased in the mid-1980's as a result of the development of
intravenous formulations which made administration of larger therapeutic doses
practical for a broad range of specific diseases. As a result, immune globulin
therapy has become a growing part of medical practice.
Nabi also is developing vaccines to be used both as immunizing agents in plasma
donors to produce antibodies for therapeutic products and as stand-alone
vaccines for long-term protection against infection in at risk populations. Nabi
is initially concentrating its vaccine development efforts on vaccines for
bacterial infections, particularly those that are hospital acquired or
associated with chronic disease. Nabi believes there may also be areas outside
of infectious diseases, for example, in the prevention and treatment of nicotine
addiction, for which conjugate vaccine technology may be applied.
Nabi has the research and development expertise and intellectual property to
develop bacterial vaccines based on carbohydrates, proteins and
carbohydrate/protein conjugates. Nabi's specific capabilities in the development
of bacterial vaccines include, among others: broad expertise in the immunology,
pathology and epidemiology associated with bacterial infections; the
identification, purification and characterization
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of bacterial antigens; the development of animal models of infection and the
development of assays and manufacturing processes.
Nabi is developing a broad product line that includes nine main products across
four product classes, including four products in clinical trials. These products
are described below:
POTENTIAL APPLICATIONS
PRODUCTS (PRODUCT TYPE) STATUS
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H-BIG(R) IV Prevention of hepatitis B reinfection Pivotal clinical trial scheduled
in liver transplant patients for 1998.
(inmune globulin).
WINRHO SDF(TM) Prevention of alloimmune Phase IV clinical trial in progress.
conditions, expansion of use
in ITP (immunoglobulin).
NABI-ALTASTAPH(TM) Prevention of Staphylococcus Donor stimulation in progress;
aureus infections (immune globulin). Phase I/II clinical trials underway.
NABI-STAPHVAX(TM) Prevention of S. AUREUS infections (vaccine). Phase II clinical trial completed;
follow-on dosing studies in
hemodialysis patients completed,
Phase III study in hemodialysis
patients scheduled to begin
first Quarter of 1998.
NABI-CIVACIR(TM) Prevention of hepatitis C virus- reinfection Preclinical primate
in liver transplant patients, post- studies underway.
exposure prophylaxis & treatment
of chronic hepatitis C virus infection
(immune globulin).
NABI-ALTASTAPH(TM)+ Prevention of S. AUREUS, S. EPIDERMIDIS Preclinical
infections and enterococcal infections
(immune globulin).
NABI-STAPHVAX(TM)+ Prevention of S. AUREUS AND S. EPIDERMIDIS Preclinical
and enterococcal infections (vaccine).
NABI-NIC VAX(TM) Prevention and treatment of nicotine Preclinical
addiction associated with tobacco use
(vaccine).
NABI-CYTERA(TM) Treatment of viral infections & cancer Preclinical
(ring expanded nucleoside analogs).
OTHER VACCINES & Various Preclinical
OTHER ANTI-MICROBIALS
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H-BIG(R) IV
Chronic hepatitis B infections can cause a deterioration of the liver, resulting
in the need for liver transplantation. Of the 126 liver transplant centers in
the U.S., only 65 currently transplant hepatitis B ("HBV") infected patients,
because historically these patients were susceptible to HBV reinfection.
However, with the use of H-BIG(R), reinfection can be significantly delayed or
prevented thus allowing more patients with HBV-induced liver failure to be
transplanted. Nabi considers this patient population a significant opportunity.
There are no products similar to H-BIG(R) IV available in the United States. In
Europe, however, certain manufacturers are currently producing substantially
similar products. If H-BIG(R) IV proves successful and receives FDA approval,
and subsequent approval in the United States medical community results in the
relaxation of prohibitions against conducting liver transplants in hepatitis B
patients, management believes that the number of hepatitis B patients receiving
liver transplants could increase.
Nabi believes treatment with H-BIG(R) IV will greatly reduce the risk of
hepatitis B re-infection in liver transplant patients by providing the patient
with additional resistance to the disease and therefore will increase the number
of liver transplants given to hepatitis B patients. Prevention of hepatitis B
reinfection is likely to require a series of intravenous treatments with large
amounts of H-BIG(R) IV during and immediately following transplantation and
maintenance doses for extended periods of undetermined length, compared to
current indications for H-BIG(R) which require only a single intramuscular
injection of a small amount of antibody. Such large doses of H-BIG(R) IV are
anticipated because liver transplant patients receive large quantities of drugs
that suppress the immune system to prevent rejection of their transplanted
organs. As a result, hepatitis B patients require large amounts of antibody in
order to neutralize the infectious virus produced BY VIRONS that persist in
non-hepatic replication sites.
Nabi is continuing human clinical trials during 1998 to study the safety and
pharmacokinetic tests in liver transplant patients. H-BIG(R) IV has been granted
Orphan Drug status as a prophylaxis against hepatitis B reinfection in liver
transplant recipients. See "-Government and Industry Regulation - Orphan Drug
Act".
WINRHO SDF(TM)
WinRho SDF(TM) is a human polyconal antibody product designed for the treatment
of ITP and the suppression of Rh isoimmunization. ITP is a blood disorder
characterized by abnormally low platelet levels due to platelet destruction by
the patient's own immune system. Because platelets are required for blood
clotting, the disorder can result in uncontrolled bleeding, either spontaneously
or in response to minor trauma. In certain cases, such as severe trauma or
spontaneous intracranial hemorrhage, the bleeding can be life-threatening. ITP
can occur as either a primary disease, with no other associated condition, or
secondary to another underlying disease, such as HIV infection or lupus. In
1997, Nabi initiated two Phase IV clinical trials for WinRho SDF(TM) and will
add another Phase IV trial in 1998 for the following indications: acute
pediatric ITP, splenectomy sparing in chronic ITP of adults and refractory
platelet alloimmunization. See "-Strategic Alliances, Licenses and Royalty
Obligations" and "-Government and Industry Regulation-Orphan Drug Act".
NABI-STAPHVAX(TM) AND NABI-ALTASTAPH(TM)
Staphylococci, especially Staphylococcus aureus ("S. AUREUS") and Staphylococcus
epidermidis ("S. EPIDERMIDIS"), are an increasingly important cause of serious
bacterial infections in hospitalized patients and patients with chronic disease.
In addition, staphylococci continue to acquire antibiotic resistance at an
alarming rate in all clinical settings.
It is currently estimated that 40% of the S. AUREUS infections and 60% of the S.
EPIDERMIDIS infections occurring in large, urban U.S. hospitals are resistant to
every antibiotic except vancomycin. As well, during the past 6 months, cases of
S. AUREUS with notably reduced sensitivity to vancomycin were
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reported in Japan and the United States. The Nabi-StaphVAX(TM) and
Nabi-Altastaph(TM) products rely on a different mechanism of action than those
of systemic antibiotics, therefore it is believed that prophylactic use of these
products will not be prone to the selection of resistant mutants.
Nabi is developing two products for the prevention and treatment of S. AUREUS
infections. Nabi-StaphVAX(TM) is a capsular polysaccharide-based glycoconjugate
vaccine which targets the two S. AUREUS serotypes (Type 5 and Type 8)
responsible for over 85% of S. AUREUS infections. This bivalent vaccine is a
carbohydrate/protein conjugate based on patented vaccine technology in-licensed
by Nabi from the National Institute of Health ("NIH"). See "-Strategies
Alliances, Licenses and Royalty Obligations". Nabi-Altastaph(TM) is a specific
polyclonal antibody product that contains high levels of antibodies against S.
AUREUS Type 5 and Type 8. It is produced by immunizing healthy plasma donors
with Nabi-StaphVAX(TM) then purifying immunoglobulin from pooled donor plasma.
Nabi-StaphVAX(TM) is directed at patients who are at high risk of infection over
an extended period of time and who are immunocompetent and thus able to respond
to a vaccine. The initial clinical target is kidney hemodialysis patients who
are at high risk of S. AUREUS infections due to their vascular access grafts.
Other potential clinical targets for Nabi-StaphVAX(TM) include: (a) at risk
patients who are expected to have long stays in medical facilities; (b) patients
undergoing planned cardiac surgery who can be vaccinated in advance and in whom
staphylococcal infections can have serious consequences; (c) prosthetic surgery
and vascular graft patients whose implants are at long-term risk of
staphylococcal infections; and (d) patients undergoing any other planned
surgery. Nabi began Phase III clinical studies of Nabi-StaphVAX(TM) in
hemodialysis patients early in 1998. This trial uses Nabi-StaphVAX(TM)
formulated to provide higher levels of protective antibodies in
immunocompromised patients, such as those undergoing renal dialysis.
Recently, Nabi identified a serotype of S. AUREUS (type 336) that accounts for
over 90% of non-type 5 and non-type 8 S. AUREUS clinical infections. The company
has identified, purified and characterized a polysaccharide from type 336 S.
AUREUS and has prepared a glycoconjugate vaccine that is capable of protecting
animals from challenge with clinical isolates of this serotype. A trivalent
Nabi-StaphVAX(TM) containing antigens to type 5, type 8 and type 336 antigens is
currently in evaluation in cattle for the prevention of S. AUREUS induced
mastitis. This study is being conducted under a Cooperative Research and
Development Agreement with the U.S. Department of Agriculture. Based on the
reactivity of antibodies to this trivalent vaccine with human clinical isolates
of S. AUREUS, this vaccine is expected to account for nearly all clinical
isolates of S. AUREUS. Nabi has applied for patents for type 336 antigen,
antibodies to type 336 and the use of type 336 antigen in vaccines. The company
plans to include type 336 antigen in the next generation of its
Nabi-StaphVAX(TM) product.
In contrast to Nabi-StaphVAX(TM), which is expected to provide long-term
immunological protection, Nabi-Altastaph(TM) is designed to provide immediate,
on demand protection for patients who are at high, short-term risk of infection
or who are immunocompromised and cannot respond effectively to a vaccine. This
type of prophylactic treatment is likely to be cost effective because
intravaneously administered polyclonal antibodies persist in the bloodstream for
several weeks, and a single dose may be sufficient to provide protection for the
entire risk period. High risk populations include low birth weight neonates,
trauma patients and surgical patients. Nabi began a Phase I/II trial in neonates
in early 1998.
Previous studies using either rats or mice in several different bacterial
challenge modes have demonstrated the efficacy of active immunization with
Nabi-StaphVAX(TM) and passive protection with Nabi-Altastaph(TM). In all
prophylactic settings studied, antibodies to Nabi-StaphVAX(TM), whether actively
or passively acquired, conferred statistically significant protection against
the relevant S. AUREUS challenge strains.
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NABI-CIVACIR(TM)
Nabi-Civacir(TM) is a human polyclonal antibody product derived from the plasma
of screened donors. It is designed to prevent hepatitis C virus reinfection in
liver transplant patients who test positive for hepatitis C antibody at the time
of transplant, as a potential adjunctive therapy in chronic hepatitis C
infection, and as a prophylaxis after needlestick injury. Approximately 40% -
50% of liver transplants are caused by liver complications resulting from
hepatitis C infections. Hepatitis C is not as imminently pathogenic as hepatitis
B; however, it does have significant economic impact because it causes chronic
infections in a significant percentage of those infected and contributes to
frequent hospitalizations when it occurs in liver transplant patients.
In 1998, Nabi initiated a series of chimpanzee studies of Nabi-Civacir(TM) in
collaboration with the U.S. Centers for Disease Control under a Cooperative
Research and Development Agreement. The studies will evaluate Nabi-Civacir(TM)
in this relevant animal model of hepatitis C virus infection. Preliminary data
from these studies to date show that Nabi-Civacir(TM) is able to delay the onset
of acute hepatitis in a challenged chimp. Additional studies are underway to
evaluate the ability of repeated doses of the drug to delay hepatitis
indefinitely. Pending results from the chimpanzee studies, Nabi plans to enter a
Phase I safety study with Nabi-Civacir(TM) iN late 1998. Nabi has applied for
Orphan Drug status for Nabi-Civacir(TM).
NABI-STAPHVAX(TM)+, NABI-ALTASTAPH(TM)+
Staphylococcus epidermidis and Enterococcus spp. are the next most clinically
common Gram positive bacterial infections after S. AUREUS. Because of this, Nabi
is developing a combination vaccine product, Nabi-StaphVAX(TM)+, that expands
coverage of Gram positive bacterial to include these pathogens. The S.
EPIDERMIDIS and enterococcal components of a combined staphylococcal and
enterococcal vaccine are undergoing preclinical testing and process development.
It recently has been shown that antibodies to these antigens are protective in
animal models and facilitate the killing of bacteria by white blood cells. In
addition, the S. EPIDERMIDIS antigens contained in this next generation vaccine
induce the formation of antibodies that recognize the S. EPIDERMIDIS strains
responsible for over 90% of S. EPIDERMIDIS infections. The company has filed
patent application in the S. EPIDERMIDIS and enterococcal antigens.
In connection with Nabi-StaphVAX(TM)+, Nabi plans to develop a second-generation
polyconal product, Nabi-Altastaph(TM)+, containing antibodies to both S. AUREUS
and S. EPIDERMIDIS. Development of this product will involve stimulating donors
with immunizing agents against both infections.
NABI-NIC VAX(TM)
The use of tobacco products has been associated with increased risk of heart and
lung disease and cancer world-wide. Addiction to nicotine as a result of tobacco
use has been identified as one of the major factors that prevent cigarette
smokers and other tobacco users from giving up this life-threatening activity.
Nabi has begun development of a vaccine against nicotine that is intended to be
used to prevent and treat nicotine addiction. Prototypic versions of the vaccine
induce high titers of nicotine-specific antibodies in vaccinated animals.
Studies evaluating the ability of the vaccine to prevent intake of nicotine into
the brain and to modify animal behavior in response to nicotine are underway.
Nabi believes that a nicotine vaccine that raises antibodies that bind nicotine
with high affinity can prevent nicotine addiction by blocking nicotine from
reaching drug receptors in the brain. The company also believes that Nabi-Nic
VAX(TM) can be an effective product for those attempting to give up tobacco use.
NABI-CYTERA(TM)
Nabi-Cytera(TM) is a new class of anti-viral therapeutics being developed from a
novel, proprietary technology developed at the University of Maryland and
licensed by Nabi. The technology permits the synthesis of so-called ring
expanded nucleoside (RENs) and nucleotide ("RENt) analogs with the potential for
antiviral and anti-tumor cell activity. Using this technology, a number of
active compounds have been
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prepared by Nabi through its collaboration with the University. A lead compound
has been selected for further development. This drug, called Nabi-Cytera(TM)-B
has been initially shown to have an acceptable cytotoxicity profile and to have
good activity and specificity against hepatitis B virus IN VITOR. Further
preclinical development of Nabi-Cytera(TM)-B is scheduled for 1998 in
preparation for studies in the highly relevant woodchuck hepatitis model planned
for later in the year". See "-Strategic Alliances, Licenses and Royalty
Obligations".
STRATEGIC ALLIANCES, LICENSES AND ROYALTY OBLIGATIONS
In its research and development and marketing programs, Nabi established
collaborations with several leading infectious disease specialists, university
laboratories, contract research companies and government laboratories. Nabi
believes that these collaborations will allow it to make efficient use of its
research resources and leverage the fundamental discoveries emerging from basic
research institutions throughout the United States.
Nabi's key strategic alliances are discussed below.
CANGENE CORPORATION
During 1997, Nabi entered into a co-promotion and supply agreement with Cangene
Corporation ("Cangene") under which Cangene will manufacture H-BIG(R) IV for
approximately three years. In addition, Cangene was granted exclusive marketing
rights for, and will share profits from sales of H-BIG(R) IV in Canada for three
years, provided Cangene achieves specified minimum annual sales levels.
Under a license and distribution agreement with Cangene, Nabi has exclusive
marketing rights for, and shares in the profits from sales of, WinRho SDF(TM) in
the United States. Cangene, which holds the FDA licenses for thE product, is
required to supply the necessary quantities of WinRho SDF(TM) to support such
sales. The Cangene agreement terminates in 2005, and requires Nabi to meet
specified sales goals and make specified payments to Cangene.
CHIRON DIAGNOSTICS CORPORATION
In November 1995, Nabi entered into an agreement with Chiron (the "Chiron
Agreement") pursuant to which Chiron has agreed to supply exclusively to Nabi
Chiron's CMV vaccine for use as an immunizing agent in humans to produce
immunotherapeutic products. The Chiron Agreement also grants Nabi options or
rights of first negotiation for exclusive rights to 14 other Chiron vaccines for
use in humans to produce immunotherapeutic products. In addition, the Chiron
Agreement grants Nabi access to Chiron's adjuvant, MF 59, for donor
immunization. Nabi will be responsible for all development, manufacturing and
worldwide distribution of these products. Nabi may terminate the Chiron
Agreement on a product-by-product basis in which event Nabi shall transfer to
Chiron all of Nabi's rights with respect to the product as to which the Chiron
Agreement has been terminated. Similarly, Chiron may terminate its obligations
to supply immunizing agents to Nabi on a product-by-product basis, in which
event Chiron shall grant to Nabi a license of the technology necessary for Nabi
to manufacture the applicable immunizing agent and the financial arrangements in
the Chiron Agreement with respect to such agent shall continue.
OTHER LICENSES AND ROYALTY OBLIGATIONS
As part of the purchase price for the H-BIG(R) product acquisition, Nabi is
obligated to pay Abbott a royalty based on net sales of H-BIG(R) through
September 2002. Nabi will also be obligated to pay a royalty to the New York
Blood Center, Inc. based upon net sales of its product manufactured with the
viral inactivation step, solvent detergent treatment.
Under a license agreement with the NIH, Nabi has exclusive rights to the NIH's
patent relating to a carbohydrate/protein conjugate vaccine against
Staphylococcus, and is obligated to pay the NIH a royalty
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based on net sales. The licensed patent rights cover Nabi-StaphVAX(TM) and
Nabi-Altastaph(TM) products. The license terminates with respect to each country
on the date that the NIH's patent rights expire in such country.
Under a license agreement with the University of Maryland, Nabi has exclusive
rights to patents relating to ring expanded nucleoside and nucleotide analogs,
and is obligated to pay the University a royalty based on net sales. The
licensed patent rights cover Nabi-Cytera(TM)'s products. The license terminates
with respect to each country on the date that the patent rights expire in such
country.
CUSTOMER RELATIONSHIPS
Nabi sells therapeutic products to wholesalers, distributors, home healthcare
companies and pharmacies. Nabi sells plasma to pharmaceutical and diagnostic
product manufacturers, most of which have been customers of Nabi for many years.
These customers constitute most of the worldwide purchasers of human blood
plasma.
Customers to which sales exceeded 10% of Nabi's annual consolidated sales in the
last three fiscal years ending December 31, 1997 were: Baxter, Bayer Corporation
("Bayer") and Immuno Trading AG ("Immuno") in 1995; Baxter; Bayer and Biotest
Pharma GmbH ("Biotest") in 1996; and Baxter and Bayer in 1997. Aggregate sales
of source and specialty plasma to these customers were approximately $92
million, $107 million and $93 million, or 47%, 45% and 41% of total sales for
the years ended December 31, 1995, 1996 and 1997, respectively.
Nabi generally sells its plasma under contracts ranging from one to five years
which allow for annual pricing renegotiations. Pricing for product deliveries is
generally mutually agreed to prior to the beginning of the contract year and
fixed for that 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 regulations. Consequently, Nabi may be
adversely or beneficially affected if changes in donor fees or other costs of
producing and selling plasma rise or fall during the year.
SUPPLY AND MANUFACTURING
THERAPEUTICS
Nabi collects and supplies the specialty plasma necessary for the manufacture of
H-BIG(R). In 1997, Nabi entered into an agreement with Cangene pursuant to which
Cangene, subject to receiving FDA approval, will formulate, process and package
H-BIG(R). Nabi anticipates receiving product from Cangene by late 1998 or early
1999, although there can be no assurance that product will be available at that
time. Nabi's previous manufacturer of H-BIG(R) has supplied Nabi with a
sufficient inventory of H-BIG(R) to maintain Nabi's historical sales levels of
the product into the fourth quarter of 1998. See "-Factors to be Considered -
Dependence upon Third Parties to Manufacture Product" and "-Factors to be
Considered - Government Regulation; Uncertainty of Regulatory Approvals". Nabi's
agreement with Cangene has a three year term commencing upon the date Cangene
receives FDA approval, although either party may terminate the agreement upon 12
months notice. Nabi has completed construction and is in the process of
validating a biopharmaceutical manufacturing facility which is designed to allow
Nabi to manufacture, formulate, and package H-BIG(R). Currently Nabi anticipates
that the facility will not be able to produce H-BIG(R) for commercial sale prior
to late 1999.
Nabi is required to purchase its requirements of WinRho SDF(TM) from Cangene,
which has granted to Nabi exclusive marketing rights to the product in the
United States. WinRho SDF(TM) is manufactured by Cangene using a process that
includes solvent-detergent treatment and nanofiltration, two validated virus
removal and inactivation steps to ensure product safety.
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In 1997, Nabi acquired certain assets associated with the product sales of
Autoplex(R)T and obtained exclusive marketing rights for this product in the
United States, Canada and Mexico from Baxter. In connection with the
acquisition, Baxter agreed to manufacture Autoplex(R)T until the earlier of May
2000 or such later date as may be approved by the Federal Trade Commission
("FTC"), or four months after Nabi obtains FDA approval to manufacture the
product. If Nabi does not obtain FDA approval within the required timetable, the
FTC could terminate the divestiture agreement associated with Nabi's acquisition
of AutoPlex(R)T from Baxter. In the event, all the assets and marketing rights
associated with the acquisition would revert to Baxter. Nabi and Baxter would
equally share in the proceeds from the ultimate sale of these assets under
certain specified conditions. See "-Factors to be Considered - Dependence upon
Third Parties to Manufacture Product" and "-Factors to be Considered -
Government Regulation; Uncertainty of Regulatory Approvals".
Nabi manufactures its clinical supplies of products under development at its
facilities in Miami and Boca Raton, Florida and Rockville, Maryland.
PLASMA COLLECTION PROCESS
Nabi currently collects and processes plasma from 75 plasma collection centers
located in 28 states and Germany, including five independently-owned centers
which under contract supply their entire plasma collection output to Nabi. Each
Nabi-owned United States center is licensed and regulated by the FDA. Most of
Nabi's centers are located in urban areas and many are near universities and
military bases. Prospective plasma donors are required to complete an extensive
medical questionnaire and are subject to laboratory testing and a physical
examination under the direction or supervision of a physician. Following this
screening, plasma is collected from suitable donors by means of a process known
as plasmapheresis.
PATENTS AND PROPRIETARY RIGHTS
Nabi's success will depend, in part, on its abilities to obtain or in-license
patents, and to protect trade secrets and other intellectual property rights.
Nabi has acquired title or licenses to a number of patents or patent
applications of others and has filed two patent applications of its own. See
"-Factors to Be Considered-Uncertainty of Legal Protection Afforded by Patents
and Proprietary Rights".
GOVERNMENT AND INDUSTRY REGULATION
The collection, processing and sale of Nabi's products as well as its research,
preclinical development and clinical trials are subject to regulation for safety
and efficacy by numerous governmental authorities in the United States and other
countries. Domestically, the federal Food, Drug and Cosmetic Act, the Public
Health Service Act, and other federal and state statutes and regulations govern
the collection, testing, manufacture, safety, efficacy, labeling, storage,
record keeping, approval, advertising and promotion of Nabi's products.
THERAPEUTICS
Immune globulin products currently are classified as "biological products" under
FDA regulations. The steps required before a biological product may be marketed
in the United States generally include preclinical studies, the filing of an
Investigation for New Drug ("IND") application with the FDA, which must become
effective pursuant to FDA regulations before human clinical studies may
commence, and FDA approval of a Product License Application ("PLA"). In addition
to obtaining FDA approval for each product, an Establishment License Application
("ELA") must be filed and the FDA must approve the manufacturing facilities for
the product. Biological products, once approved, have no provision allowing
competitors to market generic versions.
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Each biological product, even if it basically has the same composition and is
for the same indication, must undergo the entire development process in order to
be approved.
Preclinical studies are conducted on laboratory animals to evaluate the
potential efficacy and safety of a product. The results of preclinical studies
are submitted as part of the IND application, which must become effective
pursuant to FDA regulations before human clinical trials may begin. The initial
human clinical evaluation, Phase I trials, generally involve administration of a
product to a small number of healthy persons. The product is tested for safety,
dosage, tolerance, metabolism and pharmacokinetic properties. Phase II trials
generally involve administration of a product to a limited number of patients
with a particular disease to determine dosage, efficacy and safety. Phase III
trials generally examine the clinical efficacy and safety of a product in an
expanded patient population at geographically dispersed clinical sites. The FDA
reviews the clinical plans and the results of trials and can discontinue the
trials at any time if there are significant safety issues. The results of the
preclinical and clinical trials are submitted after completion of the Phase III
trials in the form of a PLA for approval to commence commercial sales. 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.
Among the requirements for product license approval is the requirement that the
prospective manufacturer's methods conform to the FDA's Good Manufacturing
Practice ("cGMP") 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.
PLASMA
The collection, storage and testing of plasma is regulated by the FDA. Any
person operating a plasma collection facility in the United States must have an
Establishment License and individual Product Licenses issued by the FDA and each
plasma center must be inspected and approved by the FDA. Nabi holds
Establishment Licenses and Product Licenses issued by the FDA covering all
Nabi-owned collection centers located in the United States. In addition, plasma
collection centers require FDA approval to collect each specialty plasma.
Nabi continually pursues its commitment to quality and compliance with
applicable FDA regulations through its own internal quality assurance programs.
As part of its commitment to quality, Nabi has embraced the Quality Plasma
Program ("QPP") which was initiated by the American Blood Resources Association,
an industry group which establishes standards for plasmapheresis centers. QPP
imposes standards for plasmapheresis centers in addition to those presently
required by the FDA. QPP certification is proving increasingly significant,
because many customers will only purchase plasma which has been collected in QPP
certified centers. All of Nabi's domestic-owned centers are QPP certified
centers.
Concern over blood safety has led to self-sufficiency movements in a number of
European countries to restrict the importation of plasma and plasma components
collected outside the country's borders or, in the case of certain European
countries, outside of Europe. In 1997, Germany increased its regulatory
requirements for plasma collected outside Germany. To date, however, these
efforts have not led to any meaningful restriction on the importation of plasma
and plasma components and have not adversely affected Nabi. There can be no
assurance, however, that such restrictions will not be imposed in the future and
that Nabi will not be adversely affected. As a partial response to this risk,
Nabi acquired or established four licensed plasma collection centers and a
testing laboratory in Germany. Despite its German centers, there can be no
assurance that an increase in restrictions on plasma collected outside Germany
or Europe will not have a material adverse effect on Nabi's business financial
condition or results of operations.
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ORPHAN DRUG ACT
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 PLA for a given drug for its
use in treating a given rare disease may receive marketing exclusivity. WinRho
SDF(TM) has received Orphan Drug protection for the treatment of ITP and Nabi
has obtained Orphan Drug status for certain other indications and certain other
of Nabi's products under development have obtained Orphan Drug status. See
"-Factors to Be Considered - Uncertainty of Orphan Drug Designation".
OTHER
Nabi's Miami-based FDA-approved testing laboratory is licensed by the State of
Florida Department of Health and Rehabilitative Services, and the states of
Maryland, New York, Pennsylvania and West Virginia. The laboratory is licensed
pursuant to Medicare regulations and regulations of the U.S. Health Care Finance
Administration's Clinical Laboratory Improvement Act of 1988.
Nabi also is subject to government regulations enforced under the Occupational
Safety and Health Act, the Environmental Protection Act, the Clean Air Act, the
Clean Water Act, the National Environmental Policy Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, the Medical Waste
Tracking Act and other national, state or local restrictions.
COMPETITION
Nabi believes that H-BIG(R) has a significant share of the domestic market and
that Nabi's access to the vaccines and specialty plasma necessary for the
manufacture of H-BIG(R) will allow it to maintain its market share provided it
has a sufficient supply of this product. See "Supply and Marketing -
Therapeutics". Nabi's main competitor in marketing H-BIG(R) has been Bayer AG
("Bayer"), a major multinational pharmaceutical company. Bayer has purchased
some of the specialty plasma used in the manufacture of its hepatitis B immune
globulin product from Nabi. Bayer also is a significant customer of source and
other specialty plasma. A significant percentage of Bayer's total plasma
requirements are provided by Nabi.
Nabi believes that WinRho SDF(TM) has a significant and growing share of the
domestic market for ITP treatment. Competing therapeutic modalities include the
use of steroids; intravenous immune globulins ("IVIG"); and splenectomy (a
surgical procedure to remove the spleen). Each of these therapies has
significant drawbacks associated with its use, and Nabi believes that WinRho
SDF(TM) can be used for long-term treatment of chronic ITP, is relatively less
expensive and less time consuming in its administration, presents no surgical
risks and has demonstrated consistency in its ability to elicit a platelet
response when compared to the alternative ITP therapies. WinRho SDF(TM) is also
designed to suppress Rh isoimmunization. There are currently three competitive
therapeutic products licensed for Rh isoimmunization indications in the United
States, however only two of these products are actively marketed. These products
are typically less expensive than WinRho SDF(TM) and, as a result, Nabi does not
anticipate significant sales of WinRho SDF(TM) for Rh isoimmunization.
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Autoplex(R)T competes in the anti-inhibitor segment of the hemophilia A
marketplace. Autoplex(R)T and other competitive agents are used to treat
patients that have developed inhibitors (an immunity) to Factor VIII, the
standard therapy for people suffering from hemophilia A. The primary competitors
to Autoplex(R)T include: FEIBA (Baxter) and Hyate C (Speywood Pharmaceuticals,
Inc.). The estimated U.S. market for anti-inhibitor products is $88 million.
Nabi and other independent plasma suppliers sell plasma principally to
pharmaceutical companies that process plasma into finished products. Although
these pharmaceutical companies generally own plasmapheresis centers, in the
aggregate they purchase a substantial portion of their plasma requirements from
independent suppliers. There is intense competition among independent plasma
collectors. Nabi attempts to compete for sales by providing customers with
substantial quantities of products, by stressing its ability to meet delivery
schedules and by providing high-quality products. Management believes Nabi has
the ability to continue to compete successfully in these areas.
Nabi competes for donors with pharmaceutical companies which obtain plasma for
their own use through their own plasma collection centers, other commercial
plasma collection companies and non-profit organizations such as the American
Red Cross and community blood banks which solicit the donations of blood. Nabi
competes for donors by providing competitive financial incentives which
compensate donors for their time, by providing outstanding customer service to
its donors, by implementing programs designed to attract donors through
education as to the uses for collected plasma, by encouraging groups to have
their members become plasma donors for fund raising purposes, and by improving
the attractiveness of Nabi's plasma collection facilities.
Most of the plasma which Nabi collects, processes, and sells to its customers is
used in the manufacture of therapeutic products to treat certain diseases.
Several companies are marketing and continue to develop products to treat some
of these diseases based upon technology which would lessen or eliminate the need
for human blood plasma. Such products could adversely affect the demand for
plasma. Products utilizing technology developed to date have not proven as
cost-effective and marketable to healthcare providers as products based on human
blood plasma. However, Nabi is unable to predict the impact on its business of
future technological advances.
EMPLOYEES
Nabi employed approximately 2,122 persons at December 31, 1997. Nabi believes
that the relations between Nabi's management and its employees are generally
good.
FACTORS TO BE CONSIDERED
The parts of this Annual Report on Form 10-K titled "Item 1 - Business," "Item 3
- - Legal Proceedings" and "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations" contain certain forward-looking
statements which involve risks and uncertainties. In addition, officers of Nabi
may from time to time make certain forward-looking statements which also involve
risks and uncertainties. Set forth below is a discussion of certain factors that
could cause Nabi's actual results to differ materially from the results
projected in such forward-looking statements.
UNCERTAINTY ASSOCIATED WITH RAPID EXPANSION OF THERAPEUTIC EFFORTS
Although Nabi's objective has been to become a fully integrated developer,
manufacturer and marketer of therapeutic products, Nabi's historic business
primarily has been the collection and sale of plasma products. Prior to its
November 1995 merger (the "Merger") with Univax Biologics, Inc. ("Univax"), Nabi
had four therapeutic products (two of which are under development and one of
which is no longer being developed). Two of these products were acquired from
Abbott. The Merger accelerated this shift to
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therapeutic products by adding 10 products (one of which is being marketed,
seven of which are under development and two of which are no longer being
developed) 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 is in the process of validating a new
biopharmaceutical manufacturing facility which is intended to enable Nabi to
manufacture for the first time on a commercial scale certain of its therapeutic
products. Although therapeutic 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
therapeutics business and its lack of in-depth prior experience in the
therapeutics business, particularly with respect to successfully bringing a
product through clinical trials and FDA licensure. There can be no assurance
that Nabi's therapeutic 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.
COSTS OF RESEARCH AND DEVELOPMENT
Nabi expects to incur significant expenses associated with its therapeutic
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 healthcare
costs and potential legislation or regulation of healthcare prices; and actions
by collaborators, customers and competitors. There can be no assurance that Nabi
has the financial resources to continue to fund research and development as
necessary for the development and commercialization of higher margin therapeutic
products. Nabi's ability to fund its research and development efforts are
dependent in large part on the success of its plasma operations. The operating
results of Nabi's plasma operations in 1997 did not meet expectations. A
significant reduction in such research, development and other expenses could
have a material adverse effect on the development and commercialization of
therapeutic products currently under development and could have a material
adverse effect on the ability of Nabi to realize its objective of becoming a
fully integrated developer, manufacturer and marketer of therapeutic products.
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 therapeutic 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 therapeutic
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
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commercialize several of its therapeutic products and obtain necessary
regulatory approvals could have a material adverse effect on Nabi's business,
financial condition and results of operations.
COMPETITIVE MARKET FOR THERAPEUTIC PRODUCTS
Nabi currently markets and sells three therapeutic products: H-BIG(R), WinRho
SDF(TM) and Autoplex(R)T. No assurance can be given that the market for these
products can be addressed effectively by Nabi's current sales force and
distribution network. Nabi will lose its exclusive rights to market WinRho
SDF(TM) in the United States if it does not meet specific sales goals or pay
specified amounts to Cangene. Nabi may also lose its rights to Autoplex(R)T if
it abandons its efforts to obtain FDA approval to manufacture the product or
does not obtain such approval by mid 2000. If Nabi successfully develops
additional therapeutic products, 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 may have extensive and well-funded marketing and sales
operations. The failure of Nabi to successfully market existing and new
therapeutic products or the loss of exclusive rights to market WinRho SDF(TM) in
the United States or to market Autoplex(R)T, could have a material adverse
effect on Nabi's business, financial condition and results of operations.
UNCERTAINTY OF MARKET ACCEPTANCE
There can be no assurance that any of Nabi's 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 any therapeutic
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 therapeutic products increase significantly. The worldwide supply of
plasma has historically fluctuated. Currently the worldwide supply exceeds the
demand for plasma as a result of the FDA's regulatory initiatives within the
plasma industry which have adversely affected the fractionation capacity of
several of Nabi's major customers. Demand for fractionated plasma products,
however, remains strong and continues to increase due to an increase in both the
number and use of products 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, its fractionation or
any negative public perception about the plasma collection process could further
adversely affect the overall supply of or demand for plasma. 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.
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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(R), WinRho SDF(TM) and
Autoplex(R)T, 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. Currently, Autoplex(R)T is manufactured by Baxter. If Nabi does not
obtain FDA approval to manufacture Autoplex(R)T on a timely basis, the assets
and marketing rights associated with Autoplex(R)T could revert to Baxter. There
can be no assurance that Nabi will be able to obtain the necessary approvals for
manufacturing or marketing of any of its products. Failure to obtain additional
FDA approvals of products currently marketed or FDA approval for products under
development could have a material adverse effect on Nabi's business, financial
condition and results of operations. If a product is approved, its 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.
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 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.
Nabi has received permission from the FDA to conduct donor stimulation programs
using the S. AUREUS and hepatitis immunizing agents. 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 therapeutic products to be produced using such
immunizing agents, the overall regulatory approval process for Nabi's
therapeutic products would be significantly delayed, which could have a material
adverse effect on Nabi's business, financial condition and results of
operations.
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DEPENDENCE UPON THIRD PARTIES TO MANUFACTURE PRODUCTS
Nabi collects and supplies the specialty plasma necessary for the manufacture of
H-BIG(R). In 1997, Nabi entered into an agreement with Cangene pursuant to which
Cangene, subject to receiving FDA approval, will formulate, process and package
H-BIG(R). Nabi anticipates receiving product from Cangene by late 1998, although
there can be no assurance that product will be available at that time. Abbott,
Nabi's previous manufacturer of H-BIG(R), has supplied Nabi with a sufficient
inventory of H-BIG(R) to maintain Nabi's historical sales levels of the product
into the fourth quarter of 1998, assuming no rejection of, or delay in, release
of lots of H-BIG(R) by the FDA. Nabi's agreement with Cangene has a three year
term commencing upon the date Cangene receives FDA approval, although either
party may terminate the agreement upon 12 months' notice. Nabi also is required
to purchase its requirements of WinRho SDF(TM) 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 SDF(TM) and Autoplex(R)T. Baxter
has agreed to manufacture Autoplex(R)T for Nabi until the earlier of May 2000,
or such later date as may be approved by the FTC, or four months after Nabi
obtains FDA approval to manufacture the product. The failure by Nabi's
manufacturers to meet Nabi's needs for these 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 manufacture, formulate
and package therapeutic products. Nabi is in the process of validating this
facility and related processes which will require licensure by the FDA. Nabi
does not anticipate that the facility will be able to produce H-BIG(R) for
commercial sale until late 1999 and Autoplex(R)T until mid 2000, respectively,
at the earliest. 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 is undergoing validation of a new
biopharmaceutical manufacturing facility and related processes in Boca Raton,
Florida. Nabi anticipates that it will receive FDA licensure for this facility
in late 1999 or early 2000. No assurance can be given that Nabi will be able to
obtain such licensure by such times or at all. Failure to 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 therapeutic products. However,
Nabi has not previously owned or operated such a facility and has no direct
experience in commercial, large-scale manufacturing of therapeutic products. The
failure of Nabi to successfully operate its new 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 fractionates 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
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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
therapeutic 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. There can be no assurance that Nabi 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 is pursuing strategic alliances with third parties for the development,
marketing and sale of certain of its therapeutic 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 current collaborators have the right to terminate their collaborative
agreements with Nabi. If any of Nabi's existing or future collaborative partners
act in, 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.
FOREIGN RESTRICTIONS ON IMPORTATION OF PLASMA
Export sales of plasma for the 1995, 1996 and 1997 fiscal years represented
approximately 36%, 39% and 24%, respectively, of Nabi's sales for those periods.
Nabi's export sales primarily are to European and Asian 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. Uncertain economic conditions and financial
markets, such as those which occurred in Asia in 1997, could also adversely
impact Nabi's sales of plasma to foreign customers and materially and adversely
affect Nabi's business, financial condition and results of operations.
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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 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 be competitive with Nabi's
applications, or 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 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.
UNCERTAINTY OF ORPHAN DRUG DESIGNATION
If a product is designated an Orphan Drug by the FDA, 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 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.
Congress has considered legislation that would amend the Orphan Drug Act to
limit the scope of marketing exclusivity granted to Orphan Drug products. WinRho
SDF(TM) 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 SDF(TM) 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.
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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 therapeutic 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 Nabi'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 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 SIGNIFICANT PLASMA SALES
During the 1995, 1996 and 1997 fiscal years, plasma sales to customers
purchasing more than 10% of Nabi's consolidated sales (which did not exceed
three customers in any such period), accounted for approximately 47%, 45% and
41%, 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 therapeutic 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 healthcare insurers and other organizations. Significant
uncertainty exists as to the reimbursement status of newly approved healthcare
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 therapeutic 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 healthcare
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 healthcare in the United States and
the concurrent growth of
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organizations such as HMOs, which could control or significantly influence the
purchase of healthcare services and products, as well as legislative proposals
to reform healthcare or reduce government insurance programs, may all result in
lower prices for Nabi's products. The cost containment measures that healthcare
providers are instituting and the impact of any healthcare 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 treatments
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
healthcare 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 initial 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.
ITEM 2. PROPERTIES
A majority of the space occupied by Nabi is primarily used to collect plasma,
and is leased from non-affiliates under leases expiring through 2010. A majority
of these leases contain renewal options which permit Nabi to renew the leases
for periods of two to five years at the then fair rental value. Nabi believes
that in the normal course of its business it will be able to renew or replace
its existing leases. Nabi also owns four plasma collection facilities located in
Arizona, Indiana, Minnesota and Washington. Nabi's plasma collection centers
range in size from approximately 2,000 to 25,000 square feet.
Nabi leases office, laboratory, warehouse and pilot manufacturing space in
Miami, Florida and Rockville, Maryland.
Nabi owns a facility that houses its executive offices and its manufacturing
plant in Boca Raton, Florida. Nabi will commence manufacturing after it obtains
FDA licensure.
ITEM 3. LEGAL PROCEEDINGS
Nabi is a party to litigation in the ordinary course of business. Nabi does not
believe that any such litigation will have a material adverse effect on its
business, financial position or results of operations.
In addition, Nabi is a co-defendant with various other parties in numerous suits
filed in the U.S. by, or on behalf of, individuals who claim to have been
infected with HIV as a result of either using HIV-contaminated products made by
the defendants other than Nabi or having familial relations with those so
infected. The claims against Nabi are based on negligence and strict liability.
One of the suits, filed in the Circuit Court for the Eleventh Judicial Circuit
of Dade County, Florida on May 23, 1995 (Case No. 95-10489 CA 02), purports to
be a class action. The defendants in this suit, other than Nabi, include Bayer
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Corporation, Centeon Pharmaceutical Company, Rhone-Poulenc Rorer, Inc., Baxter
Healthcare Corporation, Alpha Therapeutic Corporation and The National
Hemophilia Foundation.
Nabi denies all claims against it in these suits and intends to defend the cases
vigorously. Nabi believes that any such litigation will not have a material
adverse effect on its business, financial position or results of operations.
ITEM 3A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Nabi are as follows:
NAME AGE POSITION
- ----------------------------------------------------------------------------------------------------
DAVID J. GURY 59 Chairman of the Board, President and
Chief Executive Officer
JOHN C. CARLISLE 51 Executive Vice President, Chief Operating Officer
and Director
PINYA COHEN, PH.D. 62 Senior Vice President, Quality Assurance and
Regulatory Affairs
ALFRED J. FERNANDEZ 49 Senior Vice President and Chief Financial Officer
FRANK J. MALINOSKI,M.D. PH.D. 43 Senior Vice President, Medical and Clinical Affairs
DAVID D. MUTH 44 Senior Vice President, Business Development,
Sales and Marketing
ROBERT B. NASO, PH.D. 53 Senior Vice President, Research and Development
LORRAINE M. BREECE 45 Controller and Chief Accounting Officer
DAVID J. GURY has served as Nabi's Chairman of the Board, President and Chief
Executive Officer since April 3, 1992. Previously, since May 21, 1984, he was
Nabi's President and Chief Operating Officer. He has been a director of Nabi
since 1984. From July 1977 until his employment by Nabi, Mr. Gury was employed
by Alpha Therapeutic Corporation (formerly Abbott Scientific Products, "Alpha")
as Director of Plasma Procurement (through October 1980), General Manager,
Plasma Operations (through October 1981) and Vice President, Plasma Supply
(through May 1984). In these capacities, Mr. Gury had executive responsibilities
for plasma procurement and operation of plasmapheresis centers.
JOHN C. CARLISLE has served as Executive Vice President and Chief Operating
Officer since March 1994 and was elected a director in August 1995. Mr. Carlisle
joined Nabi in January 1994 and previously, from August 1989 to January 1994 he
was President and Chief Executive Officer of Premier BioResources, Inc. ("PBI").
From June 1981 to August 1989 he served as Director of Plasma Supply for Alpha.
PINYA COHEN, PH.D. is Senior Vice President, Quality Assurance and Regulatory
Affairs, has served in that capacity since November 1995 and has served as an
executive officer since August 1992. From 1990 to 1992, he was Vice President,
Regulatory Affairs for Connaught Laboratories, Inc.. From 1976 to 1979,
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Dr. Cohen was Director, Quality Control and Regulatory Affairs and from 1979 to
1990 was Vice President, Quality Control and Regulatory Affairs at Merieux
Institute, Inc. From 1972 to 1976, he was Director of the Plasma Derivatives
Branch, Bureau of Biologics, FDA and prior to that time, from 1964 to 1972, he
was Director of the Plasma Derivatives Branch, Division of Biologics Standards,
the NIH.
ALFRED J. FERNANDEZ is Senior Vice President and Chief Financial Officer of
Nabi, has served in that capacity since November 1995 and has served as an
executive officer of Nabi since April 5, 1989. Previously, Mr. Fernandez had
been associated with Rachlin & Cohen, Certified Public Accountants, in Miami,
Florida as Director of Accounting and Audit Services since January 1988. Mr.
Fernandez was employed by the Chattahoochee Financial Corporation in Atlanta,
Georgia from May 1986 to September 1987 as Executive Vice President and Chief
Financial Officer, with responsibility over all financial, accounting and
investment functions. For more than five years prior to that time, Mr. Fernandez
served as a Senior Manager with Price Waterhouse, an international public
accounting firm.
FRANK J. MALINOSKI, M.D., PH.D. is Senior Vice President, Medical and Clinical
Affairs, and has served in that capacity since March 1997. Dr. Malinoski joined
Nabi in March 1996 as Vice President, Medical and Clinical Affairs. Previously
from 1992 to 1996, he was Director, Clinical Research for Lederle-Praxis
Biologicals in Rochester, New York. Prior to that time, from 1986 to 1992, Dr.
Malinoski conducted clinical research with the U.S. Army Medical Research
Institute of Infectious Diseases.
DAVID D. MUTH is Senior Vice President, Business Development, Sales and
Marketing, and has served in that capacity since November 1996. Mr. Muth joined
Nabi in August 1996 and previously he was Senior Vice President, Business
Development at Duramed Pharmaceuticals, Inc. in Cincinnati, Ohio from February
1995 to May 1996. From 1978 to 1995, he was employed by Ortho McNeil
Pharmaceuticals Corporation, a division of Johnson & Johnson in New Brunswick,
New Jersey as Director, Corporate Development (1992 - 1995) and numerous
positions of increasing responsibilities in both sales and marketing (1978 -
1992). Prior to that time, Mr. Muth held financial positions at Paine Webber and
Dun & Bradstreet.
ROBERT B. NASO, PH.D. joined Nabi in November 1995 as Senior Vice President,
Research and Development and General Manager, Rockville Operations. Previously,
he was Vice President of Research at Univax beginning in May 1992, and became
Vice President of Research and Development in October 1994. From 1983 to 1992,
Dr. Naso was a manager and director of pharmaceutical and vaccine research and
development at the R.W. Johnson Pharmaceutical Research Institute, a division of
Ortho Pharmaceutical Corporation and the Johnson & Johnson Biotechnology Center,
a division of the R.W. Johnson Pharmaceutical Research Institute.
LORRAINE M. BREECE is Controller and Chief Accounting Officer, and has served in
that capacity since April 1991. Previously, she had been associated with
Trammell Crow Company as Controller and as a consultant since October 1989. For
more than five years prior to that time, Ms. Breece served as Controller for
Levitt Corporation.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Nabi's common stock is quoted on the Nasdaq National Market under the symbol
"NABI". The following table sets forth for each period indicated the high and
low sale prices for the common stock (based upon intra-day trading) as reported
by the Nasdaq National Market.
HIGH LOW
--------------------------
1996
- ------------------------------------------------------------------------------
First Quarter 14 3/4 9 1/2
Second Quarter 14 5/8 8 3/4
Third Quarter 12 3/8 6 7/8
Fourth Quarter 12 1/8 7 3/8
1997
- ------------------------------------------------------------------------------
First Quarter 12 3/8 6 13/16
Second Quarter 7 1/2 5 15/16
Third Quarter 8 3/16 5 7/16
Fourth Quarter 7 5/8 3 5/16
The number of record holders of Nabi's common stock at December 31, 1997 was
1,542.
No cash dividends have been previously paid on Nabi's common stock and none are
anticipated in 1998. Nabi's credit agreement also restricts dividend payments.
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ITEM 6. SELECTED FINANCIAL DATA - FIVE YEARS ENDED DECEMBER 31, 1997
The following table sets forth selected consolidated financial data for Nabi for
the five years ended December 31, 1997 that were derived from Nabi's
consolidated financial statements, which have been audited by Price Waterhouse
LLP, independent accountants. On November 29, 1995, Univax, a publicly traded
biopharmaceutical company, was merged with and into Nabi in a tax-free,
stock-for-stock transaction. The Merger was accounted for as a pooling of
interests and accordingly, all prior period financial information has been
combined.
The data should be read in conjunction with, and are qualified by reference to,
Nabi's Consolidated Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations". All
amounts in the following table are expressed in thousands, except for per share
data.
Year Ended December 31,
----------------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
STATEMENT OF OPERATIONS DATA:
Sales $ 101,574 $ 164,426 $ 195,928 $ 239,909 $ 228,744
Cost of products sold 81,607 131,192 152,148 181,914 180,533
--------- --------- --------- --------- ---------
Gross profit 19,967 33,234 43,780 57,995 48,211
Selling, general and administrative expense 12,284 16,467 26,816 21,095 25,012
Research and development expense 17,089 17,599 20,132 16,721 19,126
Royalty expense 1,545 1,426 3,490 5,253 6,617
Other operating expense 1,842 2,234 3,015 3,757 3,087
Non-recurring charges -- -- -- -- 5,680
--------- --------- --------- --------- ---------
Operating income (loss) (12,793) (4,492) (9,673) 11,169 (11,311)
Interest income 1,187 354 1,064 1,275 272
Interest expense (3,282) (3,254) (1,931) (3,987) (4,712)
Other, net (24) (28) (334) (511) (70)
--------- --------- --------- --------- ---------
Income (loss) before benefit (provision) for income
taxes and accounting change/extraordinary charge (14,912) (7,420) (10,874) 7,946 (15,821)
Benefit (provision) for income taxes (1,988) (5,774) (6,687) 6,214 4,668
--------- --------- --------- --------- ---------
Income (loss) before accounting change
extraordinary charge (16,900) (13,194) (17,561) 14,160 (11,153)
Accounting change/extraordinary charge 100 (717) -- (932) --
--------- --------- --------- --------- ---------
Net income (loss) $ (16,800) $ (13,911) $ (17,561) $ 13,228 $ (11,153)
========= ========= ========= ========= =========
Basic earnings (loss) per share:
Income (loss) before accounting change/
extraordinary charge $ (0.76) $ (0.47) $ (0.52) $ 0.41 $ (0.32)
Accounting change/extraordinary charge 0.01 (0.03) -- (0.03) --
--------- --------- --------- --------- ---------
Net income (loss) $ (0.75) $ (0.50) $ (0.52) $ 0.38 $ (0.32)
========= ========= ========= ========= =========
Diluted earnings (loss) per share:
Income (loss) before accounting change/
extraordinary charge $ (0.76) $ (0.47) $ (0.52) $ 0.40 $ (0.32)
Accounting change/extraordinary charge 0.01 (0.03) -- (0.03) --
--------- --------- --------- --------- ---------
Net income (loss) $ (0.75) $ (0.50) $ (0.52) $ 0.37 $ (0.32)
========= ========= ========= ========= =========
BALANCE SHEET DATA:
Working capital $ 39,806 $ 52,208 $ 14,690 $ 63,630 $ 63,933
Total assets 91,459 132,089 137,975 202,142 225,906
Notes payable, including current maturities 21,202 27,557 42,894 83,465 121,081
Contingent purchase price obligation,
including current maturities 7,056 -- -- -- --
Total stockholders' equity 51,635 85,319 69,442 86,061 75,663
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of Nabi's financial condition and results
of operations for the three years ended December 31, 1997 should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
with the information contained under "Factors to be Considered" in Item 1.
On November 29, 1995, Univax, a publicly traded biopharmaceutical company, was
merged with and into Nabi in a tax-free, stock-for-stock transaction. The Merger
was accounted for as a pooling of interests and accordingly, all prior period
financial information has been combined.
RESULTS OF OPERATIONS
The following table sets forth Nabi's results of operations for the respective
periods expressed as a percentage of sales:
YEAR ENDED DECEMBER 31,
---------------------------------
1995 1996 1997
------- ------- -------
Sales 100.0% 100.0% 100.0%
Cost of products sold 77.7 75.8 78.9
------- ------- -------
Gross profit margin 22.3 24.2 21.1
Selling, general and administrative expense 13.7 8.8 10.9
Research and development expense 10.3 7.0 8.4
Royalty expense 1.7 2.2 2.9
Other operating expense 1.5 1.6 1.3
Non-recurring charges -- -- 2.5
------- ------- -------
Operating income (loss) (4.9) 4.6 (4.9)
Interest income 0.5 0.5 --
Interest expense (1.0) (1.6) (2.0)
Other, net (0.2) (0.2) --
------- ------- -------
Income (loss) before benefit (provision) for income taxes
and extraordinary charge (5.6) 3.3 (6.9)
Benefit (provision) for income taxes (3.4) 2.6 2.0
Extraordinary charge -- (0.4) --
======= ======= =======
Net income (loss) (9.0)% 5.5% (4.9)%
======= ======= =======
Information concerning Nabi's sales by industry segment, for the respective
periods, is set forth in the following table. All dollar amounts set forth in
the table are expressed in thousands.
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1995 1996 1997
--------------------- --------------------- ---------------------
Plasma Products
-Source $108,327 55.3% $121,025 50.4% $135,331 59.2%
-Specialty 61,178 31.2 86,807 36.2 54,348 23.8
-------- ------- -------- ------- -------- -------
169,505 86.5 207,832 86.6 189,679 83.0
Therapeutic products 18,590 9.5 26,405 11.0 34,470 15.0
Diagnostic products
and services 7,833 4.0 5,672 2.4 4,595 2.0
-------- ------- -------- ------- -------- -------
TOTAL $195,928 100.0% $239,909 100.0% $228,744 100.0%
======== ======= ======== ======= ======== =======
28
29
1997 AS COMPARED TO 1996
SALES. Sales for 1997 were $228.7 million compared to $239.9 million for 1996.
Overall, revenues for the year were adversely affected by a 8.7% decline in
plasma sales attributable to several factors, notably the general disruption in
the plasma industry caused by regulatory problems experienced by the major
plasma processors and a shift in demand from certain specialty plasmas to source
plasma. While the industry disruption has not impacted the continued strong
demand for plasma derived products, it has led to decreased fractionation
capacity, a decreased ability to process raw plasma and an increase of plasma
inventories. The decline in plasma revenue was partially offset by a 30.5%
increase in therapeutic product revenues over the prior year largely due to an
increased demand for WinRho SDFTM and sales of Autoplex(R)T, a product which was
acquired from Baxter in May 1997.
GROSS PROFIT MARGIN. Gross profit and related margin for 1997 was $48.2 million
or 21.1%, compared to $58 million or 24.2% in 1996. Gross profit margins were
adversely affected by several factors, including a less favorable sales mix of
specialty and source plasma; under absorption of fixed overhead as a result of
reduced production levels in response to the general disruption in the plasma
industry and certain expenses associated with process improvement initiatives
within plasma operations. The increase in sales of higher margin therapeutic
products partially offset the overall decline in gross profit margin.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense was $25.0 million or 10.9% of sales in 1997, compared to $21.1 million
or 8.8% of sales in 1996. The increase was primarily attributable to sales and
marketing expenses associated with increased therapeutic product sales and
expenses associated with the implementation and ongoing support of new
information systems.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $19.1
million or 8.4% of sales in 1997, compared to $16.7 million or 7.0% of sales in
1996. The increase in expenses relates primarily to the advancement of clinical
trials for Nabi-H-BIG(R), Nabi-StaphVAX(TM) and Nabi-Altastaph(TM).
NON-RECURRING CHARGES. Nabi recognized approximately $5.7 million of
non-recurring charges during 1997. These charges included $3.9 million of asset
impairment losses, principally associated with Nabi's investment in Michigan
Biologic Products Institute ("MBPI"), an alternative contract fractionation
facility for the production of H-BIG(R). The project was abandoned during the
third quarter as Nabi entered into an H-BIG(R) manufacturing agreement with
Cangene Corporation. Streamlining initiatives within plasma operations
principally involving center closings contributed the remaining $1.8 million in
non-recurring charges.
INTEREST AND OTHER EXPENSE, NET. Interest and other expense, net for 1997 was
$4.5 million, compared to $3.2 million in 1996. The increase was primarily
attributable to higher average outstanding borrowings and lower average
outstanding investments as compared to 1996.
OTHER FACTORS. The provision for income taxes results in a benefit of $4.7
million for 1997, compared to a benefit of $6.2 million in 1996. The benefit for
1997 relates to the recovery of income taxes previously paid on taxable income
in prior years. The benefit recognized in 1996 was primarily due to the release
of valuation allowances associated with certain net operating loss ("NOL")
carryforwards and other deferred tax assets acquired through the Merger.
29
30
1996 AS COMPARED TO 1995
SALES. Sales for 1996 increased 22% to $239.9 million, compared to $195.9
million in 1995, reflecting an increase in plasma sales of $38.3 million and an
increase in immunotherapeutic product sales of $7.8 million, both of which were
offset by a decrease in diagnostic products and services sales of $2.2 million.
The 22.6% increase in plasma sales was primarily attributable to increased
specialty plasma sales. Increased sales of immunotherapeutic products was
primarily due to an increase in H-BIG(R) sales.
GROSS PROFIT MARGIN. Gross profit and related margin for 1996 was $58 million or
24.2%, compared to $43.8 million or 22.3% in 1995. An improved sales mix
resulting primarily from increased sales of higher-margin specialty plasma and
immunotherapeutic products accounted for the improved profitability.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense was $21.1 million or 8.8% of sales in 1996, compared to $26.8 million or
13.7% of sales in 1995. The decrease was primarily attributable to approximately
$6 million in non-recurring merger expenses associated with the Univax merger in
1995.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $16.7
million or 7.0% of sales in 1996, compared to $20.1 million or 10.3% of sales in
1995. The decrease in expenses relates primarily to the discontinuation of
clinical trials for HyperGAM+CF during June 1996.
OTHER FACTORS. The benefit for income taxes was $6.2 million in 1996, compared
to a provision of $6.7 million in 1995. The benefit was primarily due to the
release of valuation allowances associated with certain NOL carryforwards and
other deferred tax assets acquired in the Merger. In 1995, the provision for
income taxes reflected non-deductible merger expenses and pre-merger income
which could not be offset by pre-merger losses incurred by Univax.
Net income for 1996 includes an extraordinary charge of $.9 million, or $.03 per
share, due to the write-off of debt issue costs associated with Nabi's early
repayment of its outstanding bank debt through the application of a portion of
the net proceeds of the 6.5% Convertible Subordinated Notes issued during the
first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, Nabi's credit agreement provided for a $50 million
revolving credit facility subject to certain borrowing base restrictions as
defined in the agreement which matures in September 2002. Borrowings under the
facility were $34.2 million and additional availability was approximately $10.3
million at December 31, 1997. As of that date, Nabi was not in compliance with
certain financial covenants. Effective March 30, 1998, Nabi amended its credit
agreement to provide for a waiver of noncompliance with respect to the financial
covenants and also to prospectively modify the financial covenants. The
agreement was also amended to provide for a $45 million revolving credit
facility due September 2002, and a $5 million term loan due March 1999, on
substantially the same terms as the previous credit agreement, with the
exception that all borrowings will bear interest at the prime rate plus 1%. Nabi
currently believes that it can comply with the amended covenants during 1998 and
the remaining term of the credit agreement.
At December 31, 1997, Nabi's working capital was $63.9 million compared to $63.6
million on December 31, 1996.
Projected capital expenditures for 1998 principally include deferred validation
costs, including capitalized interest for manufacturing facilities, development
and implementation of information systems and plasma center renovations. Nabi
believes that cash flow from operations and its available bank credit facilities
will be sufficient to meet its anticipated cash requirements for 1998.
30
31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and information required by Item 8 are listed in the
Index, presented as Item 14, and included herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item and not provided in Item 3A will be
contained in Nabi's Proxy statement, which Nabi intends to file within 120 days
following the end of Nabi's fiscal year ended December 31, 1997 and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item will be contained in Nabi's Proxy
Statement which Nabi intends to file within 120 days following the end of Nabi's
fiscal year ended December 31, 1997 and such information is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item will be contained in Nabi's Proxy
Statement which Nabi intends to file within 120 days following the end of Nabi's
fiscal year ended December 31, 1997 and such information is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item will be contained in Nabi's Proxy
Statement which Nabi intends to file within 120 days following the end of Nabi's
fiscal year ended December 31, 1997 and such information is incorporated herein
by reference.
31
32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The following consolidated financial statements of Nabi and its subsidiaries are
included pursuant to Item 8 hereof.
PAGE #
------
Report of Independent Certified Public Accountants...................................................34
Consolidated Statement of Operations for the years ended December 31, 1995, 1996
and 1997.............................................................................................35
Consolidated Balance Sheet at December 31, 1996 and 1997.............................................36
Consolidated Statement of Changes in Stockholders' Equity for the years ended
December 31, 1995, 1996 and 1997.....................................................................37
Consolidated Statement of Cash Flows for the years ended December 31, 1995, 1996
and 1997.............................................................................................38
Notes to Consolidated Financial Statements...........................................................39
(A) (2) FINANCIAL STATEMENT SCHEDULES
Schedule II - Valuation and Qualifying Accounts and Reserves.........................................55
All other schedules omitted are not required, inapplicable or the
information required is furnished in the financial statements or notes
therein.
(A) (3) EXHIBITS.............................................................................................56
(B) REPORTS ON FORM 8-K
On August 21, 1997, Nabi filed a current report on Form 8-K relating to its
adoption of the Shareholders Rights Plan. Nabi inadvertently omitted disclosure
of the filing in its quarterly report on Form 10Q for the three months ended
September 30, 1997.
32
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on this 30th day of March,
1998.
NABI
By: /s/ DAVID J. GURY
------------------------------------
David J. Gury
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ DAVID J. GURY Chairman of the Board, March 30, 1998
- -------------------------------- President, Chief Executive Officer
David J. Gury
/s/ JOHN C. CARLISLE Senior Executive Vice President March 30, 1998
- --------------------------------
John C. Carlisle
/s/ ALFRED J. FERNANDEZ Senior Vice President, March 30, 1998
- -------------------------------- Chief Financial Officer
Alfred J. Fernandez
/s/ LORRAINE M. BREECE Chief Accounting Officer March 30, 1998
- --------------------------------
Lorraine M. Breece
/s/ JOSEPH C. COOK, JR. Director March 30, 1998
- --------------------------------
Joseph C. Cook, Jr.
/s/ RICHARD A. HARVEY, JR. Director March 30, 1998
- --------------------------------
Richard A. Harvey, Jr.
/s/ DAVID L. CASTALDI Director March 30, 1998
- --------------------------------
David L. Castaldi
/s/ DAVID A. THOMPSON Director March 30, 1998
- --------------------------------
David A. Thompson
/s/ PAUL BOGIKES Director March 30, 1998
- --------------------------------
Paul Bogikes
/s/ GEORGE W. EBRIGHT Director March 30, 1998
- --------------------------------
George W. Ebright
/s/ LINDA JENCKES Director March 30, 1998
- --------------------------------
Linda Jenckes
33
34
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of
Nabi
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14 (a) (1) and (2) present fairly, in all material
respects, the financial position of Nabi and its subsidiaries at December 31,
1996 and 1997, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of Nabi's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Miami, Florida
March 30, 1998
34
35
NABI
CONSOLIDATED STATEMENT OF OPERATIONS
For The Years Ended December 31,
-----------------------------------------
(In Thousands, Except Per Share Data) 1995 1996 1997
--------- --------- ---------
SALES $ 195,928 $ 239,909 $ 228,744
COSTS AND EXPENSES:
Costs of products sold 152,148 181,914 180,533
Selling, general and administrative expense 26,816 21,095 25,012
Research and development expense 20,132 16,721 19,126
Royalty expense 3,490 5,253 6,617
Other operating expense, principally
amortization and freight 3,015 3,757 3,087
Non-recurring charges -- -- 5,680
--------- --------- ---------
OPERATING INCOME (LOSS) (9,673) 11,169 (11,311)
INTEREST INCOME 1,064 1,275 272
INTEREST EXPENSE (1,931) (3,987) (4,712)
OTHER, NET (334) (511) (70)
--------- --------- ---------
INCOME (LOSS) BEFORE BENEFIT (PROVISION) FOR
INCOME TAXES AND EXTRAORDINARY CHARGE (10,874) 7,946 (15,821)
BENEFIT (PROVISION) FOR INCOME TAXES (6,687) 6,214 4,668
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY CHARGE (17,561) 14,160 (11,153)
EXTRAORDINARY CHARGE -- (932) --
--------- --------- ---------
NET INCOME (LOSS) $ (17,561) $ 13,228 $ (11,153)
========= ========= =========
BASIC EARNINGS (LOSS) PER SHARE:
Earnings (loss) before extraordinary charge $ (0.52) $ 0.41 $ (0.32)
Extraordinary charge -- (0.03) --
--------- --------- ---------
Net earnings (loss) $ (0.52) $ 0.38 $ (0.32)
========= ========= =========
DILUTED EARNINGS (LOSS) PER SHARE:
Earnings (loss) before extraordinary charge $ (0.52) $ 0.40 $ (0.32)
Extraordinary charge -- (0.03) --
--------- --------- ---------
Net earnings (loss) $ (0.52) $ 0.37 $ (0.32)
========= ========= =========
The accompanying Notes are an integral part of these Financial Statements.
35
36
NABI
CONSOLIDATED BALANCE SHEET
December 31,
-------------------------
(In Thousands) 1996 1997
--------- ---------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 18,513 $ 3,397
Short-term investments 8,797 --
Trade accounts receivable, net 38,127 36,060
Inventories, net 28,395 43,387
Prepaid expenses and other assets 4,269 16,128
--------- ---------
TOTAL CURRENT ASSETS 98,101 98,972
PROPERTY AND EQUIPMENT, NET 60,587 89,187
OTHER ASSETS
Excess of acquisition cost over net assets acquired, net 18,072 17,123
Intangible assets, net 9,684 8,104
Other, net 15,698 12,520
--------- ---------
TOTAL ASSETS $ 202,142 $ 225,906
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 9,800 $ 11,390
Accrued expenses 22,484 17,396
Notes payable 2,187 6,253
--------- ---------
TOTAL CURRENT LIABILITIES 34,471 35,039
NOTES PAYABLE 81,278 114,828
OTHER 332 376
--------- ---------
TOTAL LIABILITIES 116,081 150,243
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Convertible preferred stock, par value $.10 per share:
5,000 shares authorized; no shares outstanding -- --
Common stock, par value $.10 per share: 75,000 shares authorized;
34,614 and 34,801 shares issued and outstanding, respectively 3,461 3,480
Capital in excess of par value 136,424 137,160
Accumulated deficit (53,824) (64,977)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 86,061 75,663
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 202,142 $ 225,906
========= =========
The accompanying Notes are an integral part of these Financial Statements.
36
37
NABI
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
Common Stock
Common Stock Warrants
-------------------------------------------------------
(In Thousands) Shares Amount Shares Amount
--------- --------- --------- --------
Balance at December 31, 1994 33,296 $ 3,330 9 $ --
Compensation related to restricted
stock issued under employee stock plan -- -- -- --
Stock options exercised 700 70 -- --
Issuance of common stock pursuant to employee stock plan 22 2 -- --
Tax benefit from stock options exercised -- -- -- --
Acquisition and retirement of treasury stock (76) (8) -- --
Issuance of warrants -- -- 100 --
Collection of note receivable -- -- -- --
Net loss for the year -- -- -- --
Other -- -- -- --
--------- --------- --------- --------
Balance at December 31, 1995 33,942 3,394 109 --
Compensation related to restricted stock issued
under employee stock plan 14 1 -- --
Stock options exercised 704 71 -- --
Tax benefit from stock options exercised -- -- -- --
Acquisition and retirement of treasury stock (50) (5) -- --
Warrants exercised 4 -- (9) --
Net income for the year -- -- -- --
Other -- -- -- --
Balance at December 31, 1996 34,614 3,461 100 --
--------- --------- --------- --------
Stock options exercised 185 19 -- --
Tax benefit from stock options exercised -- -- -- --
Net loss for the year -- -- -- --
Other 2 -- -- --
--------- --------- --------- --------
Balance at December 31, 1997 34,801 $ 3,480 100 --
========= ========= ========= ========
Capital in Receivable
Excess of Accumulated from Stockholders'
(In Thousands) Par Value Deficit Stockholder Equity
---------- ----------- ----------- -----------
Balance at December 31, 1994 $ 131,606 $ (49,491) $ (126) $ 85,319
Compensation related to restricted
stock issued under employee stock plan 5 -- -- 5
Stock options exercised 1,127 -- -- 1,197
Issuance of common stock pursuant to employee stock plan 102 -- -- 104
Tax benefit from stock options exercised 819 -- -- 819
Acquisition and retirement of treasury stock (555) -- -- (563)
Issuance of warrants -- -- -- --
Collection of note receivable -- -- 126 126
Net loss for the year -- (17,561) -- (17,561)
Other (4) -- -- (4)
--------- --------- --------- ---------
Balance at December 31, 1995 133,100 (67,052) -- 69,442
Compensation related to restricted stock issued
under employee stock plan 164 -- -- 165
Stock options exercised 2,526 -- -- 2,597
Tax benefit from stock options exercised 1,211 -- -- 1,211
Acquisition and retirement of treasury stock (495) -- -- (500)
Warrants exercised -- -- -- --
Net income for the year -- 13,228 -- 13,228
Other (82) -- -- (82)
--------- --------- --------- ---------
Balance at December 31, 1996 136,424 (53,824) -- 86,061
Stock options exercised 427 -- -- 446
Tax benefit from stock options exercised 477 -- -- 477
Net loss for the year -- (11,153) -- (11,153)
Other (168) -- -- (168)
--------- --------- --------- ---------
Balance at December 31, 1997 $ 137,160 $ (64,977) -- $ 75,663
========= ========= ========= =========
The accompanying Notes are an integral part of these Financial Statements.
37
38
NABI
CONSOLIDATED STATEMENT OF CASH FLOWS
For The Years Ended December 31,
--------------------------------------
(In Thousands) 1995 1996 1997
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(17,561) $ 13,228 $(11,153)
Adjustments to reconcile net income (loss) to net cash (used)
provided by operating activities:
Depreciation and amortization 6,959 7,883 9,856
Non-recurring charge -- -- 5,680
Compensation under employee stock plan 657 165 --
Deferred income taxes (806) (6,369) 2,503
Tax benefit from stock options exercised 819 1,211 477
Extraordinary charge -- 932 --
Other 119 916 1,179
Change in assets and liabilities:
Decrease (increase) in trade accounts receivable (4,743) (10,589) 1,066
Decrease (increase) in inventories (1,401) (5,749) (15,096)
Decrease (increase) in prepaid expenses 369 (1,396) (12,259)
Decrease (increase) in other assets (2,578) (1,106) (2,633)
Increase (decrease) in accounts payable and accrued expenses 5,495 7,121 (5,246)
-------- -------- --------
Total adjustments 4,890 (6,981) (14,473)
-------- -------- --------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (12,671) 6,247 (25,626)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash consideration for business acquisition (6,425) -- --
Capital expenditures (24,387) (23,085) (36,367)
Collections on note receivable from stockholder 126 -- --
Purchases of short-term investments (4,036) (18,190) --
Sales and redemptions of short-term investments 22,885 9,724 8,850
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (11,837) (31,551) (27,517)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of convertible subordinated debentures -- 77,884 --
Net proceeds from sale and issuance of common stock 612 -- --
Proceeds from exercise of options and warrants 419 1,872 446
Borrowings (repayments) under line of credit, net (626) (6,760) 34,246
Repayments of term debt, net (388) (10,933) (614)
Borrowings (repayments) of flexible term notes 12,936 (18,000) --
Borrowings (repayments) of other debt 3,414 (4,237) 3,949
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 16,367 39,826 38,027
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (8,141) 14,522 (15,116)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,132 3,991 18,513
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,991 $ 18,513 $ 3,397
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 2,190 $ 3,605 $ 6,295
======== ======== ========
Income taxes paid (refunded), net $ 7,190 $ (264) $ 350
======== ======== ========
The accompanying Notes are an integral part of these Financial Statements
38
39
NABI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BUSINESS AND ORGANIZATION
Nabi is a fully integrated research and development driven biopharmaceutical
company that develops and commercializes therapeutic products for the prevention
and treatment of infectious diseases and immunological disorders and supplies
human blood plasma.
On November 29, 1995, Univax Biologics, Inc. ("Univax"), a publicly traded
biopharmaceutical company, was merged with and into Nabi. Under the terms of the
agreement and plan of merger, Nabi issued an aggregate of 14,173,508 shares of
its common stock for the outstanding shares of Univax common and preferred
stock. The merger was accounted for as a pooling of interests and qualified as a
tax free reorganization under Internal Revenue Service regulations.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Nabi and its subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
BASIS OF PRESENTATION: Certain items in the 1995 and 1996 consolidated financial
statements have been reclassified for comparative purposes. All dollar amounts
are expressed in thousands of dollars except amounts related to per share data.
REVENUE RECOGNITION: Revenue is recognized when title and risk of loss are
transferred to the customer, generally as products are shipped. Cash collections
in excess of amounts earned on billings are recorded as deferred revenue and
recognized as services are rendered or products are shipped.
RESEARCH AND DEVELOPMENT EXPENSE: Research and development costs are expensed as
incurred. Amounts payable to third parties under collaborative product
development agreements are recorded at the earlier of the milestone achievement
or as payments become contractually due. Reimbursements from third parties for
research and development activities are recorded as a reduction in research and
development expense.
INCOME TAXES: The provision for income taxes includes federal and state income
taxes currently payable and the change in amounts deferred because of temporary
differences between financial statement and tax basis of assets and liabilities.
Deferred tax assets are accounted for under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes,"
which requires a valuation allowance when it is "more likely than not" that some
portion of the deferred tax assets will not be realized. The pronouncement
further states that "forming a conclusion that a valuation allowance is not
required is difficult" when there is persuasive evidence to the contrary, such
as cumulative losses in recent years. Nabi periodically evaluates the
probability of future taxable income including the occurrence of intervening
events which affect the probability of future taxable income and adjusts its
valuation allowance accordingly.
39
40
EARNINGS PER SHARE: During the fourth quarter of 1997, Nabi adopted SFAS No.
128, "Earnings Per Share", which requires presentation of basic and diluted
earnings per share and restatement of earnings per share for all prior periods
presented. Basic earnings per share is determined based on the weighted average
number of common shares outstanding during the year. Diluted earnings per share
is determined based on the weighted average number of common shares and
potentially dilutive securities outstanding during the year.
FINANCIAL INSTRUMENTS: The carrying amounts of financial instruments including
cash and cash equivalents, short-term investments, accounts receivable, accounts
payable and short-term debt approximated fair value as of December 31, 1996 and
1997, because of the relatively short maturity of these instruments.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: Cash equivalents consist of money
market funds and bankers acceptances with a maturity of three months or less.
Short-term investments consist of securities issued or guaranteed by the U.S.
Treasury and U.S. Government Agency Securities.
Short-term investments are classified as available-for-sale based on
management's assessment of its intent and ability to hold these investments.
INVENTORIES: Inventories are stated at the lower of cost or market with cost
determined on the first-in first-out ("FIFO") method for substantially all
inventories.
PROPERTY AND EQUIPMENT: Property and equipment are carried at cost. Depreciation
is recognized on the straight-line method over the estimated useful lives of the
assets. Depreciable lives of property and equipment are as follows:
ASSET LIFE
--------------------------------------------------------------------------
Buildings 35 - 39 Years
Furniture and fixtures 5 - 8 Years
Information systems 3 - 10 Years
Machinery and equipment 3 - 8 Years
Leasehold improvements Lesser of lease term or economic life
Maintenance and repairs are expensed as incurred. Major renewals and betterments
are capitalized as additions to property and equipment. Gain or loss upon the
retirement or sale of property and equipment is reflected currently in the
results of operations.
EXCESS OF ACQUISITION COST OVER NET ASSETS ACQUIRED: Excess of acquisition cost
over net assets acquired (goodwill) represents the excess of cost over the fair
value of identifiable assets acquired in business acquisitions. Goodwill is
amortized ratably from the date of acquisition over periods ranging from 10 to
25 years and is evaluated periodically in relation to the operating performance
and future undiscounted cash flows of the underlying assets.
INTANGIBLE ASSETS: Intangible assets represent the fair value of assets acquired
in business, product and plasma center acquisitions including customer lists,
donor lists, trademarks and trademark registrations, and non-competition
agreements. These costs are amortized ratably from the date of acquisition over
periods ranging from 3 to 25 years and are evaluated periodically in relation to
the operating performance and future undiscounted cash flows of the underlying
assets.
NOTE 3 SHORT-TERM INVESTMENTS
The following is a summary of securities available for sale as of December 31,
1996:
FAIR VALUE
-----------------------------------------------------------------
U.S. Treasury Bill $4,955
U.S. Government Agencies 3,842
------
TOTAL $8,797
======
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41
The fair value of the above securities approximates carrying value at December
31, 1996.
NOTE 4 TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are comprised of the following:
DECEMBER 31,
-----------------------
1996 1997
-------- --------
Trade accounts receivable $ 38,774 $ 36,463
Allowance for doubtful accounts (647) (403)
-------- --------
TOTAL $ 38,127 $ 36,060
======== ========
NOTE 5 INVENTORIES
The components of inventories are as follows:
DECEMBER 31,
-----------------------
1996 1997
-------- --------
Finished goods $ 23,610 $ 40,029
Work in process 1,836 212
Raw materials 8,504 3,787
-------- --------
33,950 44,028
Less reserves (5,555) (641)
-------- --------
TOTAL $ 28,395 $ 43,387
======== ========
Inventory reserves at December 31, 1997 declined substantially from the prior
year, principally due to the write-off of previously reserved development stage
raw material inventories which had no commercial viability.
NOTE 6 PREPAID EXPENSES AND OTHER ASSETS
The components of prepaid expenses and other current assets are summarized
below:
DECEMBER 31,
--------------------
1996 1997
------- -------
Federal and State income tax receivables -- $ 7,767
Other prepaid items $ 4,269 8,361
------- -------
TOTAL $ 4,269 $16,128
======= =======
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NOTE 7 PROPERTY AND EQUIPMENT
Property and equipment and related allowances for depreciation and amortization
are summarized below:
DECEMBER 31,
-------------------------
1996 1997
--------- ---------
Information systems $ 4,692 $ 19,066
Leasehold improvements 15,106 17,523
Machinery and equipment 16,839 16,882
Land and buildings 7,155 8,634
Furniture and fixtures 4,907 5,122
Construction in progress 32,298 46,776
--------- ---------
Total property and equipment 80,997 114,003
Less accumulated depreciation and amortization (20,410) (24,816)
--------- ---------
TOTAL $ 60,587 $ 89,187
========= =========
Construction in progress consists primarily of costs incurred in connection with
construction of Nabi's biopharmaceutical facility included deferred validation
costs of $2,754 and $9,370 and capitalized interest of $2,757 and $5,149 at
December 31, 1996 and 1997, respectively.
The biopharmaceutical facility requires FDA licensure to produce therapeutic
products. Nabi believes that the facility will be licensed by late 1999 or early
2000. The anticipated costs of completion to prepare the facility for its
intended use are estimated to be approximately $11,000 and $12,500 in 1998 and
1999, respectively.
Machinery and equipment includes certain assets which have been accounted for as
capital leases with a net book value of $1,056 and $421 at December 31, 1996 and
1997, respectively.
Depreciation and amortization expense during 1995, 1996 and 1997 includes
amortization of assets under capital leases of approximately $861, $743 and $447
respectively.
NOTE 8 OTHER ASSETS
Other assets consist of the following:
DECEMBER 31,
-----------------------
1996 1997
-------- --------
Excess of acquisition cost over net
assets acquired $ 22,204 $ 22,204
Less accumulated amortization (4,132) (5,081)
-------- --------
$ 18,072 $ 17,123
======== ========
Intangible assets $ 15,733 $ 15,557
Less accumulated amortization (6,049) (7,453)
-------- --------
$ 9,684 $ 8,104
======== ========
Other $ 20,330 $ 18,145
Less accumulated amortization (4,632) (5,625)
-------- --------
TOTAL $ 15,698 $ 12,520
======== ========
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NOTE 9 ACCRUED EXPENSES
Accrued expenses consist of the following:
DECEMBER 31,
--------------------
1996 1997
------- -------
Employee compensation and benefits $ 6,919 $ 5,127
Accrued royalties and product costs 3,282 3,741
Accrued interest 2,210 2,389
Accrued chargebacks 1,956 715
Other 8,117 5,424
------- -------
TOTAL $22,484 $17,396
======= =======
NOTE 10 NOTES PAYABLE
Notes payable consist of the following:
DECEMBER 31,
-------------------------
1996 1997
--------- ---------
Bank indebtedness:
Revolving credit facility -- $ 34,246
Other $ 1,573 4,599
--------- ---------
1,573 38,845
6.5% Convertible Subordinated Notes 80,500 80,500
Equipment term notes 957 343
Other 435 1,393
--------- ---------
Total notes payable 83,465 121,081
Current maturities (2,187) (6,253)
--------- ---------
Notes payable, long-term $ 81,278 $ 114,828
========= =========
At December 31, 1997, the annual aggregate maturities of debt through the year
2002 and thereafter were $6,253; $82; $0; $0; $34,246; and $80,500.
At December 31, 1997, Nabi's credit agreement provided for a $50,000 revolving
credit facility subject to certain borrowing base restrictions as defined in the
agreement which matures in September 2002. Availability under the new facility
was approximately $10,300 at December 31, 1997. As of the same date, Nabi was
not in compliance with certain financial covenants. Effective March 30, 1998
Nabi amended its credit agreement to provide for a waiver of noncompliance with
respect to the financial covenants and also to prospectively modify the
financial covenants. The agreement was also amended to provide for a $45,000
revolving credit facility due September 2002, and a $5,000 term loan due March
1999, on substantially the same terms as the previous credit agreement, with the
exception that all borrowings will bear interest at the prime rate plus 1%. Nabi
currently believes that it can comply with the amended covenants during 1998 and
the remaining term of the credit agreement. This credit agreement is secured by
substantially all assets and contains covenants prohibiting dividend payments
and requiring the maintenance of certain financial covenants. Other bank
indebtedness includes amounts due for transactional float under the revolving
credit facility.
Equipment term notes outstanding at December 31,1997 have a weighted-average
interest rate of 5.57%, are payable in installments through 1999 and are secured
by equipment having a net book value of approximately $400 at December
31, 1997.
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44
During the first quarter of 1996, Nabi issued $80,500 of 6.5% Convertible
Subordinated Notes due February 1, 2003 ("Notes") in a private placement. The
Notes are convertible into Nabi common stock at a conversion price of $14 per
share at any time on or after May 6, 1996, unless previously redeemed or
repurchased. At any time on or after February 4, 1999, the Notes may be redeemed
at Nabi's option without premium. A total of 5,750,000 shares of common stock
have been registered and reserved for issuance upon conversion of the Notes.
Nabi utilized a portion of the net proceeds of the offering to repay a $10,000
term loan, $18,000 in flexible term notes and approximately $12,200 under a
revolving credit facility. In connection with the early repayment of the
outstanding bank debt through the application of the net proceeds of the Notes,
Nabi incurred an extraordinary charge of approximately $932 in the first quarter
of 1996.
At December 31, 1997, the fair value of Nabi's convertible subordinated notes
was approximately $53,900. The fair value was estimated using an independently
quoted market price. The carrying value of all other long-term notes payable
approximated fair value based upon quoted market prices for the same or similar
debt issues.
NOTE 11 STOCKHOLDERS' EQUITY
COMMON STOCK
Effective November 29, 1995, Nabi issued approximately 14.2 million shares of
its common stock in exchange for all of the outstanding common and preferred
stock of Univax.
Effective January 1995, Nabi increased its authorized common stock from 20
million to 50 million shares and in November 1995 to 75 million shares.
WARRANTS
In November 1995, Nabi issued a warrant to purchase 100,000 shares of its common
stock to an affiliate of its principal bank lender in connection with an
agreement whereby Nabi had the right to issue up to $20,000 in subordinated
notes. The warrants are exercisable at $9.82 per share and expire on December
31, 2000.
STOCK OPTIONS
Nabi maintains four stock option plans for its employees. Under these plans,
Nabi has granted options to certain employees entitling them to purchase shares
of common stock within ten years. The options vest over periods ranging from six
months to four years from the date of grant and are granted with exercise prices
equal to or greater than the fair market value of the underlying common stock on
the date of grant.
During May 1995, the stockholders of Nabi adopted the Stock Plan for
Non-Employee Directors (the "Directors Plan"). Nabi granted options under the
Director's Plan to certain directors entitling them to purchase shares of Nabi
common stock within five years, vesting at six months after the date of grant
and at an option price equal to the fair market value of the underlying common
stock at the date of grant. Also, during May 1995, the stockholders of Univax
approved the 1995 Director's Stock Option Plan (the "Univax Director's Plan")
for the former directors of Univax. Under the Univax Director's Plan, options to
purchase 27,650 shares of common stock were granted, all of which were exercised
prior to the effective date of the Univax merger upon which date the plan was
terminated.
44
45
At December 31, 1997, there were options outstanding under all Nabi's stock
plans to acquire 4.9 million shares of its common stock of which 1.8 million
were then exercisable. As of the same date, 4.9 million shares of common stock
are reserved for future issuance under the plans. Stock options granted and
outstanding under these plans as of December 31, 1997 is presented below:
STOCK OPTION ACTIVITY
OPTIONS EXERCISE PRICE
------- --------------
(In Thousands)
BALANCE AT DECEMBER 31, 1994 3,054 $ .19 - $12.97
Granted 1,029 $5.38 - $11.00
Exercised or canceled (1,029) $ .19 - $12.97
------- --------------
BALANCE AT DECEMBER 31, 1995 3,054 $ .19 - $12.97
Granted 975 $8.63 - $13.75
Exercised or canceled (912) $ .19 - $ 3.75
------- --------------
BALANCE AT DECEMBER 31, 1996 3,117 $ .19 - $13.75
Granted 1,001 $4.25 - $11.13
Exercised or canceled (345) $1.03 - $13.75
------- --------------
BALANCE AT DECEMBER 31, 1997 3,773 $ .19 - $13.75
======= ==============
STOCK OPTIONS OUTSTANDING
OUTSTANDING EXERCISABLE
------------------------------------------- ----------------------------
Average Average Average
EXERCISE PRICE RANGE Years Exercise Exercise
-------------------- Options Remaining Price Options Price
--------- ---------- ---------- --------- ---------
(In Thousands) (In Thousands)
$0.19 - $4.25 540 4.6 $2.65 520 $2.59
$5.06 - $7.59 1,260 7.1 6.75 834 6.77
$8.39 - $11.125 1,121 6.9 10.72 168 9.11
$12.97 - $13.75 852 6.5 13.73 241 13.68
--------- ---------- ---------- --------- ---------
TOTAL 3,773 6.5 $8.46 1,763 $8.04
========= ========== ========== ========= =========
In connection with the merger of Univax into Nabi, certain employees' stock
options were vested in connection with the termination of their employment.
Nabi has recorded compensation in connection with these plans of $657 and $165
in 1995 and 1996, respectively.
In October 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123, "Accounting for Stock-Based Compensation". SFAS 123, the disclosure
provisions of which must be implemented for fiscal years beginning subsequent to
December 15, 1995, establishes a fair value based method of accounting for
stock-based compensation plans, the effect of which can either be disclosed or
recorded. Nabi adopted the disclosure-only provisions of SFAS 123 in 1996 and
upon adoption, retained its intrinsic value method of accounting for stock-
based compensation.
The following information reflects Nabi's proforma earnings (loss) information
as if compensation expense associated with Nabi's stock plans had been recorded
under the provisions of SFAS 123. Proforma compensation expense has been
determined based upon the estimated fair market value of the options at the date
of grant.
1996 1997
---------- ----------
Net income (loss) $ 12,230 $ (12,658)
Basic earnings (loss) per share $ 0.36 $ (0.36)
Diluted earnings (loss) per share $ 0.35 $ (0.36)
45
46
The estimated fair value of each option grant is estimated using the
Black-Scholes option-pricing model with the following ranges of assumptions:
expected term of 2 - 5 years; expected volatility of 57% - 83%; and risk-free
interest rates of 5% - 8%. The weighted-average estimated fair value of options
granted during 1996 was $5.93 and $6.48 for 1997.
Effective July 25, 1997, Nabi's Board of Directors adopted a shareholders rights
plan under which a dividend of one preferred share purchase right ("the Right")
was distributed for each outstanding share of common stock held as of the close
of business on August 27, 1997. Each right entitles the holder to purchase one
one-hundredth of a share of Series One Preferred Stock at a price of $70,
subject to adjustment. The Rights expire August 1, 2007, and are exercisable
only if an individual or group has acquired or obtained the right to acquire, or
has announced a tender or exchange offer that if consummated would result in
such individual or group acquiring beneficial ownership of 15% or more of the
common stock. Such percentage may be lowered at the Board's discretion. If the
Rights become exercisable, the holder may be entitled to receive upon exercise
shares of Nabi's common stock having a market value of two times the exercise
price of the Rights or the number of shares of the acquiring company which have
a market value of two times the exercise price of the Rights. The Rights
separate from the common stock if they become exercisable. Nabi is entitled to
redeem the Rights in whole for $.01 per Right under certain circumstances.
During January 1998, Nabi granted approximately 1.6 million options to its
employees under the stock option plans.
STOCK PURCHASE PLAN
During 1991, Nabi adopted an employee stock purchase plan which was terminated
effective November 29, 1995 in connection with the Univax merger. The plan
provided for the purchase of common stock by employees at a price equal to 85%
of the fair market value of such stock. Under this plan, 41,830 common shares
were issued to employees.
NOTE 12 INCOME TAXES
Income (loss) before benefit (provision) for income taxes and extraordinary
charge was taxed under the following jurisdictions:
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1996 1997
-------- -------- --------
Domestic $ (9,148) $ 6,172 $(15,348)
Foreign (1,726) 1,774 (473)
-------- -------- --------
TOTAL $(10,874) $ 7,946 $(15,821)
======== ======== ========
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The benefit (provision) for income taxes consists of the following:
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
------- ------- -------
Current
Federal $(5,926) $ (529) $ 6,929
State (730) (231) (60)
------- ------- -------
(6,656) (760) 6,869
------- ------- -------
Deferred
Federal 771 7,719 (1,631)
State 35 484 (75)
------- ------- -------
806 8,203 (1,706)
------- ------- -------
Benefit charged directly to equity from exercise
of stock options and warrants (819) (1,211) (477)
Acquired tax benefit used to reduce intangible
assets (18) (18) (18)
------- ------- -------
TOTAL $(6,687) $ 6,214 $ 4,668
======= ======= =======
Deferred tax assets (liabilities) are comprised of the following:
December 31,
--------------------------------------
1995 1996 1997
-------- -------- --------
DEFERRED TAX ASSETS:
NOL carryforward $ 18,338 $ 17,429 $ 17,987
Capitalized research and development 12,712 10,387 9,003
Research tax credit 2,801 3,078 2,882
Inventory reserve and capitalization 1,518 2,044 482
Amortization 1,090 2,185 2,349
Bad debt reserve 126 233 145
Depreciation 523 719 678
Alternative minimum tax credit -- -- 703
Other 593 525 928
-------- -------- --------
37,701 36,600 35,157
Valuation allowance (34,635) (27,251) (28,324)
-------- -------- --------
Deferred tax assets 3,066 9,349 6,833
DEFERRED TAX LIABILITIES:
Amortization (937) (906) (906)
Other (72) (17) (4)
-------- -------- --------
Deferred tax liabilities (1,009) (923) (910)
======== ======== ========
Net deferred tax assets $ 2,057 $ 8,426 $ 5,923
======== ======== ========
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In November 1995, Univax was merged with and into Nabi. The merger qualifies as
a tax-free reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended. Univax's pre-merger deferred tax assets are
available to offset the future taxable income of Nabi, subject to certain annual
and change of control limitations. The Univax pre-merger deferred tax assets
primarily include NOL carryforwards, capitalized research and development
expense and research tax credit carryforwards. The NOLs and research tax credit
carryforwards expire in varying amounts through the year 2010.
Pursuant to SFAS No. 109 "Accounting for Income Taxes," Nabi recognized
approximately $7,400 of certain deferred tax assets during 1996 primarily as a
result of releasing a portion of the valuation allowance previously established
against these assets acquired in the Nabi/Univax merger. During 1997, Nabi
utilized deferred tax assets of approximately $2,500. The ultimate realization
of the remaining deferred tax assets is largely dependent on Nabi's ability to
generate sufficient future taxable income. Nabi believes that the valuation
allowance at December 31, 1997 is appropriate, given its historical loss
experience and other factors including but not limited to the uncertainty of
future taxable income expectations beyond Nabi's strategic planning horizon.
During 1997, Nabi generated a federal income tax receivable in the amount of
$6,900 due to carryback of the current year net operating loss.
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'
The significant elements contributing to the difference between the federal
statutory tax rate and the effective tax rate are as follows:
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
------ ------ ------
Federal statutory rate (35.0)% 35.0% (35.0)%
State income taxes, net of federal benefit 4.1 (2.9) 0.1
Goodwill and other amortization 2.3 (0.2) 1.1
Foreign trade income (5.1) (12.8) 1.0
Foreign loss 5.7 -- --
Merger transaction cost 19.0 (0.6) (0.9)
Pre-merger losses 14.9 -- --
Increase (reduction) in valuation allowance -- (92.9) 5.5
Tax credits -- (3.3) 0.2
Capitalized research and development 60.2 -- --
Other (4.6) (0.5) (1.5)
------ ------ ------
61.5% (78.2)% (29.5)%
====== ====== ======
NOTE 13 EARNINGS PER SHARE
Effect of
Basic Dilutive Securities: Diluted
EPS Stock Options EPS
-------- ------------------- --------
1995
Income (Loss) Before Extraordinary Charge $(17,561) -- $(17,561)
Shares 33,574 -- 33,574
Per Share $ (0.52) $ (0.52)
-------- --------- --------
1996
Income (Loss) Before Extraordinary Charge $ 14,160 -- $ 14,160
Shares 34,387 995 35,382
Per Share $ 0.41 $ 0.40
-------- --------- --------
1997
Income (Loss) Before Extraordinary Charge $(11,153) -- $(11,153)
Shares 34,737 -- 34,737
Per Share $ (0.32) $ (0.32)
-------- --------- --------
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NOTE 14 LEASES
Nabi conducts a majority of its operations under operating lease agreements.
Certain laboratory and office equipment leases are accounted for as capital
leases. The majority of the related lease agreements contain renewal options
which enable Nabi to renew the leases for periods of two to five years at the
then fair rental value at the end of the initial lease term. Management expects
that the leases will be renewed or replaced in the normal course of business.
Rent expense was approximately $5,225, $6,293 and $6,785 for the years ended
December 31, 1995, 1996 and 1997, respectively.
As of December 31, 1997, the aggregate future minimum lease payments under all
non-cancelable operating leases with initial or remaining lease terms in excess
of one year are as follows:
YEAR ENDING DECEMBER 31,
1998 $5,727
1999 4,826
2000 4,105
2001 3,487
2002 2,136
Thereafter 4,188
--------
Total minimum lease commitments $24,469
========
NOTE 15 RELATED PARTY TRANSACTIONS
Effective September 30, 1992, Nabi acquired H-BIG(R) (hepatitis B immune
globulin) a proprietary plasma-based product from Abbott Laboratories
("Abbott"), in consideration of 2 million shares of Nabi common stock valued at
$3,854 and royalties based upon product sales. The shares of Nabi common stock
issued to Abbott were not registered under the federal securities laws and
therefore were subject to restrictions on transfer. With respect to its
investment in Nabi, Abbott has agreed to various standstill measures, including
agreements not to acquire additional shares without approval of Nabi's Board of
Directors and to vote its shares on most matters in the same proportion as other
stockholders.
Related party transactions with Abbott for the years ended December 31, 1995,
1996 and 1997 are summarized below:
1995 1996 1997
------- ------- -------
Sales of plasma-related products and testing services $ 4,574 $ 3,027 $ 2,720
Purchases of diagnostic, therapeutic and testing products 8,516 10,390 14,028
Product royalty obligations 1,977 2,617 2,489
Rental payments and other 1,048 919 1,030
At December 31, 1996 and 1997, trade accounts receivable from Abbott totaled
$311 and $499 respectively, and accounts payable to Abbott aggregated $1,554 and
$894, respectively.
At December 31, 1997, notes receivable from corporate officers aggregated $390,
bear interest at the prime rate and mature at varying dates through December 31,
1998.
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NOTE 16 STRATEGIC ALLIANCES, LICENSES AND ROYALTY AGREEMENTS
Nabi has entered into product development and licensing agreements with certain
collaborators. Under these agreements, Nabi has made payments for contract
initiation, milestone achievements, cost reimbursements and profit sharing and
is obligated to make future payments under these agreements if certain
contractual conditions are achieved. Nabi incurred research and development
expenses under these agreements of $1,900 in 1995, In addition, under a certain
collaboration agreement, Nabi recorded research support reimbursements of $6,036
and $2,148 in 1995 and 1996, respectively. This collaboration agreement
terminated in 1996.
As discussed in Note 15, Nabi is obligated to pay Abbott royalties based upon
its H-BIG(R) product sales.
In connection with an exclusive licensing and distribution agreement with
Cangene Corporation ("Cangene") to market and distribute WinRho SDF(TM) in the
U.S. through March 2005, Nabi was obligated to expend a minimum of $3,000 for
sales and marketing expenses in each of the fiscal years ended May 1996 and
1997. In addition, Nabi has agreed to loan Cangene fifty percent (50%) of the
cost of capital improvements to its manufacturing facility up to $3,000, of
which $2,240 was advanced at December 31, 1997. Under the agreement which
terminates in 2005, Nabi has exclusive marketing rights for and shares in the
profits from sales of WinRho SDF(TM) in the United States.
During 1997, Nabi entered into a co-promotion and supply agreement with Cangene
under which Cangene will manufacture H-BIG(R) for approximately three years once
the new formulation receives U.S. regulatory approval. In a reciprocal
agreement, Cangene gains exclusive rights to distribute H-BIG(R) in Canada for
three years, provided Cangene achieves specified minimum annual sales, and will
share profits on all Canadian sales with Nabi. Nabi is obligated to purchase
approximately $6,800 of H-BIG(R) over the three years following receipt of
regulatory approval.
Nabi also entered into an agreement in May 1997 with Baxter Healthcare
Corporation ("Baxter") to acquire certain assets associated with the product
sales of Autoplex(R)T and obtained exclusive marketing rights for this product
in the United States, Canada and Mexico. In connection with the acquisition,
Baxter agreed to manufacture Autoplex(R)T until the earlier of May 2000, or such
later date as may be approved by the Federal Trade Commission ("FTC"), or four
months after Nabi obtains FDA approval to manufacture the product. If Nabi does
not obtain FDA approval within the required timetable, FTC could terminate the
divestiture agreement associated with Nabi's acquisition of Autoplex(R)T from
Baxter. In this event, all assets and marketing rights associated with the
acquisition would revert to Baxter. Nabi and Baxter would equally share in the
proceeds from the ultimate sale of these assets under certain specified
conditions. Upon FDA licensure to manufacture the product, Nabi is obligated to
pay $1,000 to Baxter, subject to recovery of fifty percent (50%) of expenditures
incurred to license the product in excess of $6,000.
NOTE 17 COMMITMENTS AND CONTINGENCIES
Nabi has been named with various other defendants in numerous suits filed in the
U.S., by or on behalf of, individuals who claim to have been infected with HIV
as a result of either using HIV-contaminated products made by the defendants
other than Nabi or having familial relations with those so infected. Nabi denies
all allegations against it, and intends to defend the cases vigorously.
At December 31, 1996, Nabi and its subsidiaries were also parties to certain
routine claims and litigation occurring in the normal course of business.
Management believes that the ultimate resolution of these matters will not have
a material adverse effect on Nabi's financial position or results of operations.
At December 31, 1997, Nabi had outstanding purchase commitments in the normal
course of business with various suppliers. Under an agreement with a principal
supplier, Nabi is obligated to purchase goods
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aggregating approximately $21,942 in fiscal 1998 and $16,457 in fiscal 1999.
Nabi is committed to purchase the entire plasma production of certain contract
centers through December 31, 1999.
NOTE 18 INDUSTRY SEGMENT INFORMATION
Nabi operates in four principal industry segments. Plasma consists of the
collection and sale of source and specialty plasmas. Therapeutic products
consists of the production and sale of proprietary plasma-based therapeutic
products. Diagnostic products and services is composed primarily of the
production and sale of human plasma-based control and diagnostic products and
laboratory testing services. Research and development expenses are presented net
of periodic reimbursements under collaborative product development agreements.
Corporate and other includes unallocated general corporate expenses, interest
and elimination of inter-segment sales and related profits.
Net export sales in 1995, 1996 and 1997 were $70,679, $93,774 and $55,464
respectively, and represented 36%, 39% and 24% of consolidated sales for those
years, respectively. Export sales are primarily to Europe. Plasma sales to
unaffiliated customers (Baxter, Bayer and Immuno for 1995; Baxter, Bayer and
Biotest for 1996; and Baxter and Bayer for 1997) exceeding 10% of consolidated
sales aggregated 47%, 45% and 41% of sales in 1995, 1996 and 1997, respectively.
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Information regarding Nabi's operations and identifiable assets in the different
industry segments is as follows:
1995 1996 1997
--------- --------- ---------
Sales:
Plasma $ 169,505 $ 207,832 $ 189,679
Therapeutic products 18,590 26,405 34,470
Diagnostic products and services 7,833 5,672 4,595
--------- --------- ---------
$ 195,928 $ 239,909 $ 228,744
========= ========= =========
Operating Profit (Loss):
Plasma $ 23,091 $ 30,218 $ 12,253
Therapeutic products 4,595 8,498 9,540
Diagnostic products and services 2,189 2,058 1,220
Research and development (20,208) (17,353) (19,126)
Corporate and other (19,340) (12,252) (15,198)
--------- --------- ---------
($ 9,673) $ 11,169 ($ 11,311)
========= ========= =========
Identifiable Assets:
Plasma $ 85,954 $ 99,000 $ 120,985
Therapeutic products 27,927 40,224 52,809
Diagnostic products and services 5,638 6,277 3,990
Research and development 6,988 5,801 5,791
Corporate and other 11,468 50,840 42,331
--------- --------- ---------
$ 137,975 $ 202,142 $ 225,906
========= ========= =========
Capital Expenditures:
Plasma $ 2,529 $ 6,010 $ 8,885
Therapeutic products 15,667 9,974 12,896
Diagnostic products and services 1,004 898 1,396
Research and development 1,124 532 1,689
Corporate and other 4,063 5,671 11,501
--------- --------- ---------
$ 24,387 $ 23,085 $ 36,367
========= ========= =========
Depreciation and Amortization Expense:
Plasma $ 3,781 $ 4,147 $ 5,105
Therapeutic products 382 381 263
Diagnostic products and services 391 436 115
Research and development 1,883 1,915 2,133
Corporate and other 522 1,004 2,240
--------- --------- ---------
$ 6,959 $ 7,883 $ 9,856
========= ========= =========
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Note 19 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Basic Per Share Data
---------------------------------------------
Income (Loss) Before Net Income (Loss) Before Net
Gross Extraordinary Income Extraordinary Extraordinary Income
Sales Margin Charge (Loss) Charge Charge (Loss)
--------- --------- --------- --------- ------------- ----------- -----------
1996
1st Quarter $ 58,552 $ 13,713 $ 1,417 $ 485 $ 0.04 $ (0.03) $ 0.01
2nd Quarter 57,682 14,057 1,642 1,642 0.05 -- 0.05
3rd Quarter (1) 57,635 12,873 1,095 1,095 0.03 -- 0.03
4th Quarter (2) 66,040 17,352 10,006 10,006 0.29 -- 0.29
--------- --------- --------- --------- ------------- ----------- -----------
$ 239,909 $ 57,995 $ 14,160 $ 13,228 $ 0.41 $ (0.03) $ 0.38
========= ========= ========= ========= ============= =========== ===========
1997
1st Quarter $ 56,377 $ 13,192 $ 1,350 $ 1,350 $ 0.04 -- $ 0.04
2nd Quarter 57,915 14,969 2,013 2,013 0.06 -- 0.06
3rd Quarter (3) 52,849 9,479 (7,889) (7,889) (0.23) -- (0.23)
4th Quarter (4) 61,603 10,571 (6,627) (6,627) (0.19) -- (0.19)
--------- --------- --------- --------- ------------- ----------- -----------
$ 228,744 $ 48,211 $ (11,153) $ (11,153) $ (0.32) -- $ (0.32)
========= ========= ========= ========= ============= =========== ===========
Diluted Per Share Data
--------------------------------------------------
Income (Loss) Before Net
Extraordinary Extraordinary Income
Charge Charge (Loss)
---------------- ----------- -----------
1996
1st Quarter $ 0.04 $ (0.03) $ 0.01
2nd Quarter 0.05 -- 0.05
3rd Quarter (1) 0.03 -- 0.03
4th Quarter (2) 0.28 -- 0.28
----------- ----------- -----------
$ 0.40 $ (0.03) $ 0.37
=========== =========== ===========
1997
1st Quarter $ 0.04 -- $ 0.04
2nd Quarter 0.06 -- 0.06
3rd Quarter (3) (0.23) -- (0.23)
4th Quarter (4) (0.19) -- (0.19)
----------- ----------- -----------
$ (0.32) -- $ (0.32)
=========== =========== ===========
(1) During the third quarter of 1996, Nabi recorded a charge of approximately $2,000 resulting from its voluntary withdrawal of
certain lots of H-BIG(R) distributed prior to 1996 in response to implementation of second generation polymerase chain reaction
("PCR") testing requirements mandated by the Food and Drug Administration in June 1996.
(2) During the fourth quarter of 1996, Nabi recognized a tax benefit of approximately $6,500 reflecting the recognition of certain
tax benefits principally associated with the Nabi/Univax merger.
(3) During the third quarter of 1997, Nabi recognized approximately $5,700 of non-recurring charges. These charges included $3,900
of asset impairment losses, principally associated with Nabi's investment in Michigan Biologic Products Institute ("MBPI"), an
alternative contract fractionation facility for the production of H-BIG(R). The project was abandoned during the third quarter as
Nabi entered into an H-BIG(R) manufacturing agreement with Cangene Corporation. Streamlining initiatives within plasma operations
principally involving center closings contributed the remaining $1,800 in non-recurring charges.
(4) During the fourth quarter of 1997, Nabi incurred a charge of approximately $1,800 related to physical inventory adjustments, and
approximately $700 related to the write-off of accounts receivable from a foreign plasma fractionator which is in bankruptcy
proceedings.
54
55
NABI
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
Additions Deductions
-----------------------------------------------
Balance at Charged to Charged to Charged
Beginning of Costs and Other Accounts- Against Balance at End
Classification Period Expenses Provision Reserve of Period
-------------- ------------ ---------- --------------- --------- -------------
Year ended December 31, 1995:
Allowance for doubtful accounts $ 547 $ (86) -- $ 216 $ 245
Deferred tax asset valuation allowance $26,676 -- $ 7,959 -- $34,635
Inventory reserve $ 896 $ 4,186 -- $ 1,014 $ 4,068
Year ended December 31, 1996:
Allowance for doubtful accounts $ 245 $ 675 -- $ 273 $ 647
Deferred tax asset valuation allowance $34,635 -- $(7,309) $ 75 $27,251
Inventory reserve $ 4,068 $ 3,419 -- $ 1,932 $ 5,555
Year ended December 31, 1997:
Allowance for doubtful accounts $ 647 $ 1,013 -- $ 1,257 $ 403
Deferred tax asset valuation allowance $27,251 -- $ 1,073 -- $28,324
Inventory reserve $ 5,555 $ 1,648 -- $ 6,562 $ 641
55
56
EXHIBIT INDEX
PAGE #
2 Agreement and Plan of Merger dated August 28, 1995 between Nabi and Univax
Biologics, Inc. (incorporated by reference to Nabi's Registration Statement on
Form S-4; Commission File No. 33-63497)....................................................N/A
3.1 Restated Certificate of Incorporation of Nabi..............................................N/A
3.2 By-Laws (incorporated by reference to Nabi's Registration Statement on Form S-4;
Commission File No. 33-63497)..............................................................N/A
4.1 Specimen Stock Certificate (incorporated by reference to Nabi's Registration
Statement on Form S-2; Commission File No. 33-83096).......................................N/A
4.2 Indenture between Nabi and State Street Bank and Trust Company, dated as of
February 1, 1996...........................................................................N/A
4.3 Registration Rights Agreement by and between Nabi and Robertson,
Stephens & Company LLC and Raymond James & Associates, Inc., dated as of
February 1, 1996...........................................................................N/A
10.1 Third Amended and Restated Revolving Credit and Term Loan Agreement between
NationsBank, National Association (South) (f/k/a NationsBank of Florida, National
Association) ("NationsBank") and Nabi dated December 1, 1994 (incorporated by
reference to Nabi's Annual Report on Form 10-K for the year ended
December 31, 1994).........................................................................N/A
10.2 Waiver and Amendment, dated December 30, 1994, of Section 8.09(e) of Third Amended
and Restated Revolving Credit, Term Loan and Reimbursement Agreement between
NationsBank and Nabi dated as of December 1, 1994 (incorporated by reference to
Nabi's Registration Statement on Form S-4; Commission File No. 33-63497)...................N/A
10.3 Amendment No. 1 to Third Amended and Restated Revolving Credit Term Loan and
Reimbursement Agreement between NationsBank and Nabi dated March 31, 1995
(incorporated by reference to Nabi's Registration Statement on Form S-4; Commission
File No. 33-63497).........................................................................N/A
10.4 Amendment Nos. 3 and 4 to Third Amended and Restated Revolving Credit
Term Loan and Reimbursement Agreement between Nabi and NationsBank dated
as of November 29, 1995 and December 20, 1995, respectively................................N/A
10.5 Shareholder Agreement effective as of September 30, 1992 between Nabi and Abbott
Laboratories (incorporated by reference to Nabi's Annual Report on Form 10-K for the
year ended December 31, 1992) .............................................................N/A
10.6 Shareholder Agreement between CGW Southeast Partners I, L.P. and Nabi dated
January 25, 1994 (incorporated by reference to Nabi's Registration Statement on
Form S-2; Commission File No. 33-83096)....................................................N/A
56
57
10.7 Plasma Supply Agreement dated January 1, 1994 between Baxter Healthcare
Corporation and Nabi (confidential treatment) (incorporated by reference to Nabi's
Registration Statement on Form S-2; Commission File No. 33-83096)..........................N/A
10.8 Plasma Supply Agreement II dated January 1, 1994 between Baxter Healthcare
Corporation, Hyland Division, and Nabi (confidential treatment) (incorporated by
reference to Nabi's Registration Statement on Form S-2;
Commission File No. 33-83096)..............................................................N/A
10.9 Agreement effective January 1, 1994 between Nabi and Immuno Trading AG
(confidential treatment) (incorporated by reference to Nabi's Registration
Statement on Form S-2; Commission File No. 33-83096).......................................N/A
10.10 Plasma Supply Agreement dated September 8, 1992 and letter dated November 1, 1993
from Behringwerke AG to Nabi (confidential treatment) (incorporated by reference to
Nabi's Registration Statement on Form S-2; Commission File No. 33-83096)...................N/A
10.11 Supply Agreement dated May 1, 1993 between Nabi and Intergen Company L.P.
(confidential treatment) (incorporated by reference to Nabi's Registration Statement on
Form S-2; Commission File No. 33-83096)....................................................N/A
10.12 Lease Agreements dated December 11, 1990, as modified on May 23, 1994 between
Nabi and Angelo Napolitano, Trustee, for certain real property located at 16500 N.W.
15th Avenue, Miami, Florida (incorporated by reference to Nabi's Registration Statement
on Form S-2; Commission File No. 33-83096).................................................N/A
10.13 Lease Agreement dated March 31, 1994 between Nabi and Angelo Napolitano, Trustee,
for certain real property located at 16500 N.W. 15th Avenue, Miami, Florida (incorporated
by reference to Nabi's Registration Statement on Form S-2; Commission
File No. 33-83096).........................................................................N/A
10.14 Employment Agreement dated January 1, 1993 between Nabi and David J. Gury
(incorporated by reference to Nabi's Annual Report on Form 10-K for the year ended
December 31,1992)..........................................................................N/A
10.15 Employment Agreement dated January 27, 1994 between John C. Carlisle and Nabi
(incorporated by reference to Nabi's Registration Statement on Form S-2; Commission
File No. 33-83096).........................................................................N/A
10.16 Employment Agreement effective August 1, 1995 between Nabi and Alfred J. Fernandez
(incorporated by reference to Nabi's Registration Statement on Form S-4; Commission
File No. 33-63497).........................................................................N/A
10.17 Employment Agreement effective August 1, 1995 between Nabi and Stephen W. Weston
(incorporated by reference to Nabi's Registration Statement on Form S-4; Commission
File No. 33-63497).........................................................................N/A
10.18 Employment Agreement effective December 1, 1995 between Nabi and Robert B. Naso
(incorporated by reference to Nabi's Annual Report on Form 10-K for the year ended
December 31, 1995).........................................................................N/A
10.19 Employment Agreement effective December 1, 1995 between Nabi and Thomas P.
Stagnaro (incorporated by reference to Nabi's Annual Report on Form 10-K for the
year ended December 31, 1995)..............................................................N/A
57
58
10.20 Separation Agreement effective January 5, 1996 between Nabi and Raj Kumar
(incorporated by reference to Nabi's Annual Report on Form 10-K for the year
ended December 31, 1995)...................................................................N/A
10.21 1990 Equity Incentive Plan (incorporated by reference to Nabi's Registration
Statement on Form S-4; Commission File No. 33-63497).......................................N/A
10.22 Amended and Restated Incentive Stock Option Plan adopted in 1993\
(incorporated by reference to Nabi's Annual Report on Form 10-K for the
year ended December 31, 1992)..............................................................N/A
10.23 Stock Plan for Non-Employee Directors (incorporated by reference to Nabi's Proxy
Statement dated April 26, 1995)............................................................N/A
10.24 Amendment No. 5 to Third Amended and Restated Revolving Credit Term Loan and
Reimbursement Agreement between NationsBank and Nabi dated March 31, 1996
(incorporated by reference to Nabi's Quarterly Report on Form 10-Q for the quarter
ended March 31,1996).......................................................................N/A
10.25 Letter Amendment to Third Amended and Restated Revolving Credit Term
Loan and Reimbursement Agreement between NationsBank and Nabi
dated August 1, 1996.......................................................................N/A
10.26 Employment Agreement dated January 1, 1997 between John C. Carlisle
and Nabi...................................................................................N/A
10.27 $50 Million Loan and Security Agreement dated as of September 12, 1997
between Nabi, The Financial Institutions Party and NationsBank, N.A........................N/A
10.28* Rights Agreement dated as of August 1, 1997, as Amended between Nabi
and Registrar and Transfer Company.......................................................59-93
10.29* Amendment No. 1 and Waiver dated as of November 14, 1997 to Loan and
Security Agreement dated as of September 12, 1997.......................................94-101
21* Subsidiaries of the Registrant.............................................................102
23* Consent of Independent Certified Public Accountants........................................103
27* Financial Data Schedule (for S.E.C. use only).
- ----------
* FILED HEREWITH
58
1
EXHIBIT 10.28
NABI
AND
REGISTRAR AND TRANSFER COMPANY
AS
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF AUGUST 1, 1997,
AS
AMENDED
2
RIGHTS AGREEMENT
Agreement dated as of August 1, 1997, between NABI, a Delaware
corporation (the "Company"), and Registrar and Transfer Company (the "Rights
Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one Series One Preferred share purchase right (a "Right") for each
Common Share (as hereinafter defined) of the Company outstanding on the Close of
Business (as hereinafter defined) on August 27, 1997 (the "Record Date"), each
Right representing the right to purchase one one-hundredth of a Series One
Preferred Share (as hereinafter defined), upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the Common Shares of the Company then outstanding, but shall
not include any Exempt Person. Notwithstanding the foregoing, no Person shall
become an "Acquiring Person" as the result of an acquisition of Common Shares by
the Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding; PROVIDED, HOWEVER, that if
a Person shall become the Beneficial Owner of 15% or more of the Common Shares
of the Company then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company, then such Person shall be deemed to
be an "Acquiring Person" if such Person is then the Beneficial Owner of 15% or
more of the Common Shares of the Company then outstanding.
(b) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
(c) A Person shall be deemed the "BENEFICIAL OWNER" of and shall be
deemed to "BENEFICIALLY OWN" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, beneficially owns (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act, as in effect on the date of this Agreement) or
has the right to dispose of;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has (A) the right to
acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights (other than these Rights),
warrants or options, or otherwise; PROVIDED, HOWEVER, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or
on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding (whether or not in writing); PROVIDED,
HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a revocable
59
3
proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person or any of such Person's Affiliates or Associates
has any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except to the
extent contemplated by the proviso to Section l(c)(ii)(B)) or disposing
of any securities of the Company;
PROVIDED, HOWEVER, that (1) no Person engaged in business as an underwriter of
securities shall be deemed the Beneficial Owner of any securities acquired
through such Person's participation as an underwriter in good faith in a firm
commitment underwriting until the expiration of 40 days after the date of such
acquisition, (2) no Person who is a director or an officer of the Company shall
be deemed the Beneficial Owner of any securities of the Company that are
beneficially owned by any other director or officer of the Company or any Exempt
Person solely as a result of his or her position as director or officer of the
Company, and (3) no director, officer, trustee or beneficiary of an Exempt
Person shall be deemed the Beneficial Owner of any securities of the Company
that are held by such Exempt Person.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(d) "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday,
or a day on which banking institutions in the State of Florida are authorized or
obligated by law or executive order to close.
(e) "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M., Florida
time, on such date; provided, HOWEVER, that if such date is not a Business Day
it shall mean 5:00 P.M., Florida time, on the next succeeding Business Day.
(f) "COMMON SHARES" when used with reference to the Company shall mean
the shares of common stock, par value $.10 per share, of the Company".Common
Shares" when used with reference to any Person other than the Company shall mean
the class of capital stock (or equity interest) with the greatest aggregate
voting power, or the class of equity securities or other equity interests having
power to control or direct the management of such other Person or, if such other
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.
(g) "COMPANY" shall mean NABI, a Delaware corporation.
(h) "DISTRIBUTION DATE" shall have the meaning set forth in Section 3
hereof.
(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, as in effect on the date of this Agreement.
(j) "EXEMPT PERSON" shall mean (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan of the Company or any Subsidiary of
the Company, or (iv) any entity holding Common Shares for or pursuant to the
terms of any such plan.
(k) "EXCHANGE RATIO" shall have the meaning set forth in Section 24
hereof.
(l) "FINAL EXPIRATION DATE" shall have the meaning set forth in Section
7 hereof.
60
4
(m) "PERSON" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(n) "PURCHASE PRICE" shall have the meaning set forth in Section 7
hereof.
(o) "RECORD DATE" shall mean the Close of Business on August 27, 1997.
(p) "REDEMPTION DATE" shall have the meaning set forth in Section 7
hereof.
(q) "REDEMPTION PRICE" shall have the meaning set forth in Section 23
hereof.
(r) "RIGHT" shall mean a Series One Preferred Share purchase right.
(s) "RIGHTS AGENT" shall mean Registrar and Transfer Company.
(t) "RIGHTS CERTIFICATE" shall have the meaning set forth in Section 3
hereof.
(u) "SERIES ONE PREFERRED SHARES" shall mean shares of Series One
Preferred Stock, par value $.10 per share, of the Company having the rights and
preferences set forth in the Form of Certificate of Designations attached to
this Agreement as Exhibit A.
(v) "SHARES ACQUISITION DATE" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
(w) "SUBSIDIARY" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person, or is
otherwise controlled by such Person.
(x) "TRADING DAY" shall have the meaning set forth in Section 11.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES. (a) On the Record Date, or
as soon as practicable thereafter, the Company will send a copy of a Summary of
Rights to Purchase Series One Preferred Shares, in substantially the form of
Exhibit C hereto (the "Summary of Rights"), by first-class, postage-prepaid
mail, to each record holder of Common Shares as of the close of business on the
Record Date, at the address of such holder shown on the records of the Company.
With respect to certificates for Common Shares outstanding as of the Record
Date, until the Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof together with a copy
of the Summary of Rights attached thereto. Until the Distribution Date (or the
earlier of the Redemption Date or the Final Expiration Date), the surrender for
transfer of any certificate for Common Shares outstanding on the Record Date,
with or without a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby. No certificate for Common Shares which becomes outstanding
after the earliest of the Redemption Date, Distribution Date or Final Expiration
Date will entitle the holder thereof to receive a Rights Certificate, except as
described below with respect to any certificate for Common Shares arising upon
the conversion of the Company's 6 1/2% Convertible Subordinated Notes due 2003
(the "Notes") by a holder thereof (each such holder, a "Note Holder").
Notwithstanding the foregoing, upon any conversion of Notes occurring after the
Distribution Date and prior to the Final Expiration Date, the converting Note
Holder shall be entitled to receive a Rights Certificate simultaneous with the
Note Holder's receipt of the certificate for Common Shares. Notwithstanding the
61
5
foregoing, (i) upon any conversion of Notes occurring after the Distribution
Date and prior to the Final Expiration Date, the converting Note Holder shall be
entitled to receive a Rights Certificate simultaneous with the Note Holder's
receipt of the certificate for Common Shares, and (ii) upon any such conversion
occurring after the Redemption Date, the converting Note Holder shall be
entitled to receive, in addition to the Note Holder's receipt of the certificate
for Common Shares, cash in the amount of $.01 for each Common Share represented
by said certificate (subject to appropriate adjustment following the occurrence
of any of the events described in Section 23(c) herein).
(b) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (b)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Rights Agreement between
NABI and Registrar and Transfer Company, dated as of August 1,
1997 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal executive offices of NABI. Under certain
circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. NABI will mail to the
holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement),
whether currently held by or on behalf of such Person or by
any subsequent holder, may become null and void. The Rights
shall not be exercisable, and shall be void so long as held by
a holder in any jurisdiction where the requisite qualification
to the issuance to such holder, or the exercise by such
holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Final Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated with the
Common Shares represented thereby. In the event that the Company purchases or
acquires any Common Shares after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Shares shall be deemed cancelled
and retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Shares which are no longer outstanding.
(c) Until the earlier of (i) the Close of Business on the tenth day
after the Shares Acquisition Date or (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of the Board of
Directors prior to such time as any Person becomes an Acquiring Person) after
the date of the commencement by any Person, other than an Exempt Person, of, or
of the first public announcement of the intention of any Person, other than an
Exempt Person, to commence, a tender or exchange offer the consummation of which
would result in any Person becoming an Acquiring Person (including any such date
which is after the date of this Agreement and prior to the issuance of the
Rights; the earlier of such dates being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced (subject to the provisions of Section
3(a) hereof) by the certificates for Common Shares registered in the names of
the holders thereof (which certificates shall also be deemed to be Rights
Certificates) and not by separate Rights Certificates, and (y) the right to
receive Rights Certificates will be transferable only in connection with the
transfer of Common Shares. As soon as practicable after the Distribution Date,
the Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause
62
6
to be sent (and the Rights Agent will, if requested, send) by first-class,
insured, postage-prepaid mail, to each record holder of Common Shares as of the
Close of Business on the Distribution Date, at the address of such holder shown
on the records of the Company, a Rights Certificate, in substantially the form
of Exhibit B hereto (a "Rights Certificate"), evidencing one Right for each
Common Share so held. As of the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates.
Section 4. FORM OF RIGHTS CERTIFICATES. The Rights Certificates (and
the forms of election to purchase Series One Preferred Shares and of assignment
to be printed on the reverse thereof) shall be substantially the same as Exhibit
B hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Sections 11, 13, and 22 hereof, the Rights
Certificates shall entitle the holders thereof to purchase such number of one
one-hundredths of a Series One Preferred Share as shall be set forth therein at
the Purchase Price, but the number of such one one-hundredths of a Series One
Preferred Share and the Purchase Price shall be subject to adjustment as
provided herein.
Section 5. COUNTERSIGNATURE AND REGISTRATION. The Rights Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
President, any of its Vice Presidents, or its Treasurer, either manually or by
facsimile signature, shall have affixed thereto the Company's seal or a
facsimile thereof, and shall be attested by the Secretary or any Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at one of its offices designated as the appropriate place for surrender
of Rights Certificates upon exercise or transfer, books for registration and
transfer of the Rights Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Rights Certificates, the
number of Rights evidenced on its face by each of the Rights Certificates and
the date of each of the Rights Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES. Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Rights
Certificate or Rights Certificates (other than Rights Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Series One Preferred Share as the Rights Certificate or Rights Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Rights Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office or offices of the
Rights Agent designated for such purpose. Thereupon the Rights Agent shall
countersign and deliver to the person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require
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payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS. (a) The registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office or offices of the Rights Agent
designated for such purpose, together with payment of the Purchase Price for
each one one-hundredth of a Series One Preferred Share as to which the Rights
are exercised, at or prior to the earliest of (i) the close of business on
August 1, 2007 (the "Final Expiration Date"), (ii) the time at which the Rights
are redeemed as provided in Section 23 hereof (the "Redemption Date"), or (iii)
the time at which such Rights are exchanged as provided in Section 24 hereof.
(b) The purchase price for each one one-hundredth of a Series One
Preferred Share pursuant to the exercise of a Right shall initially be $70.00
(the "Purchase Price"), shall be subject to adjustment from time to time as
provided in Sections 11 and 13 hereof, and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Series One
Preferred Shares (or make available, if the Rights Agent is the transfer agent
therefor) certificates for the number of Series One Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B-1) if the Company shall have elected to
deposit the total number of shares of Series One Preferred Stock issuable upon
exercise of the Rights hereunder with a depository agent, requisition from the
depositary agent depositary receipts representing such number of one
one-hundredths of a Series One Preferred Share as are to be purchased (in which
case certificates for the Series One Preferred Shares represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company hereby directs the depositary agent to comply with such request,
(ii) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional shares in accordance with Section 14
hereof, (iii) promptly after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) when appropriate, after receipt, deliver
such cash to or upon the order of the registered holder of such Rights
Certificate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Rights Certificate or to
his duly authorized assigns, subject to the provisions of Section 14 hereof.
(e) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Series One Preferred
Shares or any Series One Preferred Shares held in its treasury, the number of
Series One Preferred Shares that will be sufficient to permit the exercise in
full of all outstanding Rights in accordance with this Section 7.
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Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Rights Certificates to the Company or shall, at the written
request of the Company, destroy such cancelled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. AVAILABILITY OF SERIES ONE PREFERRED SHARES. The Company
covenants and agrees that it will take all such action as may be necessary to
ensure that all Series One Preferred Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Series One Preferred
Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates or of
any Series One Preferred Shares upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Rights Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts for the
Series One Preferred Shares in a name other than that of, the registered holder
of the Rights Certificate evidencing Rights surrendered for exercise or to issue
or to deliver any certificates or depositary receipts for Series One Preferred
Shares upon the exercise of any Rights until any such tax shall have been paid
(any such tax being payable by the holder of such Rights Certificate at the time
of surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
Section 10. SERIES ONE PREFERRED SHARES RECORD DATE. Each person in
whose name any certificate for Series One Preferred Shares is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of the Series One Preferred Shares represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Series One Preferred
Shares transfer books of the Company are closed, such person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the Series One Preferred Shares
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a holder of Series One Preferred Shares for which the Rights shall
be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number of Series One Preferred Shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Series One Preferred Shares payable
in Series One Preferred Shares, (B) subdivide the outstanding Series One
Preferred Shares, (C) combine the outstanding Series One Preferred Shares into a
smaller number of Series One Preferred Shares or (D) issue any shares of its
capital stock in a reclassification of the Series One Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a), the Purchase Price in effect at the
time of the record date for such
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dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock issuable on
such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and
kind of shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Series One Preferred
Shares transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; PROVIDED, HOWEVER, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to the following paragraph of this subparagraph
(ii) and to Section 24 of this Agreement, in the event (A) any Person (other
than an Exempt Person), alone or together with its Affiliates and Associates,
shall become an Acquiring Person (other than through an acquisition described in
subparagraph (iii) of this paragraph (a)) or (B) during such time as there is an
Acquiring Person, there shall be any reclassification of securities (including
any reverse stock split), or recapitalization or reorganization of the Company
which has the effect, directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity securities
of the Company or any of its Subsidiaries beneficially owned by any Acquiring
Person or any Affiliate or Associate thereof, each holder of a Right shall
thereafter have a right to receive, upon exercise thereof at a price equal to
the then current Purchase Price multiplied by the number of one one-hundredths
of a Series One Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Series One Preferred
Shares, such number of Common Shares of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the number of one
one-hundredths of a Series One Preferred Share for which a Right is then
exercisable and dividing that product by (y) 50% of the then current per share
market price of the Company's Common Shares (determined pursuant to Section
11(d) hereof) on the date such Person became an Acquiring Person.
From and after the occurrence of the earlier of the events described in
clauses (A) and (B) above, any Rights that are or were acquired or beneficially
owned by such Acquiring Person (or any Associate or Affiliate of such Acquiring
Person) shall be void without any further action and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of
this Agreement and no rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. No Rights Certificate shall
be issued pursuant to Section 3 that represents Rights beneficially owned by an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof; no Rights Certificate shall be issued at
any time upon the transfer of any Rights to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and
any Rights Certificate delivered to the Rights Agent for transfer to an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof shall be cancelled.
(iii) The right to purchase Common Shares of the Company
pursuant to subparagraph (ii) of this paragraph (a) shall not arise as a result
of any Person becoming an Acquiring Person through an acquisition of Common
Shares pursuant to a tender offer made in the manner prescribed by Section 14(d)
of the Exchange Act and the rules and regulations promulgated thereunder;
PROVIDED, HOWEVER, that (A) such tender offer shall provide for the acquisition
of all the outstanding Common Shares held by any Person other than such Person
and its Affiliates for cash and (B) such acquisition shall cause such Person,
together with all Affiliates and Associates of such Person, to be the Beneficial
Owner of 90% or more of the Common Shares then outstanding.
(iv) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii), the Company shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exercise of the Rights.
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(b) If the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Series One Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Series One Preferred Shares (or shares having the same
rights, privileges and preferences as the Series One Preferred Shares
("equivalent Series One Preferred Shares")) or securities convertible into
Series One Preferred Shares or equivalent Series One Preferred Shares at a price
per Series One Preferred Share or equivalent Series One Preferred Share (or
having a conversion price per share, if a security convertible into Series One
Preferred Shares or equivalent Series One Preferred Shares) less than the then
current per share market price of the Series One Preferred Shares (as defined in
Section 11(d)) on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Series One Preferred Shares outstanding on such record
date plus the number of Series One Preferred Shares which the aggregate offering
price of the total number of Series One Preferred Shares and/or equivalent
Series One Preferred Shares so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price and the denominator of which shall be the number of
Series One Preferred Shares outstanding on such record date plus the number of
additional Series One Preferred Shares and/or equivalent Series One Preferred
Shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); PROVIDED, HOWEVER, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Series One Preferred Shares owned by or held for
the account of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of the Series One Preferred Shares (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Series One Preferred Shares) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Series One Preferred
Shares on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
assets or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to one Series One Preferred Share and the
denominator of which shall be such current per share market price of the Series
One Preferred Shares; PROVIDED, HOWEVER, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be issued
upon exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is not so
made, the Purchase Price shall again be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
(as such term is hereinafter defined) immediately prior to such date; PROVIDED,
HOWEVER, that in the event that the current per share market price of the
Security is determined during a period following the announcement by the issuer
of such Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend or
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distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other
system then in use, or, if on any such date the Security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Security selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in the Security, the fair value of the Security on such date as
determined in good faith by the Board of Directors shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day. If the Security is not
publicly held or not listed or traded, "current per share market price" shall
mean the fair value per share as determined in good faith by the Board of
Directors, whose determination shall be described in a statement filed with the
Rights Agent.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Series One Preferred Shares shall be
determined in accordance with the method set forth in Section 11(d)(i). If the
Series One Preferred Shares are not publicly traded, the "current per share
market price" of the Series One Preferred Shares shall be conclusively deemed to
be the current per share market price of the Common Shares as determined
pursuant to Section 11(d)(i) (appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof),
multiplied by one hundred. If neither the Common Shares nor the Series One
Preferred Shares are publicly held or so listed or traded, "current per share
market price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; PROVIDED, HOWEVER, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
Series One Preferred Share or one ten-thousandth of any other share or security
as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three years from the date of the transaction which requires such
adjustment or (ii) the date of the expiration of the right to exercise any
Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Series One
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Series One Preferred Shares contained in Section 11(a) through
(c), inclusive, and the provisions of Sections 7, 9, 10 and 13 with respect to
the Series One Preferred Shares shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Series One Preferred Share purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
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(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Series One Preferred Share (calculated to the nearest one one-millionth of a
Series One Preferred Share) obtained by (i) multiplying (x) the number of one
one-hundredths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Series One Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths of a Series One Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least 10 days later
than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Series One Preferred Share issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-hundredths of a Series One Preferred Share which were expressed in the
initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of the
Series One Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Series One Preferred Shares at such adjusted Purchase Price.
(1) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Series One Preferred Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the Series One
Preferred Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such
holder a due bill or other appropriate
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instrument evidencing such holder's right to receive such additional shares upon
the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Series One Preferred Shares,
issuance wholly for cash of any Series One Preferred Shares at less than the
current market price, issuance wholly for cash of Series One Preferred Shares or
securities which by their terms are convertible into or exchangeable for Series
One Preferred Shares, dividends on Series One Preferred Shares payable in Series
One Preferred Shares or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders of its
Series One Preferred Shares shall not be taxable to such stockholders.
(n) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (i) the
number of one one-hundredths of a Series One Preferred Share purchasable after
such event upon proper exercise of each Right shall be determined by multiplying
the number of one one-hundredths of a Series One Preferred Share so purchasable
immediately prior to such event by a fraction, the numerator of which is the
number of Common Shares outstanding immediately before such event and the
denominator of which is the number of Common Shares outstanding immediately
after such event, and (ii) each Common Share outstanding immediately after such
event shall have issued with respect to it that number of Rights which each
Common Share outstanding immediately prior to such event had issued with respect
to it. The adjustments provided for in this Section 11(n) shall be made
successively whenever such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.
(o) The Company covenants and agrees that after the Distribution Date
it shall not, except as permitted by Sections 23 and 27 hereof, take (or permit
any Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Series One Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Rights Certificate in accordance with
Section 25 hereof.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER. In the event that, following the Shares Acquisition Date,
directly or indirectly, (a) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction not prohibited by Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (b)
any Person (other than a Subsidiary of the Company in a transaction not
prohibited by Section 11(o) hereof) shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Shares shall be changed into or exchanged for stock or other
securities of any other Person (or the Company) or cash or any other property,
or (c) the Company shall sell, mortgage, license or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the value of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company or one or more of
its wholly-owned Subsidiaries in one or more transactions not prohibited by
Section 11(o) hereof), then, and in each such case, proper provision shall be
made so that (i) each holder of a Right (except as otherwise provided herein)
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shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Series One Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu of
Series One Preferred Shares, such number of validly authorized and issued, fully
paid and non-assessable, freely tradeable Common Shares of such other Person
(including the Company as successor thereto or as the surviving corporation),
free and clear of rights of call or first refusal, liens, encumbrances or other
adverse claims, as shall equal the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-hundredths of a Series One
Preferred Share for which a Right is then exercisable and dividing that product
by (B) 50% of the then current per share market price of the Common Shares of
such other Person (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; (ii) the issuer of
such Common Shares shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale, mortgage, license or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the term
"Company" shall thereafter be deemed to refer to such issuer; and (iv) such
issuer shall take such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights. The Company shall not consummate any such consolidation, merger,
sale, mortgage, license or transfer unless prior thereto the Company and such
issuer shall have executed and delivered to the Rights Agent a supplemental
agreement so providing. The Company shall not, at any time after the
Distribution Date, enter into any transaction of the kind referred to in this
Section 13 if at the time of such transaction there are any rights, warrants,
instruments or securities outstanding or any agreements or arrangements which,
as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights. The
provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales, mortgages, licenses or other transfers.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Company
shall not be required to issue fractions of Rights or to distribute Rights
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Series One
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Series One Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Series One Preferred Shares
(other than fractions which are integral multiples of one one-hundredth of a
Series One Preferred Share). Fractions of Series One Preferred Shares in
integral multiples of one one-hundredth of a Series One Preferred Share may, at
the election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
PROVIDED, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and
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preferences to which they are entitled as beneficial owners of the Series One
Preferred Shares represented by such depositary receipts. In lieu of fractional
Series One Preferred Shares that are not integral multiples of one one-hundredth
of a Series One Preferred Share, the Company shall pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
Series One Preferred Share. For the purposes of this Section 14(b), the current
market value of a Series One Preferred Share shall be the closing price of a
Series One Preferred Share (as determined pursuant to the second sentence of
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate form of assignment and the certificate contained therein duly
completed and executed;
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Rights Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Rights Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any government authority, prohibiting or otherwise restraining
performance of such obligation; PROVIDED, HOWEVER, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the
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Series One Preferred Shares or any other securities of the Company which may at
any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Rights Certificate or
certificate for the Series One Preferred Shares or Common Shares or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created by
this Agreement any of the Rights Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
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(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by a person believed by the Rights Agent to
be the Chairman of the Board, the Chief Executive Officer, the President, a Vice
President, the Treasurer or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after actual
notice that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Series One Preferred Shares to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any Series
One Preferred Shares will, when issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
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(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certification set forth in the form
of assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Series One Preferred Shares by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon 30 days'
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Shares or Series One
Preferred Shares by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be (i) a corporation organized and doing business under the laws of the
United States or of the State of Florida (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the State of Florida), in good standing, having an office in the
State of Florida, which is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50 million or (ii) an
Affiliate of a corporation described in clause (i) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares or Series
One Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement.
Section 23. REDEMPTION. (a) The Board of Directors of the Company may,
at its option, at any time prior to the Close of Business on the Shares
Acquisition Date, redeem all but not less than all the then
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outstanding Rights at a redemption price of $.01 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). The Rights may not be redeemed at any
time after the earlier of the Close of Business, on (i) the Shares Acquisition
Date and (ii) the Final Expiration Date. Subject to the foregoing provisions of
this subparagraph (a), the redemption of the Rights by the Board of Directors
may be made effective at such time on such basis and with such conditions as the
Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; PROVIDED, HOWEVER, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors ordering
the redemption of the Rights pursuant to paragraph (a), the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
(c) In the event the Company shall at any time after the date of this
Rights Agreement (i) pay any dividend on the Common Shares in Common Shares,
(ii) subdivide the outstanding Common Shares into a greater number of shares, or
(iii) combine the outstanding Common Shares into a smaller number of shares,
then and in each such event the Redemption Price after such event shall equal
the Redemption Price immediately prior to such event multiplied by a fraction
the numerator of which is the number of Common Shares outstanding immediately
after such event and the denominator of which is the number of Common Shares
outstanding immediately prior to such event.
Section 24. EXCHANGE. (a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares at an exchange ratio of one Common Share per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person, other than an Exempt Person, together with all Affiliates
and Associates of such Person, becomes the Beneficial Owner of 50% or more of
the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; PROVIDED,
HOWEVER, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights
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(other than Rights which have become void pursuant to the provisions of Section
11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Series One Preferred Shares (or equivalent Series One
Preferred Shares, as such term is defined in Section 11(b) hereof) for Common
Shares exchangeable for Rights, at the initial rate of one one-hundredth of a
Series One Preferred Share (or equivalent Series One Preferred Share) for each
Common Share, as appropriately adjusted to reflect adjustments in the voting
rights of the Series One Preferred Shares pursuant to the terms thereof, so that
the fraction of a Series One Preferred Share delivered in lieu of each Common
Share shall have the same voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares or
Series One Preferred Shares issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this Section 24, the Company shall take all such action as may be necessary to
authorize additional Common Shares or Series One Preferred Shares for issuance
upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional Common Shares, the Company shall pay to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (e), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. NOTICE OF CERTAIN EVENTS. (a) In case the Company shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Series One Preferred Shares or to make any other distribution to the holders
of its Series One Preferred Shares (other than a regular quarterly cash
dividend), (ii) to offer to the holders of its Series One Preferred Shares
rights or warrants to subscribe for or to purchase any additional Series One
Preferred Shares or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Series One Preferred
Shares (other than a reclassification involving only the subdivision of
outstanding Series One Preferred Shares), (iv) to effect any consolidation or
merger into or with, or to effect any sale, mortgage, license or other transfer
(or to permit one or more of its Subsidiaries to effect any such transaction),
in one or more transactions, of 50% or more of the value of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person, (v) to effect the liquidation, dissolution or winding up of the
Company, or (vi) to declare or pay any dividend on the Common Shares payable in
Common Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares), then, in each such case, the Company shall give to each holder
of a Rights Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, mortgage, license, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Common Shares and/or Series One
Preferred Shares, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least 10
days prior to the record date for determining holders of the Series One
Preferred Shares for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the Common Shares and/or
Series One Preferred Shares, whichever shall be the earlier.
(b) In case any event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
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Section 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
NABI
P. O. Box 310701
Boca Raton, FL 33431-0701
Attention: Chief Financial Officer
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016-3572
Attention:
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company may, and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of Common
Shares. From and after the Distribution Date and subject to the penultimate
sentence of this Section 27, the Company may, and the Rights Agent shall at any
time and from time to time, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein
or (iii) to change or supplement the provisions hereunder in any manner which
the Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Rights Certificates (other than an Acquiring
Person or an Affiliate or Associate of any such Person); PROVIDED, HOWEVER, that
this Agreement may not be supplemented or amended to lengthen (A) a time period
relating to when the Rights may be redeemed at such time as the Rights are not
then redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of any such Person). Upon the delivery of a certificate
from an appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 27, the
Rights Agent shall execute such supplement or amendment. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price, the Final Expiration Date, the
Purchase Price or the number of shares of Series One Preferred Stock for which a
Right is exercisable. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Share.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
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Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
The Board of Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including without limitation a determination to redeem or not redeem
the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject any director to any liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. GOVERNING LAW. This Agreement and each Rights Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested, all as of the day and year first above written.
NABI
Attest:
By: /s/ Constantine Alexander By: /s/ David J. Gury
-------------------------------- -----------------------------------
Title: Secretary Title: Chairman of the Board,
President and Chief Executive
Officer
Attest: REGISTRAR AND TRANSFER COMPANY
By: /s/ William P. Tatler By: /s/ John H. Gaffney
-------------------------------- -----------------------------------
Title: Vice President and Title: Vice President
Assistant Secretary
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EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES ONE PREFERRED STOCK
of
NABI
(Pursuant to Section 151 of the
Delaware General Corporation Law)
NABI (hereinafter called the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"Delaware Act"), hereby certifies that the following resolutions were adopted by
the Board of Directors of the Corporation as required by Section 151 of the
Delaware Act at a meeting duly called and held on July 25, 1997:
WHEREAS, Article Four of the Company's Amended and Restated Certificate
of Incorporation (hereinafter called the "Certificate of Incorporation")
authorizes eighty million (80,000,000) shares of capital stock, consisting of
five million (5,000,000) shares of preferred stock, $.10 par value per share
(the "Preferred Stock") issuable from time to time in one or more series, and
seventy-five million (75,000,000) shares of common stock, $.10 par value per
share (the "Common Stock").
NOW, THEREFORE, BE IT RESOLVED, in accordance with Section 151 of the
Delaware Act and pursuant to the authority granted to and vested in the Board of
Directors of this Corporation (hereinafter called the "Board of Directors" or
the "Board") pursuant to Article Four of the Certificate of Incorporation
whereby the Board of Directors is authorized to fix the designations, powers,
preferences and relative, participating, optional or other special rights, if
any, and qualifications, limitations or restrictions thereof, of any wholly
unissued series of Preferred Stock, and to fix the number of shares constituting
such series, and to increase or decrease the number of shares of any such series
(but not below the number of shares thereof then outstanding), the Board of
Directors hereby creates a series of Preferred Stock and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series One Preferred Stock" (the "Series One Preferred Stock")
and the number of shares constituting the Series One Preferred Stock shall be
750,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors; PROVIDED, that no decrease shall reduce the number of
shares of Series One Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series One
Preferred Stock.
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Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series One Preferred Stock with respect to dividends, the holders of shares
of Series One Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series One Preferred Stock, in an amount (if any) per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock of the Company or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series One Preferred
Stock. In the event the Corporation shall at any time after the issuance of any
share or fraction of a share of Series One Preferred Stock, declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount to which holders of shares of Series One Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series One Preferred Stock as provided in paragraph (A) of this Section at the
same time it declares a dividend or distribution on the Common Stock (other than
a dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series One
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date. No dividend or distribution (other than a dividend
payable in shares of Common Stock) on the Common Stock shall be paid or set
aside for payment on the Common Stock unless the dividend or distribution
required as a result thereof to be paid on the Series One Preferred Stock shall
be simultaneously paid or set aside for payment on the Series One Preferred
Stock.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series One Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series One Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series One Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series One Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series One Preferred
Stock shall have the following voting rights:
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(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series One Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series One
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series One Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series One Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series One Preferred Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series One Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series One Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series One Preferred Stock, except dividends paid ratably on the Series
One Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series
One Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation ranking junior
(as to dividends and upon dissolution, liquidation or winding up) to
the Series One Preferred Stock.
(iv) except as permitted by subclause (v) of this Section
4(A), redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series One Preferred
Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Corporation ranking junior (as to dividends
and upon dissolution, liquidation or winding up) to the Series One
Preferred Stock; or
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27
(v) purchase or otherwise acquire for consideration any shares
of Series One Preferred Stock, or any shares of stock ranking on a
parity with the Series One Preferred Stock (either as to dividends or
upon liquidation, dissolution or winding up), except in accordance with
a purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such terms
as the Board of Directors after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series One Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reisssued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series One Preferred Stock unless, prior thereto, the holders
of shares of Series One Preferred Stock shall have received the greater of (i)
$1.00 per share plus an amount equal to any accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment, and
(ii) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of shares of Common Stock. The amount to which holders of
Series One Preferred Stock may be entitled upon liquidation, dissolution or
winding up of the Corporation pursuant hereto is hereinafter referred to as the
"Series One Preferred Liquidation Preference". In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the aggregate amount to
which holders of shares of Series One Preferred Stock were entitled immediately
prior to such event under clause (b) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) In the event that there are not sufficient assets available to
permit payment in full of the Series One Preferred Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series One Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series One Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification
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28
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series One Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. NO REDEMPTION. The shares of Series One Preferred Stock
shall not be redeemable.
Section 9. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series One Preferred
Stock so as to affect them adversely without the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Series One Preferred Stock,
voting together as a single class.
Section 10. RANKING. The Series One Preferred Stock shall rank junior
to all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets on liquidation unless the terms of any
such series of Preferred Stock shall provide otherwise and senior to the Common
Stock.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chief Executive Officer and attested by its
Secretary this day of August, 1997.
NABI
Attest: By: /s/ David J. Gury
-------------------------------
By: /s/ Constantine Alexander Title: Chairman of the Board
-------------------------------- President and Chief Executive
Title: Secretary Officer
REGISTRAR AND TRANSFER COMPANY
Attest: By: /s/ John Gaffney
-------------------------------
By: /s/ William P. Tatler Title: Vice President
---------------------------------
Title: Vice President and
Assistant Secretary
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EXHIBIT B
Form of Rights Certificate
Certificate No. Rights
NOT EXERCISABLE AFTER AUGUST 1, 2007 OR EARLIER IF REDEMPTION
OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT
$.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT.
Rights Certificate
NABI
This certifies that _____________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of August 1, 1997 (the "Rights Agreement"), between NABI, a
Delaware corporation (the "Company"), and Registrar and Transfer Company (the
"Rights Agent"), to purchase from the Company at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M.,
Florida time, on August 1, 2007 at the office or offices of the Rights Agent
designated for such purpose, or at the office of its successor as Rights Agent,
one one-hundredth of a fully paid non-assessable share of Series One Preferred
Stock, par value $.10 per share (the "Series One Preferred Shares"), of the
Company, at a purchase price of $70.00 per one one-hundredth of a Series One
Preferred Share (the "Purchase Price"), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Rights Certificate (and the number of one
one-hundredths of a Series One Preferred Share which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of August 27, 1997, based on the Series One
Preferred Shares as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one-hundredths of a Series
One Preferred Share which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned office or offices of the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the above-mentioned office or offices of the Rights Agent, may
be exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of Series One Preferred Shares as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for shares of the
Company's Common Stock, par value $.10 per share or Series One Preferred Shares
(or equivalent Series One Preferred Shares, as provided in the Rights
Agreement).
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No fractional Series One Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a Series One Preferred Share, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Series One
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ____________________, 19___.
ATTEST: NABI
By
Countersigned:
By:
Authorized Signature
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Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto ________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _______________________, __
- -----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this
Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
Signature
----------------------------------
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Form of Reverse Side of Rights Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate.)
To NABI:
The undersigned hereby irrevocably elects to exercise _________________
__________________ Rights represented by this Rights Certificate to purchase the
Series One Preferred Shares issuable upon the exercise of such Rights and
requests that certificates for such Series One Preferred Shares be issued in the
name of:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
Dated: ___________________, __
- ------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
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Form of Reverse Side of Rights Certificate -- continued
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this
Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
__________________________ Signature
- --------------------------------------------------------------------------------
NOTICE
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
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EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
SERIES ONE PREFERRED SHARES
On July 25, 1997, the Board of Directors of NABI (the "Company")
adopted a Shareholder Rights Plan pursuant to which a dividend of one preferred
share purchase right (a "Right") for each outstanding share of common stock, par
value $.10 per share (the "Common Shares"), of the Company will be distributed
to the stockholders of record as of the close of business on August 27, 1997
(the "Record Date"). Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series One Preferred Stock, par
value $.10 per share (the "Series One Preferred Shares"), of the Company, at a
price of $70.00 per one one-hundredth of a Series One Preferred Share (the
"Purchase Price"), subject to adjustment. The description and terms of the
Rights are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and Registrar and Transfer Company, as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding Common Shares or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 15% or more of
such outstanding Common Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date, upon transfer or new
issuance of Common Shares, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Rights Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on the close of business on August 1, 2007 (the "Final Expiration
Date"), unless the Rights are earlier redeemed by the Company, as described
below.
The Purchase Price payable, and the number of Series One Preferred
Shares or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Series One Preferred Shares, (ii) upon the grant to holders of the Series One
Preferred Shares of certain rights or warrants to subscribe for or purchase
Series One Preferred Shares at a price, or securities convertible into Series
One Preferred Shares with a conversion price, less than the then current market
price of the Series One Preferred Shares, or (iii) upon the distribution to
holders of the Series One Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Series One Preferred Shares) or of
subscription rights or warrants (other than those referred to above).
91
35
The number of outstanding Rights and the number of one one-hundredths
of a Series One Preferred Share issuable upon exercise of each Right are also
subject to adjustment in the event of a stock split of the Common Shares or a
stock dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Series One Preferred Shares purchasable upon exercise of the Rights
will not be redeemable. Each Series One Preferred Share will be entitled to a
quarterly dividend payment equal to the greater of (a) $1.00 or (b) 100 times
the dividend declared per Common Share. In the event of liquidation, the holders
of the Series One Preferred Shares will also be entitled to a preferential
payment equal to the greater of (a) $1.00 per share plus all accrued and unpaid
dividends, whether or not declared, and (b) 100 times the aggregate payment made
per Common Share. Each Series One Preferred Share will have 100 votes, voting
together with the Common Shares. In the event of any merger, consolidation or
other transaction in which Common Shares are exchanged, each Series One
Preferred Share will be entitled to receive 100 times the amount received per
Common Share. These rights are protected by customary antidilution provisions.
Because of the nature of the Series One Preferred Shares' dividend,
liquidation and voting rights, the value of the one one-hundredth interest in a
Series One Preferred Share purchasable upon exercise of each Right should
approximate the value of one Common Share.
In the event that, following the date of the first public announcement
that a person has become an Acquiring Person (the "Shares Acquisition Date"),
the Company is acquired in a merger or other business combination transaction or
50% or more of the value of its consolidated assets or earning power are sold or
otherwise transferred, proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon the exercise thereof at
the then current exercise price of the Right, that number of shares of common
stock of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right. In the event that any
person becomes an Acquiring Person (unless such person first acquires 15% or
more of the outstanding Common Shares by a purchase pursuant to a tender offer
for all of the Common Shares for cash, which purchase increases such person's
beneficial ownership to 90% or more of the outstanding Common Shares), proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
Common Shares and prior to the acquisition by such person or group of 50% or
more of the outstanding Common Shares, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group which have
become void), in whole or in part, at an exchange ratio of one Common Share, or
one one-hundredth of a Series One Preferred Share (or of a share of a class or
series of the Company's preferred stock having equivalent rights, preferences
and privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Series One Preferred Shares will be issued
(other than fractions which are integral multiples of one one-hundredth of a
Series One Preferred Share, which may, at the election of the Company, be
evidenced by depositary receipts) and in lieu thereof, an adjustment in cash
will be made based on the market price of the Series One Preferred Shares on the
last trading day prior to the date of exercise.
At any time prior to the close of business on the Shares Acquisition
Date (but not thereafter), the Board of Directors of the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"). Subject to the foregoing, the redemption of the Rights may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion
92
36
may establish. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, except that from and
after the Shares Acquisition Date no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
August __, 1997. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
93
1
Exhibit 10.29
AMENDMENT NO. 1 AND WAIVER
DATED AS OF NOVEMBER 14, 1997
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 12, 1997
2
[EXECUTION COPY]
AMENDMENT NO. 1 AND WAIVER
DATED AS OF NOVEMBER 14, 1997
TO
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 12, 1997
THIS AMENDMENT NO. 1 AND WAIVER dated as of November 14, 1997
(this "Amendment") is made between NABI, a Delaware corporation (the
"Borrower"), the financial institutions party from time to time to the Loan
Agreement referred to below (the "Lenders"), and NATIONSBANK, N.A., a national
banking association, as agent for the Lenders (in that capacity, together with
any successors in that capacity, the "Agent").
PRELIMINARY STATEMENTS
The Borrower, the Lenders, and the Agent are parties to a Loan
and Security Agreement dated as of September 12, 1997 (the "Loan Agreement";
terms defined in the Loan Agreement and not otherwise defined herein being used
herein as therein defined).
A Default has occurred and is continuing under the Loan
Agreement by reason of the Borrower's failure to maintain a minimum consolidated
Fixed Charge Coverage Ratio of at least 1.10 to 1 for the Fiscal Quarter ending
on September 30, 1997, as required under Section 10.1(a) of the Loan Agreement
(the "Existing Default"), as a result of which the Lenders are entitled to
exercise the rights and remedies provided for in the Loan Agreement.
The Borrower has requested that the Lenders waive the Existing
Default, modify certain financial covenants and amend certain other provisions
of the Loan Agreement, and the Lenders have agreed, upon and subject to the
terms, conditions and provisions of this Amendment.
NOW, THEREFORE, in consideration of the Loan Agreement, the
Loans made by the Lenders and outstanding thereunder, the mutual promises
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. AMENDMENT TO LOAN AGREEMENT. The Loan Agreement is
hereby amended, subject to the provisions of Section 3 of this Amendment
(a) by amending Section 1.1 DEFINITIONS thereof
(i) by amending the definition of "Applicable Margin" by
adding a new sentence at the end thereof to read as follows:
"So long as the consolidated EBITDA of the Borrower and its
Consolidated Subsidiaries for the four consecutive Fiscal Quarters most
recently ended is less than $18,000,000, the Applicable Margin as
determined above shall in each case be increased by .25%".
(ii) by amending the definition of "Fixed Charge Coverage
Ratio" in its entirety to read as follows:
95
3
"FIXED CHARGE COVERAGE RATIO" means for any specified
period, the ratio obtained by dividing (i) the sum of EBITDA minus cash
outlays for income taxes, minus Maintenance Capex and minus Other
Included Expenditures of the Borrower and its Consolidated Subsidiaries
for such period, by (ii) the sum of interest expense plus scheduled
principal payments on Debt (other than the Loans), including scheduled
payments of Capitalized Lease Obligations, of the Borrower and its
Consolidated Subsidiaries during such period. For the purposes of this
definition "Other Included Expenditures" means any expenditures during
the computation period for a Permitted Repurchase or for Excess
Permitted Capital Expenditures or for Permitted Investments listed on
Schedule 1.1A (other than the 1st, 4th and 5th items listed on such
Schedule) made after the Effective Date that are not included in the
Capital Expenditures budgeted by the Borrower for such period and
subject to the limitations of SECTION 10.5.
(iii) by amending subsection (b) of the definition of
"Permitted Investments" in its entirety to read as follow:
(b) Investments of the Borrower and its Subsidiaries in:
(i) the Borrower's Subsidiaries existing on the
Effective Date,
(ii) Guaranties permitted pursuant to SECTION 10.3,
(iii) those items described on SCHEDULE 1.1A -
PERMITTED INVESTMENTS,
(iv) an Investment in any entity approved in writing
by the Required Lenders in an aggregate amount not in excess
of $10,000,000, funded exclusively with the proceeds of the
issuance and sale by the Borrower of additional common or
convertible preferred stock of the Borrower, and
(v) other Investments not in excess of $500,000
individually or $1,000,000 in the aggregate at any time
outstanding.
(b) by amending Section 10.1 FINANCIAL RATIOS in its entirety to read
as follows:
SECTION 10.1 FINANCIAL RATIOS. Permit:
(a) MINIMUM FIXED CHARGE COVERAGE. The consolidated Fixed Charge
Coverage Ratio of the Borrower and its Consolidated Subsidiaries as of the end
of any Fiscal Quarter ending during any period described
below to be less than the ratio set forth below opposite such period:
PERIOD RATIO
------ -----
Fiscal Quarter ending December 31, 1997 .36 to 1;
the two consecutive Fiscal Quarters ending
March 31, 1998 .52 to 1;
the three consecutive Fiscal Quarters ending
June 30, 1998 .62 to 1;
the four consecutive Fiscal Quarters ending
September 30, 1998 .76 to 1;
96
4
the four consecutive Fiscal Quarters ending
December 31, 1998 1.0 to 1;
each four consecutive Fiscal Quarter period
ending during Fiscal Year 1999 1.1 to 1; or
each four consecutive Fiscal Quarter period
ending thereafter 1.25 to 1.
(b) MINIMUM EBITDA Consolidated EBITDA of the Borrower and its
Consolidated Subsidiaries for each Fiscal Year set forth below to be less than
the amount set forth opposite such Fiscal Year:
FISCAL YEAR AMOUNT
----------- ------
December 31, 2000 $32,000,000
December 31, 2001 $36,000,000
(c) MINIMUM CONSOLIDATED NET WORTH. Permit consolidated Net
Worth of the Borrower and its Consolidated Subsidiaries calculated at the end of
any Fiscal Quarter ending on or after December 31, 1997 to be less than an
amount equal to the sum of $79,000,000 PLUS 50% of the consolidated Net Income
(without deduction for losses) of the Borrower and its Consolidated
Subsidiaries, on a cumulative basis, for the period beginning on October 1, 1997
and ending on the last day of such Fiscal Quarter.
(c) by amending Section 10.15 MINIMUM COLLATERAL AVAILABILITY by
deleting the amount of "$2,000,000" therein and substituting therefor the amount
of "$5,000,000".
Section 2. WAIVER OF DEFAULT. On the Amendment Effective Date
(as hereinafter defined) the Lenders hereby waive the Existing Default.
Section 3. EFFECTIVENESS OF AMENDMENT. Section 1 of this
Amendment shall become effective as of the first date (the "Amendment Effective
Date") on which the Lenders shall have received four copies each of the
following documents (except that on the Amendment Effective Date, the
effectiveness of the "Applicable Margin" definition, as amended herein, shall be
retroactive to October 1, 1997 and the effectiveness of Section 2 of this
Amendment shall be retroactive to November 14, 1997):
(a) this Amendment duly executed and delivered by the Borrower, each
Lender and the Agent;
(b) a certificate of the Secretary of the Borrower having attached
thereto the articles or certificate of incorporation and bylaws of the Borrower
as in effect on the Amendment Effective Date attached thereto (or containing the
certification of such Secretary that no amendment or modification of such
articles or certificate or bylaws has become effective since the last date on
which such documents were delivered to the Lenders pursuant to the Loan
Agreement), all corporate and partnership action, including shareholders' or
partners' approval, if necessary, taken by the Borrower and/or its shareholders
or partners to authorize the execution, delivery and performance of this
Amendment, and to the further effect that the incumbency certificate delivered
in connection with the occurrence of the Effective Date remains in effect,
unchanged;
(c) a certificate of the president or any vice-president of the
Borrower stating that, to the best of his knowledge and based on an examination
reasonably believed by him to be sufficient to enable him to make an informed
statement,
97
5
(i) after giving effect to the waiver set forth in Section 2
of this Amendment, all of the representations and warranties
made or deemed to be made under the Loan Agreement are true
and correct as of the date hereof, and
(ii) after giving effect to the waiver set forth in Section 2
of this Amendment, no Default or Event of Default exists, and
the Agent shall be satisfied as to the truth and accuracy
thereof;
(d) the Confirmation of Guarantors attached hereto as ANNEX A duly
executed and delivered by each Guarantor;
(e) the payment of an amendment fee in the amount of $50,000 and all
accrued interest resulting from the amendment to the Applicable Margin; and
(f) such other documents and instruments as the Agent or any Lender may
reasonably request.
Section 4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
makes the following representations and warranties to the Agent and the Lenders,
which representations and warranties shall survive the delivery of this
Amendment and the making of additional Loans under the Loan Agreement as amended
hereby:
(a) AUTHORIZATION OF AGREEMENTS. The Borrower has the right and power,
and has taken all necessary action to authorize it, to execute, deliver and
perform this Amendment and each other agreement contemplated hereby to which it
is a party in accordance with their respective terms. This Amendment and each
other agreement contemplated hereby to which it is a party have been duly
executed and delivered by the duly authorized officers of the Borrower and each
is, or each when executed and delivered in accordance with this Amendment will
be, a legal, valid and binding obligation of the Borrower, enforceable in
accordance with its terms.
(b) COMPLIANCE OF AGREEMENTS WITH LAWS. The execution, delivery and
performance of this Amendment and each other agreement contemplated hereby to
which the Borrower is a party in accordance with their respective terms do not
and will not, by the passage of time, the giving of notice or otherwise,
(i) require any Governmental Approval or violate any
Applicable Law relating to the Borrower or any of its
Subsidiaries,
(ii) conflict with, result in a breach of or constitute a
default under the articles or certificate of incorporation or
by-laws or any shareholders' agreement of the Borrower or any
of its Subsidiaries, any material provisions of any indenture,
agreement or other instrument to which the Borrower, any of
its Subsidiaries or any of Borrower's or such Subsidiaries'
property may be bound or any Governmental Approval relating to
the Borrower or any of its Subsidiaries, or
(iii) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or
hereafter acquired by the Borrower other than the Security
Interest.
Section 5. EXPENSES. The Borrower agrees to pay or reimburse
on demand all costs and expenses, including, without limitation, reasonable fees
and disbursements of counsel, incurred by the Agent in connection with the
negotiation, preparation, execution and delivery of this Amendment.
Section 6. EFFECT OF AMENDMENT. From and after the Amendment
Effective Date, all references in the Loan Agreement and in any other Loan
Document to "this Agreement," "the Loan
98
6
Agreement," "hereunder," "hereof" and words of like import referring to the Loan
Agreement, shall mean and be references to the Loan Agreement as amended by this
Amendment. Except as expressly amended hereby, the Loan Agreement and all terms,
conditions and provisions thereof remain in full force and effect and are hereby
ratified and confirmed. The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Lenders under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
Section 7. COUNTERPART EXECUTION; GOVERNING LAW.
(a) EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed signature page of any party hereto by facsimile
transmission shall be effective as delivery of a manually executed counterpart
thereof.
(b) GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.
99
7
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
BORROWER
NABI
[CORPORATE SEAL]
By: /s/ Alfred J. Fernandez
---------------------------------
Alfred J. Fernandez
Senior Vice President and
Attest: Chief Financial Officer
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
AGENT
NATIONSBANK, N.A.
By: /s/ John C. Glazebrook
---------------------------------
Name: John C. Glazebrook
---------------------------
Title: Vice President
---------------------------
LENDERS
NATIONSBANK, N.A.
By: /s/ John C. Glazebrook
---------------------------------
Name: John C. Glazebrook
---------------------------
Title: Vice President
---------------------------
BANKBOSTON, N.A.
By: /s/ John C. Todd
---------------------------------
Name: John C. Todd
---------------------------
Title: Director
---------------------------
100
8
ANNEX A
CONSENT AND CONFIRMATION OF GUARANTORS
The undersigned, each in their capacity as a Guarantor under
the Subsidiary Guaranty dated as of September 12, 1997 (as modified or amended
to date, the "Subsidiary Guaranty"), in favor of the Lenders, hereby confirms,
for the benefit of the Borrower and the Lenders, that (1) such Guarantor is a
Subsidiary of Borrower, (2) such Guarantor has received a copy of Amendment No.
1 and Waiver dated as of November 14, 1997 and consents thereto and (3) the
Subsidiary Guaranty of which such Guarantor is the maker constitutes a
continuing unconditional, guaranty of the Secured Obligations under and as
defined in the Subsidiary Guaranty. Each of the undersigned is and continues to
be liable under the Subsidiary Guaranty in accordance with the terms thereof,
notwithstanding the execution and delivery of the aforesaid Amendment.
Dated: December 27, 1997
BIOMUNE CORPORATION
[Corporate Seal] By: /s/ Alfred J. Fernandez
-------------------------------------
Alfred J. Fernandez
Treasurer
NABI FINANCE, INC.
[Corporate Seal] By: /s/ Alfred J. Fernandez
-------------------------------------
Alfred J. Fernandez
President
NABIMED, LTD.
[Corporate Seal] By: /s/ Alfred J. Fernandez
-------------------------------------
Alfred J. Fernandez
Secretary
UNIVAX PLASMA, INC.
[Corporate Seal] By: /s/ Alfred J. Fernandez
-------------------------------------
Alfred J. Fernandez
Treasurer and Chief Financial Officer
101
1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
Set forth below is a listing of all of the existing
subsidiaries of the Registrant. The Registrant owns 100% of the stock of each of
the subsidiaries listed below.
SUBSIDIARIES STATE OR NATION OF INCORPORATION
- ------------ --------------------------------
NABI Foreign Sales, Ltd.........................................................Barbados, West Indies
BioMune Corporation.............................................................Delaware
NABI Finance, Inc...............................................................Delaware
Nabi BioMedical GmbH............................................................Germany
NabiMed, Ltd...................................................................Delaware
102
1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (No. 33-10148, No.
33-24117, No. 33-47239, No. 33-75868 and No. 333-2253) and the Registration
Statements on Form S-8 (No. 33-42223, No. 33-42224, No. 33-05219, No. 33-60795,
No. 33-64092 and No. 33-65069) of Nabi and its subsidiaries of our report dated
March 30, 1998, appearing in this Form 10-K.
/s/ Price Waterhouse LLP
- ---------------------------
PRICE WATERHOUSE LLP
Miami, Florida
March 30, 1998
103
5
1,000
YEAR
DEC-31-1997
JAN-01-1997
DEC-31-1997
3,397
0
36,060
0
43,387
98,972
89,187
0
225,906
35,039
121,081
0
0
3,480
72,183
225,906
228,744
228,744
180,533
180,533
59,522
0
4,712
(15,821)
(4,668)
(11,153)
0
0
0
(11,153)
(0.32)
0
RECEIVABLES, INVENTORY AND PP&E REPRESENT NET AMOUNTS.
LOSS PROVISION INCLUDED IN OTHER EXPENSES.
