<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 1995.
REGISTRATION NO. 33-63497
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NORTH AMERICAN BIOLOGICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 2836 59-1212264
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
5800 PARK OF COMMERCE BOULEVARD, N.W.
BOCA RATON, FLORIDA 33487
(407) 989-5800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DAVID J. GURY
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NORTH AMERICAN BIOLOGICALS, INC.
5800 PARK OF COMMERCE BOULEVARD, N.W.
BOCA RATON, FLORIDA 33487
(407) 989-5800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES OF COMMUNICATIONS TO:
CONSTANTINE ALEXANDER, ESQUIRE JOSHUA W. R. PICKUS, ESQUIRE
NUTTER, MCCLENNEN & FISH VENTURE LAW GROUP
ONE INTERNATIONAL PLACE A PROFESSIONAL CORPORATION
BOSTON, MASSACHUSETTS 02110-2699 2800 SAND HILL ROAD
(617) 439-2000 MENLO PARK, CALIFORNIA 94025
(415) 854-4488
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: Upon the
effective date of the merger described in this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE PRICE(3) FEE(4)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
($.10 par value)...... 14,271,782 Shares (2) $109,194,418 $37,653.25
</TABLE>
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- -------------------------------------------------------------------------------
(1) Based upon the maximum number of shares that may be issued in the merger
described herein.
(2) Not applicable.
(3) The registration fee is calculated in accordance with Rule 457(f)(1) under
the Securities Act of 1933 by multiplying $6.125, the average of the high
and low prices on October 16, 1995 of the Common Stock of Univax
Biologics, Inc., by 17,827,660, the number of shares of Common Stock of
Univax Biologics, Inc. to be received by the Registrant in exchange for
the Common Stock of the Registrant pursuant to the merger described
herein.
(4) Of this amount, $26,248.42 was paid in connection with the filing of the
Registrant's Preliminary Proxy material on September 15, 1995. In
accordance with Rule 457(b) under the Securities Act of 1933, $11,377.37
of the balance of the filing fee was previously paid in connection with
the filing of the Registration Statement on October 18, 1995 and the
balance of $27.46 is being paid in connection with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
JOINT PROXY STATEMENT/PROSPECTUS
ITEM AND CAPTION OF FORM S-4 CAPTION OF LOCATION
---------------------------- --------------------------------
<C> <S> <C>
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus........ Facing Page of Registration Statement;
Cross Reference Sheet; Outside Front
Cover Page of Joint Proxy
Statement/Prospectus.
2. Inside Front and Outside Back
Cover Pages of Prospectus....... Inside Front Cover Page; Available
Information; Table of Contents.
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information..................... Summary; NABI Business; Univax Business; The
The Merger; Comparative Stock Price Data
and Dividend History; Pro Forma
Financial Information; Risk Factors;
NABI Selected Consolidated Financial
Data; Univax Selected Historical
Financial Information.
4. Terms of the Transaction......... Summary; The Merger; Comparative Per
Share Data; Description of NABI Capital
Stock.
5. Pro Forma Financial Information.. Summary; Pro Forma Financial
Information.
6. Material Contacts with the
Company Being Acquired.......... The Merger.
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to Be
Underwriters.................... Not Applicable.
8. Interests of Named Experts and
Counsel......................... Experts; Legal Matters.
9. Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities...... Not Applicable.
10. Information with Respect to S-3
Registrants..................... Not Applicable.
11. Incorporation of Certain
Information by Reference........ Not Applicable.
12. Information with Respect to S-2
or S-3 Registrants.............. Not Applicable.
13. Incorporation of Certain
Information by Reference........ Not Applicable.
14. Information with Respect to
Registrants Other Than S-3 or S-
2 Registrants................... Summary; Comparative Stock Price Data
and Dividend History; NABI Business;
NABI Selected Consolidated Financial
Data; NABI Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Unaudited Pro
Forma Condensed Combined Financial
Information; Financial Statements.
15. Information with Respect to S-3
Companies....................... Not Applicable.
16. Information with Respect to S-2
or S-3 Companies................ Not Applicable.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JOINT PROXY STATEMENT/PROSPECTUS
ITEM AND CAPTION OF FORM S-4 CAPTION OF LOCATION
---------------------------- --------------------------------
<C> <S> <C>
17. Information with Respect to
Companies Other Than S-3 or S-2
Companies......................... Summary; Univax--Business; Univax
Selected Historical Financial
Information; Univax Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Financial Statements.
18. Information if Proxies, Consents or
Authorizations are to be
Solicited......................... Summary; The Merger; The Merger--
Appraisal Rights; NABI Certain
Transactions; NABI Management and
Executive Compensation; NABI Principal
Stockholders.
19. Information if Proxies, Consents or
Authorizations are not to be
Solicited or in an Exchange
Offer............................. Not Applicable.
</TABLE>
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC.
5800 PARK OF COMMERCE BOULEVARD, N.W.
BOCA RATON, FL 33487
(407) 989-5800
October 27, 1995
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders (the
"Special Meeting") of North American Biologicals, Inc. ("NABI") to be held on
November 29, 1995 at the Radisson Plaza Hotel, Charlotte, North Carolina, at
10:00 a.m. local time.
At the Special Meeting, you will be asked to approve a merger agreement (the
"Merger Agreement") pursuant to which Univax Biologics, Inc. ("Univax") will
be merged with and into NABI (the "Merger"). In the Merger, each share of
Univax common stock will be converted into the right to receive .79 share of
NABI common stock. Approval of the Merger Agreement also will constitute
approval of certain Univax stock option plans, because NABI will be assuming
outstanding options under these plans, and approval to amend NABI's
Certificate of Incorporation to increase the number of shares of common stock
authorized for issuance to 75,000,000. NABI's Board of Directors believes the
Merger is in the best interests of NABI and its stockholders. The Board has
approved the Merger Agreement and recommends that NABI's stockholders vote to
approve the Merger Agreement.
Univax is a biopharmaceutical company developing and marketing products that
prevent and treat autoimmune and infectious diseases and related complications
through activation and targeting of the human immune system. The Merger will
produce a fully integrated biopharmaceutical company from research through
product commercialization and will combine NABI's large-scale plasma
collection, manufacturing and financial resources with Univax's donor
stimulation technology, vaccine and immunoglobulin pipeline and sales and
marketing presence. Univax's pipeline of products should accelerate NABI's
previously announced strategy to shift to higher margin value-added
therapeutic products. The merged company will be well positioned for
leadership in antibody plasma immunotherapeutic products.
At the Special Meeting, you also will be asked to approve a proposal to
amend NABI's 1990 Equity Incentive Plan (the "Plan"), contingent upon
consummation of the Merger, to increase the number of shares of NABI common
stock available for issuance under the Plan. NABI's Board of Directors has
approved the proposal and recommends that NABI's stockholders vote to approve
the amendment to the Plan.
Accompanying this letter is a Joint Proxy Statement/Prospectus relating to
the actions to be taken by NABI stockholders at the Special Meeting and to the
action to be taken at a special meeting of Univax's stockholders. The Joint
Proxy Statement/Prospectus sets forth in greater detail the Merger exchange
ratio and more fully describes the Merger and the terms of the Merger
Agreement. It also includes detailed information about NABI and Univax. I urge
that you carefully read this Joint Proxy Statement/Prospectus.
Whether or not you plan to attend, it is important that your shares are
represented at the Special Meeting. ACCORDINGLY, PLEASE PROMPTLY COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
Sincerely,
/s/ David J. Gury
David J. Gury
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
UNIVAX BIOLOGICS, INC.
12280 WILKINS AVENUE
ROCKVILLE, MARYLAND 20852
(301) 770-3099
October 27, 1995
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders (the
"Univax Meeting") of Univax Biologics, Inc. ("Univax") to be held on November
29, 1995 at 9:00 a.m., local time, at Univax's principal offices at 12280
Wilkins Avenue, Rockville, Maryland.
At the Univax Meeting, you will be asked to consider and approve an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which Univax
will be merged with and into North American Biologicals, Inc. ("NABI") as
described more fully in the attached Joint Proxy Statement/Prospectus (the
"Merger"). In the Merger, each share of Univax common stock will be converted
into the right to receive .79 share of NABI common stock.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER DESCRIBED IN THE
ATTACHED MATERIALS AND THE TRANSACTIONS CONTEMPLATED THEREBY AND HAS
DETERMINED THAT THEY ARE FAIR TO AND IN THE BEST INTERESTS OF UNIVAX AND ITS
STOCKHOLDERS. AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE IN FAVOR OF THE MERGER.
All of Univax's directors and certain Univax stockholders affiliated with
the Board of Directors, which collectively hold 5,048,965 shares of Univax
common stock (or 29.3% of all outstanding shares), have agreed to vote their
shares of Univax common stock in favor of the Merger Agreement.
Accompanying this letter is a Notice of Special Meeting of Stockholders, a
Joint Proxy Statement/ Prospectus relating to the actions to be taken by
Univax stockholders at the Univax Meeting and a proxy card. The Joint Proxy
Statement/Prospectus more fully describes the proposed Merger and the terms of
the Merger Agreement and includes information about NABI and Univax. Please
give this material your careful attention.
WHETHER OR NOT YOU PLAN TO ATTEND THE UNIVAX MEETING, PLEASE COMPLETE, SIGN,
DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN THOUGH YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED
AT THE UNIVAX MEETING.
Sincerely,
/s/ Thomas Stagnaro
Thomas Stagnaro
President and
Chief Executive Officer
<PAGE>
NABI LOGO
NORTH AMERICAN BIOLOGICALS, INC.
5800 PARK OF COMMERCE BOULEVARD, N.W.
BOCA RATON, FL 33487
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 29, 1995
A Special Meeting of Stockholders of North American Biologicals, Inc.
("NABI") will be held on November 29, 1995 at 10:00 o'clock in the forenoon,
local time, at the Radisson Plaza Hotel, Charlotte, North Carolina, for the
following purposes:
1. To consider and vote upon a proposal to adopt and approve the
Agreement and Plan of Merger dated as of August 28, 1995 (the "Merger
Agreement") between NABI and Univax Biologics, Inc., a Delaware corporation
("Univax"), pursuant to which, among other things, Univax would be merged
with and into NABI (the "Merger") and each stockholder of Univax would
receive (i) for each share of Univax common stock owned as of the effective
time of the Merger, .79 share of common stock, par value $.10 per share, of
NABI (the "NABI Common Stock") and (ii) for each share of Univax preferred
stock owned as of the effective time of the Merger, pursuant to the terms
of Univax's Certificate of Incorporation, such number of shares of NABI
Common Stock as is obtained by dividing $9.95 by the closing price of the
NABI Common Stock on the date on which the effective time of the Merger
occurs, as described in the accompanying Joint Proxy Statement and
Prospectus (the "Proxy Statement/Prospectus"). As more fully described in
the Proxy Statement/Prospectus, approval of the Merger Agreement also will
constitute approval of certain Univax stock option plans and approval to
amend NABI's Certificate of Incorporation to increase the number of shares
of NABI Common Stock authorized for issuance to 75,000,000 shares.
2. To consider and act upon a proposal to increase the shares of NABI
Common Stock available for issuance under the 1990 Equity Incentive Plan,
contingent upon consummation of the Merger.
The Board of Directors has fixed the close of business on October 20, 1995
as the record date for determining the stockholders having the right to
receive notice of and to vote at the Special Meeting. Only holders of record
of NABI Common Stock at the close of business on such date are entitled to
notice of and to vote at the Special Meeting.
The Proxy Statement/Prospectus, containing information about the matters to
be acted upon at the Special Meeting, and a form of proxy accompany this
notice.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE YOUR STOCK IN FAVOR OF EACH
OF THE ABOVE PROPOSALS.
By Order of the Board of Directors
Constantine Alexander
Secretary
Boca Raton, Florida
October 27, 1995
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN,
DATE AND MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON
BEHALF OF THE NABI BOARD OF DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
- --------------------------------------------------------------------------------
<PAGE>
UNIVAX BIOLOGICS, INC.
12280 WILKINS AVENUE
ROCKVILLE, MARYLAND 20852
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 29, 1995
A Special Meeting of Stockholders (the "Univax Meeting") of Univax
Biologics, Inc., a Delaware corporation ("Univax"), will be held on November
29, 1995, at 9:00 a.m., local time, at Univax's principal offices at 12280
Wilkins Avenue, Rockville, Maryland for the following purpose:
To consider and vote upon a proposal to adopt and approve the Agreement and
Plan of Merger between North American Biologicals, Inc., a Delaware
corporation ("NABI"), and Univax pursuant to which, among other things, Univax
would be merged with and into NABI (the "Merger") and stockholders of Univax
would receive (i) for each share of Univax common stock, par value $.01 per
share, owned as of the effective time of the Merger, 0.79 share of NABI common
stock, par value $.10 per share (the "NABI Common Stock"), and (ii) for each
share of Univax preferred stock, par value $.01 per share, owned at the
effective time of the Merger, pursuant to the terms of Univax's Certificate of
Incorporation, such number of shares of NABI Common Stock as is obtained by
dividing $9.95 by the closing price of the NABI Common Stock on the date on
which the effective time of the Merger occurs, as described in the
accompanying Joint Proxy Statement and Prospectus (the "Proxy
Statement/Prospectus").
The Board of Directors has fixed the close of business on October 20, 1995
as the record date for determining the stockholders having the right to
receive notice of and to vote at the Special Meeting. Only holders of record
at the close of business on such date are entitled to notice of and to vote at
the Special Meeting.
The Proxy Statement/Prospectus containing information about the matters to
be acted upon at the Special Meeting and a form of proxy accompany this
notice.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE YOUR STOCK IN FAVOR OF THE
ABOVE PROPOSAL.
By Order of the Board of Directors
/s/ Cabot R. Caskie
Cabot R. Caskie, Secretary
Rockville, Maryland
October 27, 1995
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN,
DATE AND MAIL PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON
BEHALF OF THE UNIVAX BOARD OF DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
- --------------------------------------------------------------------------------
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC.
AND
UNIVAX BIOLOGICS, INC.
JOINT PROXY STATEMENT
----------------
NORTH AMERICAN BIOLOGICALS, INC.
PROSPECTUS
14,271,782 SHARES OF COMMON STOCK
This Joint Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is
being furnished to the holders of common stock, par value $.10 per share (the
"NABI Common Stock"), of North American Biologicals, Inc., a Delaware
corporation ("NABI"), in connection with the solicitation of proxies by the
NABI Board of Directors for use at the Special Meeting of Stockholders of NABI
to be held at the Radisson Plaza Hotel, Charlotte, North Carolina, on November
29, 1995, at 10:00 a.m., and at any and all adjournments or postponements
thereof (the "NABI Meeting").
This Proxy Statement/Prospectus also is being furnished to the holders of
common stock, par value $.01 per share (the "Univax Common Stock"), and Series
E Convertible Preferred Stock, par value $.01 per share (the "Univax Preferred
Stock"), of Univax Biologics, Inc., a Delaware corporation ("Univax"), in
connection with the solicitation of proxies by the Univax Board of Directors
for use at a Special Meeting of Stockholders of Univax to be held at 12280
Wilkins Avenue, Rockville, Maryland 20852, on November 29, 1995, at 9:00 a.m.,
and at any and all adjournments or postponements thereof (the "Univax
Meeting").
This Proxy Statement/Prospectus relates to the proposed merger of Univax
with and into NABI (the "Merger") pursuant to an Agreement and Plan of Merger
dated as of August 28, 1995 between NABI and Univax (the "Merger Agreement").
In the Merger, each outstanding share of Univax Common Stock will be converted
into and represent the right to receive .79 share of NABI Common Stock. As
required by Univax's Certificate of Incorporation, assuming the Univax
Preferred Stock is not voluntarily converted into Univax Common Stock, each
share of Univax Preferred Stock will be entitled to receive such number of
shares of NABI Common Stock as is determined by dividing $9.95 by the closing
price of NABI Common Stock on the date on which the effective time of the
Merger occurs. Cash will be paid in lieu of any fractional share of NABI
Common Stock. Holders of NABI Common Stock also will be asked to consider a
proposal to amend NABI's 1990 Equity Incentive Plan to increase the number of
shares of NABI Common Stock available for issuance thereunder, contingent upon
consummation of the Merger.
This Proxy Statement/Prospectus also constitutes the Prospectus of NABI with
respect to up to shares of NABI Common Stock to be issued in connection
with the Merger. NABI Common Stock is traded on the Nasdaq National Market
("Nasdaq") under the symbol "NBIO." On October 20, 1995, the closing sale
price for NABI Common Stock as reported on Nasdaq was $8.00 per share.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of NABI and Univax on or about October 27, 1995.
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY NABI AND UNIVAX STOCKHOLDERS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS OCTOBER 27, 1995
<PAGE>
AVAILABLE INFORMATION
NABI and Univax are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
These materials can be inspected and copied at the public reference facilities
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661. Copies of these materials may be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. NABI Common Stock is
listed for trading on Nasdaq under the trading symbol NBIO. Univax Common
Stock is listed for trading on Nasdaq under the symbol UNVX. Reports, proxy
statements and other information concerning NABI and Univax may be inspected
at the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
NABI has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") relating
to the NABI Common Stock to be issued by NABI pursuant to the Merger
Agreement. This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto.
Statements contained in this Proxy Statement/Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement may be inspected by anyone without charge and may be
obtained at prescribed rates at the Public Reference Section of the
Commission, maintained by the Commission at its principal office located at
450 Fifth Street, N.W., Washington, D.C., 20549, and at the following Regional
Offices of the Commission: 7 World Trade Center, 13th Floor, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, 14th
Floor, Chicago, Illinois 60661.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY UNIVAX OR NABI. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE, ANY
OF THE SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR THE ISSUANCE OR SALE OF ANY SECURITIES HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF NABI OR UNIVAX SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
----------------
NABI(R), H-BIG(R), NorMLCera-Plus(R) and QC-HIV(R) are registered trademarks
of NABI. Other NABI trademarks referred to in this Proxy Statement/Prospectus
include HIV-IGTM, H-CIGTM, H-BIG IVTM, VirocheQC ITM, QC-HIVTM and QC-
HepatitisTM.
NeoGAM(R) and Novasome(R) are registered trademarks owned by Univax or its
collaborators. Other trademarks referred to in this Proxy Statement/Prospectus
that are either owned or licensed by Univax include StaphVAXTM, StaphGAMTM,
HyperGAM+CFTM, CMV NeutraGAMTM, QS-21 StimulonTM, WinRho SDTM and OmniGAMTM.
2
<PAGE>
TABLE OF CONTENTS
FOR PROXY STATEMENT/PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... 2
SUMMARY................................................................... 7
The Companies........................................................... 7
Meetings of Stockholders................................................ 7
The Merger.............................................................. 8
Merger Consideration.................................................. 8
Effective Time........................................................ 8
Stock Options and Warrants............................................ 8
Amendment to NABI's Certificate of Incorporation...................... 8
Conditions to Merger; Termination..................................... 9
No Solicitation....................................................... 9
Anticipated Accounting Treatment...................................... 9
Appraisal Rights...................................................... 9
Recommendations of the Boards of Directors; Reasons for and Advantages
and Disadvantages of the Merger........................................ 9
Product Pipeline Following the Merger................................... 10
Management and Operations Following the Merger.......................... 10
Fairness Opinions....................................................... 11
Interests of Certain Persons in the Merger.............................. 11
Risk Factors............................................................ 11
Certain Federal Income Tax Consequences................................. 11
Voting and Affiliate Agreements......................................... 11
The NABI Common Stock................................................... 12
Exchange of Univax Stock Certificates................................... 12
Amendment to the NABI 1990 Equity Incentive Plan........................ 12
Selected Financial Data................................................. 13
Selected Financial Data--Pro Forma Combined (Unaudited)................. 14
COMPARATIVE PER SHARE DATA................................................ 15
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY......................... 16
RISK FACTORS.............................................................. 17
Factors Regarding Univax................................................ 17
Factors Regarding NABI.................................................. 20
Factors Regarding the Combined Company; Potential Disadvantages of the
Merger................................................................. 23
THE NABI MEETING.......................................................... 24
Time, Place and Date.................................................... 24
Purpose of the NABI Meeting............................................. 24
Record Date; Voting Rights; Proxies..................................... 24
Solicitation of Proxies................................................. 25
Quorum.................................................................. 25
Required Vote........................................................... 25
THE UNIVAX MEETING........................................................ 26
Time, Place and Date.................................................... 26
Purpose of the Univax Meeting........................................... 26
Record Date; Voting Rights; Quorum; Proxies............................. 26
Solicitation of Proxies................................................. 26
Required Vote........................................................... 27
</TABLE>
3
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<TABLE>
<CAPTION>
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THE MERGER................................................................ 27
Background of the Merger................................................ 27
Recommendation of NABI Board of Directors; Reasons for and Advantages of
the Merger............................................................. 30
Recommendation of Univax Board of Directors; Reasons for and Advantages
of the Merger.......................................................... 32
Risks Associated with and Disadvantages of the Merger................... 33
Opinion of Raymond James................................................ 33
Opinion of Robertson Stephens........................................... 37
Management and Operations Following the Merger.......................... 40
Univax Equity Incentive Plans........................................... 41
Univax Warrant.......................................................... 42
Conversion of Shares; Procedures for Exchange of Certificates........... 42
Interests of Certain Persons in the Merger.............................. 42
Voting and Affiliate Agreements......................................... 43
Regulatory Approvals.................................................... 43
Certain Federal Income Tax Consequences of the Merger................... 44
Anticipated Accounting Treatment........................................ 45
Federal Securities Law Consequences..................................... 45
Appraisal Rights........................................................ 46
Listing of NABI Shares.................................................. 46
THE MERGER AGREEMENT...................................................... 47
The Merger.............................................................. 47
Effective Time.......................................................... 47
Fractional Shares....................................................... 47
Stock Options and Warrants.............................................. 47
Representations and Warranties.......................................... 48
Conditions to Consummation of the Merger................................ 48
Covenants............................................................... 49
No Solicitation......................................................... 51
Termination............................................................. 52
Indemnification......................................................... 53
Expenses................................................................ 53
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION.............. 53
Pro Forma Condensed Combined Balance Sheet.............................. 54
Pro Forma Condensed Combined Statements of Operations................... 55
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION..... 59
NABI BUSINESS............................................................. 60
Plasma Business......................................................... 60
Immune Globulin Therapeutic Business.................................... 63
Diagnostic Products and Services........................................ 67
Competition............................................................. 67
Government and Industry Regulation...................................... 68
Employees............................................................... 71
Properties.............................................................. 71
Product Liability and Insurance......................................... 71
Legal Proceedings....................................................... 71
DESCRIPTION OF NABI CAPITAL STOCK......................................... 72
NABI SELECTED CONSOLIDATED FINANCIAL DATA................................. 74
</TABLE>
4
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<TABLE>
<CAPTION>
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<S> <C>
NABI MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................... 75
Results of Operations.................................................. 75
Liquidity and Capital Resources........................................ 78
Pricing................................................................ 78
Inflation.............................................................. 78
NABI MANAGEMENT AND EXECUTIVE COMPENSATION............................... 79
Directors and Executive Officers....................................... 79
Summary Compensation Table............................................. 81
Option Grants in Last Fiscal Year...................................... 82
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Op-
tion Values........................................................... 82
Employment Agreements.................................................. 82
Director Compensation.................................................. 83
NABI PRINCIPAL STOCKHOLDERS.............................................. 84
NABI CERTAIN TRANSACTIONS................................................ 85
UNIVAX BUSINESS.......................................................... 88
General................................................................ 88
Background............................................................. 89
Univax Technology...................................................... 91
WinRho SD.............................................................. 92
Products Under Development............................................. 93
StaphVAX and StaphGAM.................................................. 93
HyperGAM+CF............................................................ 95
CMV NeutraGAM.......................................................... 96
Other Development Programs............................................. 96
Product Development Risks.............................................. 97
Collaborative Agreements............................................... 97
Manufacturing and Supply............................................... 99
Marketing and Sales.................................................... 99
Patents and Proprietary Rights......................................... 99
Government Regulation and Product Approvals............................ 100
Competition............................................................ 102
Employees.............................................................. 102
Properties............................................................. 102
Legal Proceedings...................................................... 103
UNIVAX SELECTED HISTORICAL FINANCIAL INFORMATION......................... 104
UNIVAX MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS................................................... 105
Results of Operations.................................................. 105
Liquidity and Capital Resources........................................ 106
UNIVAX MANAGEMENT AND EXECUTIVE COMPENSATION............................. 107
Directors and Executive Officers....................................... 107
Summary Compensation Table............................................. 109
Option Grants in Last Year............................................. 110
Option Exercises and Fiscal Year-End Option Values..................... 110
Director Compensation.................................................. 111
UNIVAX PRINCIPAL STOCKHOLDERS............................................ 112
AMENDMENT TO THE NABI 1990 EQUITY INCENTIVE PLAN......................... 113
</TABLE>
5
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<TABLE>
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<S> <C>
LEGAL MATTERS.............................................................. 117
EXPERTS.................................................................... 117
PROPOSALS OF STOCKHOLDERS.................................................. 117
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
</TABLE>
APPENDIX A
Agreement and Plan of Merger
APPENDIX B
Fairness opinion of Raymond James & Associates, Inc.
APPENDIX C
Fairness opinion of Robertson, Stephens & Company, L.P.
APPENDIX D
1990 Equity Incentive Plan
6
<PAGE>
SUMMARY
The following summary is intended to highlight certain information contained
elsewhere in this Proxy Statement/Prospectus. This summary is not intended to
be a complete statement of all material features of the Merger and the matters
to be voted on at the NABI Meeting or the Univax Meeting, and is qualified in
its entirety by reference to the more detailed information contained elsewhere
in this Proxy Statement/Prospectus and appendices hereto. Certain capitalized
terms used in this summary are defined elsewhere in this Proxy
Statement/Prospectus. Stockholders of NABI and Univax should read carefully
this Proxy Statement/Prospectus and the appendices hereto in their entirety.
THE COMPANIES
NABI is the world's largest independent provider of human blood plasma
elements to the healthcare industry and is dedicated to improving the quality
of human life by providing plasma and plasma-based products for the diagnosis
or therapy of immune disorders. NABI's plasma collection operations encompass
78 locations, with 76 centers in 30 states and two centers in Germany. See
"NABI Business."
NABI is a Delaware corporation organized in 1967. Its principal executive
offices are located at 5800 Park of Commerce Boulevard, N.W., Boca Raton,
Florida 33487, and its telephone number is (407) 989-5800. Unless the context
otherwise requires, "NABI" refers to NABI and its subsidiaries.
Univax is a biopharmaceutical company engaged in the development and
marketing of products that prevent and treat autoimmune and infectious diseases
and related complications through activation and targeting of the human immune
system. Univax's product pipeline includes vaccines for long-term protection
and specific polyclonal antibodies for immediate, short-term protection and
therapeutic intervention. Univax has begun marketing its first product, WinRho
SD, which recently received U.S. Food and Drug Administration ("FDA")
regulatory clearance. See "Univax Business."
Univax is a Delaware corporation organized in 1988. Its principal executive
offices are located at 12280 Wilkins Avenue, Rockville, Maryland 20852, and its
telephone number is (301) 770-3099. Unless the context otherwise requires,
"Univax" refers to Univax and its subsidiary.
MEETINGS OF STOCKHOLDERS
This Proxy Statement/Prospectus relates to the NABI Meeting and the Univax
Meeting (collectively, the "Meetings"). At the Meetings, the stockholders of
each of NABI and Univax will consider and vote upon a proposal to adopt and
approve the Merger Agreement pursuant to which Univax will be merged with and
into NABI. In addition, NABI stockholders will be asked to consider and approve
an amendment to NABI's 1990 Equity Incentive Plan to increase the number of
shares available for issuance under the plan from 2,745,000 shares to 4,245,000
shares, contingent upon consummation of the Merger (the "Plan Amendment
Proposal").
The NABI Meeting will be held on November 29, 1995 at 10:00 a.m., local time,
at the Radisson Plaza Hotel, Charlotte, North Carolina. The record date for
determining the stockholders of NABI entitled to notice of and to vote at the
NABI Meeting is as of the close of business on October 20, 1995 (the "NABI
Record Date"). Each share of NABI Common Stock is entitled to one vote on each
matter coming before the stockholders. As of the NABI Record Date, there were
19,549,954 shares of NABI Common Stock outstanding. The Merger will require
approval of the Merger Agreement by the affirmative vote of the holders of a
majority of the outstanding shares of NABI Common Stock entitled to vote
thereon. Approval of the Plan Amendment Proposal will require the affirmative
vote of the holders of a majority of the shares of NABI Common Stock voting on
the matter. As of the NABI Record Date, NABI's directors, executive officers
and their affiliates held 12.9% of the outstanding shares of NABI Common Stock.
See "The NABI Meeting."
The Univax Meeting will be held on November 29, 1995 at 9:00 a.m., local
time, at Univax's principal offices at 12280 Wilkins Avenue, Rockville,
Maryland. The record date for determining the stockholders of
7
<PAGE>
Univax entitled to notice of and to vote at the Univax Meeting is as of the
close of business on October 20, 1995 (the "Univax Record Date"). As of the
Univax Record Date, there were 17,239,410 shares of Univax Common Stock
outstanding and 502,512 shares of Univax Preferred Stock outstanding. As of
such date, each share of Univax Preferred Stock was convertible into 1.10097
shares of Univax Common Stock. Holders of Univax Common Stock are each entitled
to one vote per share and holders of Univax Preferred Stock are each entitled
to one vote for each share of Univax Common Stock into which each share of
Univax Preferred Stock is convertible as of the Univax Record Date. The Merger
will require adoption and approval of the Merger Agreement by a majority of the
votes entitled to be cast, with the outstanding shares of Univax Common Stock
and Univax Preferred Stock voting together as a single class. As of the Univax
Record Date, Univax's directors, executive officers and their affiliates held
29.5% of the outstanding shares of Univax Common Stock and no shares of Univax
Preferred Stock, and such directors, executive officers and affiliates are
entitled to cast 28.6% of the votes which are entitled to be cast at the Univax
Meeting. See "The Univax Meeting." All Univax directors and such affiliates
have agreed to vote their shares of Univax Common Stock to adopt and approve
the Merger Agreement. See "The Merger--Voting and Affiliate Agreements."
THE MERGER
Merger Consideration. Under the Merger Agreement, at the Effective Time (as
defined below) of the Merger, each share of Univax Common Stock will be
automatically converted into and represent the right to receive .79 share of
NABI Common Stock (the "Common Exchange Ratio"), and each share of Univax
Preferred Stock, assuming it is not converted into Univax Common Stock and as
required by Univax's Certificate of Incorporation, will be automatically
converted into and represent the right to receive the number of shares of NABI
Common Stock as is determined by dividing $9.95 by the closing price of NABI
Common Stock on the date on which the Effective Time occurs (the "Preferred
Exchange Ratio"). No fractional shares of NABI Common Stock will be issued by
NABI in the Merger. Each stockholder of Univax otherwise entitled to a
fractional share of NABI Common Stock will receive an amount of cash in lieu
thereof determined by multiplying the fraction of a share of NABI Common Stock
to which the stockholder otherwise would be entitled by the average closing
price of NABI Common Stock on Nasdaq during the 20 trading days preceding the
Effective Time. See "Comparative Per Share Data" for information concerning the
recent price of NABI Common Stock. Upon consummation of the Merger, Univax will
be merged with and into NABI and Univax's separate corporate existence will
cease.
Effective Time. The Merger will become effective at the time a Certificate of
Merger with respect to the Merger is filed with the Secretary of State of the
State of Delaware (the "Effective Time"), unless NABI and Univax agree that a
later time, specified in the Certificate of Merger, will be the Effective Time.
Stock Options and Warrant. NABI will assume all outstanding options to
purchase Univax Common Stock, whether vested or unvested, issued under Univax's
1989 Stock Plan and 1995 Stock Option Plan (the "Stock Option Plans") or
pursuant to other option agreements (excluding options under Univax's 1995
Directors' Stock Option Plan) outstanding as of the Effective Time
(collectively, the "Outstanding Options"). NABI also will assume an outstanding
warrant to purchase 11,400 shares of Univax Common Stock (the "Outstanding
Warrant"). The Outstanding Options and the Outstanding Warrant to be assumed by
NABI will be automatically converted into options and a warrant to purchase
shares of NABI Common Stock, subject to adjustment of the number of underlying
shares and the exercise price by the Common Exchange Ratio. In accordance with
the terms of Univax's 1995 Directors' Stock Option Plan, all options
outstanding thereunder became fully exercisable upon the adoption of the Merger
Agreement by the Univax Board of Directors (notwithstanding the vesting
schedule of such options), and all options outstanding under this plan which
remain unexercised at the Effective Time will terminate. See "The Merger--
Univax Equity Incentive Plans" and "--Univax Warrant."
Amendment to NABI's Certificate of Incorporation. Under the Merger Agreement,
at the Effective Time, NABI's Certificate of Incorporation will be amended to
increase the authorized number of shares of NABI Common Stock from 50,000,000
shares to 75,000,000 shares.
8
<PAGE>
Conditions to Merger; Termination. Consummation of the Merger is subject to
the satisfaction of various conditions. See "The Merger Agreement--Conditions
to Consummation of the Merger." The Merger Agreement also may be terminated
under certain circumstances, including by mutual written consent of the Boards
of Directors of NABI and Univax and by either NABI or Univax if the other party
is in material breach of any representation, warranty or covenant contained in
the Merger Agreement and such breach has a material adverse effect, if the
Merger is not consummated on or before January 31, 1996, or if either party
receives a proposal from a third party that is determined by the recipient to
be superior to the transactions contemplated by the Merger Agreement (provided
it is a condition of the right to terminate as a result of such superior
proposal that the party proposing to terminate pays to the non-terminating
party a termination fee of $5,000,000 and the non-terminating party's fees and
expenses in connection with the Merger). See "The Merger Agreement--
Termination." The $5,000,000 termination fee to be paid in the event of such a
superior third party proposal may have the effect of deterring such a proposal
from a third party.
No Solicitation. Univax and NABI have agreed that neither party will initiate
or solicit discussions with any other party relating to any acquisition
proposal involving itself or any other transaction, the consummation of which
could prevent or materially delay the Merger. See "The Merger Agreement--No
Solicitation."
Anticipated Accounting Treatment. NABI and Univax anticipate that the Merger
will be treated as a pooling of interests for financial reporting purposes.
Consummation of the Merger is conditioned upon receipt by NABI and Univax of
letters from their independent certified public accountants regarding those
accountants' affirmative opinions as to the appropriateness of pooling of
interests accounting for the Merger. See "The Merger--Anticipated Accounting
Treatment."
Appraisal Rights. Pursuant to the General Corporation Law of the State of
Delaware (the "DGCL"), the holders of Univax Common Stock and NABI Common Stock
are not entitled to appraisal rights with respect to the Merger. The holders of
Univax Preferred Stock, however, are entitled to appraisal rights under the
DGCL. See "The Merger--Appraisal Rights."
See "The Merger" and "The Merger Agreement" for more information regarding
the terms of the Merger.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; REASONS FOR AND ADVANTAGES AND
DISADVANTAGES OF THE MERGER
The Boards of Directors of NABI and Univax have approved the Merger Agreement
and unanimously recommend that the stockholders of their respective companies
vote FOR adoption and approval of the Merger Agreement. Among the reasons why
the boards of both companies believe the Merger is in the best interests of
their respective stockholders are the following advantages of the Merger:
. The Merger will accelerate NABI's strategic shift to higher margin value-
added therapeutic products.
. Univax will add significant product pipeline and product development as
well as additional marketing and distribution capabilities to NABI.
. The Merger will build on NABI's core technical strength and donor base and
permit more efficient utilization of NABI's manufacturing facilities.
. The Merger will provide Univax with financial resources to support its
product pipeline.
. The Merger will provide Univax with access to plasma and plasma
fractionation capability.
See "Risk Factors--Factors Regarding the Combined Company; Potential
Disadvantages of the Merger" for a discussion of potential disadvantages of the
Merger and of the factors associated with an investment in the combined
company, including the following:
. The Merger will create risks typically associated with a proposed
combination of two large independent business organizations, including the
risk that anticipated synergies will not develop.
. The profitability of NABI will be adversely affected over the short term as
a result of the Merger.
9
<PAGE>
. The combined company, with certain exceptions, will be subject to risks
previously associated with NABI and Univax individually.
. The use by the combined company of federal tax net operating loss and
research tax credit carryforwards will be subject to certain limitations.
PRODUCT PIPELINE FOLLOWING THE MERGER
The following table summarizes NABI's pipeline of products on the market or
in clinical development following the Merger. For more information regarding
these products, see "NABI Business--Immune Globulin Therapeutic Business" and
"Univax Business--Products Under Development."
<TABLE>
<CAPTION>
PRODUCTS POTENTIAL APPLICATIONS STATUS COMPANY
-------- ---------------------- ------ -------
<S> <C> <C> <C>
PRODUCTS ON THE MARKET
WinRho SD............... Immune thrombocytopenic PLA approved Univax
purpura ("ITP") and Rh
isoimmunization
H-BIG................... Hepatitis B PLA approved NABI
PRODUCTS IN DEVELOPMENT
WinRho SD............... Additional autoimmune Phase IV clinical trials to Univax
conditions commence in 1995 and 1996
HIV-IG.................. HIV/AIDS transmission from Phase III clinical trial in NABI
mother to fetus progress to determine
efficacy
HyperGAM+CF............. Chronic pseudomonas infections Phase II clinical trial in Univax
in cystic fibrosis patients progress
StaphVAX................ Staphylococcal infections Phase II clinical trial Univax
(vaccines) completed; follow-on donor
stimulation with
immunizing agent began in
September 1995
StaphGAM................ Staphylococcal infections (SPA Donor stimulation in Univax
products) progress; Phase I/II to
begin in 1996
H-BIG IV................ Hepatitis B reinfection in Phase I/II clinical trial NABI
liver transplant patients to begin in 1996
CMV NeutraGAM........... CMV in renal transplant Phase I/II clinical trial Univax
patients to begin in 1996
H-CIG IV................ Hepatitis C reinfection in Phase I/II clinical trial NABI
liver transplant patients to begin in 1996
NeoGAM.................. Staph A, Staph epi and E. coli Preclinical Univax
in neonates
OmniGAM................. Pseudomonas and Enterococci in Preclinical Univax
ICU patients
</TABLE>
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
The combined company will retain the name "North American Biologicals, Inc."
and will be headquartered in Boca Raton, Florida. Upon completion of the
Merger, the Board of Directors of NABI will have ten members, four of whom will
be persons who are currently members of the Board of Directors of Univax. Mr.
David J. Gury will continue as Chairman, President and Chief Executive Officer
of NABI. Mr. Thomas P. Stagnaro,
10
<PAGE>
currently President and Chief Executive Officer of Univax, will serve as Senior
Executive Vice President of NABI, overseeing research and development, sales
and marketing and new business development. See "The Merger--Management and
Operations Following the Merger."
FAIRNESS OPINIONS
On August 26, 1995, Raymond James & Associates, Inc. ("Raymond James")
delivered its opinion to the NABI Board of Directors to the effect that the
Common Exchange Ratio and the Preferred Exchange Ratio are fair, from a
financial point of view, to NABI. Raymond James subsequently updated its
opinion to the date of this Proxy Statement/Prospectus. See "The Merger--
Opinion of Raymond James."
On August 27, 1995, Robertson, Stephens & Company, L.P. ("Robertson
Stephens") delivered its written opinion to the Univax Board of Directors to
the effect that, as of such date, the consideration to be received by the
holders of Univax Common Stock in the Merger is fair from a financial point of
view. Robertson Stephens subsequently updated its opinion to the date of this
Proxy Statement/Prospectus. See "The Merger--Opinion of Robertson Stephens."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Stockholders of NABI should be aware that certain members of NABI's Board of
Directors have interests in the Merger that are in addition to the interests of
stockholders of NABI generally. Richard A. Harvey, Jr. is President of BNY
Associates, Incorporated ("BNYA"), which has acted as a financial advisor to
NABI in connection with the Merger. Upon the closing of the Merger, BNYA will
be entitled to payment of a fee in addition to the fees it has received to date
for acting as NABI's financial advisor. In addition, David L. Castaldi was
retained by NABI in connection with the Merger to head a team of specialists to
evaluate Univax's technology, product pipeline and scientific and commercial
prospects. Mr. Castaldi has accrued a fee for his services. See "The Merger--
Interests of Certain Persons in the Merger."
RISK FACTORS
The Merger involves certain risks that should be carefully considered by
stockholders of NABI and Univax in voting on the Merger Agreement. See "Risk
Factors."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Except as more fully described under "The Merger--Certain Federal Income Tax
Consequences of the Merger," no gain or loss will be recognized by Univax
stockholders and no gain or loss will be recognized by NABI or Univax as a
consequence of the Merger. Consummation of the Merger is conditioned upon the
delivery of opinions of counsel dated as of the closing date of the Merger to
the effect that the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). ALL STOCKHOLDERS OF UNIVAX SHOULD CONSULT THEIR OWN TAX ADVISORS.
VOTING AND AFFILIATE AGREEMENTS
All of the members of the Univax Board of Directors and certain Univax
stockholders affiliated with certain members of the Univax Board of Directors
have entered into agreements with NABI agreeing, among other things, to vote
their shares of Univax Common Stock in favor of the Merger Agreement and
against any competing proposal, and not to transfer any of their shares of
Univax Common Stock until the completion of the Merger or the termination of
the Merger Agreement, with certain limited exceptions. The affiliated
stockholders consist of Charter Ventures, Domain Partners II, L.P. and Kleiner
Perkins Caufield & Byers V. Together, the Univax Board of Directors and such
affiliated stockholders hold an aggregate of 5,048,965 shares of Univax Common
Stock, or 29.3% of the outstanding shares of Univax Common Stock and 28.4% of
the votes entitled to be cast to adopt and approve the Merger Agreement. See
"The Merger--Voting and Affiliate Agreements."
Certain "affiliates" (as that term is defined in Rule 145 under the
Securities Act of 1933, as amended (the "Securities Act")) of Univax and NABI
will, prior to the Effective Time, enter into agreements restricting the
11
<PAGE>
sale or disposition of their shares of NABI Common Stock received in the Merger
so as to comply with the requirements of the securities laws, in the case of
affiliates of Univax, and with the requirements for "pooling of interests"
accounting, in the case of affiliates of both Univax and NABI. See "The
Merger--Voting and Affiliate Agreements."
THE NABI COMMON STOCK
There are 50,000,000 shares of NABI Common Stock authorized for issuance. The
Merger Agreement provides that upon completion of the Merger, NABI's
Certificate of Incorporation will be amended to increase the number of shares
of NABI Common Stock authorized for issuance to 75,000,000 shares. As of
October 20, 1995, there were 19,549,954 shares of NABI Common Stock
outstanding, and an additional 1,796,955 shares issuable upon exercise of all
outstanding options. It is anticipated that at the Effective Time,
approximately 14,271,782 shares of NABI Common Stock will be issued to the
holders of Univax Common Stock and Univax Preferred Stock (collectively, the
"Univax Capital Stock"), and up to an additional 1,478,481 shares of NABI
Common Stock may be issued upon the exercise of the Outstanding Options and the
Outstanding Warrant which were previously exercisable for shares of Univax
Common Stock. The NABI Common Stock trades on Nasdaq under the symbol "NBIO."
See "Description of NABI Capital Stock."
EXCHANGE OF UNIVAX STOCK CERTIFICATES
Upon consummation of the Merger, each holder of a certificate representing
shares of Univax Common Stock or Univax Preferred Stock ("Certificates")
outstanding prior to the Effective Time of the Merger will, upon the surrender
thereof (duly endorsed, if required) to Registrar and Transfer Company, as
exchange agent (the "Exchange Agent"), be entitled to receive (i) in the case
of Univax Common Stock, a certificate or certificates representing the number
of whole shares of NABI Common Stock into which such shares of Univax Common
Stock will have been automatically converted as a result of the Merger at the
rate of .79 share of NABI Common Stock for each share of Univax Common Stock,
(ii) in the case of Univax Preferred Stock, pursuant to the terms of Univax's
Certificate of Incorporation, a certificate or certificates representing the
number of whole shares of NABI Common Stock into which each share of Univax
Preferred Stock will have been automatically converted as a result of the
Merger determined by dividing $9.95 by the closing price of NABI Common Stock
on the date on which the Effective Time of the Merger occurs, and (iii) if
applicable, cash in lieu of any fractional share of NABI Common Stock in an
amount determined by multiplying the fraction of a share of NABI Common Stock
to which the holder otherwise would be entitled to receive by the average
closing sale price of NABI Common Stock on Nasdaq as reported by The Wall
Street Journal for the 20 trading days immediately preceding the Effective Time
(the "Merger Consideration").
After the consummation of the Merger, the Exchange Agent will mail a letter
of transmittal with instructions to all holders of record of Univax Capital
Stock as of the Effective Time as to the process for surrendering their
Certificates in exchange for the Merger Consideration. CERTIFICATES SHOULD NOT
BE SURRENDERED UNTIL THE LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED.
See "The Merger--Conversion of Shares; Procedures for Exchange of
Certificates."
AMENDMENT TO THE NABI 1990 EQUITY INCENTIVE PLAN
At the NABI Meeting, assuming that the Merger Agreement is approved, NABI
stockholders also will be asked to approve the Plan Amendment Proposal to
increase the number of shares of NABI Common Stock which may be issued under
NABI's 1990 Equity Incentive Plan from 2,745,000 shares to 4,245,000 shares,
contingent upon the consummation of the Merger. See "Amendment to the NABI 1990
Equity Incentive Plan."
12
<PAGE>
SELECTED FINANCIAL DATA
Set forth below are selected financial data of NABI and Univax. The financial
data for the years ended 1994, 1993, 1992, 1991 and 1990 have been derived from
their respective audited financial statements previously filed with the
Commission. The selected financial data for both companies for the six months
ended June 30, 1995 and 1994 have been derived from the companies' separate
unaudited Quarterly Reports on Form 10-Q, which were previously filed with the
Commission and which, in the opinion of management, include all normal
recurring adjustments necessary for a fair presentation of the financial
position and results of operations for the unaudited interim periods. See "NABI
Selected Consolidated Financial Data" and "Univax Selected Historical Financial
Information."
SELECTED FINANCIAL DATA--NORTH AMERICAN BIOLOGICALS, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- -------- -------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues................ $ 93,452 $ 77,280 $164,678 $101,574 $82,354 $68,230 $72,822
Operating income........ $ 10,986 $ 7,778 $ 17,426 $ 8,473 $ 1,859 $ 3,284 $ 3,271
Income (loss) from
continuing operations
before extraordinary
items and cumulative
effect of accounting
change................. $ 6,480 $ 3,710 $ 8,627 $ 3,405 $ (573) $ 2,217 $ 2,212
Per share:
Income (loss) from
continuing operations
before extraordinary
items and cumulative
effect of accounting
change................ $ 0.32 $ 0.22 $ 0.49 $ 0.25 $ (0.04) $ 0.14 $ 0.14
Weighted average shares
and common share
equivalents............ 20,347 16,670 17,590 13,540 13,328 15,980 15,587
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------------------
1995 1994 1993 1992 1991 1990
----------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Working capital........... $ 30,022 $25,552 $12,558 $ 9,680 $12,929 $ 5,438
Total assets.............. $106,426 $93,817 $52,888 $47,520 $26,550 $23,667
Long-term obligations..... $ 27,007 $19,549 $20,969 $22,411 $ 4,264 $ 750
Stockholders' equity...... $ 58,309 $51,765 $17,982 $13,917 $15,117 $12,101
</TABLE>
SELECTED FINANCIAL DATA--UNIVAX BIOLOGICS, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 4,002 $ 1,363 $ 2,783 $ 1,181 $ 973 $ 1,194 $ 664
Operating loss.......... $(11,503) $(10,167) $(21,918) $(21,266) $(14,405) $(4,336) $(1,099)
Loss from continuing op-
erations............... $(10,839) $(10,435) $(21,821) $(20,305) $(12,994) $(4,322) $(1,205)
Per share:
Loss from continuing
operations............ $ (0.63) $ (0.80) $ (1.52) $ (1.74) $ (1.19) $ (0.57) $ (0.17)
Weighted average number
of common shares....... 17,092 13,011 14,358 11,689 10,889 7,629 7,160
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------------------
1995 1994 1993 1992 1991 1990
----------- ------- ------- ------- ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........... $16,546 $26,657 $27,248 $26,704 $5,069 $ 241
Total assets.............. $28,907 $38,272 $38,571 $42,438 $9,879 $ 936
Long-term obligations..... $ 1,575 $ 1,520 $ 2,241 $ 1,125 $ 972 $ 2,000
Stockholders' equity (def-
icit).................... $22,973 $33,555 $33,653 $38,761 $7,295 $(1,466)
</TABLE>
13
<PAGE>
SELECTED FINANCIAL DATA--PRO FORMA COMBINED (UNAUDITED)
Set forth below are unaudited selected financial data (pro forma combined) of
NABI and Univax which give effect to the Merger under the pooling of interests
method of accounting. Such pro forma data assumes the Merger had been effective
at January 1, 1992 for the statement of operations information and on June 30,
1995 and December 31, 1994, 1993 and 1992 for the balance sheet information.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the future operating results or financial
position of the combined companies. The selected unaudited pro forma combined
financial data should be read in conjunction with the "Unaudited Pro Forma
Condensed Combined Financial Information," including the notes thereto.
SELECTED FINANCIAL DATA--PRO FORMA COMBINED (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ----------------------------
1995 1994 1994 1993 1992
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................... $97,103 $78,572 $167,208 $102,755 $ 83,327
Operating loss................. $ (516) $(2,389) $ (4,493) $(12,793) $(12,546)
Loss from continuing operations
before extraordinary items and
cumulative effect of
accounting change............. $(4,359) $(6,725) $(13,194) $(16,900) $(13,567)
Per share:
Loss from continuing
operations before
extraordinary items and
cumulative effect of account
change...................... $ (0.13) $ (0.26) $ (0.47) $ (0.76) $ (0.65)
Weighted average number of
common shares................. 33,377 25,873 27,963 22,297 20,850
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------------
1995 1994 1993 1992
-------- -------- ------- -------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................... $ 42,568 $ 52,209 $39,806 $36,384
Total assets.................................. $135,333 $132,089 $91,459 $89,958
Long-term obligations......................... $ 28,582 $ 21,070 $23,210 $23,535
Stockholders' equity.......................... $ 77,282 $ 85,319 $51,635 $52,678
</TABLE>
14
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth the earnings (loss) per common share and
common share equivalent and unaudited book value per common share and common
share equivalent of NABI and Univax on both historical and unaudited pro forma
combined bases. In addition, the following information sets forth the loss and
book value for Univax on an unaudited per share equivalent pro forma basis.
Pro forma combined loss per share is derived from the pro forma combined
information presented elsewhere herein, which gives effect to the Merger using
the pooling of interests accounting method as if the Merger had occurred on
January 1, 1992. The per share equivalent pro forma combined data for Univax
is calculated by multiplying the pro forma combined per share amounts for the
combined company by the exchange ratio of .79 (based upon the conversion of
Univax Common Stock to NABI Common Stock). Book value per share for the pro
forma combined presentation is based upon outstanding common shares, adjusted
to include the shares of NABI Common Stock to be issued in the Merger and
assumes that the Merger had been effective at the end of the period presented.
The information below should be read in conjunction with the respective
financial statements of NABI and Univax and the "Unaudited Pro Forma Condensed
Combined Financial Information," including the notes thereto.
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ -------------------------
1995 1994 1994 1993 1992
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NABI--HISTORICAL
Net earnings (loss) from
continuing operations per
common share and common share
equivalent..................... $ 0.32 $ 0.22 $ 0.49 $ 0.25 $(0.04)
Book value per common share and
common share equivalent........ $ 2.85 -- $ 2.56 -- --
UNIVAX--HISTORICAL
Net loss from continuing
operations per common share.... $(0.63) $(0.80) $(1.52) $(1.74) $(1.19)
Book value per common share..... $ 1.34 -- $ 1.97 -- --
NABI-UNIVAX PRO FORMA COMBINED
Net loss from continuing
operations per common share.... $(0.13) $(0.26) $(0.47) $(0.76) $(0.65)
Book value per common share..... $ 2.31 -- $ 2.57 -- --
UNIVAX PRO FORMA EQUIVALENTS
Net loss from continuing
operations per common share.... $(0.10) $(0.21) $(0.37) $(0.60) $(0.51)
Book value per common share..... $ 1.82 -- $ 2.03 -- --
</TABLE>
15
<PAGE>
COMPARATIVE STOCK PRICE DATA AND DIVIDEND HISTORY
NABI Common Stock and Univax Common Stock are quoted on Nasdaq under the
trading symbols "NBIO" and "UNVX," respectively. The following table sets
forth, for the periods indicated, the quarterly high and low sale prices per
share of NABI Common Stock and Univax Common Stock (based, in the case of
Univax Common Stock, upon intra-day trading), as reported by Nasdaq.
<TABLE>
<CAPTION>
NABI COMMON STOCK UNIVAX COMMON STOCK
------------------ --------------------
HIGH LOW HIGH LOW
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
FISCAL YEAR 1995
First Quarter........................ $ 9.38 $ 6.25 $ 8.00 $ 4.25
Second Quarter....................... 10.38 8.00 8.38 4.50
Third Quarter........................ 11.75 7.75 9.00 4.75
Fourth Quarter (through October 20,
1995)............................... 8.63 7.88 6.56 5.63
FISCAL YEAR 1994
First Quarter........................ $ 7.88 $ 3.06 $ 10.50 $ 7.25
Second Quarter....................... 7.00 5.06 9.50 6.25
Third Quarter........................ 7.75 5.50 7.50 5.00
Fourth Quarter....................... 8.50 6.13 6.75 3.88
FISCAL YEAR 1993
First Quarter........................ $ 3.13 $ 2.00 $ 11.50 $ 6.75
Second Quarter....................... 3.50 2.00 9.00 6.75
Third Quarter........................ 3.56 2.63 8.50 7.25
Fourth Quarter....................... 3.94 2.94 10.75 7.25
</TABLE>
The number of holders of record of NABI Common Stock and Univax Common Stock
on October 20, 1995 were 1,497 and 227, respectively.
No cash dividends have been previously paid on NABI Common Stock or Univax
Common Stock, and none are anticipated in the foreseeable future. Any future
determination concerning the payment of cash dividends will depend upon NABI's
results of operations, financial condition, capital requirements and other
factors deemed relevant by NABI's Board of Directors. NABI's loan agreements
currently prohibit dividend payments.
The following table sets forth the high, low and closing sale prices as
reported on Nasdaq of the NABI Common Stock and the Univax Common Stock on
Friday, August 25, 1995. The public announcement of the Merger Agreement
occurred prior to the opening of trading on Monday, August 28, 1995.
<TABLE>
<CAPTION>
NABI UNIVAX UNIVAX EQUIVALENT(1)
------ ------ --------------------
<S> <C> <C> <C>
High......................................... $11.38 $8.50 $8.99
Low.......................................... $11.00 $7.75 $8.69
Closing...................................... $11.19 $8.13 $8.84
</TABLE>
- --------
(1) The Univax equivalent market value is computed by multiplying the high,
low and closing market price per share of NABI Common Stock by the Common
Exchange Ratio.
The last reported sale prices for NABI Common Stock and Univax Common Stock
as reported on Nasdaq on October 20, 1995 were $8.00 and $6.56, respectively.
16
<PAGE>
RISK FACTORS
In considering the proposal to approve the Merger Agreement, the
stockholders of NABI and Univax should carefully consider, in addition to all
other portions of this Proxy Statement/Prospectus, the following risk factors
regarding Univax, NABI and the combined company. The following factors
regarding NABI and Univax will apply individually to an investment in each
respective company before the Merger and, unless otherwise indicated, jointly
to an investment in the combined company after the Merger.
FACTORS REGARDING UNIVAX
No Assurance of Successful and Timely Product Development or Approval of
Products under Development. Univax's success will depend on its ability to
achieve scientific and technologic advances and to translate such advances
into commercially competitive products on a timely basis. Univax's products
are at various stages of research and development, and further development and
testing will be required to determine their technical feasibility and
commercial viability. Most of these products are not likely to become
commercially available, if at all, for several more years. The proposed
development schedules for Univax's products may be affected by a variety of
factors, including technological difficulties, proprietary technology of
others, reliance on third parties for support and changes in governmental
regulation, many of which factors will not be within the control of Univax. In
addition, any delay in the development, introduction or marketing of Univax's
potential products 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. See "Univax
Business--Products Under Development,--Univax Technology and--Government
Regulation and Product Approvals."
Product Safety; Disease Transmission. Univax's hyperimmune intravenous
immunoglobulin ("IVIG") products under developments are expected to be
manufactured using plasma from human donors. There can be no assurance that
infectious diseases will not be transmitted by Univax's plasma-derived
hyperimmune IVIG products. In addition, Univax is unable to predict with
certainty the position that regulatory agencies, such as the FDA, will take
with respect to the risk of transmission or the reaction of the private
medical community or the public to Univax's plasma-derived hyperimmune IVIG
products. The transmission of any infectious disease by plasma-derived
products or regulatory, physician or public concerns regarding any such
transmission, even if no transmission were to take place, could delay,
prevent, limit or halt the commercialization of Univax's hyperimmune IVIG
products under development. See "Univax Business--Background."
Government Regulation. Univax's research, preclinical development, clinical
trials, manufacturing and marketing of its products are subject to extensive
regulation by numerous governmental authorities in the United States and other
countries. The process of obtaining FDA and other required regulatory
approvals is lengthy and expensive, and the time required for such approval is
uncertain. Most of Univax's clinical trials are at a relatively early stage
and, except for WinRho SD, no approval from the FDA or any other governmental
agency for the manufacturing or marketing of any of its products under
development has been granted. There can be no assurance that Univax will be
able to obtain the necessary approvals for manufacturing or marketing of any
of its products under development. Once approved, failure to comply with
applicable regulatory requirements can, among other things, result in fines,
suspension or revocation of regulatory approvals, product recalls or seizures,
operating restrictions, injunctions and criminal prosecutions.
Sales of pharmaceutical products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country.
Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities of foreign countries must be obtained prior
to the commencement of marketing the product in those countries. The time
required to obtain such approval may be longer or shorter than that required
for FDA approval.
Univax is also subject to regulation by the Occupational Safety and Health
Administration ("OSHA") and the Environmental Protection Agency ("EPA") and to
regulation under the Toxic Substances Control Act, the
17
<PAGE>
Resource Conservation and Recovery Act and other regulatory statutes, and may
in the future be subject to other federal, state or local regulations. OSHA
and/or the EPA may promulgate regulations concerning biotechnology that may
affect Univax's research and development programs. Univax is unable to predict
whether any agency will adopt any regulation which would have a material
adverse effect on Univax's operations. Univax voluntarily complies with
National Institutes of Health ("NIH") guidelines regarding research involving
recombinant DNA molecules. Such guidelines, among other things, restrict or
prohibit certain recombinant DNA experiments and establish levels of
biological and physical containment that must be met for various types of
research. See "Univax Business--Government Regulation and Product Approvals."
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 Univax will be able to obtain additional licenses to patents of others or
that Univax will be able to develop additional patentable technology of its
own. There can be no assurances that any patents issued to Univax 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 Univax, design around
such patents. If patents that contain competitive or conflicting claims are
issued to others and such claims are ultimately determined to be valid, Univax
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 Univax will be able to obtain any such licenses on commercially
favorable terms, if at all. Univax's failure to obtain a license to any
technology that it may require to commercialize its products may have a
material adverse impact on Univax. Litigation, which could result in
substantial cost to Univax, may also be necessary to enforce any patents
issued to Univax or to determine the scope and validity of third-party
proprietary rights.
Univax also relies on secrecy to protect its technology, especially where
patent protection is not believed to be appropriate or obtainable. Univax
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 breached, that Univax would have
adequate remedies for any breach, or that Univax's trade secrets will not
otherwise become known or be independently discovered by competitors.
Competition. Competition in the development of biopharmaceutical products is
intense, both from biotechnology and pharmaceutical companies. Many of
Univax's competitors have substantially greater financial resources and larger
research and development staffs than Univax, as well as substantially greater
financial 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. Univax
also competes with universities and other institutions in the development of
products, technologies and processes. There can be no assurance that Univax's
competitors will not succeed in developing technologies and products that are
more effective or affordable than those being developed by Univax. In
addition, one or more of Univax's competitors may achieve product
commercialization or patent protection earlier than Univax.
Limited Manufacturing Experience; Limited Supply. Manufacturing of Univax's
vaccines is a complex process. Univax has built a pilot production facility
which is currently being used for the manufacture of vaccines for clinical
trials. Univax does not currently possess the facilities or staff necessary to
manufacture products in commercial quantities. There can be no assurance that
such facilities can be built or acquired on commercially reasonable terms, or
at all, or that Univax will be able to meet manufacturing requirements through
arrangements with third parties. Manufacture of Univax's specific polyclonal
antibody products requires human plasma. It is anticipated that Rh
Pharmaceuticals, Inc. ("Rh Pharmaceuticals"), which manufactures WinRho SD for
Univax, will obtain substantially all of the specialty plasma necessary for
manufacture of WinRho SD. Univax believes that Rh Pharmaceuticals has
contracts in place for the amounts of specialty plasma necessary to meet
Univax's first year sales targets. No assurance can be given, however, that Rh
Pharmaceuticals will be able to obtain sufficient plasma to satisfy Univax's
orders for subsequent years. While Univax believes that sufficient specialty
18
<PAGE>
plasma for Univax's foreseeable needs for other products will be available,
there can be no assurance that Univax will be able to enlist sufficient
numbers of donors for its immunization programs, or that it will not
experience shortages of specialty plasma that will have a detrimental effect
on Univax's product development. See "Univax Business--Manufacturing and
Supply." Following the Merger, however, the combined company will be able to
utilize NABI's manufacturing facility, which is currently in the final phases
of construction and is anticipated to be validated and licensed by the FDA in
1997, and will have access to NABI's extensive donor population and specialty
plasma supply capabilities.
Limited Marketing Experience; Uncertainty of Market Acceptance. Univax
currently markets and sells one product, WinRho SD, under license from a third
party. Although Univax believes that the WinRho SD market may be addressed
effectively with its relatively small sales force working in conjunction with
distributors, to the extent that Univax itself undertakes to market other
products or is unable to continue third-party marketing of such other
products, significant additional expenditures, management resources and time
may be required to develop a larger sales force. There can be no assurance
that Univax will be able to enter into additional marketing agreements or that
it will be successful in gaining market acceptance for its products. See
"Univax Business--Marketing and Sales."
Dependence on Qualified Personnel and Key Individuals. Because of the
specialized nature of Univax's business, Univax is highly dependent upon its
ability to attract and retain qualified scientific and technical personnel.
There is intense competition for qualified personnel in the areas of Univax's
activities and there can be no assurance that Univax will be able to continue
to attract and retain the qualified personnel necessary for the development of
its business. In addition, because many key responsibilities within Univax
have been assigned to a relatively small number of individuals, loss of the
services of any of these individuals could be detrimental to Univax's
development. See "Univax Business--Competition."
Dependence on Third Parties. Continued funding and participation by Univax's
corporate partners under joint development and licensing agreements will
depend not only on the timely achievement of research and development
objectives by Univax, which cannot be assured, but also on each corporate
partner's own financial, competitive, marketing and strategic considerations.
Although Univax believes that its corporate partners will have an economic
incentive to meet their contractual responsibilities, the amount and timing of
resources devoted to these responsibilities generally will be controlled by
the corporate partners. Suspension or termination of agreements with certain
of Univax's corporate partners or the failure of those partners to meet their
contractual responsibilities could have a material adverse effect on Univax.
As a result of the Merger, however, management of Univax believes that it will
be less dependent upon the continued funding and participation of corporate
partners, and that while the suspension or termination of an agreement with
any of Univax's corporate partners may have an adverse effect on the
development of the particular product which is the subject of the agreement,
such suspension or termination will be less likely to have a material adverse
effect on the combined company.
Continued Operating Losses; Need for Additional Financing. Univax has had
net operating losses since its inception and expects such losses for at least
several more years. The ability of Univax to achieve profitability depends
principally upon the success of its product development efforts and the timing
and scope of regulatory approvals. In the absence of the Merger, Univax would
need to arrange additional financing for the operation of its business,
including the commercialization of its products currently under development,
and would consider collaborative arrangements and additional public or private
financings, including additional equity financings. There can be no assurances
that such additional collaborative arrangements or financings could be
obtained on reasonable terms. The management of Univax believes, however, that
the financial position and profitability of Univax will be enhanced as result
of the Merger. See "--Factors Regarding the Combined Company; Potential
Disadvantages of the Merger."
Health Care Reimbursement. Univax's ability to commercialize its products
and related treatments will be dependent upon government health administration
authorities, private health care insurers and other organizations. Significant
uncertainty exists as to the reimbursement status of newly approved health
care products, and there can be no assurance that adequate third-party
coverage will be available for Univax to maintain price levels sufficient for
realization of an adequate return on its investment in developing new
products. Government and other third-party payors are increasingly attempting
to contain health care costs by limiting both
19
<PAGE>
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. If adequate
coverage and reimbursement levels are not provided by government and third-
party payors for use of Univax's products, the market acceptance of these
products could be adversely affected.
Risk of Product Liability; Limited Insurance. Univax's business will expose
it to potential product liability risks which are inherent in the testing,
manufacturing, marketing and sale of pharmaceutical products. Product
liability insurance for the bio-pharmaceutical industry generally is expensive
to the extent it is available at all. While Univax currently has $10 million
in product liability insurance, there can be no assurance that it will be able
to maintain such insurance on acceptable terms, that it will be able to secure
increased coverage as the commercialization of its products progresses or that
its existing insurance or any insurance acquired in the future will provide
adequate insurance against liability.
Volatility of Stock Price. The market prices for securities of biotechnology
companies, including the securities of Univax, have been volatile.
Announcements of technological innovations or new commercial products by
Univax or its competitors, a change in status of a corporate partner,
developments concerning proprietary rights, including patents and litigation
matters, publicity regarding actual or potential medical results with products
under development by Univax, regulatory developments in both the United States
and foreign countries and public concern about the safety of biotechnology or
pharmaceutical products, as well as period-to-period fluctuations in revenues
and financial results, may have a significant impact on the market price of
Univax's Common Stock.
FACTORS REGARDING NABI
Fluctuations in Plasma Supply and Demand. The basic raw material essential
to NABI's business is human blood plasma. As a result of factors affecting
both the demand for and supply of plasma, worldwide demand for human blood
plasma has exceeded supply since 1991. The demand for plasma has increased
primarily as a result of an increase in both the number and use of products
which require plasma components for their manufacture. The general decrease in
the supply of plasma has resulted primarily from concern over the safety of
blood products, including plasma. This concern has resulted in the adoption of
more rigorous screening procedures by regulatory authorities and manufacturers
of plasma-based products. These procedures, which include a more extensive
investigation into a donor's background and new tests, have disqualified
numerous potential donors and discouraged other donors who may be reluctant to
undergo the screening procedures. Future changes in government regulation
relating to the collection and use of plasma or any negative public perception
about the plasma collection process could further adversely affect the number
and type of available donors and, consequently, the overall plasma supply.
Future fluctuations in the demand for or supply of plasma could adversely
affect NABI.
Dependence on Small Number of Customers. NABI sells plasma to approximately
21 pharmaceutical and diagnostic product manufacturers, most of which are
long-standing customers of NABI. These customers constitute substantially all
of the worldwide purchasers of human blood plasma. During the first six months
of 1995, and the 1994, 1993 and 1992 fiscal years, plasma sales to customers
purchasing more than 10% of NABI's consolidated sales (which did not exceed
four customers in any such period), accounted for approximately 60%, 59%, 34%
and 46%, respectively, of NABI's consolidated sales for each period. The loss
of any major customer or a material reduction in a major customer's purchases
of plasma could have a material adverse effect upon NABI, although NABI
believes that, under current market conditions, if it were to lose a major
customer, it would be able to sell any remaining supply of plasma to other
customers on satisfactory terms.
Terms of Sale. Most of NABI's plasma sales are made pursuant to contracts
having terms ranging from one to five years. These contracts generally provide
for annual pricing renegotiations. Once established, the pricing generally
remains fixed for the year subject to price changes to reflect changes in
customer specifications or price adjustments to compensate NABI for increased
costs associated with new governmental testing requirements. As a result, NABI
may be adversely affected if, due to changes in government regulation or other
20
<PAGE>
factors, its costs of collecting and selling plasma rise during a given year
because NABI may not be able to pass on the increased costs until the next
annual pricing renegotiation. Similarly, NABI will benefit if its costs of
collecting and selling plasma fall during the year. However, under a five-year
contract with Baxter Healthcare Corporation ("Baxter") effective January 1,
1994, with respect to a substantial amount of source plasma, pricing will
periodically adjust to reflect changes in NABI's principal costs for the
collection of plasma.
Foreign Restrictions on Importation of Plasma. Export sales of plasma for
the first six months of 1995 and the 1994, 1993 and 1992 fiscal years
represented approximately 37%, 37%, 48% and 55%, respectively, of NABI's sales
for those periods. Export sales primarily are to European customers. Concern
over blood safety has led to movements in a number of European and other
countries to restrict the importation of plasma and plasma components
collected outside the countries' borders or, in the case of certain European
countries, outside Europe. 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; the decline in NABI's export sales of plasma
as a percentage of NABI's overall sales reflects increased sales to domestic
customers. 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 affect on the demand
for NABI's products and on the U.S. plasma industry as a whole. As a partial
response to this risk, NABI acquired the assets of two plasma collection
centers in Germany in June 1994 and intends to establish additional centers in
Europe. NABI's plasma collection centers in Germany currently do not collect
material amounts of plasma in relation to the demand for plasma from NABI's
European customers. While NABI currently intends to increase its European
plasma collections, there can be no assurance that it will be successful or
able to serve all or most of the needs of its foreign customers from European
plasma collections.
Availability of H-BIG. Since NABI acquired rights to H-BIG in September
1992, this product has made a significant contribution to NABI's
profitability. The essential raw material for manufacture of H-BIG is a
specialty plasma containing high concentrations of hepatitis B antibodies.
NABI obtains this plasma from donors whose production of these antibodies is
stimulated by the administration of a vaccine. The manufacturer of the vaccine
used to inoculate donors has discontinued its production of the product, and
other available vaccines are not as effective in stimulating the production of
these antibodies for NABI's current formulation of H-BIG. NABI believes it has
sufficient inventory of its current vaccine to meet NABI's needs until
November 1996 when the Investigational New Drug ("IND") status for the vaccine
expires. By that time, NABI expects to have been able to collect sufficient
quantities of specialty plasma to supply NABI's raw material needs for H-BIG
for another three to five years. Before NABI's inventory of the vaccine and
the resulting supply of specialty plasma have been consumed, NABI intends to
reformulate H-BIG to permit the use of other currently available vaccines to
stimulate donors in order to obtain the specialty plasma necessary for the
manufacture of H-BIG. See "NABI Business--Immune Globulin Therapeutic
Business." Alternatively, NABI will seek to develop another source of vaccine
similar to the discontinued vaccine. There can be no assurance that NABI's
efforts will be successful.
Although NABI obtains and provides the specialty plasma necessary for the
manufacture of H-BIG, at the present time it is dependent on a single
manufacturer to process this raw material for H-BIG and on Abbott Laboratories
("Abbott") to formulate and package the product. NABI's contracts with the
manufacturer will expire in 1996. NABI's contract with Abbott expired on
September 30, 1995. Abbott has advised NABI that Abbott does not intend to
renew its contract, although it has no present intention of discontinuing its
formulation and packaging of the product. In August 1995, NABI entered into an
agreement with the Michigan Department of Public Health ("MDPH") pursuant to
which MDPH will also process quantities of the raw material for H-BIG. NABI
anticipates receiving product from the MDPH facility in early 1996. NABI is
constructing a biopharmaceutical manufacturing facility which will allow NABI
to formulate, process and package H-BIG. Construction should be completed
before the end of 1995. However, because the facility will require validation
and licensure by the FDA, NABI does not anticipate that the facility will be
able to produce H-BIG for commercial sale until 1997. Although management of
NABI believes that the MDPH contract and management's ability to inventory a
sufficient supply of H-BIG will enable it to meet customer demand until NABI
is able to
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manufacture the product in its own facility, disruption in NABI's ability to
obtain H-BIG for commercial sale or material changes in the terms under which
NABI now obtains the product could adversely affect NABI.
Ability to Develop Proprietary Immune Globulin Therapeutic Products. One of
NABI's strategies for achieving enhanced profitability is to become a fully
integrated developer, manufacturer and marketer of proprietary plasma-based
immune globulin therapeutic products. To date NABI has not developed and
commercialized such a product. H-BIG, NABI's one commercially available immune
globulin therapeutic product to date, was acquired from Abbott in September
1992 after having been approved by the FDA. NABI also has a plasma-based
immune globulin therapeutic product, HIV-IG, which it also acquired from
Abbott in 1992, in Phase III human clinical trials. NABI expects to enter two
other immune globulin therapeutic products in human clinical trials. These
products will require significant clinical testing prior to commercialization.
There can be no assurance that any of these products or any other products
NABI may develop will meet applicable regulatory standards, obtain required
regulatory approvals, be capable of being produced in commercial quantities at
reasonable costs or be successfully marketed. As a result of the Merger and
the addition of Univax's research and development and clinical and regulatory
expertise, however, management of NABI believes that its ability to develop
products will be enhanced.
Government Regulation. NABI's United States plasma collection, storage,
labeling and distribution activities are subject to strict regulation and
licensing by the FDA. NABI's 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. 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. Because the applicable regulations or their interpretation
or enforcement are subject to change, there can be no assurance that NABI will
be able to continue to comply with any such changed regulations or that the
costs of such compliance will not otherwise adversely affect NABI.
NABI's development of proprietary immune globulin therapeutic products and
the future manufacturing and marketing of such products by NABI are also
subject to FDA and other federal regulations. Product development and approval
within this framework may take a number of years and involve the expenditure
of substantial resources. In addition, there can be no assurance that this
regulatory framework will not change or that additional regulation will not
arise at any stage of NABI's product development, which may delay or prevent
regulatory approval or require additional expenditures by NABI.
The current process for producing H-BIG does not contain a viral
inactivation step. Consequently, the FDA requires lots of H-BIG to be tested
for viral contamination before the lots can be released for commercial sale.
To date, there is no one commonly accepted test to determine the presence of
such contamination, and different tests may produce different results.
Although NABI believes that H-BIG poses no significant risk of viral
contamination and, in addition, has each lot of H-BIG independently tested to
determine safety, rejection of lots of H-BIG by the FDA or delay by the FDA in
the release of lots for commercial sale could adversely affect NABI. NABI is
pursuing the development of a manufacturing process for H-BIG which includes a
viral inactivation step.
Competition. NABI competes for 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 financial incentives which
NABI offers for the donation of the plasma it collects, 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 and by improving
the attractiveness of NABI's plasma collection facilities. If NABI is unable
to maintain and expand its donor base, its business and future prospects will
be adversely affected.
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Product Liability and Insurance. The processing and sale of NABI's plasma
and plasma-based products involve a risk of product liability claims, and NABI
currently is a party to litigation involving such claims. See "NABI Business--
Legal Proceedings." NABI currently maintains commercial general (including
products and professional liability) insurance with a limit of $5.75 million
per occurrence and in the annual aggregate on a claims made basis. The limit
is in excess of a $250,000 self insurance retention per claim limited to a $1
million annual aggregate. There can be no assurance that the coverage of
NABI's insurance policy and/or any rights of indemnification and contribution
that NABI may have will offset potential claims. A successful claim against
NABI in excess of insurance coverage and not subject to indemnification could
have a material adverse effect on NABI.
Anti-Takeover Provisions. NABI's Certificate of Incorporation includes
provisions that may discourage or prevent certain types of transactions
involving an actual or potential change in control of NABI, including
transactions in which the stockholders might otherwise receive a premium for
their shares over then-current market prices, and may limit the ability of the
stockholders to approve transactions that they may deem to be in their best
interests. For example, NABI's Certificate of Incorporation enables the Board
of Directors to fix the rights and preferences of and to issue shares of
preferred stock. The Board of Directors could avail itself of this authority
to discourage or to prevent certain types of transactions involving an actual
or potential change of control of NABI, which could have an adverse effect on
the price of NABI Common Stock. In addition, NABI's Certificate of
Incorporation and Section 203 of the DGCL each have differing provisions which
prohibit NABI from engaging in certain business combinations with interested
stockholders unless special supermajority stockholder votes are obtained.
These provisions may have the effect of delaying or preventing a change in
control of NABI and therefore could adversely affect the price of NABI Common
Stock.
FACTORS REGARDING THE COMBINED COMPANY; POTENTIAL DISADVANTAGES OF THE MERGER
Historically, NABI's operations generally have been profitable, and
beginning in fiscal 1993, its quarterly and annual reported results of
operations have shown increased profitability as compared to the corresponding
period one year earlier. Univax, on the other hand, has accumulated net losses
from its inception. Univax expects its operations to continue to incur losses
for a number of years as research and development and clinical trial programs
and related expenses continue. The management of NABI and Univax believe that
if the Merger is consummated, the profitability of Univax as a stand-alone
entity will result earlier and the long-term profitability and prospects of
NABI will be enhanced. Over the shorter term, however, the profitability of
NABI will be adversely affected by the Merger, and NABI likely will report a
loss for 1995. Because the Merger will be accounted for as a pooling of
interests, upon completion of the Merger the historical financial statements
of NABI will be restated to reflect the operations of NABI and Univax on a
combined basis. For the impact of the restatement of the financial statements
on a combined basis, see "Unaudited Pro Forma Condensed Combined Financial
Information."
The Merger also will produce risks typically associated with the merger of
two large independent organizations, including the possibility that the
integration of the businesses of the companies after the Merger may cause
interruptions and dislocations which may adversely affect the business and
results of operations of the combined company and that the combined resources
of the companies may not be adequate to deal successfully with the needs of
the combined company. In addition, there can be no assurance that the
synergies which the Boards of Directors of NABI and Univax expect to result
from the Merger will in fact occur.
Following completion of the Merger, the combined company will be entitled
to use substantial federal income tax net operating loss and research tax
credit carryforwards. Such use is subject to certain restrictions (including a
limitation as to the amount that can be used in any one taxable year). In
addition, such carryforwards will expire over time. There can be no assurance
that the combined company will be able to use these carryforwards in full
before they expire or at all.
The closing of the Merger is conditioned upon Univax's receipt of an opinion
from its counsel that the Merger will be treated for federal income tax
purposes as a reorganization with the result that no gain or loss
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will be recognized to holders of Univax Common Stock upon their receipt of
NABI Common Stock. There are, however, no assurances that the Internal Revenue
Service ("IRS") will not challenge such treatment and that any such challenge
would not be successful. Neither NABI nor Univax intends to seek a ruling from
the IRS as to the tax consequences of the Merger.
The Boards of Directors of NABI and Univax considered the foregoing
possibilities, and the Board of Directors of NABI also considered the impact
on NABI's short-term operating performance which will result from the Merger.
After such consideration and consideration of the factors listed under "The
Merger--Recommendation of NABI's Board of Directors; Reasons for and
Advantages of the Merger and --Recommendation of Univax's Board of Directors;
Reasons for and Advantages of the Merger," the Boards of Directors of NABI and
Univax determined that the Merger is in the best interests of their respective
companies and stockholders and approved the Merger Agreement. The Boards of
Directors also unanimously recommend that their respective stockholders vote
in favor of the Merger Agreement. In so doing, the Board of Directors of NABI
relied in part on the opinion of Raymond James and the Board of Directors of
Univax relied in part on the opinion of Robertson Stephens. At the time,
Raymond James and Robertson Stephens made a market in the Common Stock of NABI
and Univax, respectively, and thereby may have a financial interest in the
Merger. Currently, Robertson Stephens also makes a market in the Common Stock
of NABI. In the ordinary course of business, Raymond James and Robertson
Stephens actively trade in NABI Common Stock and Univax Common Stock for their
own accounts and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities. Although Robertson
Stephens has already received a fee for rendering its opinion, it will be
entitled to a more substantial fee for financial advisory services contingent
upon completion of the Merger.
THE NABI MEETING
TIME, PLACE AND DATE
The NABI Meeting will be held at the Radisson Plaza Hotel, Charlotte, North
Carolina, on November 29, 1995 at 10:00 a.m., local time.
PURPOSE OF THE NABI MEETING
At the NABI Meeting, holders of NABI Common Stock will consider and vote
upon adoption and approval of the Merger Agreement. See "The Merger" and "The
Merger Agreement." In addition, holders of NABI Common Stock will consider and
vote upon a proposal to amend NABI's 1990 Equity Incentive Plan to increase
the number of shares available for issuance under the plan contingent upon
consummation of the Merger. See "Amendment to the NABI 1990 Equity Incentive
Plan." NABI stockholders will also consider and vote upon such other matters
as may properly be brought before the meeting.
THE NABI BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND THE PLAN
AMENDMENT PROPOSAL AND UNANIMOUSLY RECOMMENDS A VOTE FOR ADOPTION AND APPROVAL
OF THE MERGER AGREEMENT AND THE PLAN AMENDMENT PROPOSAL.
RECORD DATE; VOTING RIGHTS; PROXIES
The NABI Board of Directors has fixed the close of business on October 20,
1995 as the record date for determining holders entitled to notice of and to
vote at the NABI Meeting (the "NABI Record Date").
As of the NABI Record Date there were 19,549,954 shares of NABI Common Stock
issued and outstanding, each of which entitles the holder thereof to one vote.
All shares of NABI Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated in such proxies. IF NO INSTRUCTIONS ARE INDICATED,
SUCH SHARES OF NABI COMMON STOCK WILL BE VOTED IN FAVOR OF ADOPTION AND
APPROVAL OF THE MERGER AGREEMENT AND THE PLAN AMENDMENT
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PROPOSAL. A stockholder who has given a proxy may revoke it at any time prior
to its exercise by giving written notice thereof to the Secretary of NABI, by
signing and returning a later dated proxy, or by voting in person at the NABI
Meeting; however, mere attendance at the NABI Meeting will not in and of
itself have the effect of revoking the proxy.
Votes cast by proxy or in person at the NABI Meeting will be tabulated by
the election inspectors appointed for the meeting, who will determine whether
a quorum is present. Where, as to any matter submitted to the stockholders for
a vote, proxies are marked as abstentions (or stockholders appear in person
but abstain from voting), such abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of any matter
submitted to the stockholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on
a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter for purposes of determining the
presence of a quorum.
SOLICITATION OF PROXIES
The costs of soliciting proxies from holders of NABI Common Stock will be
borne by NABI, except that the costs of printing and mailing this proxy
material will be borne equally by NABI and Univax. NABI may solicit proxies
otherwise than by use of the mail, and certain officers and regular employees
of NABI, without additional compensation, may use their personal efforts, by
telephone or otherwise, to obtain proxies. Such assistance may take the form
of personal, telephonic or written solicitation or any combination thereof.
NABI will also request persons, firms and corporations holding shares in their
names, or in the names of their nominees, which shares are beneficially owned
by others, to send this proxy material to and obtain proxies from such
beneficial owners and will reimburse such holders for their reasonable
expenses in doing so.
NABI has retained D.F. King & Co., Inc. ("DFK") to assist it in the
solicitation of proxies by telephonic and written means on behalf of the NABI
Board of Directors and the mailing and distribution of proxy material. The
anticipated cost of DFK's services, exclusive of reimbursement for expenses,
is approximately $16,000.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of all of the outstanding shares of NABI Common Stock is necessary to
constitute a quorum at the NABI Meeting.
REQUIRED VOTE
Under the DGCL, approval of the Merger will require the affirmative vote of
a majority of the outstanding shares of NABI Common Stock. Approval of the
Plan Amendment Proposal will require the affirmative vote of holders of a
majority of the shares of NABI Common Stock voting on the matter. As of the
NABI Record Date, NABI's directors, executive officers and their affiliates
held an aggregate of 2,519,472 shares of NABI Common Stock (12.9% of the
outstanding shares of NABI Common Stock).
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THE UNIVAX MEETING
TIME, PLACE AND DATE
The Univax Meeting will be held at Univax's principal offices at 12280
Wilkins Avenue, Rockville, Maryland 20852 on November 29, 1995 at 9:00 a.m.,
local time.
PURPOSE OF THE UNIVAX MEETING
At the Univax Meeting, holders of Univax Common Stock will consider and vote
upon adoption and approval of the Merger Agreement. See "The Merger" and "The
Merger Agreement."
THE UNIVAX BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND UNANIMOUSLY RECOMMENDS A VOTE FOR ADOPTION AND APPROVAL OF THE MERGER
AGREEMENT.
RECORD DATE; VOTING RIGHTS; QUORUM; PROXIES
Holders of record of Univax Capital Stock at the close of business on
October 20, 1995 (the "Univax Record Date") are entitled to notice of and to
vote at the Univax Meeting. On the Univax Record Date, there were 17,239,410
shares of Univax Common Stock issued and outstanding and held by approximately
227 stockholders of record, and 502,512 shares of Univax Preferred Stock
issued and outstanding and held by one stockholder of record. Except for the
stockholders identified herein under "Univax Principal Stockholders," on the
Univax Record Date, there were no other persons known to the management of
Univax to be the beneficial owners of more than 5% of the outstanding Univax
Common Stock (assuming conversion of all outstanding shares of Univax
Preferred Stock into Univax Common Stock).
Holders of shares of Univax Common Stock are entitled to one vote per share
at the Univax Meeting. Holders of shares of Univax Preferred Stock, voting as
if converted to Univax Common Stock, are entitled to 1.10097 votes per share
at the Univax Meeting. Holders of Univax Common Stock and Univax Preferred
Stock collectively are entitled to cast 17,792,660 votes at the Univax
Meeting.
All properly executed proxies that are not revoked will be voted at the
Univax Meeting in accordance with the instructions contained therein. Proxies
returned and containing no instructions regarding the proposals specified in
the form of proxy will be voted FOR adoption and approval of the Merger
Agreement and as the proxy holders deem advisable on any other proposals
submitted to a vote in accordance with the unanimous recommendations of the
Univax Board of Directors. A stockholder who has executed and returned a proxy
may revoke it at any time before it is voted at the Univax Meeting by
executing and returning a proxy bearing a later date, by filing written notice
of such revocation with the Secretary of Univax stating that the proxy is
revoked, or by attending the Univax Meeting and voting in person.
Votes cast by proxy or in person at the Univax Meeting will be tabulated by
the Inspector of Elections (the "Inspector") with the assistance of Univax's
transfer agent. The Inspector will also determine whether or not a quorum is
present. The Inspector will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum and as
negative votes for purposes of determining the approval of any matter
submitted to the stockholders for a vote. If a broker indicates on the
enclosed proxy or its substitute that it does not have discretionary authority
as to certain shares to be voted on a particular matter, those shares will not
be considered as present with respect to that matter. Univax believes that the
tabulation procedures to be followed by the Inspector are consistent with the
general statutory requirements of the DGCL concerning the voting of shares and
determination of a quorum.
SOLICITATION OF PROXIES
The costs of soliciting proxies from holders of Univax Capital Stock will be
borne by Univax, except that the costs of printing and mailing this proxy
material will be borne equally by NABI and Univax. In addition to
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solicitation by mail, the directors, officers and employees of Univax may
solicit proxies from stockholders by telephone, facsimile or letter or in
person. Arrangements may also be made on behalf of Univax with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of stock held of record by such
persons, and, in such case, Univax will reimburse such custodians, nominees
and fiduciaries for reasonable out-of-pocket expenses incurred by them in
connection therewith.
Univax has retained DFK to assist it in the solicitation of proxies by
telephonic and written means on behalf of the Univax Board of Directors. The
anticipated cost of DFK's services, exclusive of reimbursement for expenses,
is approximately $2,000.
REQUIRED VOTE
Under the DGCL and Univax's Certificate of Incorporation, adoption and
approval of the Merger Agreement requires a majority of the votes entitled to
be cast, with the outstanding shares of Univax Common Stock and Univax
Preferred Stock voting together as a single class. All of Univax's directors
and certain Univax stockholders affiliated with certain Univax directors,
which collectively hold 5,048,965 shares of Univax Common Stock (or 29.3% of
all outstanding shares of Univax Common Stock and 28.4% of all votes entitled
to be cast at the Univax Meeting by the holders of all shares of Univax
Capital Stock), have agreed to vote their shares of Univax Common Stock in
favor of the Merger Agreement. See "The Merger--Voting and Affiliate
Agreements."
THE MATTERS TO BE CONSIDERED AT THE NABI MEETING AND THE UNIVAX MEETING ARE
OF GREAT IMPORTANCE TO THE STOCKHOLDERS OF NABI AND UNIVAX. ACCORDINGLY,
STOCKHOLDERS ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION
PRESENTED IN THIS PROXY STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THE MERGER
BACKGROUND OF THE MERGER
NABI. Since 1992, NABI's goal has been to enhance stockholder value through
growth in revenues and profits. Its strategy has been to increase its
collection, processing and sale of specialty plasmas, which sell at higher
prices and produce higher profit margins than source plasma, and then, over
the longer term, to become a fully integrated developer, manufacturer and
marketer of proprietary plasma-based immune globulin therapeutic products.
NABI has implemented the first element of its strategy primarily by adding
plasma collection centers through acquisitions. NABI has also taken a number
of steps to implement the remainder of its strategy. NABI established an
immunotherapy division, and in 1992 acquired from Abbott H-BIG, a product
which provides passive immunity to hepatitis B, and HIV-IG, an experimental
product intended to prevent the transmission of HIV/AIDS from HIV-positive
mothers to their unborn offspring. H-BIG is currently marketed and sold by
NABI and makes a significant contribution to NABI's profitability. See "NABI
Management's Discussion and Analysis of Financial Condition and Results of
Operations." In addition, NABI is constructing a biopharmaceutical
manufacturing facility in Boca Raton, Florida, which is capable of
manufacturing H-BIG as well as other immune globulin and therapeutic products.
From 1992 through 1994, NABI's net revenues, net income (loss) from continuing
operations and earnings (loss) per share from continuing operations have grown
from approximately $82,300,000, ($573,000) and ($.04) to $164,700,000,
$8,600,000 and $.49, respectively. See "NABI Consolidated Financial
Statements."
Having achieved this success, NABI's management determined that in order to
achieve the goal of revenue and profit growth over the long term, the next
phase was to complete the process of transforming NABI into a fully integrated
biopharmaceutical company. To accomplish this transformation, NABI's
management concluded that NABI should have a broader pipeline of proprietary
products derived from plasma; access to enabling
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technologies which could lead to the development of additional products;
strengthened research and development, and clinical and regulatory,
capabilities; and more extensive sales and marketing capabilities. NABI
considered various courses of action to achieve these objectives, ranging from
hiring additional technical personnel and seeking to license or otherwise
acquire new products and technology to acquiring or entering into business
combinations with biotechnology or biopharmaceutical companies. After careful
consideration of the risks and rewards of these options, including the short-
term financial impact, NABI determined that a business combination with a
company having the requisite product pipeline and portfolio, enabling
technologies, and research and development, clinical and regulatory, and sales
and marketing capabilities was the most effective means of achieving
sustainable long-term revenue and profit growth.
Univax. Univax is engaged in the development and marketing of vaccines and
specific polyclonal antibody products that prevent and treat autoimmune and
infectious diseases and related complications through activation and targeting
of the human immune system. In mid 1993, Univax's Board of Directors
determined that in order for Univax to maintain its progress in the
development and commercialization of its products, it would need to achieve
three strategic objectives in the next two to three years: (i) ensure
continued funding for Univax's products under development, (ii) obtain long-
term plasma fractionation capacity; and (iii) acquire a source for large
volumes of stimulated plasma. The Board resolved to explore a variety of
alternatives in order to achieve these three objectives. To raise capital, in
September 1994, Univax completed a $21.5 million secondary offering which will
fund Univax's development expenses into the second quarter of 1996. With
respect to fractionation capacity, Univax analyzed the possibility of
constructing its own fractionation facility, but subsequently rejected this
approach because of the time and expense involved. In order to meet a portion
of its short-term plasma supply needs, Univax recently acquired two plasma
collection facilities.
From mid 1993 to February 1995, Univax engaged in discussions regarding a
variety of possible transactions with a number of other companies, including
pharmaceutical and other biotechnology companies, in order to achieve its
three strategic objectives. A range of possible transactions was considered,
including long-term supply agreements with plasma collectors and fractionators
and collaboration agreements similar to Univax's existing collaborations to
develop WinRho SD and HyperGAM+CF. Other transactions discussed included
business combinations where some or all of Univax was proposed to be acquired,
or where Univax would acquire a third party. In each case, possible
transactions were evaluated in terms of their effects on Univax's stockholders
and their abilities to achieve some or all of the three objectives. Other
factors specific to individual transactions were also considered. While the
discussions advanced to varying degrees, in each case they were ultimately
terminated by mutual agreement of the parties.
In February 1995, Univax's Board retained Robertson Stephens to assist
Univax in identifying companies with capabilities in some or all of the three
areas important to Univax. Robertson Stephens also was retained to assist in
structuring the particular transactions and to render an opinion with respect
to the fairness to Univax of any resulting transactions from a financial point
of view. In April 1995, one of the companies which Robertson Stephens
identified as a possible candidate for a business combination was NABI.
NABI and Univax. For several years, NABI and Univax have discussed various
donor stimulation programs, and Premier BioResources, Inc. ("PBI"), prior to
its acquisition by NABI, had stimulated donors and collected the specialty
plasma necessary to produce Univax's HyperGAM+CF. In March 1995, NABI and
Univax explored a product supply relationship in which NABI would reserve a
portion of its donor stimulation and specialty plasma collection capability
for Univax's future product needs. The proposed relationship did not develop.
On or about June 8, 1995, David J. Gury, NABI's Chief Executive Officer and
Chairman of the Board, contacted Thomas Stagnaro, Univax's Chief Executive
Officer, to determine whether Univax would be receptive to beginning
discussions about a possible business combination which would involve an
exchange of shares of the companies. Mr. Stagnaro responded positively. On
June 16, 1995, Mr. Gury and John C. Carlisle, NABI's Chief Operating Officer,
met with Mr. Stagnaro at Univax's offices in Rockville, Maryland to further
discuss such options and exchange information about the companies. During the
meeting, a series of possible business
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transactions was explored, including general strategic and specific product
partnering arrangements and joint ventures, dedication of a portion of NABI's
donor stimulation and specialty plasma collection capabilities to Univax's
products, and a complete business combination of the companies, with the
latter the primary focus of the discussions. At the conclusion of the meeting,
all those present expressed an interest in continuing discussions toward a
business combination between the companies. On June 26, 1995, NABI and Univax
entered into a mutual confidentiality agreement.
On July 11, 1995, in a telephonic meeting, Mr. Gury reported to NABI's Board
of Directors on the June 16th meeting at Univax, and NABI's Board discussed
the possibility of a business combination with Univax. Recognizing that a
thorough assessment of Univax and its technology had to be completed before a
business combination could be negotiated and considered for approval by the
directors, the Board authorized NABI's management to conduct extensive legal,
scientific and financial due diligence on Univax and to conduct preliminary
negotiations toward a business combination involving an exchange of shares of
the companies. To this end, the Board also specifically authorized NABI to
retain the services of (i) David L. Castaldi, a director of NABI, to assemble
a team of specialists to evaluate Univax's technology, product pipeline and
scientific and commercial prospects, (ii) the investment banking firm of BNYA,
the President of which is Richard A. Harvey, Jr., a director of NABI, to act
as NABI's financial advisor in connection with any transaction with Univax and
(iii) the investment banking firm of Raymond James for the purpose of
rendering an opinion to the Board of Directors on the fairness, from a
financial point of view, of any transaction with Univax. See "The Merger--
Interests of Certain Persons in the Merger."
On July 13, 1995, at a meeting of Univax's Board of Directors in Rockville,
Maryland, Mr. Stagnaro reported to the Board on the June 16th meeting with
NABI. The Board directed the officers of Univax to proceed with due diligence
investigations of NABI. The Board also appointed two Board members to work
closely with Univax management on the Board's behalf during the due diligence
process.
On July 24, 1995, in a telephonic meeting, Mr. Stagnaro reported to Univax's
Board of Directors on meetings held July 16-18 between Univax and NABI. Mr.
Stagnaro discussed the results of the clinical and scientific due diligence
conducted to date. Mr. Stagnaro outlined key issues to be resolved in a
transaction with NABI including relative valuation, board composition,
management structure, timing and other matters. Robertson Stephens made a
presentation to the Board regarding the possible business combination with
NABI, including its financial terms. A discussion of the possible NABI
transaction and of Univax's strategic objectives and alternatives ensued. The
Board directed management and the two delegated Board members to provide
certain analyses of the potential transaction and arranged for individual
Board members to meet with representatives of NABI.
Commencing on July 17, 1995 in a meeting at NABI's headquarters in Boca
Raton, Florida, and continuing through the remainder of July and the first
half of August in meetings held in Boca Raton, Rockville, Maryland and
elsewhere, NABI and Univax through their respective due diligence teams and
legal counsel conducted due diligence and preliminary negotiations on the
proposed business combination. There were no negotiations concerning an
appropriate exchange ratio during this time.
At a meeting of NABI's Board of Directors in Boca Raton on August 12, 1995,
the Board received reports from NABI's management on its due diligence and on
the preliminary merger negotiations, from BNYA and Mr. Castaldi on the
preliminary results of the scientific and financial due diligence and
analysis, and from NABI's legal counsel on its due diligence and the material
terms of the Merger Agreement which had been negotiated to date. The Board
authorized the completion of NABI's due diligence review and analysis and,
based thereupon, the negotiation of the final terms of the Merger Agreement,
subject to approval of the Board.
At telephonic meetings on August 4 and August 15, 1995, Mr. Stagnaro and
other members of management updated the Univax Board of Directors on the
results of Univax's continuing clinical, legal, scientific and financial
diligence regarding NABI and on the progress of negotiations regarding the
proposed business combination. Mr. Stagnaro presented an overview of the
combined company and its Board and management
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structure. Mr. Stagnaro also discussed the risks associated with the proposed
transaction. Robertson Stephens provided input with respect to financial
issues and legal counsel briefed the Board on legal due diligence matters and
on the status of negotiations regarding the Merger Agreement.
On August 22, 1995, Messrs. Gury and Harvey met with Mr. Stagnaro, Brian H.
Dovey, Chairman of the Board of Directors of Univax, and representatives of
Robertson Stephens in Washington, D.C. At this meeting, the Common Exchange
Ratio was agreed upon. During the period August 22 through August 25, 1995,
all remaining issues concerning the Merger Agreement were resolved through
negotiations between the management and legal counsel of both companies.
At a meeting of NABI's Board of Directors in Alexandria, Virginia on August
26, 1995, the Board received final reports from NABI's management on its due
diligence and on the merger negotiations, from Mr. Castaldi on the final
results of the scientific and commercial due diligence and analysis, and from
NABI's legal counsel on its due diligence and the material terms of the Merger
Agreement which had been negotiated. The Board also received reports from its
financial advisor, BNYA, which recommended the Merger on the terms which were
presented to the Board, and from Raymond James, which also delivered its
written opinion that the Common Exchange Ratio and Preferred Exchange Ratio
were fair, from a financial point of view, to NABI. Based upon the foregoing
and upon the factors considered by the Board described under "--Recommendation
of NABI Board of Directors; Reasons for and Advantages of the Merger," the
Board approved the Merger Agreement, with Mr. Harvey abstaining because,
through BNYA, he may be deemed to have a financial interest in the
transaction.
At a meeting of Univax's Board of Directors near Washington, D.C. on August
27, 1995, the Board received final reports from Univax's management and legal
counsel on due diligence regarding NABI. Legal counsel also described the
material terms of the Merger Agreement negotiated by the parties and responded
to questions from the Board regarding these terms. The Board received a
presentation by Robertson Stephens as well as its written opinion that, as of
such date, the consideration to be received by the holders of Univax Common
Stock in the Merger was fair from a financial point of view. Based upon the
foregoing, upon consideration of Univax's strategic alternatives and upon the
factors described under "Recommendation of the Univax Board of Directors;
Reasons for and Advantages of the Merger," the Board unanimously approved the
Merger Agreement and the related voting agreements.
On August 28, 1995, the Merger Agreement was executed and the Merger was
announced to the public.
RECOMMENDATION OF NABI BOARD OF DIRECTORS; REASONS FOR AND ADVANTAGES OF THE
MERGER
The NABI Board of Directors has approved the Merger Agreement and determined
that the Merger is in the best interests of NABI and its stockholders, and
unanimously recommends that the holders of NABI Common Stock vote FOR approval
of the Merger Agreement.
The NABI Board of Directors based its approval of the Merger Agreement and
its determination that the Merger is in the best interests of NABI and its
stockholders upon a number of factors, including the following advantages of
the Merger:
Acceleration of Strategic Shift to Higher Margin, Value-Added Therapeutic
Products. For several years, NABI's strategy has been to increase its
collection, processing and sale of higher margin, value-added specialty
plasmas and therapeutic products. To date, NABI believes that its strategy has
been validated as gross margins have improved with increased sales of
specialty plasmas and H-BIG. See "NABI Management's Discussion and Analysis of
Financial Condition and Results of Operations." NABI expects that the addition
of Univax's products will accelerate this strategic shift to higher margin
products. Univax is commercially marketing one therapeutic product, WinRho SD,
and it has several other products in varying stages of clinical development.
Univax's Significant Product Pipeline and Product Development
Capability. NABI has one product, HIV-IG, which it acquired from Abbott, in
Phase III human clinical trials and expects to enter two other therapeutic
products in human clinical trials. Univax has seven products under clinical
development, including additional
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indications for WinRho SD in Phase IV clinical trials and two products in
Phase II clinical trials, HyperGAM+CF to treat Pseudomonas aeruginosa
("Pseudomonas") lung infections in cystic fibrosis patients and StaphVAX to
prevent staphylococcus infections. The Merger will therefore significantly
expand NABI's product pipeline. See "Summary--Product Pipeline Following the
Merger." In addition NABI will gain Univax's research and development, and
clinical and regulatory, capabilities. Upon completion of the Merger, the
number of persons at NABI primarily dedicated to research and development of
immune globulin therapeutic products will increase from four persons to 67
persons. The number of persons at NABI primarily dedicated to clinical
regulatory activities will increase from 20 to 45.
The Merger Builds on NABI's Core Technical Strength and Donor Base. The
Merger will build upon NABI's core technical strength, its expertise in the
specialty plasma business, and its extensive donor base. A significant
component of NABI's business is the collection of specialty plasmas from its
large and diverse donor base through its nationwide network of collection
centers. See "NABI Business--Plasma Business." NABI believes that it has
become expert in the recruitment, management and retention of donors who
supply specialty plasma. The NABI Board of Directors believes that NABI's
specialty plasma expertise and donor base will assist the production and
enhance the profitability of Univax's products, most of which (including
WinRho SD, HyperGAM+CF and StaphGAM) are derived from specialty plasma.
Common Focus on Polyclonal Antibody-Based Immunotherapeutic Products. The
Merger will combine two companies that share a common focus on polyclonal
antibody-based immunotherapeutic products. Both companies are currently
marketing such a product: NABI is marketing H-BIG, the first hepatitis B
immune globulin to be licensed by the FDA, and Univax is marketing WinRho SD,
which is indicated for the treatment of immune thrombocytopenic purpura
("ITP") and Rh isoimmunization. Each company also has several other polyclonal
antibody-based immunotherapeutic products under development.
Additional Marketing and Distribution Capability. Univax has an established
United States marketing and distribution organization engaged in sales of
Univax's WinRho SD through 13 Univax salespersons and distribution
arrangements with five distributors adding 40 additional salespeople. NABI
currently has a limited internal sales force and relies on distributors to
distribute H-BIG. The addition of Univax's marketing and distribution
organization is expected to enhance sales of the combined company's products.
Utilization of NABI's Manufacturing Facilities. NABI is nearing completion
of construction of a biopharmaceutical manufacturing facility in Boca Raton,
Florida. This facility, which NABI expects will be validated and licensed by
the FDA in 1997, will allow NABI to vertically integrate all the steps
involved in the manufacture of products derived from specialty plasma
collected in NABI's plasma collection facilities, including NABI's proprietary
immunoglobulin therapeutic products. In addition, NABI currently operates a
pilot manufacturing facility in Miami, and in August 1995 entered into an
agreement with MDPH pursuant to which MDPH would perform manufacturing for
NABI. The Board of Directors of NABI believes that its full-scale
manufacturing facility and pilot plant, together with MDPH, will be capable of
manufacturing Univax's products under development. All of NABI's manufacturing
capabilities will be more efficiently utilized if the Merger is completed and
Univax's products are successfully developed, licensed by regulatory
authorities and commercially sold.
Creation of Operating and Financial Synergies. The Merger will create a
fully integrated biopharmaceutical company with pro forma revenues in 1995 of
approximately $200 million. Because of its size, capitalization and
integration, the Board of Directors believes that the combined company should
be well positioned to commercialize additional clinical applications of its
immunizing technologies and pursue new corporate collaborations similar to
Univax's existing collaboration with Genzyme Corporation ("Genzyme") to
develop HyperGAM+CF. Although there can be no assurance that the combined
company will be able to enter into any such collaborations or that they will
be successful, the NABI Board of Directors regards Univax's collaboration with
Chiron Corporation's The Biocine Company ("Chiron") as one indication of the
opportunities which may become available to the combined company from the
combination of NABI's large scale plasma collection, manufacturing and
financial resources with Univax's donor stimulation technology, vaccine and
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immunoglobulin pipeline, and clinical and marketing resources. See "Univax
Business--Collaborative Agreements." The NABI Board of Directors also believes
that the combined company can benefit through utilization of Univax's tax net
operating loss and research tax credit carryforwards.
The NABI Board of Directors also considered the following in approving the
Merger Agreement and determining that the Merger is in the best interests of
NABI and its stockholders: (i) the presentation by David L. Castaldi, a
director of NABI, who together with certain members of NABI's management and
outside consultants analyzed Univax from a scientific and commercial
perspective; (ii) the presentation by BNYA and the recommendation by BNYA that
the Board approve a merger with Univax having the Common Exchange Ratio and
the Preferred Exchange Ratio; (iii) the presentation by and opinion of Raymond
James as to the fairness, from a financial point of view, of the Common
Exchange Ratio and Preferred Exchange Ratio to NABI; (iv) the presentations by
NABI's management and its outside legal counsel; (v) the Board's knowledge of
the business, operations, properties, assets, financial condition, operating
results and prospects of NABI and Univax; (vi) current industry, economic and
market trends and conditions; (vii) the terms of the Merger Agreement; and
(viii) the structure, accounting and tax treatment of the transaction.
In view of the variety of factors considered in connection with the
evaluation of the Merger, the NABI Board of Directors did not find it
practical to and did not quantify or otherwise assign relevant weights to
specific factors considered in reaching its determination.
RECOMMENDATION OF UNIVAX BOARD OF DIRECTORS; REASONS FOR AND ADVANTAGES OF THE
MERGER
The Univax Board of Directors has unanimously approved the Merger Agreement.
The Board believes that the terms of the Merger Agreement are fair to, and in
the best interests of, Univax and its stockholders, and unanimously recommends
that stockholders of Univax vote FOR approval of the Merger Agreement.
The Univax Board of Directors based its approval of the Merger Agreement and
its determination that the Merger Agreement is in the best interests of Univax
and its stockholders upon a number of factors, including the following
advantages of the Merger:
Financial Resources to Support Product Pipeline. The Merger will provide
resources to fund Univax's product development efforts. Univax currently has
seven products under development, including additional indications for WinRho
SD in Phase IV clinical trials and two products in Phase II clinical trials.
Substantial clinical trials and other costs will be required for continued
development of such products, and Univax does not anticipate that revenues
generated by WinRho SD will be sufficient to support these development
programs. By combining NABI's financial resources with Univax's product
pipeline and Univax's research and development, and clinical and regulatory,
capabilities, the combined company will be better positioned to support the
development of a broad product portfolio based on these products than would
Univax as an independent company.
Access to Plasma Fractionation Capability. Univax's line of specific
polyclonal antibody products ("SPA products") under development requires that
it secure and maintain sources of fractionated plasma. This requires not only
obtaining sufficient supplies of plasma, but arranging for fractionation of
the plasma. Constructing a facility for Univax was an alternative which was
rejected due to cost and time constraints. Univax could not identify a long
term supply from a third party due to limited capacity within the industry.
See "Risk Factors--Factors Regarding Univax." By merging with NABI, Univax
will be combining with an entity which is developing substantial fractionation
capability which will support Univax's product commercialization efforts.
Access to Donors for Donor Stimulation Program; Access to Plasma. Certain of
Univax's SPA products are produced by immunizing donors who subsequently
donate plasma with high levels of specific antibodies. The Merger will provide
Univax with access to NABI's extensive donor population to participate in such
programs. In addition to accessing NABI's donor population, Univax will secure
through NABI a reliable and substantial source of plasma. Univax has in the
past obtained plasma either by operating its own collection
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centers on a limited scale or by purchasing plasma from third party suppliers,
such as NABI. Univax anticipates that as a result of the Merger it will be
able to obtain plasma in the amounts and at the times needed to support its
current product development and commercialization efforts.
The Univax Board of Directors considered the financial presentation of
Robertson Stephens and its opinion dated August 27, 1995 that, as of such
date, the consideration to be received by the holders of Univax Common Stock
is fair from a financial point of view. See "--Opinion of Robertson Stephens."
The Univax Board of Directors also considered the following factors in
approving the Merger Agreement and determining that the Merger is in the best
interests of Univax and its stockholders: (i) presentations by Univax's
management and legal counsel; (ii) the Board's knowledge of the business,
operations, properties, assets, financial condition, and prospects of Univax
and NABI; (iii) the enhanced ability of the combined company to become a fully
integrated biopharmaceutical company; (iv) alternatives to the Merger,
including remaining an independent entity and pursuing other strategic
transactions, and the probable terms, timing and feasibility of such
alternatives; (v) current industry economic and market trends and conditions;
(vi) the terms of the Merger Agreement; and (vii) the structure of the Merger,
which will permit stockholders of Univax to convert their shares into NABI
Common Stock on a tax-free basis.
In view of the variety of factors considered in connection with the
evaluation of the Merger, the Univax Board of Directors did not find it
practical to and did not quantify or otherwise assign relevant weights to
specific factors considered in reaching its determination.
RISKS ASSOCIATED WITH AND DISADVANTAGES OF THE MERGER
In addition to considering the foregoing reasons for the Merger,
stockholders of NABI and Univax should see "Risk Factors" and the discussion
of the disadvantages of the Merger discussed therein, including the risks
typically associated with a merger of two large independent organizations and
the risk of a potential short term adverse effect on NABI's profitability.
OPINION OF RAYMOND JAMES
Raymond James was engaged by NABI to render an opinion as to whether the
consideration to be paid to the stockholders of Univax is fair, from a
financial point of view, to NABI. Raymond James was retained based on Raymond
James' experience as a financial advisor in connection with mergers and
acquisitions as well as Raymond James' industry knowledge and familiarity with
NABI. On August 26, 1995, Raymond James delivered its oral opinion to the
Board of Directors of NABI, which opinion was confirmed in writing dated the
same date, to the effect that, as of the date of such opinion, and subject to
the assumptions, factors and limitations set forth in such written opinion as
described below, the consideration to be paid was fair, from a financial point
of view, to NABI. Raymond James subsequently updated its opinion to the date
of this Proxy Statement/Prospectus.
THE FULL TEXT OF THE WRITTEN OPINION OF RAYMOND JAMES DATED AUGUST 26, 1995,
WHICH SETS FORTH ASSUMPTIONS MADE, PROCEDURES FOLLOWED, FACTORS CONSIDERED,
LIMITATIONS ON AND THE SCOPE OF THE REVIEW UNDERTAKEN BY RAYMOND JAMES, IS
INCLUDED AS APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED
HEREIN BY REFERENCE. NABI STOCKHOLDERS ARE URGED TO READ SUCH OPINION
CAREFULLY IN ITS ENTIRETY. RAYMOND JAMES' OPINION IS DIRECTED ONLY TO THE
FAIRNESS TO NABI, FROM A FINANCIAL POINT OF VIEW, OF THE CONSIDERATION TO BE
PAID TO THE STOCKHOLDERS OF UNIVAX IN CONNECTION WITH THE PROPOSED MERGER OF
NABI WITH UNIVAX PURSUANT AND SUBJECT TO THE MERGER AGREEMENT BETWEEN NABI AND
UNIVAX AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF NABI AS
TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE NABI MEETING. RAYMOND JAMES WAS NOT
REQUESTED TO, AND DID NOT MAKE, ANY RECOMMENDATION TO THE NABI BOARD OF
DIRECTORS AS TO THE FORM AND AMOUNT OF THE CONSIDERATION TO BE PAID TO THE
STOCKHOLDERS OF UNIVAX IN THE MERGER. RAYMOND JAMES WAS ADVISED BY THE
MANAGEMENT OF NABI THAT THE FORM AND
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AMOUNT OF CONSIDERATION TO BE PAID TO STOCKHOLDERS OF UNIVAX IN THE MERGER WAS
DETERMINED THROUGH ARMS LENGTH NEGOTIATIONS BETWEEN NABI AND UNIVAX. THE
SUMMARY OF THE OPINION OF RAYMOND JAMES SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE OPINION.
In arriving at its opinion, Raymond James reviewed and analyzed: (i) the
Merger Agreement, (ii) publicly available information concerning NABI and
Univax which it believed to be relevant to its inquiry, (iii) financial and
operating information with respect to the business, operations and prospects
for NABI and Univax furnished to it by NABI and Univax, (iv) a trading history
of NABI Common Stock and Univax Common Stock from August 26, 1994 through
August 25, 1995, (v) a comparison of the historical financial results and
present financial condition of NABI and Univax with those of other companies
which Raymond James deemed relevant, and (vi) a comparison of the financial
terms of the Merger with the terms of certain other recent transactions which
it deemed relevant. In addition, Raymond James had discussions with the
respective managements of NABI and Univax concerning their respective
businesses, operations, assets, financial conditions and prospects and
undertook such other studies, analyses and investigations and considered such
other factors as Raymond James deemed necessary or appropriate.
In connection with its review, Raymond James assumed and relied upon the
accuracy and completeness of all financial and other information used by it in
arriving at its opinion, without independent verification. With respect to the
financial projections provided to it by NABI and Univax, Raymond James assumed
that such projections were reasonably prepared on bases reflecting the best
currently available estimates and good faith judgments of the respective
managements of NABI and Univax as to the future financial performance of the
respective companies.
Raymond James also assumed, with NABI's consent, that: (i) the Merger will
qualify as a tax-free reorganization under the Code; (ii) the Merger will be
accounted for as a pooling of interests; (iii) no adjustment will be made to
the Common Exchange Ratio or Preferred Exchange Ratio; and (iv) all material
liabilities (contingent or otherwise, known or unknown) of NABI and Univax
required under generally accepted accounting principles ("GAAP") to be set
forth have been set forth in the financial statements of NABI and Univax. In
arriving at its opinion, Raymond James did not conduct a physical inspection
of the properties and facilities of NABI or Univax, and did not make or obtain
any evaluations or appraisals of the assets or liabilities of NABI or Univax.
Raymond James' opinion was necessarily based upon market, economic and other
conditions as they existed and could be evaluated as of the date of its
opinion.
In connection with its presentation to the NABI Board of Directors of its
opinion on August 26, 1995, Raymond James performed certain financial and
comparative analyses, including those described below. The preparation of a
fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of those
methods to the particular circumstances, and therefore such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at its
fairness opinion, Raymond James did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as
to the significance and relevance of each analysis and factor. Accordingly,
Raymond James believes that its analyses must be considered as a whole and
that considering any portions of such analyses and the factors considered,
without considering all analyses and factors, could create a misleading or
incomplete view of the process underlying the opinion. In conducting its
analysis, Raymond James made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are beyond the control of NABI and Univax. Any estimates contained in
these analyses are not necessarily indicative of actual value or predictive of
future results or values (including as to the future market price for NABI
Common Stock), which may be significantly more or less favorable than as set
forth therein. In addition, analyses relating to the value of businesses do
not purport to be appraisals or to reflect the prices at which businesses
actually may be sold.
Discounted Cash Flow Analysis. Raymond James analyzed the valuations of NABI
and Univax based on an unleveraged discounted cash flow analysis of the
projected financial performance of NABI and Univax. These analyses were based
upon financial information provided by NABI and Univax and upon discussions
with NABI
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and Univax management. After extensive discussions with the senior management
of each of NABI and Univax concerning management financial projections,
Raymond James made certain adjustments to the projections of NABI and Univax.
The purpose of such adjustments was to provide a basis for considering the
exchange ratios to be paid in the Merger on a more conservative analytical
basis to reflect the uncertainty concerning the timing of anticipated product
approval and introductions, market acceptance and penetration of certain
products and product pricing assumptions.
In conducting its analysis on Univax, Raymond James estimated a range of
equity valuations for Univax based on an analysis of financial forecasts
through the year 2002 that Univax had developed. After-tax cash flows were
calculated as the after-tax operating earnings of Univax plus projected
depreciation and amortization, plus (or minus) projected net changes in
projected non-cash working capital, minus projected capital expenditures.
Raymond James estimated the terminal value of Univax by applying a range of
multiples to earnings before interest and taxes ("EBIT") projected for Univax
in 2002. The cash flow streams and terminal values were then discounted to
present values using a range of discount rates which were chosen to reflect
different assumptions, including the risk assumptions applied by Raymond James
to the financial forecasts. To derive a value for the equity of Univax,
Raymond James deducted Univax's total outstanding debt and added back its cash
balance. Raymond James' estimate for Univax's per share equity value ranged
from $8.68 to $15.88 utilizing discounted cash flow analysis when including
the projected income to be derived from the development of products
anticipated with the signing of the definitive agreement between Univax and
Chiron. The signing of a binding agreement in principle between Univax and
Chiron, while not announced prior to Raymond James rendering its opinion, was
announced by Univax concurrently with the Merger announcement on August 28,
1995.
Raymond James performed the same analysis on after-tax cash flows and
terminal values of NABI, utilizing ranges of multiples of projected year 2001
EBIT and discount rates which reflected the different characteristics of
NABI's business as compared to that of Univax. The discounted cash flow
analysis for NABI was based on financial forecasts through the year 2001 that
NABI had developed. Raymond James' estimate for NABI's per share equity value
ranged from $10.70 to $18.37 utilizing discounted cash flow analysis.
Raymond James compared the two discounted cash flow analyses and noted that
the relative value of Univax as compared to the value of NABI for the above
indicated valuations was between .75 and .94 and approximated the relative
valuation implied by the Common Exchange Ratio.
Pro Forma Analysis of the Merger. Raymond James analyzed certain pro forma
effects on earnings, after-tax cash flow and capitalization resulting from the
Merger at the Common Exchange Ratio for the period 1996 to 2001. This analysis
was based on the projections of NABI and Univax referred to above and certain
publicly available information about NABI and Univax. Raymond James also
considered potential cost savings which could result from the elimination of
duplicative expenses and the rationalization of the combined company's
research and development expenses and such other adjustments made known to it
by NABI and Univax.
In conducting its analysis on the pro forma results, Raymond James estimated
a range of equity valuations for the combined company based on an analysis of
financial forecasts through the year 2001 that Univax and NABI had developed.
The cash flow streams and terminal values were then discounted to present
values utilizing ranges of multiples of projected year 2001 EBIT and discount
rates which were similar to those used in evaluating NABI and Univax on a
stand-alone basis. The resulting net present values per share were then
compared to the estimated per share equity values for NABI noted above. This
analysis showed an accretive difference in the estimated per share equity
value between the combined company and NABI on a stand-alone basis ranging
from $1.35 to $3.95.
Selected Comparable Merger Analysis. Raymond James also reviewed with the
NABI Board of Directors publicly available information for selected mergers
and acquisitions of biotechnology companies. Raymond James compared the
purchase price per share in the selected transactions to the targets closing
stock price one day, one week and four weeks prior to the announcement of the
transaction to calculate the premium over such
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stock price. Raymond James noted that the median premium for the periods one
day, one week and four weeks prior to the announcement of the selected
transactions were 37.48%, 35.59% and 56.98%, respectively. A similar premium
analysis of selected stock swap transactions involving companies from a
variety of industries, but excluding transactions involving financial
institutions, yielded a median premium for the periods one day, one week and
four weeks prior to the announcement of the selected transactions of 26.80%,
26.80% and 34.05%, respectively. These figures were compared to the premium
implied by the .79 Common Exchange Ratio for the periods one day, one week and
four weeks prior to the announcement of the Merger of 8.39%, 5.93% and 31.92%,
respectively.
Raymond James also applied the median premium of 37.48% observed one day
prior to announcement of the selected biotechnology industry transactions to
the relative stock price between Univax and NABI for the periods one month,
three months, six months, and one year prior to August 24, 1995. Applying the
median premium to the relative stock price between Univax and NABI on those
dates would indicate an implied exchange ratio ranging between approximately
.84 and 1.04. Similarly, Raymond James applied the median premium of 26.80%
observed one day prior to announcement of the selected non-financial stock
swap transactions to the relative stock price between Univax and NABI for the
periods one month, three months, six months, and one year prior to August 24,
1995 and this analysis indicated an implied exchange ratio ranging between
approximately .77 and .96.
Because the reasons for and the circumstances surrounding the precedent
transactions were specific to such transactions and because of the inherent
differences between the businesses, operations and prospects of Univax and the
businesses, operations and prospects of the selected acquired companies
analyzed, Raymond James believed that it was inappropriate to, and therefore
did not, rely solely on the results of the historical transaction premium
analysis.
Comparable Public Company Analysis. Using public and other available
information, Raymond James reviewed various multiples of income statement and
historical balance sheet data and stock prices as of August 24, 1995 of Univax
and compared such multiples to that of other selected companies within the
biotechnology industry which were deemed to be of a similar size and stage of
development. Due to the lack of earnings among this group of companies,
Raymond James believed that a purely quantitative comparable company analysis
would not be particularly meaningful in the context of the Merger.
Raymond James is a nationally recognized investment banking firm and, as a
customary part of its investment banking activities, is regularly engaged in
the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements, and valuations for corporate and other
purposes. Raymond James has engaged in on-going analysis and research relating
to NABI. Raymond James served as lead managing underwriter for the secondary
public offering of NABI Common Stock in October 1994, in connection with which
Raymond James received customary underwriting discounts and commissions. In
addition, Raymond James makes a market in NABI Common Stock and may continue
to provide investment banking services to the combined company in the future.
In the ordinary course of its business, Raymond James actively trades in NABI
Common Stock for its own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
NABI entered into an engagement letter with Raymond James on August 7, 1995
pursuant to which NABI retained Raymond James as a financial advisor in
connection with the Merger. For its advisory services, including the rendering
of its opinion, Raymond James received a fee of $50,000 upon its engagement
and an additional fee of $200,000 upon delivery of its fairness opinion. NABI
has also agreed to reimburse Raymond James for its reasonable out-of-pocket
expenses and has agreed to indemnify Raymond James against certain liabilities
that may arise in connection with its engagement, including liabilities that
may arise under federal securities laws.
IN ITS FAIRNESS OPINION DELIVERED TO THE NABI BOARD OF DIRECTORS, RAYMOND
JAMES STATES THAT THE CONTENTS OF THE OPINION ARE FOR THE INFORMATION OF THE
NABI BOARD OF DIRECTORS ONLY IN EVALUATING THE PROPOSED MERGER AND ARE NOT
INTENDED TO CONFER RIGHTS UPON UNIVAX OR THE STOCKHOLDERS OF NABI OR
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UNIVAX. AN ISSUE EXISTS UNDER APPLICABLE SECURITIES LAWS AS TO WHETHER THE
STOCKHOLDERS OF NABI ARE ENTITLED TO RELY UPON A FAIRNESS OPINION DELIVERED TO
THE NABI BOARD OF DIRECTORS BY ITS FINANCIAL ADVISOR. FURTHER, DOUBT EXISTS AS
TO THE VALIDITY AND EFFECT OF THE FOREGOING STATEMENT BY RAYMOND JAMES.
OPINION OF ROBERTSON STEPHENS
Univax retained Robertson Stephens to act as its financial advisor in
connection with the Merger. Robertson Stephens was retained based on Robertson
Stephens' experience as a financial advisor in connection with mergers and
acquisitions as well as Robertson Stephens' industry knowledge and familiarity
with Univax.
At the August 27, 1995 special meeting of the Univax Board of Directors,
Robertson Stephens delivered its opinion to the effect that, as of such date
and based on the matters described therein, the consideration to be received by
the holders of Univax Common Stock (the "Univax Common Stockholders") was fair
to the Univax Common Stockholders from a financial point of view. Robertson
Stephens did not recommend to Univax that any specific consideration was
appropriate for the Merger. Robertson Stephens' opinion to the Univax Board of
Directors addresses only the fairness from a financial point of view of the
consideration to be received by Univax Common Stockholders, and does not
constitute a recommendation to any stockholder as to how such stockholder
should vote at the Univax Meeting. Robertson Stephens' opinion as to the
fairness of the consideration does not take into account the tax status or
position of any particular Univax Common Stockholder. In addition, Robertson
Stephens does not express any opinion regarding pro forma tax considerations.
Robertson Stephens has subsequently updated its August 27, 1995 opinion to the
date of this Proxy Statement/Prospectus.
THE COMPLETE TEXT OF THE OPINION DATED AUGUST 27, 1995 IS ATTACHED HERETO AS
APPENDIX C AND THE SUMMARY OF THE OPINION SET FORTH BELOW IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. STOCKHOLDERS OF UNIVAX
ARE URGED TO READ SUCH OPINION CAREFULLY AND IN ITS ENTIRETY FOR A DESCRIPTION
OF THE PROCEDURES FOLLOWED, THE FACTORS CONSIDERED, THE ASSUMPTIONS MADE AND
THE SCOPE OF, AS WELL AS LIMITATIONS ON, THE REVIEW UNDERTAKEN BY, ROBERTSON
STEPHENS IN RENDERING ITS OPINION.
In connection with the preparation of its opinion dated August 27, 1995,
Robertson Stephens, among other things: (i) reviewed financial information
relating to Univax and NABI furnished to it by both companies, including
certain internal financial analyses and forecasts prepared by Univax's and
NABI's managements; (ii) reviewed publicly available information; (iii) held
discussions with the managements of Univax and NABI concerning the businesses,
past and current business operations, certain regulatory effects on each
business, the status and likelihood of respective product development efforts,
financial condition and future prospects of both companies, independently and
combined, including discussions with the managements of both Univax and NABI
concerning potential cost savings and synergies that could result from the
Merger; (iv) reviewed the Merger Agreement; (v) reviewed the stock price and
trading histories of both companies; (vi) reviewed the exchange ratios implied
by historical stock prices of the two companies; (vii) reviewed the
contribution by each company to pro forma combined revenue, gross income,
research and development expenditures, operating income and pretax income;
(viii) reviewed the valuations of publicly traded companies which it deemed
comparable to Univax and NABI; (ix) compared the financial terms of the Merger
with other transactions which it deemed relevant; (x) prepared discounted cash
flow analyses of both companies; (xi) analyzed the pro forma earnings per share
of the combined company; and (xii) made such other studies and inquiries and
reviewed such other data as it deemed relevant.
In arriving at its opinion, Robertson Stephens did not independently verify
any of the foregoing information and has relied on all such information being
complete and accurate in all material respects. Furthermore, Robertson Stephens
did not obtain any independent appraisal of the properties or assets and
liabilities of Univax or NABI or of any of their subsidiaries. With respect to
the financial and operating forecasts (and the assumptions and bases therefor)
of Univax and NABI which Robertson Stephens reviewed, Robertson Stephens
assumed that such forecasts were reasonably prepared and reflect the best
available estimates and judgments of such respective managements and that such
forecasts will be realized in the amounts and in the time periods currently
estimated by the managements of Univax and NABI. In addition, Robertson
Stephens has relied upon estimates and judgments of Univax and NABI managements
as to the future financial performance of both companies,
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including the cost savings and synergies resulting from the Merger. Robertson
Stephens also assumed that the Merger will be accounted for as a pooling of
interests under GAAP. Robertson Stephens noted among other things that its
opinion is necessarily based upon market, economic and other conditions that
exist and can be evaluated as of the date of the opinion, and on information
available to Robertson Stephens as of such date.
The following summary does not purport to be a complete description of the
analyses performed by Robertson Stephens. The information presented below is
based on the financial conditions of Univax and NABI as of a date or dates
shortly before the Merger Agreement was executed on August 28, 1995, and stock
price information through the close of the market on August 25, 1995.
Stock Price and Trading History. Robertson Stephens reviewed the trading
activity including price and volume of NABI and Univax for the last 12 months
prior to August 25, 1995. With respect to NABI, Robertson Stephens noted that,
since August 25, 1994, the daily closing prices of the NABI Common Stock ranged
from a high of $11.50 on August 21, 1995 to a low of $5.69 on August 26, 1994.
With respect to Univax, Robertson Stephens noted that, since August 25, 1994,
the daily closing prices of the Univax Common Stock ranged from a high of $8.63
on August 22, 1995 to a low of $4.25 on December 22, 1994. In addition,
Robertson Stephens compared the indexed performance of Univax Common Stock with
the common stock of Cytel Corporation, MedImmune, Inc., North American Vaccine,
Inc. and Ribi Immunochem Research, Inc. since August 25, 1994. Robertson
Stephens also compared the indexed performance of Univax Common Stock, NABI
Common Stock, the Standard & Poor's 500 Index and the Robertson Stephens
Biotechnology Index since August 25, 1994. In addition, Robertson Stephens
reviewed selected commentary of research analysts at different points in the
trading histories of Univax Common Stock and NABI Common Stock during the 12-
month period.
Exchange Ratio Analysis. Robertson Stephens reviewed the exchange ratio of
shares of NABI Common Stock per share of Univax Common Stock implied by the
daily closing prices of NABI and Univax Common Stock in the last six months
from February 27, 1995 to August 25, 1995, and in the last 12 months from
August 25, 1994 to August 25, 1995. Robertson Stephens noted that the average
implied exchange ratio in the last six months was 0.698 with a high of 0.935
and a low of 0.494, and in the last 12 months the average exchange ratio was
0.759 with a high of 1.087 and a low of 0.494.
Robertson Stephens reviewed the premium represented by the Common Exchange
Ratio compared to the implied exchange ratios based on closing prices as of one
day and 20 trading days prior to August 25, 1995. Such premiums were 8.8% and
15.6% respectively. In addition, Robertson Stephens reviewed the premium
represented by the Common Exchange Ratio compared to implied exchange ratios
based on average historical closing prices for the latest 30, 60 and 90 trading
days, the latest six months and the latest 12 months. Such premiums ranged
between 4.1% and 27.5%.
Contribution Analysis. Robertson Stephens compared the contribution of Univax
and NABI to, among other things, pro forma estimated combined revenue,
operating income, and pretax income for calendar years 1998, 1999 and 2000.
Robertson Stephens noted that NABI contributes approximately 83.0%, 79.4% and
76.8% of revenue to 1998, 1999 and 2000 estimates, respectively. These
contributions imply an exchange ratio between 0.22x and 0.33x. NABI contributes
approximately 84.8%, 73.8% and 76.6% of operating income to 1998, 1999 and 2000
estimates, respectively. These contributions imply an exchange ratio between
0.20x and 0.39x. NABI contributes approximately 82.5%, 73.1% and 77.0% of pre-
tax income to 1998, 1999 and 2000 estimates, respectively. These contributions
imply an exchange ratio between 0.23x and 0.40x.
Precedent Mergers. Robertson Stephens reviewed seven stock-for-stock mergers
of companies of comparable sizes and operating statistics. These mergers (with
their years of announcement) were: Glycomed Incorporated/Ligand
Pharmaceuticals, Inc. (1995); Vestar, Inc./NeXagen Inc. (1994); Gynex
Pharmaceuticals, Inc./Bio-Technology General Corp. (1993); Nova Pharmaceutical
Corporation/Scios Inc. (1992); Cetus Corporation/Chiron Corporation (1991);
Morino Associates/Duquesne Systems (LEGENT) (1988); and Bridge
Communications/3Com Corporation (1987). Robertson Stephens analyzed and
compared such parameters as the pro forma ownership percentage, the makeup of
the pro forma combined board of directors, which company employed the combined
company's chief executive officer that resulted from the merger, the offered
stock price
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premiums to the target's one-day and 20-day average stock price, the offered
exchange ratio premium to the trailing 20-day exchange ratio, the offered
exchange ratio as a percentage of the 52-week high and low trade exchange
ratios and the market capitalization of the target relative to the acquiror.
Robertson Stephens noted that of the merger of equals transactions, pro forma
ownership of the target ranged from approximately 23.8% to 52.0%, with an
average of 37.9%, as compared to Univax versus NABI of 42.0% at time of
announcement. Three mergers had pro forma boards of directors with an equal
representation from both the target and the acquiror; and the four other
mergers had target-to-acquiror director ratios of 1 to 7, 2 to 10, 3 to 5 and 3
to 6, versus Univax to NABI of 4 to 6. In every case studied, the chief
executive officer came from the acquiring company, as is proposed with Univax
and NABI. The one-day stock price premium ranged from (3.4%) to 42.1%, with an
average of 15.0%, compared to 8.8% for the proposed transaction. These premiums
imply an equity valuation per share ranging from $7.85 to $11.54 with an
average of $9.34. The 20-day average stock price premium ranged from (5.7%) to
46.3%, with an average of 16.5%, compared to 16.0% for the proposed
transaction. These premiums imply an equity valuation per share ranging from
$7.19 to $11.15 with an average of $8.88. The premium exchange ratio to the
trailing 20-day trading exchange ratio ranged from (9.5%) to 38.1%, with an
average of 13.8%, compared to 15.6% for the proposed transaction. The offered
exchange ratio as a percentage of the 52-week exchange ratio high ranged from
65.6% to 108.9%, with an average of 84%, compared to 72.7% for the proposed
transaction. The offered exchange ratio as a percentage of the 52-week low
exchange ratio ranged from 152.8% to 344.2%, with an average of 202.7%,
compared to 159.9% for the proposed transaction. The market capitalization
percentage of the target to the acquiror prior to the merger ranged from 24.1%
to 86.1%, with an average of 46.8%, compared to 66.6% for the proposed
transaction.
Comparable Company Analysis Relating to NABI. Robertson Stephens compared
certain financial data and multiples of income statement parameters accorded to
other publicly traded companies deemed by Robertson Stephens to be comparable
to NABI. Financial data compared included market capitalization, total
capitalization, revenues, gross profit, operating income, net income, earnings
per share, gross margin, operating margin, net margin and projected earnings
per share growth rate. Multiples compared included total capitalization to
revenue, total capitalization to operating income, and price per share to
earnings per share. Companies deemed by Robertson Stephens to be comparable to
NABI included Hemacare Corporation and Serologicals Corporation (the
"Comparable Companies"). For NABI, based on average total capitalization to
revenues multiples for the Comparable Companies of 3.2 for calendar 1994, 2.6
for calendar 1995 estimates and 2.3 for calendar 1996 estimates, implied equity
values per share were $24.26, $22.78, and $22.23 respectively. Based on average
total capitalization to operating income multiples for the Comparable Companies
of 21.0 for calendar 1994, 12.5 for calendar 1995 estimates and 10.4 for
calendar 1996 estimates, NABI implied equity values per share were $16.38,
$10.74 and $10.97, respectively. Based on average price per share to earnings
per share multiples for the Comparable Companies of 27.4 for calendar 1994,
26.3 for calendar 1995 estimates and 19.1 for calendar 1996 estimates, NABI's
implied equity values per share were $11.55, $14.85, and $13.15, respectively.
Discounted Cash Flow Analysis of NABI. Robertson Stephens also performed
discounted cash flow analyses of NABI and presented a range of implied equity
values per NABI share of $12.70 to $22.95 with a median value of $17.36. In
performing these analyses, Robertson Stephens selected the following
parameters: operating income multiples of 12 times to 18 times and discount
rates of 15% to 19%.
Comparable Company Analysis Relating to Univax. Robertson Stephens compared
certain financial data and multiples of income statement parameters accorded to
other publicly traded companies deemed by Robertson Stephens to be comparable
to Univax. Financial data compared included market capitalization, total
capitalization, revenues, gross profit, net income, earnings per share, gross
margin, net margin and projected earnings per share growth rate. Multiples
compared included total capitalization to revenue and price per share to
earnings per share. Companies deemed by Robertson Stephens to be comparable to
Univax included Cytel Corporation, MedImmune, Inc., North American Vaccine,
Inc., and Ribi Immunochem Research, Inc. (the "Selected Companies"). For
Univax: (i) based on a total capitalization to revenues multiple range of 1.3x
to 1.4x with an average of 1.3x for calendar 1999 estimates, the implied equity
valuation per share ranges from $4.85 to $5.31 with an average of $5.08; (ii)
based on a total capitalization to revenues multiple range of 1.6x to 4.1x with
an average of 2.5x for calendar year 1998 estimates, the implied equity
valuation per share ranges from $4.40 to $11.42 with an average of $6.91; (iii)
based on a market capitalization to net income multiple
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range of 5.2x to 9.2x with an average of 7.2x for calendar 1999 estimates, the
implied equity valuation per share ranges from $4.19 to $7.47 with an average
of $5.38; and (iv) based on a market capitalization to net income multiple
range of 7.1x to 25.0x with an average of 16.1x for calendar 1998 estimates,
the implied equity valuation per share ranges from $2.78 to $9.79 with an
average of $6.29.
Discounted Cash Flow Analysis of Univax. Robertson Stephens also performed
discounted cash flow analyses of Univax and presented a range of average
implied equity values per share of $5.21 to $12.95 with a median value of
$8.41. In performing these analyses, Robertson Stephens selected the following
parameters: operating income multiples of 12 times to 18 times, and discount
rates of 16% to 22%.
The preparation of fairness opinions involves various determinations as to
the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such opinions are not readily susceptible to
summary description. Accordingly, Robertson Stephens believes its analyses must
be considered as a whole and that considering any portion of such analyses and
the current factors, without considering all such analyses and current factors,
could create a misleading or incomplete view of the process underlying such
opinions. In its analyses, Robertson Stephens made numerous assumptions with
respect to industry performance, general business and other conditions and
matters, many of which are beyond the control of Univax and NABI. Any estimates
contained in these analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than as set forth therein. In addition, analyses relating to the
value of a business do not purport to be appraisals or to reflect the prices at
which businesses actually may be sold.
Robertson Stephens has provided financial advisory and investment banking
services to Univax since February 24, 1995. Robertson Stephens also makes a
market in Univax Common Stock and NABI Common Stock. In the course of its
market making and other activities, Robertson Stephens may, from time to time,
have a long or short position in and buy and sell securities of Univax and
NABI.
Univax formally engaged Robertson Stephens on February 24, 1995 by means of
an engagement letter to provide financial advisory services in connection with
potential merger or acquisition transactions. The engagement letter provides
that, for its services, Robertson Stephens is to be paid, contingent upon the
closing of the Merger, a fee of $350,000 plus one percent of the Aggregate
Transaction Value (as defined in the engagement letter) in excess of $10
million. Univax has also agreed to reimburse Robertson Stephens for its
reasonable out-of-pocket expenses and to indemnify Robertson Stephens for
certain liabilities relating to or arising out of services provided by
Robertson Stephens as financial advisor to Univax.
Robertson Stephens' transaction fee is currently estimated to be
approximately $1.3 million based upon an estimated stock price of $6.00 per
share of Univax Common Stock, the number of Univax's fully-diluted shares
outstanding (treasury method) and Univax's outstanding debt as of the date of
this Proxy Statement/Prospectus. The actual fees could be higher or lower based
upon Univax's implied stock price, the number of fully-diluted shares
outstanding (treasury method) and the amount of outstanding debt immediately
prior to the Merger. Pursuant to the engagement letter, Robertson Stephens
received a fee of $250,000 upon delivery of its fairness opinion, which will be
credited against the payment of any fee due to Robertson Stephens upon the
closing of the Merger.
Robertson Stephens is a nationally recognized investment banking firm. As
part of its investment banking business, Robertson Stephens is frequently
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and other matters.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
The combined company will retain the name "North American Biologicals, Inc."
and will be headquartered in Boca Raton, Florida. Administration and
Biopharmaceutical Manufacturing will remain in Boca Raton. Research,
Development and Clinical Affairs will remain in Univax's Rockville, Maryland
facilities. David
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J. Gury will serve as Chairman, President and Chief Executive Officer of the
combined company. Reporting to Mr. Gury will be: Thomas P. Stagnaro, currently
Univax's President and Chief Executive Officer, who will serve as Senior
Executive Vice President overseeing research and development, sales and
marketing and new business development; John C. Carlisle, currently NABI's
Executive Vice President and Chief Operating Officer, who will serve as Senior
Executive Vice President overseeing donor operations, manufacturing and other
corporate services; Alfred J. Fernandez, currently NABI's Vice President,
Finance and Chief Financial Officer, who will serve as Executive Vice
President, Finance and CFO; and Pinya Cohen, Ph.D., currently Vice President,
Quality Assurance and Regulatory Affairs, who will continue in that capacity.
Robert Naso, Ph.D., of Univax will continue to be responsible for research and
development.
Upon completion of the Merger, NABI's Board of Directors will have ten
members. Joining NABI's Board will be Brian H. Dovey, currently Univax's
Chairman and formerly the President of Rorer Group, Inc.; Thomas P. Stagnaro,
Univax's President and Chief Executive Officer; George W. Ebright, formerly
Chairman, President and Chief Executive Officer of Cytogen Corporation; and
Joseph C. Cook, Jr., formerly Group Vice President at Eli Lilly and Co.
UNIVAX EQUITY INCENTIVE PLANS
At or prior to the Effective Time, Univax and NABI will take all actions
necessary to cause the assumption by NABI as of the Effective Time of the
Outstanding Options to purchase Univax Common Stock (Outstanding Options do
not include options issued under the Univax 1995 Directors' Stock Option
Plan). Each of the Outstanding Options will be automatically converted into an
option to purchase shares of NABI Common Stock as of the Effective Time. The
number of shares of NABI Common Stock that the holder of an Outstanding Option
will be entitled to receive upon exercise is the whole number of shares
(rounded to the nearest whole share) determined by multiplying the number of
shares of Univax Common Stock subject to the option, determined immediately
before the Effective Time, by the Common Exchange Ratio. The option price of
each share of NABI Common Stock subject to an Outstanding Option will be the
amount (rounded up to the nearest whole cent) obtained by dividing the
exercise price per share of Univax Common Stock at which the option is
exercisable immediately before the Effective Time by the Common Exchange
Ratio. After the Effective Time, the Stock Option Plans will be continued in
effect by NABI subject to amendment, modification, suspension, abandonment or
termination as provided therein, and the Stock Option Plans as so continued
(a) will relate solely to Outstanding Options and (b) thereafter will relate
only to the issuance of NABI Common Stock as provided in the Merger Agreement.
In accordance with the terms of Univax's 1995 Directors' Stock Option Plan,
all options outstanding under such plan became fully exercisable regardless of
the vesting schedule of such options on the date of the Merger Agreement and
will terminate at the Effective Time.
Approval of the Merger Agreement by the stockholders of NABI will constitute
stockholder approval of the assumption by NABI of the rights and obligations
of Univax under the Stock Option Plans and Outstanding Options so that each
such option will become at the Effective Time an option to purchase shares of
NABI Common Stock on the terms described above. Outstanding options under
NABI's stock option plans will be unaffected by approval of the Merger
Agreement or consummation of the Merger.
At October 20, 1995, Univax had Outstanding Options to purchase 1,860,095
shares of Univax Common Stock. Of these, options to purchase approximately
1,114,420 shares, with exercise prices from $.15 to $10.25, will by their
terms have vested by the Effective Time (assuming a November 30, 1995
Effective Time). Assuming an $8.00 price per share of NABI Common Stock (the
closing price of the NABI Common Stock on Nasdaq on October 20, 1995),
substantially all of such vested options will have an exercise price that is
less than the per share Merger Consideration. If all of these vested options
were exercised, an aggregate of 880,391 shares of NABI Common Stock would be
issued with respect to such options in the Merger.
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UNIVAX WARRANT
At or prior to the Effective Time, Univax and NABI will take all action
necessary to cause the assumption by NABI as of the Effective Time of the
Outstanding Warrant to purchase 11,400 shares of Univax Common Stock. The
Outstanding Warrant will be automatically converted into a warrant to purchase
that number of whole shares (rounded up to the nearest whole share) of NABI
Common Stock determined by multiplying the number of shares of Univax Common
Stock subject to such warrant, determined immediately before the Effective
Time, by the Common Exchange Ratio. The exercise price for each share of NABI
Common Stock subject to the Outstanding Warrant will be the amount (rounded up
to the nearest whole cent) obtained by dividing the exercise price per share
of Univax Common Stock at which the Outstanding Warrant is exercisable
immediately before the Effective Time by the Common Exchange Ratio.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
At the Effective Time, each share of NABI Common Stock issued and
outstanding immediately prior to the Effective Time shall continue unchanged
as an outstanding share of NABI Common Stock, except that any share of NABI
Common Stock that is owned by Univax shall become treasury stock of NABI. Each
share of Univax Capital Stock issued and outstanding immediately prior to the
Effective Time will cease to be outstanding and, except for any share of
Univax Capital Stock owned by NABI or any subsidiary of NABI, in the case of
Univax Common Stock, will be converted into the right to receive the number of
fully paid and non-assessable shares of NABI Common Stock as is obtained by
multiplying such share by the Common Exchange Ratio, and in the case of Univax
Preferred Stock, will be converted into the right to receive the number of
fully paid and non-assessable shares of NABI Common Stock as is obtained by
multiplying such share by the Preferred Exchange Ratio. Each share of Univax
Capital Stock which immediately prior to the Effective Time was issued and
outstanding and held by NABI or any of its subsidiaries will be cancelled and
retired. Each authorized but unissued share of Univax Capital Stock will cease
to exist.
After the Effective Time of the Merger, NABI will request that each holder
of an outstanding Certificate surrender the same for cancellation to the
Exchange Agent, and each such holder shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of whole shares
of NABI Common Stock into which the surrendered shares were converted as
herein provided. Until so surrendered, each such certificate shall be deemed
for all purposes to evidence only the right to receive the Merger
Consideration.
Fractional shares of NABI Common Stock will not be issued in connection with
the Merger. In lieu of any such fractional share, each holder of Univax
Capital Stock who would otherwise have been entitled to a fraction of a share
of NABI Common Stock upon surrender of Certificates for exchange will be paid
cash (without interest, and rounded to the nearest whole cent) in an amount
determined by multiplying the average of the closing sale price of NABI Common
Stock on Nasdaq as reported by The Wall Street Journal for the 20 trading days
immediately preceding the Effective Time of the Merger by the fraction of a
share of NABI Common Stock to which such holder otherwise would be entitled.
As soon as practicable after the Effective Time, the Exchange Agent will
send a notice and transmittal form to each holder of a Certificate advising
such holder of the effectiveness of the Merger and the procedure for
surrendering such Certificate to the Exchange Agent for exchange into NABI
Common Stock at and after the Effective Time. Each holder of a Certificate
shall cease to have any rights as a shareholder of Univax, except for the
right to surrender such Certificate in the manner prescribed in exchange for
the NABI Common Stock and cash in lieu of any fractional share.
HOLDERS OF UNIVAX CAPITAL STOCK SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE A NOTICE AND TRANSMITTAL FORM FROM THE EXCHANGE AGENT.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Stockholders of NABI should be aware that certain members of NABI's Board of
Directors have interests in the Merger that are in addition to the interests
of stockholders of NABI generally. Richard A. Harvey, Jr. is
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President of BNYA, which has acted as a financial advisor to NABI since 1991
and, in particular, as a financial advisor to NABI in connection with the
Merger. BNYA has been paid monthly retainers aggregating $45,000 plus expenses
for services rendered in connection with the Merger Agreement and the
transactions contemplated thereby, and was paid an additional $75,000 upon the
signing of the Merger Agreement. Upon, and subject to, the closing of the
Merger, BNYA will be entitled to a payment of $350,000.
In addition, David L. Castaldi was retained by NABI in connection with the
Merger to head a team of specialists that evaluated Univax's technology,
product pipeline and scientific and commercial prospects. Mr. Castaldi was
compensated for these services at the rate of $2,000 per day plus expenses.
Aggregate compensation of $52,000 has been paid to Mr. Castaldi for these
services.
VOTING AND AFFILIATE AGREEMENTS
NABI and each of Charter Ventures, Domain Partners II, L.P., Kleiner Perkins
Caufield & Byers V, Brian H. Dovey, Joseph S. Lacob, Joseph C. Cook, Jr., A.
Barr Dolan, George W. Ebright, Richard S. Schweiker, Nelson N.H. Teng and
Thomas P. Stagnaro (each, a "Stockholder") have entered into letter agreements
dated August 28, 1995 (the "Voting Agreements"), pursuant to which each
Stockholder agreed, among other things, to vote all shares of Univax Common
Stock over which such Stockholder has voting control in favor of the Merger
Agreement and the Merger, and to vote all shares of Univax Common Stock over
which such Stockholder has voting control against approval of any other
agreement providing for or proposal authorizing a merger, consolidation, sale
of any assets or other business combination of Univax or its subsidiary with
any person or entity other than NABI and its subsidiaries. See "Univax
Principal Stockholders" for the number of shares of Univax Common Stock held
by each of the Stockholders. In addition, pursuant to the Voting Agreements,
each Stockholder has agreed not to sell, assign, transfer or otherwise dispose
of any shares of Univax Common Stock subject to the Voting Agreements except
for transfers by will or by operation of law, transfers where the transferee
agrees in writing to be bound by the provisions of the Voting Agreement and a
copy of the transferee's agreement is delivered to NABI, or as NABI may
otherwise agree in writing. The Stockholders collectively hold 5,048,965
shares of Univax Common Stock, or 29.3% of all outstanding shares of Univax
Common Stock.
Certain "affiliates" (as that term is defined in Rule 145 under the
Securities Act) of Univax and NABI will, prior to the Effective Time, enter
into agreements restricting the sale or disposition of their shares of NABI
Common Stock received in the Merger so as to comply with the requirements of
the securities laws, in the case of affiliates of Univax, and with the
requirements for "pooling of interests" accounting, in the case of affiliates
of both Univax and NABI.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act") and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger cannot be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
specified waiting period requirements have been satisfied. NABI and Univax
each filed notification and report forms under the HSR Act with the FTC and
the Antitrust Division on September 29, 1995 and October 3, 1995,
respectively. Early termination of the required waiting period under the HSR
Act was granted on October 12, 1995. At any time before or after consummation
of the Merger, the Antitrust Division or the FTC could take such action under
the antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of NABI or Univax. At any time before or
after the Effective Time, and notwithstanding that the HSR Act waiting period
has expired, any state could take such action under its antitrust laws as it
deems necessary or desirable. Such action could include seeking to enjoin the
consummation of the Merger or seeking divestiture of Univax or businesses of
NABI or Univax by NABI. Private parties may seek to take legal action under
state and federal antitrust laws under certain circumstances.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following summary of the material federal income tax considerations of
the Merger is based upon the opinions of Nutter, McClennen & Fish, counsel to
NABI, and Venture Law Group, A Professional Corporation, counsel to Univax,
expected to be delivered to NABI and Univax, respectively, at the Effective
Time.
The Merger is intended to qualify for federal income tax purposes as a tax-
free reorganization under Section 368(a) of the Code, with each of NABI and
Univax treated as "a party to a reorganization" within the meaning of Section
368(b) of the Code. Assuming the Merger so qualifies, no gain or loss will be
recognized by holders of Univax Capital Stock upon the receipt of NABI Common
Stock in exchange for their Univax Capital Stock.
Univax stockholders will have a tax basis for the shares of NABI Common
Stock received in the Merger, including any fractional shares for which cash
is received, equal to the tax basis for the shares of Univax Capital Stock
surrendered in exchange therefor. If the shares of Univax Capital Stock are
held as capital assets, the holding period of the shares of NABI Common Stock
received in the Merger will include the period during which the shares of
Univax Capital Stock surrendered in exchange therefor were held.
Neither NABI nor Univax will recognize any material amounts of gain solely
as a result of the Merger.
The IRS has announced a ruling policy of treating cash paid in lieu of
fractional interests arising in corporate reorganizations as having been
received by the stockholders in payment for the fractional share interests
redeemed if the cash distribution is undertaken solely for the purpose of
saving the corporation the expense and inconvenience of issuing and
transferring fractional shares and is not separately bargained-for
consideration. The IRS has stated further that the purpose of the transaction
giving rise to the fractional share interests, the maximum amount of cash that
may be received by any one stockholder and the percentage of the total
consideration that will be cash are among the factors that will be considered
in this regard. If so treated in the present case, gains and losses realized
by a Univax stockholder with respect to the receipt of cash in lieu of
fractional shares will be capital gain or loss, provided that the shares
surrendered are held as capital assets and are not "Section 306 stock," and
that the "collapsible corporation" provisions of the Code do not apply. To
determine the amount of such gain or loss, a portion of the basis in the
stockholder's Univax Capital Stock will be allocated to the fractional shares
under the rules described above. The amount of such gain or loss will be the
difference between the amount of cash received for such fractional shares and
the amount of such basis.
The parties are not requesting rulings from the IRS in connection with the
Merger, but as noted above, will receive opinions on the tax consequences of
the Merger from their respective counsel. Univax stockholders should be aware
that these opinions are not binding on the IRS. Further, these opinions are
subject to certain assumptions, including but not limited to the truth and
accuracy of certain representations made by NABI and Univax.
If the IRS were to challenge successfully the status of the Merger as a tax-
free reorganization, Univax stockholders would recognize taxable gain or loss
upon surrender of their Univax Capital Stock in exchange for NABI Common Stock
equal to the difference, if any, between the fair market value of the NABI
Common Stock received and the basis of their Univax Capital Stock surrendered
in exchange therefor. If the shares of Univax Capital Stock are held as
capital assets and are not "Section 306 stock" and the "collapsible
corporation" provisions of the Code do not apply, any such gain would be
capital gain, either long-term or short-term, depending upon the holding
period for the Univax Capital Stock.
The foregoing discussion is intended only as a summary of selected federal
income tax consequences of the Merger under current law and does not purport
to be a complete analysis or description of all potential tax effects of the
Merger. The summary does not address all of the tax consequences that may be
important to stockholders subject to special tax treatment, such as insurance
companies, corporations subject to the alternative minimum tax, banks, dealers
in securities, tax exempt organizations or foreign persons, or to stockholders
who acquired their Univax Capital Stock as compensation.
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No information is provided herein with respect to the tax consequences, if
any, of the Merger under applicable foreign, state, local and other tax laws.
The foregoing discussion is based upon the current provisions of the Code,
final and proposed Treasury regulations thereunder and current administrative
rulings and court decisions, all of which are subject to change. Any such
change could affect the accuracy of this discussion. Accordingly, UNIVAX
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER
TAX LAWS AND THE POSSIBLE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAW.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for accounting
and financial reporting purposes. Under this method of accounting, the
recorded assets and liabilities of NABI and Univax will be carried forward to
the combined company at their recorded amounts; income of the combined company
will include income of NABI and Univax for the entire fiscal year in which the
Merger occurs; and the reported income of the separate corporations for prior
periods will be combined and restated as income of the combined company.
NABI and Univax anticipate receiving letters dated as of the Effective Time
from Price Waterhouse LLP regarding the appropriateness of pooling of
interests accounting for the Merger under Accounting Principles Board Opinion
No. 16. Receipt of such letters and availability of pooling of interests
accounting treatment are conditions to consummation of the Merger.
FEDERAL SECURITIES LAW CONSEQUENCES
All NABI Common Stock issued in connection with the Merger will be freely
transferable, except that any NABI Common Stock received by persons who are
deemed to be "affiliates" (as such term is defined under the Securities Act)
of Univax or NABI prior to the Merger may be sold by them only in transactions
permitted by the resale provisions of Rule 145 under the Securities Act with
respect to affiliates of Univax, or Rule 144 under the Securities Act with
respect to persons who are or become affiliates of NABI, or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of Univax or NABI generally include individuals or entities that control, are
controlled by, or are under common control with, such party and may include
certain officers and directors of such party as well as principal stockholders
of such party.
Affiliates of Univax may not sell their shares of NABI Common Stock acquired
in connection with the Merger, except pursuant to an effective registration
statement under the Securities Act covering such shares or in compliance with
Rule 145 (or Rule 144 under the Securities Act in the case of persons who
become affiliates of NABI) or another applicable exemption from the
registration requirements of the Securities Act. In general, under Rule 145,
for two years following the Effective Time, an affiliate (together with
certain related persons) would be entitled to sell shares of NABI Common Stock
acquired in connection with the Merger only through unsolicited "broker's
transactions" or in transactions directly with a "market maker," as such terms
are defined in Rule 144. Additionally, the number of shares to be sold by an
affiliate (together with certain related persons and certain persons acting in
concert) within any three-month period for purposes of Rule 145 may not exceed
the greater of 1% of the outstanding shares of NABI Common Stock or the
average weekly trading volume of such stock during the four calendar weeks
preceding such sale. Rule 145 would only remain available, however, to
affiliates if NABI remained current with its informational filings with the
Commission under the Exchange Act. Two years after the Effective Time, an
affiliate would be able to sell such NABI Common Stock without such manner of
sale or volume limitations, provided that NABI was current with its Exchange
Act informational filings and such affiliate was not then an affiliate of
NABI. After two years following the Effective Time, all restrictions on resale
of securities acquired in the Merger shall cease, except that any person who
remains an affiliate of NABI at such time shall continue to be subject to the
limitations of Rule 144 applicable to affiliates.
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APPRAISAL RIGHTS
Under Section 262 of the DGCL, the holders of Univax Common Stock and NABI
Common Stock are not entitled to any appraisal rights with respect to the
Merger. However, holders of Univax Preferred Stock are entitled to such
appraisal rights. Currently, there is one holder of Univax Preferred Stock. See
"Univax Principal Stockholders."
LISTING OF NABI SHARES
It is a condition to the Merger that the shares of NABI Common Stock to be
issued in connection with the Merger be authorized for listing on Nasdaq,
subject to official notice of issuance.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which is annexed to this Proxy Statement/Prospectus as Appendix A
and is incorporated herein by reference. This summary is qualified in its
entirety by reference to the Merger Agreement.
THE MERGER
The Merger Agreement provides that, subject to the adoption and approval of
the Merger Agreement by the stockholders of each of NABI and Univax, and the
satisfaction or waiver of the other conditions to the Merger, Univax will be
merged with and into NABI in accordance with the DGCL, whereupon the separate
corporate existence of Univax will cease and NABI will be the surviving
corporation (the "Surviving Corporation") of the Merger. The Certificate of
Incorporation of NABI will be the Certificate of Incorporation of the
Surviving Corporation, except that the Certificate of Incorporation of NABI
will be amended pursuant to the Merger Agreement to increase the number of
shares of Common Stock authorized for issuance to 75,000,000 shares. The By-
laws of NABI will be the By-laws of the Surviving Corporation. The Board of
Directors of the Surviving Corporation will consist of all six current
directors of NABI and four of the current directors of Univax, until their
respective successors are duly elected and qualified.
EFFECTIVE TIME
Following the adoption of the Merger Agreement and subject to satisfaction
or waiver of certain terms and conditions contained in the Merger Agreement,
the Merger will become effective at the time the Certificate of Merger is
filed with the Secretary of State of the State of Delaware, unless NABI and
Univax agree that a later time, specified in the Certificate of Merger, will
be the Effective Time.
FRACTIONAL SHARES
Fractional shares of NABI Common Stock will not be issued in connection with
the Merger. In lieu of any such fractional share, each holder of Univax Common
Stock who would otherwise have been entitled to a fraction of a share of NABI
Common Stock upon surrender of Certificates for exchange will be paid cash
(without interest, and rounded to the nearest whole cent) in an amount
determined by multiplying the average closing sale price of NABI Common Stock
on Nasdaq as reported by The Wall Street Journal for the 20 trading days
immediately preceding the Effective Time of the Merger by the fraction of a
share of NABI Common Stock to which such holder otherwise would be entitled.
STOCK OPTIONS AND WARRANTS
At or prior to the Effective Time, Univax and NABI will take all action
necessary to cause the assumption by NABI as of the Effective Time of the
Outstanding Options. Each of the Outstanding Options will be automatically
converted into an option to purchase shares of NABI Common Stock as of the
Effective Time. The number of shares of NABI Common Stock that the holder of
an Outstanding Option will be entitled to receive upon exercise is the whole
number of shares (rounded to the nearest whole share) determined by
multiplying the number of shares of Univax Common Stock subject to the option,
determined immediately before the Effective Time, by the Common Exchange
Ratio. The option price of each share of NABI Common Stock subject to an
Outstanding Option will be the amount (rounded up to the nearest whole cent)
obtained by dividing the exercise price per share of Univax Common Stock at
which the option is exercisable immediately before the Effective Time by the
Common Exchange Ratio. After the Effective Time, the Stock Option Plans will
be continued in effect by NABI subject to amendment, modification, suspension,
abandonment or termination as provided therein, and the Stock Option Plans as
so continued (a) shall relate solely to Outstanding Options and (b) thereafter
shall relate only to the issuance of NABI Common Stock as provided in the
Merger Agreement.
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In accordance with the terms of Univax's 1995 Directors' Stock Option Plan,
all options outstanding under such plan became fully exercisable regardless of
the vesting schedule of such options on the date of the Merger Agreement and
will terminate at the Effective Time.
At or prior to the Effective Time, Univax and NABI will take all action
necessary to cause the assumption by NABI as of the Effective Time of the
Outstanding Warrant. The Outstanding Warrant will be automatically converted
into a warrant to purchase that number of whole shares (rounded up to the
nearest whole share) of NABI Common Stock determined by multiplying the number
of shares of Univax Common Stock subject to such warrant, determined
immediately before the Effective Time, by the Common Exchange Ratio. The
exercise price for each share of NABI Common Stock subject to the Outstanding
Warrant will be the amount (rounded up to the nearest whole cent) obtained by
dividing the exercise price per share of Univax Common Stock at which the
Outstanding Warrant is exercisable immediately before the Effective Time by
the Common Exchange Ratio.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of NABI
and Univax relating to, among other things, the following matters (which
representations and warranties are subject, in certain cases, to specified
exceptions and disclosures): (i) the due organization, power and standing of,
and similar corporate matters with respect to, each of NABI and Univax; (ii)
each of NABI's and Univax's capitalization; (iii) the authorization and
validity of the execution, delivery, performance and enforceability of the
Merger Agreement and the transactions contemplated thereby by each party and
the absence of any conflict with each party's Certificate of Incorporation and
By-laws and certain contracts, orders, statutes or rules; (iv) consents and
approvals required by governmental entities and third parties in connection
with the execution and delivery of the Merger Agreement and the consummation
of the transactions contemplated thereby; (v) the accuracy of the information
contained in certain financial statements of NABI and Univax, and the
conformance of such statements (and the parties' books and records) with GAAP;
(vi) the absence of certain changes or events having a material adverse effect
on the business, results of operations, properties or assets or financial
condition (whether or not covered by insurance) of the parties and their
subsidiaries taken as a whole (a "Material Adverse Effect"); (vii) the absence
of any litigation as to which there is a reasonable probability of an adverse
determination which would have a Material Adverse Effect on NABI or Univax;
(viii) the timely filing of tax returns, timely payment of taxes, compliance
with all tax laws and regulations, absence of tax delinquencies and other tax
matters; (ix) the rights and liabilities of each party with respect to
intellectual property; (x) the absence of any default under each party's
employment benefit plans and the administration of such plans in accordance
with the Employee Retirement Income Security Act of 1974, as amended; (xi) the
absence of any material untrue statement or omission in documents filed with
the Commission; (xii) compliance with applicable laws in the conduct of each
party's business; (xiii) the absence of any defaults under any material
agreements, or any failure to obtain specified consents or amendments with
respect to such material agreements, which defaults or failures would,
individually or in the aggregate, have a Material Adverse Effect; (xiv) the
absence of any material undisclosed liabilities; (xv) each of NABI and Univax
having no reason to believe that the Merger will not qualify as a "pooling of
interests" for accounting purposes; (xvi) the receipt of opinions of NABI's
and Univax's financial advisors as to the fairness of the transactions
contemplated by the Merger Agreement; and (xvii) the absence of any material
untrue statement or omission in this Proxy Statement/Prospectus (or, in NABI's
case, in this Proxy Statement/Prospectus and the Registration Statement).
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of NABI and Univax to effect the Merger are
subject to the satisfaction of certain conditions, including: (i) the approval
and adoption of the Merger Agreement by the requisite vote of the holders of
Univax Capital Stock and NABI Common Stock; (ii) expiration or early
termination of applicable waiting periods under the HSR Act; (iii) NABI
obtaining the consent of NationsBank of Florida, National Association
("NationsBank") under NABI's credit facility with NationsBank to the
transactions contemplated by the Merger, with such consent and any amendment
to the credit facility not directly prohibiting the research and
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development expenditures currently planned for the Surviving Corporation for
its principal products under development and being otherwise satisfactory to
NABI in its sole judgment; (iv) the effectiveness of the Registration
Statement under the Securities Act (with no suspensions thereof initiated or
threatened by the Commission), and the receipt by the parties of all necessary
state securities law authorizations; (v) the absence of any legal restraint or
prohibition preventing the consummation of the Merger or any of the
transactions contemplated thereby; (vi) the parties receiving opinions of
counsel that, at the Effective Time, the Merger will be treated as a tax-free
reorganization and that NABI and Univax will each be a "party" to that
reorganization as such term is defined in the Code; (vii) NABI and Univax each
receiving a letter from Price Waterhouse LLP, addressed to each of them and
dated no earlier than five days prior to the Closing Date (as defined in the
Merger Agreement), to the effect that the Merger will qualify for "pooling of
interests" accounting treatment; (viii) the representations and warranties of
each party as set forth in the Merger Agreement being true and correct as of
the Closing Date as though made on and as of the Closing Date (except to the
extent such representations and warranties speak as of an earlier date),
unless the failure would not have a Material Adverse Effect on NABI or Univax,
as the case may be; and (ix) each party performing all obligations required to
be performed by it under the Merger Agreement at or prior to the Closing Date,
unless the failure to so perform would not, individually or in the aggregate,
have a Material Adverse Effect on NABI or Univax, as the case may be. The
obligation of NABI to effect the Merger is also subject to NABI's receipt of
the written opinion of Raymond James or a written confirmation of the
continued effectiveness of an opinion previously delivered, dated as of the
date of this Proxy Statement/Prospectus, to the effect that, as of such date,
the Common Exchange Ratio and the Preferred Exchange Ratio are fair, from a
financial point of view, to NABI. The obligation of Univax to effect the
Merger is also subject to Univax's receipt of the written opinion of Robertson
Stephens or a written confirmation of the continued effectiveness of an
opinion previously delivered, dated as of the date of this Proxy
Statement/Prospectus, to the effect that, as of such date, the consideration
to be received in the Merger by holders of Univax Common Stock is fair, from a
financial point of view, to such holders.
COVENANTS
Each of NABI and Univax will afford to the other party and its
representatives reasonable access to its properties, books, contracts,
commitments and records, and make available to the other party and its
representatives (i) a copy of each report, schedule, registration statement
and other document filed or received by it prior to the Effective Time
pursuant to the requirements of federal securities laws, and (ii) all other
information concerning its business, properties and personnel as said party
and representatives may reasonably request.
NABI and Univax will promptly prepare and file with the Commission this
Proxy Statement/Prospectus and NABI will promptly prepare and file with the
Commission the Registration Statement. Each of NABI and Univax will use all
reasonable efforts to have the Registration Statement declared effective under
the Securities Act as promptly as practicable after such filing, and NABI and
Univax will thereafter as promptly as practicable mail the Proxy
Statement/Prospectus to their respective stockholders. NABI will use all
reasonable efforts to obtain all necessary state securities law or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
the Merger Agreement. Each party will promptly notify the other of the receipt
by it of any comments of the Commission or state securities laws regulators
and will promptly supply the other with copies of all correspondence between
it and its representatives, on the one hand, and the Commission or state
securities laws regulators or the members of their respective staffs, on the
other hand, with respect to this Proxy Statement/Prospectus, the Registration
Statement or such "Blue Sky" permits and approvals.
Each of NABI and Univax will promptly prepare and file the applicable
notices (if any) required to be filed by it under the HSR Act and comply
promptly with any requests to it from the FTC or Antitrust Division for
additional information.
Each of NABI and Univax will use its best efforts to cause each director,
executive officer and other person who is an "affiliate" (for purposes of Rule
145 under the Securities Act and for purposes of qualifying the
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Merger for "pooling of interests" accounting treatment) of such party to
deliver to the other party hereto, as soon as practicable, and prior to the
date of the Meetings, a written agreement providing that such person will not
sell, pledge, transfer or otherwise dispose of any shares of NABI Common Stock
or Univax Capital Stock held by such "affiliate" and, in the case of the
"affiliates" of Univax, the shares of NABI Common Stock to be received by such
"affiliate" in the Merger: (i) in the case of shares of NABI Common Stock to
be received by "affiliates" of Univax in the Merger, except in compliance with
the applicable provisions of the Securities Act and the rules and regulations
thereunder; and (ii) during the period commencing 30 days prior to the
Effective Time and ending at the time of the publication of financial results
covering at least 30 days of combined operations of NABI and Univax.
NABI will use all reasonable efforts to publish no later than 90 days after
the end of the first month after the Effective Time in which there are at
least 30 days of post-Merger combined operations, combined sales and net
income figures as contemplated by and in accordance with the terms of
Commission Accounting Series Release No. 135.
Each of NABI and Univax will call a meeting of its stockholders to be held
as soon as practicable for the purpose of obtaining the stockholder approvals
required in connection with the Merger Agreement, and each will use its best
efforts to cause such meetings to occur on the same date. The Boards of
Directors of NABI and Univax will recommend to their respective stockholders
that they vote to approve the Merger Agreement and the Merger.
Each of NABI and Univax will use its best efforts to take, or cause to be
taken, all actions necessary, proper or advisable (i) to comply promptly with
all legal requirements which may be imposed on such party with respect to the
Merger and (ii) to consummate the transactions contemplated by the Merger
Agreement.
Until the Effective Time, except as expressly contemplated or permitted by
the Merger Agreement, each of NABI and Univax will (i) conduct its business in
the usual, regular and ordinary course consistent with past practice, (ii) use
reasonable efforts to maintain and preserve intact its business organization,
employees and advantageous business relationships and retain the services of
its officers and key employees (provided, however, that the failure (after
taking such reasonable efforts) to retain the services of officers and key
employees shall not constitute a breach of this covenant or a failure by
either party to perform the obligations required to be performed by it under
the Merger Agreement), (iii) take no action which would adversely affect or
delay its ability to obtain any necessary approvals of any governmental
authority required for the transactions contemplated by the Merger Agreement
or to perform its covenants and agreements under the Merger Agreement, (iv)
use reasonable efforts to (a) perform and fulfill, or have performed or
fulfilled, all of the conditions and perform and fulfill the obligations to be
performed and fulfilled by it under the Merger Agreement, (b) ensure that, to
the extent that the same is within its control, the transactions contemplated
by the Merger Agreement will be fully carried out in a timely fashion, and (c)
preserve and protect its Intellectual Property (as defined in the Merger
Agreement) and all technology, know-how and processes necessary for the
conduct of its business as now conducted and presently proposed to be
conducted, and (v) maintain in force at comparable levels of coverage all
insurance policies in effect as of the date of the Merger Agreement.
Until the Effective Time, except as expressly contemplated or permitted by,
or disclosed in, the Merger Agreement, neither NABI nor Univax will, without
the prior written consent of the other: (i) other than in the ordinary course
of business consistent with past practice, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other entity, or make any loan or
advance other than to a direct or indirect wholly-owned subsidiary; (ii)
adjust, split, combine or reclassify any capital stock, declare, set aside or
pay any dividend or make any other distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares of
its capital stock, or grant any stock appreciation rights or grant any entity
any stock option or other right to acquire any shares of its capital stock or
any security exchangeable for or convertible into any such shares of capital
stock, or issue any additional shares of capital stock, except pursuant to (a)
the exercise of stock options and the Outstanding Warrant or (b) the
conversion of
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shares of the Univax Preferred Stock; (iii) sell, transfer, mortgage,
encumber, license or otherwise dispose of any of its material properties or
assets to any entity other than a direct or indirect wholly-owned subsidiary,
or cancel, release or assign any indebtedness to any such person or any claims
held by any such person, except in the ordinary course of business consistent
with past practice or pursuant to contracts or agreements in force at the date
of the Merger Agreement; (iv) except for transactions in the ordinary course
of business consistent with past practice, make any material investment either
by purchase of stock or securities, contributions to capital, property
transfers, merger or consolidation or purchase of any property or assets of
any other individual, corporation or other entity other than a wholly-owned
subsidiary; (v) except for transactions in the ordinary course of business
consistent with past practice, enter into or terminate any material contract
or agreement, or make any change in any of its material leases, licenses or
contracts, other than renewals of contracts, licenses and leases without
material changes of terms; (vi) increase in any manner the compensation or
fringe benefits of any of its employees or pay any pension or retirement
allowance not required by any existing plan or agreement to any such employees
or become a party to, amend or commit itself to any pension, retirement,
profit-sharing or welfare benefit plan or agreement or employment agreement
with or for the benefit of any employee other than in the ordinary course of
business consistent with past practice, or accelerate the vesting of or
otherwise modify the terms of any stock options or other stock-based
compensation; (vii) settle any material claim, action or proceeding involving
money damages, except in the ordinary course of business consistent with past
practice; (viii) take any action that would prevent or impede the Merger from
qualifying (a) for pooling of interests accounting treatment or (b) as a tax-
free reorganization; (ix) amend its Certificate of Incorporation or its By-
laws; (x) fail to duly and timely (by the due date or any duly granted
extension thereof) file all Returns (as defined in the Merger Agreement)
required to be filed with the proper governmental authorities, or make any tax
election except in the ordinary course of business consistent with immediate
past practice; (xi) unless it is contesting the same in good faith and, if
appropriate, has established reasonable reserves therefor, fail to (a)
promptly pay all Taxes (as defined in the Merger Agreement) indicated by such
Returns or otherwise lawfully levied or assessed upon it or any of its
properties and (b) withhold or collect and pay to the proper governmental
authorities or hold in separate bank accounts for such payment all Taxes and
other assessments which it believes in good faith to be required by law to be
so withheld or collected; (xii) take any action that is intended or may
reasonably be expected to result in any of its representations and warranties
set forth in the Merger Agreement being or becoming untrue in any material
respect at any time prior to the Effective Time, or in any of the conditions
to the Merger set forth in Article VII of the Merger Agreement not being
satisfied or in a violation of any provision of the Merger Agreement, except,
in every case, as may be required by applicable law; (xiii) change any
material accounting principle used by it, except for such changes as may be
required by GAAP or the rules and regulations of the Commission; or (xiv)
agree to, or make any commitment to, take any of the actions prohibited by
(i)-(xiii) above.
NO SOLICITATION
Each of NABI and Univax will not (a) solicit, initiate or knowingly
encourage or take any action knowingly to facilitate the submission of
inquiries, proposals or offers from any person relating to (i) any acquisition
or purchase of any of its material assets or any class of its equity
securities, (ii) any tender offer (including a self tender offer) or exchange
offer involving shares of its capital stock, (iii) any merger, consolidation,
business combination, sale of substantially all assets, recapitalization,
liquidation, dissolution or similar transaction other than the transactions
contemplated by the Merger Agreement, or (iv) any other transaction the
consummation of which would or could reasonably be expected to impede,
interfere with, prevent or materially delay the Merger or which would or could
reasonably be expected to materially dilute the benefits to either party of
the transactions contemplated by the Merger Agreement (the transactions
referred to in clauses (i)-(iv) are collectively referred to herein as
"Transaction Proposals"), or agree to or endorse any Transaction Proposal, or
(b) enter into or participate in any discussions or negotiations regarding any
Transaction Proposal, or furnish to any other person any information with
respect to its business, properties or assets or any Transaction Proposal, or
otherwise cooperate in any way with, or assist or participate in, facilitate
or encourage, any effort or attempt by any person to make or seek any
Transaction Proposal; provided, however, that the foregoing will not prohibit
either party from (i) furnishing information pursuant to a confidentiality
agreement substantially similar to the confidentiality
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agreement signed by the parties in connection with the discussions pertaining
to the Merger to a third party who has initiated contact with either party
regarding a bona fide unsolicited Transaction Proposal under specified
circumstances (a "Permitted Contact"), (ii) engaging in discussions or
negotiations with a third party who has initiated a Permitted Contact
regarding a Transaction Proposal, and/or (iii) following receipt of a
Transaction Proposal, taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) under the Exchange Act, or otherwise making
disclosure to its stockholders, but in each case referred to in the foregoing
clauses (i) through (iii) only to the extent that the Board of Directors
concludes in good faith in the exercise of its fiduciary duties, after
consultation with its outside counsel and financial advisor, that such actions
are more likely than not to result in a bona fide Transaction Proposal, the
terms of which would be more favorable to its stockholders than the Merger (a
"Superior Proposal"); provided, further, that the Board of Directors will not
take any of the foregoing actions referred to in clauses (i) through (iii)
until after reasonable notice to and consultation with the other party with
respect to any such actions and that such Board of Directors will continue to
consult with the other party after taking any such actions, except to the
extent that it receives the opinion of its outside counsel that such continued
consultation would constitute a breach of its fiduciary duties to its
stockholders under the DGCL. If either party receives a Transaction Proposal,
it will within one business day of the receipt of such proposal inform the
other of the terms and conditions of such proposal and the identity of the
person making it.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of NABI and Univax: (i) by mutual consent
of the Boards of Directors of NABI and Univax; (ii) by either party if the
Merger is not consummated on or before January 31, 1996, unless the failure to
consummate the Merger by such date is due to the failure of the party seeking
to terminate the Merger Agreement to perform or observe the covenants and
agreements of such party set forth therein; (iii) by either party if there has
been a misrepresentation or breach on the part of the other in the
representations, warranties, covenants or obligations of the other and such
misrepresentation or breach has resulted or would result in a Material Adverse
Effect on the other, provided that in the case of a breach of any such
covenant or obligation, such breach has not been cured within 10 business days
after the non-breaching party has notified the breaching party of such breach;
(iv) by either party if prior to the consummation of the Merger, (x) such
party receives a bona fide written Transaction Proposal from a third party,
(y) the Board of Directors of such party determines in good faith that such
Transaction Proposal is a Superior Proposal and (z) such party has provided
the other with at least five business days' written notice of such Transaction
Proposal, including a copy thereof, and of the determination of its Board of
Directors referred to in clause (y) above; provided, however, that a condition
to the effectiveness of the termination of the Merger Agreement and the
abandonment of the Merger in accordance with this subsection (iv) is the
payment to the non-terminating party in same day funds of the sum of
$5,000,000 (the "Termination Fee"); (v) by either party if any court issues an
order, decree or ruling or takes any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree, ruling
or other action becomes final and non-appealable; or (vi) by either party, if
the approval of its stockholders is not obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or any
adjournment thereof. If the Merger Agreement is terminated in accordance with
(i)-(vi) above, the Merger shall be abandoned without further action by NABI
or Univax.
If the Merger Agreement is terminated in accordance with subsection (iv)
above, the terminating party must pay to the other, in addition to the
Termination Fee, the other party's Expenses within five business days after
receipt of a written request therefor, in same day funds. "Expenses" means
documented out-of-pocket fees and expenses incurred or paid by or on behalf of
a party in connection with the Merger or any of the transactions contemplated
by the Merger Agreement, including, without limitation, all printing costs,
all reasonable fees and expenses of counsel, commercial banks, investment
banking firms, accountants, experts and consultants, and all filing fees with
any governmental entities.
The terminating party also must pay, or cause to be paid, in same day funds
to the non-terminating party, the Termination Fee and the non-terminating
party's Expenses upon demand if prior to termination of the Merger
52
<PAGE>
Agreement (other than by the terminating party in accordance with subsection
(iii) above) a Transaction Proposal is made and within nine months of such
termination (x) such Transaction Proposal or any other transaction
constituting a Transaction Proposal (an "Alternative Transaction") is
consummated involving the terminating party and the party (or an affiliate of
such party) which made such Transaction Proposal prior to the termination of
the Merger Agreement or (y) the terminating party enters into an agreement
with respect to, approves or recommends or takes any action to facilitate any
such Transaction Proposal or Alternative Transaction.
INDEMNIFICATION
After the Effective Time, NABI will indemnify and hold harmless and advance
expenses to any person who was a director or officer of Univax, and the heirs,
executors and administrators of any such person (collectively, the
"Indemnified Parties"), to the fullest extent authorized or permitted by the
By-laws of NABI in effect at the Effective Time, against any liability, cost
or expense (including, without limitation, attorneys' fees) imposed upon or
reasonably incurred by him by reason of the fact that he was a director or
officer of Univax, or that he took or failed to take any action as a director
or officer of Univax. Such obligations shall apply to any action, suit or
proceeding whether commenced before or after the Effective Time. Such
obligations will be binding on all successors and assigns of the Surviving
Corporation; provided, however, that such obligations will not create any
rights in any person other than the Indemnified Parties and their heirs,
executors and administrators, and no such other person will become a third
party beneficiary of the Merger Agreement by virtue of serving as a member of
the Board of Directors of the Surviving Corporation.
EXPENSES
All costs and expenses incurred in connection with the Merger Agreement
shall be paid by the party incurring such expenses, except as otherwise
described under "--Termination" above and except that the costs and expenses
of printing and mailing this Proxy Statement/Prospectus, and all filing and
other fees paid to the Commission and the FTC in connection with the Merger,
will be borne equally by NABI and Univax.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
give effect to the proposed Merger of NABI and Univax. The Merger will be
accounted for as a pooling of interests in accordance with Accounting
Principles Board Opinion No. 16. The fiscal years of NABI and Univax end on
December 31 and, as such, the historical statements of operations have been
reported on such fiscal basis. The unaudited pro forma condensed combined
balance sheet combines the historical balance sheets of NABI and Univax as if
the Merger had become effective on June 30, 1995. The unaudited pro forma
condensed combined statements of operations for the six months ended June 30,
1995 and 1994 and the years ended December 31, 1994, 1993 and 1992 combine the
historical statements of operations of NABI and Univax as if the Merger had
become effective January 1, 1992. These unaudited pro forma financial
statements should be read in conjunction with the historical financial
statements and notes thereto of NABI and Univax contained elsewhere in this
Proxy Statement/Prospectus.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated on January 1, 1992 with
respect to the pro forma statements of operations or at June 30, 1995 with
respect to the pro forma balance sheet, nor is it indicative of the future
operating results or financial position of the combined companies.
53
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC. AND UNIVAX BIOLOGICS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1995
PRO FORMA PRO FORMA
NABI UNIVAX ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments.... $ 1,863 $ 16,914 -- $ 18,777
Trade accounts receivable, net..... 26,047 2,429 -- 28,476
Inventories........................ 20,167 417 -- 20,584
Other current assets............... 3,055 1,145 -- 4,200
-------- -------- ------- --------
TOTAL CURRENT ASSETS............. 51,132 20,905 -- 72,037
Property and equipment, net........ 24,369 7,177 -- 31,546
Excess of acquisition cost over net
assets acquired, net.............. 16,407 -- -- 16,407
Other assets....................... 14,518 825 -- 15,343
-------- -------- ------- --------
TOTAL ASSETS..................... $106,426 $ 28,907 -- $135,333
======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable............. $ 3,863 $ 2,129 -- $ 5,992
Accrued expenses................... 10,776 1,112 -- 11,888
Other current liabilities.......... 6,471 1,118 $ 4,000 (2A) 11,589
-------- -------- ------- --------
TOTAL CURRENT LIABILITIES........ 21,110 4,359 4,000 29,469
Long-term debt..................... 27,007 1,575 -- 28,582
-------- -------- ------- --------
TOTAL LIABILITIES................ 48,117 5,934 4,000 58,051
-------- -------- ------- --------
Preferred stock, par value $.01;
10,000 shares authorized, 502
shares outstanding................ -- 5 (5)(2B) --
Common stock, par value $.10;
50,000 shares authorized, 19,487
shares outstanding................ 1,949 -- 45 (2B) 3,349
1,355 (2C)
Common stock, par value $.01;
30,000 shares authorized, 17,149
shares outstanding................ -- 171 (171)(2C) --
Capital in excess of par value..... 37,701 95,306 (40)(2B) 131,783
(1,184)(2C)
Retained earnings (deficit)........ 18,659 (72,509) (4,000)(2A) (57,850)
-------- -------- ------- --------
TOTAL STOCKHOLDERS' EQUITY....... 58,309 22,973 (4,000) 77,282
-------- -------- ------- --------
TOTAL LIABILITIES AND STOCKHOLD-
ERS' EQUITY..................... $106,426 $ 28,907 -- $135,333
======== ======== ======= ========
</TABLE>
See accompanying Notes to the unaudited pro forma condensed combined financial
information.
54
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC. AND UNIVAX BIOLOGICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
------------------------------------------
PRO FORMA PRO FORMA
NABI UNIVAX ADJUSTMENTS COMBINED
------- -------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues........................... $93,452 $ 4,002 $(351)(2D) $97,103
Costs of products sold............. 74,201 385 (323)(2D) 74,263
Research and product development... 226 11,031 (28)(2D) 11,229
Selling, general and administrative
expenses.......................... 5,715 4,088 -- 9,803
Other expenses..................... 2,324 -- -- 2,324
------- -------- ----- -------
Operating income (loss)............ 10,986 (11,502) -- (516)
Interest expense................... (533) (95) -- (628)
Investment income, net............. -- 758 -- 758
------- -------- ----- -------
Income (loss) before provision for
income taxes...................... 10,453 (10,839) -- (386)
Provision for income taxes......... (3,973) -- -- (3,973)
------- -------- ----- -------
Net income (loss).................. $ 6,480 $(10,839) -- $(4,359)
======= ======== ===== =======
Earnings (loss) per share.......... $ 0.32 $ (0.63) $ (0.13)
======= ======== =======
Weighted average number of shares
outstanding....................... 20,347 17,092 33,377
======= ======== =======
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1994
------------------------------------------
PRO FORMA PRO FORMA
NABI UNIVAX ADJUSTMENTS COMBINED
------- -------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues........................... $77,280 $ 1,363 $ (71)(2D) $78,572
Cost of products sold.............. 61,507 -- (52)(2D) 61,455
Research and product development... 478 8,916 (19)(2D) 9,375
Selling, general and administrative
expenses.......................... 5,65 2,614 -- 8,268
Other expenses..................... 1,863 -- -- 1,863
------- -------- ----- -------
Operating income (loss)............ 7,778 (10,167) -- (2,389)
Interest expense................... (1,766) (118) -- (1,884)
Investment loss, net............... -- (150) -- (150)
------- -------- ----- -------
Income (loss) before provision for
income taxes...................... 6,012 (10,435) -- (4,423)
Provision for income taxes......... (2,302) -- -- (2,302)
------- -------- ----- -------
Net income (loss).................. $ 3,710 $(10,435) -- $(6,725)
======= ======== ===== =======
Earnings (loss) per share.......... $ 0.22 $ (0.80) $ (0.26)
======= ======== =======
Weighted average number of shares
outstanding....................... 16,670 13,011 25,873
======= ======== =======
</TABLE>
See accompanying Notes to the unaudited pro forma condensed combined financial
information.
55
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC. AND UNIVAX BIOLOGICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------------------
PRO FORMA PRO FORMA
NABI UNIVAX ADJUSTMENTS COMBINED
-------- -------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues................. $164,678 $ 2,782 $(252)(2D) $167,208
Cost of products sold.... 131,368 -- (176)(2D) 131,192
Research and product
development............. 964 19,494 (76)(2D) 20,382
Selling, general and
administrative
expenses................ 11,260 5,207 -- 16,467
Other expenses........... 3,660 -- -- 3,660
-------- -------- ----- --------
Operating income (loss).. 17,426 (21,919) -- (4,493)
Interest expense......... (3,025) (219) -- (3,244)
Investment income, net... -- 317 -- 317
-------- -------- ----- --------
Income (loss) before
provision for income
taxes and extraordinary
charge.................. 14,401 (21,821) -- (7,420)
Provision for income
taxes................... (5,774) -- -- (5,774)
-------- -------- ----- --------
Income (loss) from
continuing operations
before extraordinary
charge.................. $ 8,627 $(21,821) -- $(13,194)
======== ======== ===== ========
Earnings (loss) per
share:
Income (loss) from
continuing operations
before extraordinary
charge................ $ 0.49 $ (1.52) $ (0.47)
======== ======== ========
Weighted average number
of shares outstanding... 17,590 14,358 27,963
======== ======== ========
</TABLE>
See accompanying Notes to the unaudited pro forma condensed combined financial
information.
56
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC. AND UNIVAX BIOLOGICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
------------------------------------------
PRO FORMA PRO FORMA
NABI UNIVAX ADJUSTMENTS COMBINED
-------- -------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues....................... $101,574 $ 1,181 -- $102,755
Cost of products sold.......... 81,607 -- -- 81,607
Research and product
development................... 205 18,065 -- 18,270
Selling, general and
administrative expenses....... 7,902 4,382 -- 12,284
Other expenses................. 3,387 -- -- 3,387
-------- -------- ---- --------
Operating income (loss)........ 8,473 (21,266) -- (12,793)
Interest expense............... (3,080) (205) -- (3,285)
Investment income, net......... -- 1,166 -- 1,166
-------- -------- ---- --------
Income (loss) before provision
for income taxes and
cumulative effect of change in
accounting for income taxes... 5,393 (20,305) -- (14,912)
Provision for income taxes..... (1,988) -- -- (1,988)
-------- -------- ---- --------
Income (loss) from continuing
operations before cumulative
effect of change in
accounting for income
taxes....................... $ 3,405 $(20,305) -- $(16,900)
======== ======== ==== ========
Earnings (loss) per share:
Income (loss) from continuing
operations before cumulative
effect of change in
accounting for income
taxes....................... $ 0.25 $ (1.74) $ (0.76)
======== ======== ========
Weighted average number of
shares outstanding............ 13,540 11,689 22,297
======== ======== ========
</TABLE>
See accompanying Notes to the unaudited pro forma condensed combined financial
information.
57
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC. AND UNIVAX BIOLOGICS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
----------------------------------------
PRO FORMA PRO FORMA
NABI UNIVAX ADJUSTMENTS COMBINED
------- -------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues............................. $82,354 $ 973 -- $ 83,327
Cost of products sold................ 71,137 -- -- 71,137
Research and product development..... 157 12,051 -- 12,208
Selling, general and administrative
expenses............................ 6,753 3,327 -- 10,080
Other expenses....................... 2,448 -- -- 2,448
------- -------- ---- --------
Operating income (loss).............. 1,859 (14,405) -- (12,546)
Interest expense..................... (2,427) (192) -- (2,619)
Investment income, net............... -- 1,603 -- 1,603
------- -------- ---- --------
Loss before provision for income
taxes............................... (568) (12,994) -- (13,562)
Provision for income taxes........... (5) -- -- (5)
------- -------- ---- --------
Net loss............................. $ (573) $(12,994) -- $(13,567)
======= ======== ==== ========
Loss per share....................... $ (0.04) $ (1.19) $ (0.65)
======= ======== ========
Weighted average number of shares
outstanding......................... 13,328 10,889 20,850
======= ======== ========
</TABLE>
See accompanying Notes to the unaudited pro forma condensed combined financial
information.
58
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
NOTE 1. BASIS OF PRESENTATION
Pursuant to the Merger Agreement each share of Univax Common Stock
outstanding at the date of consummation will be converted into .79 share of
NABI Common Stock. Additionally, the Merger Agreement provides that, subject
to appraisal rights, each share of Univax Preferred Stock will be converted
into the amount of NABI Common Stock as is determined by dividing $9.95 by the
closing price of NABI Common Stock as of the date on which the Effective Time
of the Merger occurs. The unaudited pro forma financial statements have been
prepared assuming no conversion of the Univax Preferred Stock into Univax
Common Stock and conversion of all outstanding Univax Preferred Stock into
NABI Common Stock at an exchange ratio of .8894, which is based on the closing
sale price of NABI Common Stock on August 25, 1995.
The pro forma financial information does not give effect to synergies which
may occur as a result of the integration of the combined operations.
Additionally, the pro forma results of operations exclude $4 million in
estimated transaction costs associated with the Merger. Such expenses will be
recognized as period expenses as of the Effective Time. However, pro forma
retained earnings have been adjusted to reflect recognition of the estimated
transaction costs in the Stockholders' Equity section of the unaudited pro
forma condensed combined balance sheet as of June 30, 1995.
Pro forma loss per share for the respective periods has been computed based
on the unaudited pro forma weighted average common shares outstanding for the
combined company, including the effects of converting all of the Univax
Preferred Stock into NABI Common Stock. Common stock equivalents of NABI have
been excluded from the calculation because of their anti-dilutive pro forma
effect.
It is intended that the Merger will qualify as a tax-free reorganization
within the meaning of Section 368 of the Code. Accordingly, Univax's net
operating losses and research tax credit carryforwards will be available to
offset future taxable income in the consolidated tax returns of the combined
company, subject to certain annual limitations.
Certain amounts in the historical financial statements of NABI and Univax
have been reclassified to conform with the unaudited pro forma condensed
combined financial statement presentation. All amounts, except per share data,
are presented in thousands of dollars.
NOTE 2. PRO FORMA ADJUSTMENTS
(A) Estimated non-recurring transaction costs associated with the Merger.
(B) Issuance of 446,934 shares of NABI Common Stock in exchange for 502,512
shares of Univax Preferred Stock.
(C) Issuance of 13,548,105 shares of NABI Common Stock in exchange for
17,149,500 shares of Univax Common Stock.
(D) Elimination of intercompany sales and associated costs.
59
<PAGE>
NABI BUSINESS
NABI is the world's largest independent provider of human blood plasma
components to the pharmaceutical and diagnostic industries. NABI collects
plasma from an extensive donor base through 76 plasma collection centers in 30
states and two plasma collection centers in Germany and processes and sells
plasma products to major healthcare companies primarily in the United States
and Europe. During the first six months of 1995 and the fiscal years ended
December 31, 1994 and 1993, NABI collected and processed approximately
958,000, 1,830,000 and 1,019,000 liters of plasma, respectively.
In addition, NABI markets and sells H-BIG, a proprietary immune globulin
therapeutic product which provides passive immunity to hepatitis B, and is
pursuing the development of other plasma-based immune globulin therapeutic
products. One product, HIV-IG, an experimental product intended to prevent the
transmission of HIV/AIDS from HIV-positive mothers to their unborn offspring,
is being used in a Phase III human clinical trial conducted by agencies of the
NIH. NABI also has filed IND applications for two additional immune globulin
therapeutic products, and expects to enter those products into human clinical
trials funded by third parties. NABI also manufactures and sells human plasma-
based control products and diagnostic products and provides testing services
on plasma and blood samples supplied by third parties.
PLASMA BUSINESS
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. According to Marketing Research Bureau, an
independent market research company, the worldwide market for plasma-based
products has grown from $1.5 billion in 1984 to $3.9 billion in 1992 and is
expected to grow to $6.4 billion by 2000. The market factors driving the
plasma industry have included the expanded use of immune globulins to prevent
and treat disease, extensive public concern over the safety of blood products
and an increase in regulatory control over the collection and testing of
plasma.
A worldwide shortage of plasma began in 1991, driven partially by the
increased need for plasma components to treat larger and older populations,
and partially by a diminished pool of donors that resulted from more
restrictive testing and screening requirements imposed by regulatory
authorities. In 1991, the FDA required mandatory screening for hepatitis C,
thereby disqualifying donations from a significant portion of the then
existing donor base. Another market factor has been increasing concern about
the safety of the blood supply, with subsequent political demand for tighter
scrutiny of blood product suppliers and a resulting reduction in blood
collection.
Source Plasma. Source plasma is composed of three primary proteins: albumin,
anti-hemophilic factor ("AHF") and immune globulin. After collection, source
plasma is fractionated, or separated, into these three proteins. The
therapeutic market for each of these proteins at any one time drives overall
demand for source plasma. The primary uses of these proteins are as follows:
. Albumin, currently the largest and most extensively used of the three
components, is the protein used to restore plasma volume subsequent to
shock, trauma, surgery and burns.
. AHF is the clotting factor in plasma used to treat hemophilia and
clotting disorder.
. Immune globulin is the component of plasma that carries antibodies to
fight disease. Therapeutic uses include the treatment of tetanus, rabies,
HIV/AIDS, hepatitis, ITP and acquired or congenital immune disorders.
Specialty Plasmas. Specialty plasmas generally contain high concentrations
of specific antibodies and are used primarily to manufacture immune globulin
therapeutic products which bolster the immunity of patients to fight a
particular infection or to treat certain immune system disorders. Following
advances in intravenous therapy in the mid-1980s, use of specialty plasmas for
therapeutic purposes significantly increased. Among the
60
<PAGE>
current uses for specialty plasmas are the production of products to prevent
hepatitis, ITP, Rh incompatibility in newborns, tetanus and rabies. Specialty
plasmas are also widely used for diagnostic and tissue culture purposes.
Depending on the rarity of the antibody or medical history of the donor,
NABI's pricing for specialty plasmas currently ranges from $80 to $5,700 per
liter, with an average price of $115 per liter. The average price of a unit of
source plasma is currently approximately $75 per liter.
NABI has in recent years placed increased emphasis on the collection of
specialty plasmas. NABI identifies potential specialty plasma donors through
internal screening and testing procedures. NABI also has developed FDA-
licensed programs to inoculate potential donors to stimulate their production
of specific antibodies. Through NABI's nationwide operating base and access to
its large and diverse donor base, NABI believes it has a strategic advantage
in its ability to collect specialty plasmas.
NABI's principal specialty plasmas are:
. Hepatitis B Plasma. NABI provides anti-hepatitis B plasma to
manufacturers of hepatitis B immune globulin therapeutic products which
provide passive immunity to hepatitis B. Anti-hepatitis B plasma
collected by NABI is also used to produce H-BIG, NABI's own hepatitis B
immune globulin therapeutic product. NABI believes that its proprietary
donor stimulation and management programs allow NABI to produce a product
having a higher concentration of antibody than competing products.
. Anti-D Plasma. Specialty plasma containing anti-D antibody 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
antibody, or who have been inoculated to raise their anti-D antibody
levels, is used to produce products to protect the infant. NABI has
proprietary donor stimulation and management programs which enhance its
ability to increase collection of anti-D plasma. More recently,
scientists have developed anti-D immune globulin for ITP, a condition in
immune compromised patients that is characterized by platelet
consumption. The FDA approved this indication in March 1995 and the high
demand for anti-D positive plasma is likely to increase.
. HAV Plasma. Hepatitis A antibody-rich plasma is available from a very
select portion of the population who have been exposed to the hepatitis A
virus. HAV plasma is used to augment general intravenous immune globulin
therapeutic products to provide protection from this virus.
. CMV Plasma. Cytomegalovirus ("CMV") antibody-positive donors are
indigenous in the population. By screening its large donor population,
NABI identifies individuals with high concentrations of CMV antibody in
their plasma, and then supplies the plasma to product manufacturers to
enhance intravenous products and to produce specific CMV immune globulin
therapeutics.
. Rabies Plasma. NABI is a major supplier of rabies antibody-rich plasma to
manufacturers of rabies immune globulin, which use the product to provide
a short-term boost in immunity to patients exposed to the rabies virus.
Plasma Collection Process. NABI currently collects and processes plasma from
78 plasma collection centers located in 30 states and Germany, including six
independently owned centers which under contract supply their entire plasma
collection output to NABI. Each U.S. 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. During this process, whole blood is withdrawn from the donor,
the plasma is separated from the donor's red blood cells by means of
centrifugation and the donor's red blood cells are returned to the donor. This
procedure, which can be manual or automated, is performed under medical
supervision. If the process is automated, the entire process can be completed
in 40 to 60 minutes. A manually operated plasmapheresis process may require up
to two hours for
61
<PAGE>
completion. Because the red blood cells have been returned to the donor, the
donor may donate plasma as frequently as twice a week. After collection, each
unit of plasma is frozen and stored at -20(degrees)C or colder through the
time of delivery to the customer. If properly handled and maintained, FDA
regulations permit the use of plasma which has been stored for up to 10 years.
Approximately 97% of NABI's collection centers are currently automated. The
automated process is more efficient, producing higher yields in less time per
cycle. In addition, because the automated process returns the donor's red
blood cells automatically through a closed, disposable system, the risk of
human error and inadvertent disease transmission in the plasmapheresis process
is substantially reduced. During the first six months of 1995, NABI processed
a monthly average of 3,000 collection procedures per center.
NABI extensively tests each unit of plasma for a number of infectious
diseases at one of its two central testing laboratories in Miami and Detroit
before shipment to the customer. NABI had collaborated with Abbott on the
development and implementation of a proprietary information system which
manages data regarding sources of donations, test results, specific product
characteristics and product destination.
Donor Recruitment and Management. Effective recruitment, management and
retention of donors are essential to NABI's plasma business. NABI seeks to
attract and retain its donor base by utilizing competitive financial
incentives which NABI offers for the donation of the plasma, by providing
outstanding customer service to its donors, by implementing programs designed
to attract donors through education as to the uses of plasma, by encouraging
groups to have their members become plasma donors and by improving the
attractiveness of NABI's plasma collection facilities. NABI cultivates its
donor base by encouraging regular participation in its donor programs and by
providing incentives to encourage donors to return. Repeat donors are
important because of the lower cost associated with obtaining their plasma and
the lesser risk that their plasma will not satisfy regulatory and customer
requirements. NABI's centers advertise for donors through targeted mailings,
newspapers, radio and television.
NABI's donor base is maintained, in part, with the assistance of donor
databases at each of NABI's collection centers which allow NABI's personnel at
the centers to track the frequency of donor visits, especially in the case of
donors of specialty plasmas. When a donor has not visited a center in one to
two months, the collection center forwards a reminder card to the donor
emphasizing the importance of the donor's continued participation. When a
certain specialty plasma is in high demand or when inventories are low, donors
of the needed plasma are pursued more actively. To increase NABI's access to
donors of specialty plasmas, NABI establishes and maintains contacts at local
blood banks and other plasma collection companies to obtain donor referrals in
instances where a particular donor's plasma is of limited or no use to the
other collection facilities.
NABI has expanded its donor base by adding collection centers through
acquisitions. In January 1994, NABI acquired PBI, which operates 22 plasma
collection centers. In June 1994, NABI completed the asset acquisition of two
plasma collection centers in Germany, and in July 1995, NABI acquired nine
plasma collection centers from Blood Systems, Inc. ("BSI"). Prior to their
acquisition by NABI, none of the PBI centers, German centers or BSI centers
collected significant quantities of specialty plasmas. NABI intends to
increase the collection of specialty plasmas at these centers following any
necessary licensure.
Marketing and Customers. NABI sells plasma to approximately 21
pharmaceutical and diagnostic product manufacturers, most of which have been
customers of NABI for many years. These customers constitute substantially all
of the worldwide purchasers of human blood plasma. NABI markets its plasma
through its internal sales staff. NABI anticipates that for 1995,
approximately 41% of NABI's plasma revenues will be from sales to customers
outside the United States, most of which are in Europe. NABI's sales of U.S.
collected plasma to foreign customers are made pursuant to fixed price
contracts denominated in U.S. dollars. Accordingly, there is no exposure to
exchange rate fluctuations.
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NABI's customers include the following:
Abbott Laboratories (USA) Organon Teknika (USA)
Alpha Therapeutic Corporation (USA) Oxytele SA (France)
Baxter Healthcare Corporation (USA) Pharmacia AB Plasma Products (Sweden)
Bayer Corporation (USA) Pasteur Merieux Serums et Vaccins
Behringwerke AG (Germany) (France)
Berna Products Corporation (USA) Pasteur Sanofi Diagnostics (France)
Biotest Pharma GmbH (Germany) National Institutes of Health (USA)
Farma Biagini (Italy) Sera Bio (France)
Immuno Trading AG (Austria) Swiss Serum Institute (Berna)
Korea Green Cross (S. Korea) (Switzerland)
Nihon Parmaceuticals (Japan) Univax Biologics (USA)
WBAG Resources (Switzerland)
Customers to which sales exceeded 10% of NABI's annual consolidated sales in
the first six months of 1995 and each of the last three fiscal years ending
December 31, 1994 were: Baxter, Bayer Corporation, Immuno Trading AG and
Behringwerke AG in 1995; Baxter, Immuno Trading AG, Behringwerke AG and Miles,
Inc. (now Bayer Corporation) in 1994; Immuno Trading AG and Behringwerke AG in
1993; and Immuno Trading AG, Amerca Associates (a United Kingdom affiliate of
Farma Biagini) and Behringwerke AG in 1992. Aggregate sales of source and
specialty plasma to these customers were approximately $56 million, $96
million, $34 million and $38 million, or 60%, 59%, 34% and 46% of total sales,
in the first six months of 1995 and the fiscal years ended December 31, 1994,
1993 and 1992, respectively.
NABI generally sells its plasma under contracts ranging from one to five
years which, with the exception of the Baxter contract discussed below, 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, due to changes in certain government
regulations, changes in donor fees or other factors, its costs of producing
and selling plasma rise or fall during the year.
In connection with its acquisition of PBI, effective January 1, 1994, NABI
entered into two separate agreements with terms of five years and three years,
respectively, to supply source plasma to Baxter. These agreements replaced
existing shorter term agreements. Under the new agreements, Baxter is
obligated to purchase an aggregate of approximately 625,000 liters of source
plasma during 1995. Baxter's purchase obligations thereafter, and the purchase
price payable by Baxter for the plasma during the term of the agreements, are
subject to adjustment. Under the five-year agreement with Baxter, which covers
500,000 liters of the plasma to be sold to Baxter in 1995, the price NABI will
receive for plasma adjusts periodically to reflect changes in NABI's principal
costs for the collection of plasma. Under NABI's three-year agreement with
Baxter, the price NABI will receive for plasma will be adjusted yearly by
mutual agreement of the parties based on market conditions. NABI anticipates
that sales to Baxter under these agreements will aggregate approximately 22%
of its total sales in 1995.
IMMUNE GLOBULIN THERAPEUTIC BUSINESS
With the establishment of its Immunotherapy Division in 1992, NABI entered
the immune globulin therapeutic products business. Immune globulin therapeutic
products have a high benefit-to-cost ratio, yield significant gross margins
and have a high level of physician acceptance based on past usage. Immune
globulin therapeutic products are produced from plasma which contains a rich
mixture of polyclonal antibodies produced naturally by a healthy donor in
response to exposure to particular component substances produced by a virus or
bacteria. Immune globulins offer numerous clinical advantages. They are
produced naturally from a human source, and their safety has been well
documented over several decades of clinical experience. Unlike laboratory-
generated monoclonal antibodies, immune globulin therapeutic products are
broad in their spectrum of activity.
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Moreover, in contrast to other immune modulators, immune globulin therapeutic
products offer the ability to fight a specific disease, such as hepatitis,
without interfering with or disabling the patient's overall immune system.
The use of immune globulin therapeutic products increased dramatically in
the mid-1980s as a result of two key factors: the development of intravenous
formulations which made administration of larger therapeutic doses practical
and diagnostic advances which allowed the identification, collection and
formulation of specific antibodies to address particular medical conditions.
As a result of these medical advances, immune globulin therapy has become a
growing part of medical practice. According to Market Research Bureau, by
1992, the market had grown to approximately $700 million, and is expected to
reach $1.2 billion by 1997.
NABI's product line of immune globulin therapeutic products was initiated
with the acquisition of H-BIG and HIV-IG from Abbott in September and November
1992, respectively. NABI's pipeline has since been expanded with the
formulation and development of H-BIG IV, an intravenous formulation of H-BIG,
and the formulation and development of H-CIG, another intravenous product.
Both H-BIG IV and H-CIG will be evaluated for passive immunity against
hepatitis in liver transplants.
The following table summarizes the current clinical status of NABI's
proprietary immune globulin therapeutic products:
IMMUNE GLOBULIN THERAPEUTIC PRODUCTS
<TABLE>
<CAPTION>
PRODUCT INDICATION CLINICAL STATUS
- ------- -------------------- -----------------------------------------------------------
RESEARCH PRECLINICAL IND PHASE I/II PHASE III PLA MARKETING
<S> <C> <C>
H-BIG Exposure/Inoculation X
-----------------------------------------------------
HIV-IG Mother/baby X
---------------------------------------
Pediatric AIDS X
------------------------
H-BIG IV Liver Transplant X
------------------------
H-CIG Liver Transplant X
------------------------
</TABLE>
H-BIG. The first hepatitis B immune globulin to be licensed by the FDA, H-
BIG is an intramuscular product used following exposure by blood transfusion,
accidental ingestion, vertical transmission from a hepatitis B antigen-
positive mother or sexual exposure. Despite the availability of hepatitis B
vaccines, hepatitis B infection has spread rapidly and now affects
approximately 300 million people worldwide. The federal Centers for Disease
Control and Prevention recommends that newborn infants of mothers who are
hepatitis B-positive be inoculated with both hepatitis B immune globulin and a
hepatitis B vaccine. The worldwide market for the current formulation and
indications of H-BIG is estimated to be approximately $50 million.
NABI sells H-BIG primarily through independent wholesalers and distributors.
NABI's principal customers are hospital pharmacies and public health
departments located in the United States.
HIV-IG. HIV-IG is an experimental product currently manufactured by NABI for
potential prophylactic and therapeutic use in treating HIV/AIDS. HIV-IG is
prepared from the plasma of HIV-antibody positive individuals who are
otherwise healthy and have displayed a strong immune response to the HIV
virus. The plasma is extensively tested and virally inactivated during
processing. The antibodies within the plasma are then purified and
concentrated in preparation for administration to patients.
In September 1993, the National Heart, Lung and Blood Institute, in
collaboration with the National Institute of Child Health and Human
Development and the National Institute of Allergy and Infectious Disease
(collectively, the "Institutes"), began a Phase III clinical trial to
determine whether HIV-IG will prevent the vertical transmission of HIV/AIDS
from HIV-positive mothers to their unborn children. The cost to the Institutes
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of this trial is estimated to be in excess of $20 million. Participants in
this trial receive HIV-IG together with zidovudine ("AZT") while a control
group receives a non-HIV-specific immune globulin and AZT. The NIH reported
results of a trial using AZT alone to prevent transmission of AIDS from
infected mothers to their children. In this trial, the rate of HIV
transmission in AZT-treated mother/child pairs was 8% compared with a
transmission rate of 26% in the control population. The disease state of the
HIV-infected mothers in this trial was generally less advanced than the
disease state in mothers who are participating in the HIV-IG trial. It is
believed that there is an increased transmission rate from mother to fetus
when the mother has a more advanced condition. The results of the AZT trial
are not necessarily indicative of the results that may be achieved in the HIV-
IG trial.
The HIV-IG used in the Phase III clinical trial is being produced by NABI
following current good manufacturing practices ("cGMP") in its pilot
manufacturing facility in Miami. NABI sells the HIV-IG to the Institutes
conducting and funding the trials. The data from the trial may be used as the
pivotal safety and efficacy data required to obtain a Product License
Application ("PLA") from the FDA in order to commercialize the product. There
can be no assurance that this Phase III clinical trial will be successful or
that NABI will be able to obtain a Product License. HIV-IG has been awarded
Orphan Drug status for use in the prevention of vertical perinatal
transmission of HIV/AIDS from mother to child. NABI believes that HIV-IG also
may have applications for the treatment of pediatric HIV patients and for the
prevention of HIV from accidental exposure.
NABI was notified by the European Patent Office in 1993 that NABI had been
allowed a patent for HIV-IG, giving NABI commercial protection in 12 European
countries until the year 2008. NABI also has patents for HIV-IG in Australia
and New Zealand, and has patent applications for HIV-IG pending in various
other foreign countries. NABI jointly owns these HIV-IG patents and
applications with the University of Minnesota. Prior to any sale of HIV-IG in
foreign countries, NABI will need to obtain any necessary licenses and
approvals. NABI has no pending patent application for HIV-IG in the United
States. If an existing U.S. patent held by an unrelated third party withstands
any challenge by NABI or others, NABI may be required to obtain a license from
the patent holder in order to market HIV-IG in the United States. While NABI
believes that, if necessary, it will be able to obtain such a license on
commercially acceptable terms, there can be no assurance that NABI will be
successful.
In the United States, approximately 30% of the infants born to HIV-infected
mothers become infected. Currently, an estimated 7,000 such infants are born
at risk of contracting HIV/AIDS from their HIV positive mothers in the United
States each year. The federal Centers for Disease Control and Prevention
estimates that there are approximately 3,500 children with AIDS in the United
States and an additional 7,000-10,000 that are HIV positive. More than 80% of
these HIV/AIDS infections resulted from the transmission of the virus from the
mother to child at birth. In addition, recent World Health Organization data
show that young women are a rapidly growing subgroup of HIV infection, making
the need for prevention of vertical transmission especially pressing.
H-BIG IV. NABI has identified a potential new indication for an intravenous
formulation of H-BIG that may provide an additional market opportunity
distinct from the market currently served by the intramuscular formulation of
H-BIG. One of the severe side effects of hepatitis B infection is
deterioration of the liver, resulting in the need for liver transplantation.
Up to 20% of the current eligible liver transplant population are hepatitis B
patients. These patients are at high risk for liver reinfection with the
hepatitis B virus once the transplant is completed. Reinfection causes the
process of liver deterioration to recur, and, as a result, most transplant
centers consider hepatitis B-infected patients to be poor candidates for
transplantation. A significant number of transplant centers have policies
precluding these patients from the transplant population given the relative
scarcity of available livers and poor prognosis for such patients. Due to
these policies, hepatitis B-infected patients' liver transplants represented
only five percent of the approximately 3,000 liver transplants performed in
the United States in 1993.
NABI believes treatment with H-BIG 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-infected patients. Prevention
of hepatitis B reinfection is likely to require a series of intravenous
treatments with large amounts of H-BIG IV immediately following
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transplantation and maintenance doses for extended periods of undetermined
length, compared to current indications for H-BIG which require only a single
intramuscular injection of a small amount of antibody. Such large doses of H-
BIG IV are anticipated because liver transplant patients receive large
quantities of immunosuppressive drugs to prevent rejection of their
transplanted organs. As a result, hepatitis B patients require amounts of
antibody that are sufficient to provide virtually 100% of the antibody
required to neutralize their infections.
NABI filed an IND application for H-BIG IV in July 1994 for the specific
indication of use for hepatitis B liver transplant cases. In 1996, NABI
intends to begin human clinical trials studying safety and pharmacokinetic
tests in liver transplant patients. The safety profile of immune globulin
therapeutic products is well known and the safety of the intramuscular H-BIG
already has been demonstrated by many years of usage of the product.
Therefore, NABI expects clinical development requirements for H-BIG IV to
consist largely of demonstrating its safety and efficacy in preventing
hepatitis B reinfection in liver transplant patients in one or two pivotal
clinical trials. NABI intends to pursue the necessary FDA licensing to use H-
BIG IV for all the indications for which H-BIG is currently used. NABI has
been granted Orphan Drug status for H-BIG IV.
H-CIG. NABI's third product in active development is H-CIG. If the FDA
licenses H-CIG, NABI plans to manufacture and market H-CIG to prevent
reinfection in liver transplant patients who test positive for hepatitis C
antibody at the time of transplant. According to researchers at transplant
centers, hepatitis C infection is actually more prevalent among their liver
transplant patients than hepatitis B. Hepatitis C was an under-recognized
contributor to morbidity and hospitalization in liver transplant patients
until recently when a diagnostic test specific for hepatitis C became widely
available. Hepatitis C is not as deadly as hepatitis B; however, it does have
significant economic impact because it contributes to frequent
hospitalizations when it occurs in liver transplant patients.
NABI filed an IND application for H-CIG in January 1994 and during 1996
intends to begin human clinical trials studying safety and pharmacokinetic
tests in liver transplant patients. Based on these initial tests and assuming
no unanticipated safety issues arise, NABI expects to proceed directly into
the design and implementation of one or more pivotal clinical trials. Because
NABI's H-CIG is the first product to provide hepatitis C antibody for clinical
use, no data exists to predict the efficacy and the dose level of H-CIG that
will produce the best combination of safety and efficacy, other than
experience with H-BIG. NABI applied for Orphan Drug status for H-CIG in 1993.
Availability of H-BIG. The essential raw material for the manufacture of H-
BIG is a specialty plasma containing high concentrations of hepatitis B
antibodies. NABI obtains this plasma from donors whose production of these
antibodies has been stimulated by the administration of a vaccine. The
manufacturer of the vaccine used to inoculate donors has discontinued its
production of the vaccine, and other available vaccines are not as effective
in stimulating the production of these antibodies for NABI's current
formulation of H-BIG. NABI believes it has sufficient inventory of its current
vaccine to meet NABI's needs until at least November 1996 when the IND for the
existing inventory of vaccine expires. By that time, NABI expects to have been
able to collect sufficient quantities of specialty plasma from use of the
vaccine to supply NABI's raw material needs for H-BIG for another three to
five years. Before NABI's inventory of the vaccine and the resulting supply of
specialty plasma have been consumed, NABI intends to reformulate H-BIG to
permit the use of other currently available vaccines to stimulate donors in
order to obtain the specialty plasma necessary for the manufacture of H-BIG.
Alternatively, NABI will seek to develop another source of vaccine similar to
the discontinued vaccine. There can be no assurance that NABI's plans with
respect to the H-BIG vaccine will be successful.
Although NABI obtains and provides the specialty plasma necessary for the
manufacture of H-BIG, it is dependent on a single manufacturer to process this
raw material for H-BIG and on Abbott to formulate and package the product.
NABI's contract with Abbott expired on September 30, 1995. Abbott has advised
NABI that Abbott does not intend to renew its contract, although it has no
present intention of discontinuing its formulation and packaging of the
product. In August 1995, NABI entered into an agreement with MDPH pursuant to
which MDPH will also process quantities of the raw material for H-BIG. NABI
anticipates receiving
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product from the MDPH facility in early 1996. NABI is constructing a
biopharmaceutical manufacturing facility which will allow NABI to formulate,
process and package H-BIG. Construction should be completed before the end of
1995. However, because the facility will require validation and licensure by
the FDA, NABI does not anticipate that the facility will be able to produce H-
BIG for commercial sale until 1997. Although management of NABI believes that
the MDPH contract and management's ability to inventory a sufficient supply of
H-BIG will enable it to meet customer demand until NABI is able to manufacture
the product in its own facility, disruption in NABI's ability to obtain H-BIG
for commercial sale or material changes in the terms under which NABI now
obtains the product could adversely affect NABI.
Regulatory developments at the FDA also could affect the availability of H-
BIG. See "--Government and Industry Regulation" and "Risk Factors--Factors
Regarding NABI--Government Regulation."
DIAGNOSTIC PRODUCTS AND SERVICES
NABI develops and manufactures human serum-based products used by clinical
laboratories to assure accurate testing for infectious diseases and growth
media used for genetic engineering. Among the products manufactured by NABI are
NorMLCera-Plus from human serum, which is sold to tissue typing banks as a
testing control for organ transplantation and for use in biological research.
In 1993, NABI obtained FDA clearance to market VirocheQC I Quality Assurance
Reagent, which is a multiconstituent reagent used as an external control to
promote testing accuracy for HIV 1 and 2, hepatitis B antigen, hepatitis core,
hepatitis C and HTLV-I. VirocheQC I, and its companion products, QC-Hepatitis
and QC-HIV, are sold to reference laboratories, blood bank laboratories and
diagnostic product companies.
NABI believes that demand for NABI's diagnostic products will continue to
expand as a result of both more widespread HIV testing and increasingly
rigorous standards for clinical testing laboratories. For example, regulations
promulgated in February 1992 under the Clinical Laboratory Improvements Act of
1988 require laboratories to use independent external controls to provide
internal quality assurance.
NABI believes that its Miami-based laboratory is one of the largest
independent plasma and blood product testing laboratories in the world. Among
the tests performed by NABI are screening tests for the antibody to HIV. NABI
currently performs HIV testing under U.S. military contracts which expire
during 1996 through 2000. NABI also performs confirmatory tests for the HIV
antibody and other blood and plasma tests, including hepatitis, tetanus, CMV
and protein electropheresis. Customers for laboratory services include
hospitals, blood banks and other plasma collectors as well as the United States
Department of Defense.
NABI markets diagnostic products and services through its own sales
organization and, in the case of diagnostic products, through independent
distributors. For the six-month period ended June 30, 1995 and the fiscal years
ended December 31, 1994, 1993 and 1992, NABI generated revenues of $2.6
million, $6.2 million, $3.9 million and $4.1 million, respectively, from the
sale of diagnostic products. For the same periods, NABI generated revenues of
$1.6 million, $5.2 million, $5.7 million and $7.4 million, respectively, from
the sale of specialized testing services.
COMPETITION
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. While there is intense competition among independent
plasma collectors, NABI has successfully competed 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
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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 NABI offers for the donation of the plasma it
collects, 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 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 attempting to develop and market products to treat these
diseases based upon technology which would lessen or eliminate the need for
human blood plasma. Such products, if successfully developed and marketed,
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.
NABI believes that significant barriers to entry exist in the plasma
collection industry. In order to commence a plasma collection business, an
organization must establish a center, a process which NABI believes takes from
15-24 months to complete due to the need for regulatory approvals. If
specialty plasmas will be collected, the approval process will be lengthened
because a separate FDA license must be obtained for each specialty plasma to
be collected. Once the center is operational, a stable donor base must be
established and cultivated. Repeat donors are critical to success for both
quality control and economic reasons. A significant volume of donated plasma,
and sophisticated screening and immunization procedures, also are necessary in
order to provide the diversity of plasma products demanded by the market.
Further, due to increasing quality requirements and more stringent testing
procedures, as well as the need to automate for cost-effectiveness, there is
an increasing need for economies of scale which generally only large firms can
provide.
NABI believes that H-BIG has a significant share of the domestic market and
that NABI's access to the vaccine and specialty plasma necessary for the
manufacture of H-BIG will allow it to maintain its market share. See "--Immune
Globulin Therapeutic Business--Availability of H-BIG." NABI's main competitor
in marketing H-BIG has been Bayer Corporation, ("Bayer") a subsidiary of major
multinational pharmaceutical company. NABI believes that Bayer's competing
product has a current domestic market share of less than 20%. 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 NABI for source plasma. NABI also may compete with other major
pharmaceutical concerns in the future development, marketing or sale of immune
globulin therapeutic products.
The testing laboratory operations of NABI compete with several large testing
facilities, most of which are operated by companies having substantially
greater resources than NABI. NABI believes that it can compete with these
other suppliers based on the volume of testing it performs on its own plasma
and the expertise that it has accordingly developed.
GOVERNMENT AND INDUSTRY REGULATION
The collection, processing and sale of NABI's products and certain areas of
its research 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. NABI believes
that it is in substantial compliance with all applicable regulations.
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.
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FDA regulations applicable to plasma collection centers require that
prospective plasma donors must be given a complete medical examination no more
than one week prior to an initial donation and that repeat donors be
reexamined at least once per year. On the day of a donation a donor must have
a normal temperature, have systolic and diastolic blood pressures within
normal limits, have a minimum weight of 110 pounds and be free from any
infectious disease or history of viral hepatitis. Plasma collection centers
are also required to maintain detailed records of all donations and storage
and shipping activities, and every container of blood or source plasma must
bear a label that includes a donor identification number, an expiration date
and any product information that a manufacturer might require for use of the
product. Each unit of plasma is accompanied by a document containing test
results for hepatitis, HIV, liver function and any other pertinent special
test results. FDA regulations also prescribe the frozen temperatures at which
plasma must be stored and limit or prohibit, depending upon the circumstances,
sales of plasma which has not been maintained at proper temperature. NABI
undergoes regular, unscheduled inspections by the FDA to ascertain its
compliance with that agency's regulations and guidelines. From time to time
NABI receives notices of deficiencies from the FDA as a result of such
inspections.
NABI continually pursues its commitment to quality and compliance with
applicable FDA regulations through its own internal quality assurance
programs. NABI continuously trains all levels of its employees, from managers
and regional managers through individual employees in each of its centers. At
least once each year on a formal basis, and more frequently on an informal
basis, NABI performs regulatory and quality assurance audits of each of its
facilities. As part of its commitment to quality, NABI has embraced the
Quality Plasma Program ("QPP") which was initiated by the American Blood
Resources Association, a trade 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. Sixty-six of NABI's 70
domestic-owned centers are QPP certified centers. NABI is highly committed to
the QPP program and has applied for or is applying for QPP certification for
the remaining four facilities. While plasma collection costs have increased
and the available donor supply has been affected industry-wide as a result of
the QPP as well as additional blood plasma testing requirements imposed by the
FDA, NABI believes that additional testing and standards may ultimately
benefit NABI because it may be better able to satisfy the higher standards
than some of its competitors which may not have the technical and financial
resources to meet new standards.
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 the country's borders or, in the case of certain European
countries, outside of Europe. 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. 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 the
assets of two plasma collection centers in Germany in June 1994 and intends to
acquire and/or establish additional centers in Europe. NABI's plasma
collection centers in Germany currently do not collect material amounts of
plasma in relation to the demand for plasma from NABI's European customers.
While NABI currently intends to increase its European plasma collections,
there can be no assurance that it will be successful or that it will be able
to serve all or most of the needs of its foreign customers from European
plasma collections.
Immune Globulin Therapeutic Products. The production and marketing of NABI's
immune globulin therapeutic products and its research and development
activities are subject to regulation for safety and efficacy by numerous
governmental authorities in the United States and other countries. In the
United States, biological products are subject to rigorous FDA regulation. The
federal Food, Drug and Cosmetic Act and other federal and state statutes and
regulations govern or influence the testing, manufacture, safety,
effectiveness, labeling, storage, record keeping, approval, advertising and
promotion of the products.
Immune globulin therapeutics 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 IND application with the FDA, which must become
effective pursuant to FDA regulations
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before human clinical studies may commence, and FDA approval of a 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. 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 in laboratory animals to evaluate the
potential efficacy and the 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 clinical evaluation, Phase I trials, generally involve
administration of a product to a small number of 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 multiple 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 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.
The testing and approval process is likely to require substantial time and
effort. There can be no assurance that any approval will be granted on a
timely basis, if at all. The FDA may deny a PLA if applicable regulatory
criteria are not satisfied, require additional testing or information, or
require post-marketing testing and surveillance to monitor the effects of
NABI's products. In addition, the FDA may require samples of any lot of the
product for testing and may deny release of the lot if the product fails the
testing. Product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing.
Sales of NABI's products outside the United States are also subject to
extensive regulatory requirements, which vary widely from country to country.
The time required to obtain such approval may be longer or shorter than that
required for FDA approval.
Orphan Drug. The Orphan Drug Act generally provides incentives to
manufacturers to undertake development and marketing of products to treat
relatively rare diseases or diseases affecting fewer than 200,000 persons in
the United States at the time of application for "Orphan Drug" designation.
HIV-IG and H-BIG IV have been designated Orphan Drugs and NABI has applied for
Orphan Drug status for H-CIG. A drug that receives Orphan Drug designation by
the FDA and is the first product to receive FDA marketing approval for its
product claim is entitled to an exclusive marketing period in the United
States of seven years for that product claim. However, a drug that is
considered by the FDA to be different than a particular Orphan Drug is not
barred from sale in the United States during such seven-year exclusive
marketing period. Legislation has been introduced in the United States
Congress that would restrict the duration of the market exclusivity of an
Orphan Drug. NABI believes that this legislation as introduced will not affect
the immune globulin therapeutic products for which it has applied for Orphan
Drug status; however, there can be no assurance that this legislation will not
be amended before passage or that additional legislation will not affect the
benefits of the existing statute.
Other. NABI's Miami-based FDA-approved diagnostic testing laboratory is
licensed by the Health and Rehabilitative Services of Florida, and the states
of Maryland, New York, Pennsylvania and West Virginia. The
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<PAGE>
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.
NABI believes that it is in substantial compliance with all applicable
regulations.
Third Party Reimbursement. NABI's ability to successfully commercialize
human therapeutic products may depend in part on the extent to which
reimbursement for the cost of such products and related treatment will be
available from government health administration authorities, private health
coverage insurers and other organizations. Significant uncertainty exists as
to the reimbursement status of newly approved health care products, and there
can be no assurance that adequate third-party coverage will be available for
NABI to maintain price levels sufficient for realization of an appropriate
return on its investment in product development.
EMPLOYEES
NABI employed approximately 1,800 persons at October 20, 1995. NABI believes
that the relations between NABI's management and its employees are
satisfactory.
PROPERTIES
A majority of the space occupied by NABI, comprising approximately 580,000
square feet, is leased from unaffiliated parties 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. Four of NABI's plasma collection centers currently operate on month-to-
month lease arrangements. 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 centers located in Arizona, Indiana, Minnesota and
Washington.
NABI's plasma collection centers range in size from approximately 1,000 to
25,000 square feet and generally are located in population centers of 80,000
to 250,000 people.
NABI is currently constructing a new 77,000 square foot biopharmaceutical
manufacturing facility in Boca Raton, Florida. This facility is being designed
to process specialty plasma into immune globulin therapeutic products, thereby
reducing NABI's reliance on outside suppliers. NABI's executive offices are
located in the new facility. NABI plans to complete construction of the
facility in late 1995. Before it can produce products for commercial sale, it
must receive validation and FDA licensing. NABI anticipates that it will
receive validation and FDA licensing in 1997.
PRODUCT LIABILITY AND INSURANCE
The processing and sale of NABI's plasma and plasma-based products involve a
risk of product liability claims. See "Legal Proceedings." NABI currently
maintains commercial general (including product and professional liability)
insurance with a limit of $5.75 million per occurrence and $5.75 million in
the annual aggregate on a claims made basis. The limit is in excess of a
$250,000 self insurance retention per claim limited to a $1 million annual
aggregate. There can be no assurance that the coverage limits of NABI's
insurance policy and/or any rights of indemnification and contribution that
NABI may have will offset potential claims. A successful claim against NABI in
excess of insurance coverage and not subject to indemnification could have a
material adverse effect on NABI.
LEGAL PROCEEDINGS
NABI is a party to litigation in the ordinary course of business. In
addition, NABI has been named in the actions described below. NABI does not
believe that any such litigation will have a material adverse effect on its
financial position or results of operations.
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<PAGE>
NABI was named in a civil action filed on May 23, 1995 in the Circuit Court
for the Eleventh Judicial Circuit of Dade County, Florida (Case No. 95-10489
CA 02) against Bayer, Armour Pharmaceutical Company, Rhone-Poulenc Rorer Inc.,
Baxter, Alpha Therapeutic Corporation, NABI and The National Hemophilia
Foundation. The plaintiffs allege that they and their class members are
persons infected with HIV as a result of using HIV-contaminated products of
various defendants or as a result of family relations with those so infected.
On June 23, 1995, the case was removed to the United States District Court for
the Southern District of Florida, Miami Division. The plaintiffs subsequently
moved to remand this case to state court. The federal court's ruling on the
removal/remand issue is pending.
NABI was named in three other civil actions filed on or about July 27, 1995
in the Circuit Court for the Eleventh Judicial Circuit of Dade County, Florida
(Case Nos. 95-15169, 95-15170 and 95-15171) against Bayer, Armour
Pharmaceutical Company, Rhone-Poulenc Rorer Inc., Baxter, NABI and Alpha
Therapeutic Corporation. The plaintiffs assert that use of AHF concentrate
made by the defendants other than NABI resulted in the plaintiffs becoming
infected with the HIV virus. On September 1, 1995, the three cases were
removed to the United States District Court for the Southern District of
Florida, Miami Division.
NABI was named in a civil action filed on or about August 9, 1995 in the
Franklin County Common Pleas Court, Civil Division, Columbus, Ohio (Case No.
95-CAB-08-5443) against Bayer, Armour Pharmaceutical Company, Rhone-Poulenc
Rorer Inc., Baxter, Alpha Therapeutic Corporation, the American Red Cross,
Arthur L. Sagone, Jr., M.D., Arthur L. Sagone, M.D., Inc., NABI and the
National Hemophilia Foundation, Inc. The plaintiffs' claims arise from the
AIDS-related death of an individual who was treated for hemophilia with
coagulation products allegedly contaminated with HIV. On September 11, 1995,
the case was removed to the United States District Court for the Southern
District of Ohio.
NABI denies all claims made against it, and intends to vigorously defend the
cases.
DESCRIPTION OF NABI CAPITAL STOCK
NABI has authorized capital stock consisting of 50,000,000 shares of Common
Stock, par value $.10 per share, of which 19,549,954 shares were outstanding
as of October 20, 1995, and 5,000,000 shares of Preferred Stock, par value
$.10 per share, none of which are outstanding. Upon the completion of the
Merger, NABI will have 33,821,736 shares of NABI Common Stock outstanding, and
vested options and an outstanding warrant to purchase an aggregate of
1,669,692 shares of NABI Common Stock.
COMMON STOCK
Each holder of NABI Common Stock is entitled to one vote for each share held
of record and is entitled to dividends as declared from time to time by the
Board of Directors out of assets legally available therefor. Outstanding
shares of NABI Common Stock are not subject to redemption and are non-
assessable. Upon any liquidation of NABI, the owners of NABI Common Stock are
entitled to receive on a pro-rata basis all assets then legally available for
distribution after satisfaction of any liquidation preference to which holders
of outstanding shares of preferred stock may be entitled. The holders of NABI
Common Stock do not have any conversion, cumulative voting, subscription or
preemptive rights.
PREFERRED STOCK
Of the 5,000,000 shares of preferred stock which are authorized, 1,538,462
shares have been designated "Series A Convertible Preferred Stock" with
certain conversion rights, liquidation preferences and voting rights. So long
as at least 769,231 shares of the Series A Convertible Preferred Stock are
outstanding, the holders thereof
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are entitled to elect a majority of NABI's Board of Directors. The remaining
authorized shares of preferred stock may be issued from time to time in one or
more series with such designations, powers, preferences, rights,
qualifications, limitations and restrictions as may be fixed by NABI's Board
of Directors. The Board of Directors, without obtaining shareholder approval,
could issue the preferred stock with voting and/or conversion rights and
thereby dilute the voting power and equity of the holders of NABI Common Stock
and adversely affect the market price of such stock. NABI has no present plans
to issue any shares of preferred stock.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
NABI is subject to the provisions of Section 203 of the DGCL. In general,
this statute prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder." An "interested
stockholder" is a person who, together with affiliates and associates, owns
(or within the prior three years did own) 15% or more of the corporation's
voting stock. NABI in the future may elect not to be governed by Section 203
by means of an amendment to NABI's Restated Certificate of Incorporation or
By-laws that has been approved by stockholders holding a majority of its
outstanding voting securities.
NABI's Restated Certificate of Incorporation provides that a merger,
consolidation or sale of all or substantially all of the assets of NABI or any
sale by NABI of its securities having a fair market value of at least $250,000
requires the approval of the holders of at least 75% of the outstanding shares
of NABI Common Stock and 50% of any outstanding shares of NABI Series A
Convertible Preferred Stock (so long as the holders of the Series A shares
have the right to elect a majority of the Board of Directors), unless the
transaction is approved by the Board of Directors and provided that, if the
transaction is with a person which owns at the time five percent or more of
the outstanding shares of NABI Common Stock, a majority of the members of the
Board of Directors voting for the approval of the transaction have been duly
elected and acting members of the Board of Directors prior to the time such
person became the holder of five percent or more of the outstanding shares of
NABI Common Stock.
NABI's Board of Directors believes that the provisions described above will
help assure that all NABI's stockholders will be treated similarly if certain
kinds of business combinations are proposed. However, these provisions also
may have the effect of deterring a hostile takeover or delaying or preventing
changes in control or management of NABI, and may make it more difficult to
accomplish certain transactions that are opposed by the incumbent Board of
Directors and that could be beneficial to stockholders.
LIMITATION OF LIABILITY
As permitted by the DGCL, NABI's Restated Certificate of Incorporation
provides that directors of NABI shall not be personally liable to NABI or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
NABI or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the DGCL, relating to prohibited dividends or
distributions or the repurchase or redemption of stock, or (iv) for any
transaction from which the director derives an improper personal benefit.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the NABI Common Stock is Registrar and
Transfer Company, Cranford, New Jersey.
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NABI SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated statement of operations data set forth below for
each of the three years in the period ended December 31, 1994 and the selected
consolidated balance sheet data at December 31, 1994 and 1993 are derived from
the consolidated financial statements of NABI audited by Price Waterhouse LLP,
independent accountants, which are included elsewhere in this Proxy
Statement/Prospectus and are qualified by reference to such financial
statements. The selected consolidated statement of operations data set forth
below for each of the two years in the period ended December 31, 1991 and the
selected consolidated balance sheet data set forth below at December 31, 1991
and 1990 are derived from financial statements audited by Price Waterhouse LLP
but which are not included herein. The selected statement of operations data
for the six months ended June 30, 1995 and 1994, and the selected balance
sheet data at June 30, 1995 are derived from unaudited financial statements of
NABI which are also included elsewhere in this Proxy Statement/Prospectus and
which, in the opinion of management, include all adjustments, consisting only
of normal recurring adjustments necessary for a fair presentation of the
financial position and the results of operations for the unaudited interim
periods. Operating results for the six months ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1995. The selected financial data set forth below should
be read in conjunction with the financial statements and "NABI Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
both appearing elsewhere herein. All amounts in the following table are
expressed in thousands, except for per share data.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ---------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- ------- -------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales.................. $ 93,452 $77,280 $164,678 $101,574 $82,354 $68,230 $72,822
Cost of products sold.. 74,201 61,507 131,368 81,607 71,137 59,041 63,599
Selling, general and
administrative ex-
pense................. 5,941 6,132 12,224 8,107 6,910 5,303 5,306
Other operating ex-
pense................. 2,324 1,863 3,660 3,387 2,448 602 646
-------- ------- -------- -------- ------- ------- -------
Operating income....... 10,986 7,778 17,426 8,473 1,859 3,284 3,271
Interest expense, net.. (533) (1,766) (3,025) (3,080) (2,427) (231) (269)
-------- ------- -------- -------- ------- ------- -------
Income (loss) before
provision for income
taxes and
extraordinary
charge/accounting
change/extraordinary
credit................ 10,453 6,012 14,401 5,393 (568) 3,053 3,002
Provision for income
taxes................. (3,973) (2,302) (5,774) (1,988) (5) (836) (790)
-------- ------- -------- -------- ------- ------- -------
Income (loss) before
extraordinary
charge/accounting
change/extraordinary
credit................ 6,480 3,710 8,627 3,405 (573) 2,217 2,212
Extraordinary
charge/accounting
change/extraordinary
credit................ -- -- (717) 100 -- -- 126
-------- ------- -------- -------- ------- ------- -------
Net income (loss)...... $ 6,480 $ 3,710 $ 7,910 $ 3,505 $ (573) $ 2,217 $ 2,338
======== ======= ======== ======== ======= ======= =======
Earnings (loss) per
share:
Income (loss) before
extraordinary
charge/accounting
change/extraordinary
credit............... $ 0.32 $ 0.22 $ 0.49 $ 0.25 $ (0.04) $ 0.14 $ 0.14
Extraordinary
charge/accounting
change/extraordinary
credit............... -- -- (0.04) 0.01 -- -- 0.01
-------- ------- -------- -------- ------- ------- -------
Net income (loss)...... $ 0.32 $ 0.22 $ 0.45 $ 0.26 $ (0.04) $ 0.14 $ 0.15
======== ======= ======== ======== ======= ======= =======
Weighted average number
of shares and common
share equivalents..... 20,347 16,670 17,590 13,540 13,328 15,980 15,587
BALANCE SHEET DATA:
Working capital........ $ 30,022 $14,921 $ 25,552 $ 12,558 $ 9,680 $12,929 $ 5,438
Total assets........... $106,426 $78,218 $ 93,817 $ 52,888 $47,520 $26,550 $23,667
Notes payable, includ-
ing current maturi-
ties.................. $ 33,478 $27,612 $ 25,028 $ 18,084 $18,641 $ 6,613 $ 7,343
Contingent purchase
price obligation, in-
cluding current matu-
rities................ -- $ 7,527 -- $ 7,056 $ 6,943 -- --
Total stockholders' eq-
uity.................. $ 58,309 $30,393 $ 51,765 $ 17,982 $13,917 $15,117 $12,101
</TABLE>
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NABI MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis examines the major factors
contributing to NABI's financial condition and results of operations for the
six months ended June 30, 1995 and 1994, and for the three years ended
December 31, 1994. The following discussion and analysis should be read in
conjunction with the Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS
The following table sets forth NABI's results of operations for the
respective periods expressed as a percentage of sales:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- -------------------------
(UNAUDITED)
1995 1994 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold........... 79.4 79.6 79.8 80.3 86.4
------- ------- ------- ------- -------
Gross margin.................... 20.6 20.4 20.2 19.7 13.6
Selling, general and administra-
tive expense................... 6.3 7.9 7.4 8.0 8.4
Other operating expense......... 2.5 2.4 2.2 3.4 3.0
------- ------- ------- ------- -------
Operating income................ 11.8 10.1 10.6 8.3 2.2
Interest expense, net........... 0.6 2.3 1.9 3.0 2.9
------- ------- ------- ------- -------
Income (loss) before provision
for income taxes, extraordinary
charge and cumulative effect of
change in accounting for income
taxes.......................... 11.2 7.8 8.7 5.3 (0.7)
Provision for income taxes...... (4.3) (3.0) (3.5) (1.9) --
Extraordinary charge/cumulative
effect of change in accounting
for income taxes............... -- -- (0.4) 0.1 --
------- ------- ------- ------- -------
Net income (loss)............... 6.9% 4.8% 4.8% 3.5% (0.7)%
======= ======= ======= ======= =======
</TABLE>
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.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------------------- ---------------------------------------------
(UNAUDITED)
SEGMENT 1995 % 1994 % 1994 % 1993 % 1992 %
------- ------- ----- ------- ----- -------- ----- -------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Plasma--Source.......... $54,172 58.0% $47,992 62.1% $ 98,882 60.0% $ 56,029 55.2% $48,258 58.6%
--Specialty........... 28,489 30.5 19,958 25.8 45,057 27.4 29,171 28.7 21,424 26.0
------- ----- ------- ----- -------- ----- -------- ----- ------- -----
82,661 88.5 67,950 87.9 143,939 87.4 85,200 83.9 69,682 84.6
Therapeutic Products.... 6,590 7.0 4,142 5.4 9,295 5.6 6,557 6.5 1,388 1.7
Diagnostic Products and
Services............... 4,201 4.5 5,188 6.7 11,444 7.0 9.817 9.6 11,284 13.7
------- ----- ------- ----- -------- ----- -------- ----- ------- -----
Total................... $93,452 100.0% $77,280 100.0% $164,678 100.0% $101,574 100.0% $82,354 100.0%
======= ===== ======= ===== ======== ===== ======== ===== ======= =====
</TABLE>
Six Months Ended June 30, 1995 as Compared to 1994
NABI achieved record sales, operating income and net income for the six
month period ended June 30, 1995. Operating income rose 41% to $11.0 million
in the first half of 1995 compared to $7.8 million in the comparable 1994
period. Net income for the first six months of 1995 was $6.5 million, or $0.32
per share versus $3.8 million or $0.22 per share in the first six months of
1994.
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Sales. Sales for the first half of 1995 rose 21% to $93.5 million compared
to $77.3 million for the first half of 1994. The increase was primarily
attributable to increased plasma shipments, primarily specialty plasma, and an
increase in H-BIG sales.
Gross Margin. The gross margin of $19.3 million or 20.6% of sales in the
first half of 1995 compared favorably to a gross margin of $15.8 million or
20.4% of sales in the first half of 1994. An improved sales mix resulting from
increased sales of H-BIG and specialty plasma accounted for the improved gross
margin.
Selling, General and Administrative Expense. Selling, general and
administrative expense was $5.9 million or 6.3% of sales for the first half of
1995 compared to $6.1 million or 7.9% of sales for the first half of 1994. The
reduction in these expenses reflects the full integration and economics
associated with the PBI acquisition in January 1994 and ongoing cost
containment measures.
Other Operating Expense. Other operating expenses were $2.3 million or 2.5%
of sales for the first half of 1995 compared to $1.9 million or 2.4% of sales
for the first half of 1994 primarily as a result of higher royalty expenses
associated with increased sales of H-BIG and additional freight expenses
associated with the increased volume of sales during the period.
Interest Expense. Interest expense decreased to $.5 million or 0.6% of sales
in the first six months of 1995 from $1.8 million or 2.3% of sales in the
first six months of 1994 primarily due to the early retirement of NABI's
subordinated and other debt in the fourth quarter of 1994. In addition,
interest associated with borrowings to finance construction of NABI's
biopharmaceutical facility is being capitalized as project cost until the
facility is available for commercial production.
Other Factors. The effective income tax rates remained stable at 38% and
38.3% for the first half of 1995 and 1994, respectively, and differed from the
federal statutory rate principally due to state income taxes and non-
deductible foreign losses in 1995, offset by the effects of foreign trade
income.
1994 as Compared to 1993
NABI achieved record sales, operating income and net income for the year
ended December 31, 1994. Operating income rose 106% to $17.4 million compared
to $8.5 million in the prior year. Net income for 1994 was $7.9 million or
$0.45 per share, versus $3.5 million or $0.26 per share in the prior year.
Sales. Sales for 1994 increased 62% to $164.7 million compared to $101.6
million, reflecting an increase in plasma sales of $58.8 million, an increase
in therapeutic product sales of $2.7 million and an increase in diagnostic
products and services of $1.6 million. Sales of source and specialty plasmas
were $144 million in 1994 compared to $85.2 million in 1993. The 69% increase
in plasma sales was primarily attributable to source plasma shipments
resulting from the PBI acquisition and to increased plasma shipments,
primarily specialty plasma, from NABI's other plasma centers. Sales of
therapeutic products increased to $9.3 million in 1994, compared to $6.6
million in the prior year, primarily due to increased sales of H-BIG.
Gross Margin. Gross margin for 1994 was $33.3 million or 20.2%, compared to
$20 million or 19.7% in 1993. The increase resulted from increased shipments
of higher margin specialty plasma and additional source plasma shipments
resulting primarily from the PBI acquisition. Gross margin percentages
improved over 1993 as a result of increased sales volume of specialty plasma
and the profit contribution from record sales of H-BIG and diagnostic control
products. The significant increase in source plasma sales from PBI partially
offset the otherwise improved product mix and reduced the gross margin as a
percentage of sales.
Selling, General and Administrative Expense. Selling, general and
administrative expense was $12.2 million or 7.4% of sales in 1994, compared to
$8.1 million or 8.0% of sales in 1993. While expenses declined as a percentage
of sales, expenses increased primarily as a result of personnel and other
corporate expenses generally associated with the acquisition and continuing
operations of PBI.
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<PAGE>
Other Operating Expense. Other operating expense was $3.7 million or 2.2% of
sales for 1994, compared to $3.4 million or 3.4% of sales for 1993 primarily
as a result of increased amortization expense associated with the PBI
acquisition.
Interest Expense. Interest expense decreased slightly to $3 million or 1.9%
of sales in 1994 from $3.1 million or 3% in 1993. Increased interest expense
associated with indebtedness incurred as a result of the PBI acquisition was
offset by the reduction in interest expense associated with the early
retirement of NABI's 11% senior subordinated notes and a contingent purchase
price obligation in October 1994.
Other Factors. The effective income tax rates were 40.1% and 36.9% for 1994
and 1993, respectively. The effective rate for 1994 differs from the federal
statutory rate of 35% principally due to state income taxes and non-deductible
foreign losses, offset by the effects of foreign trade income. The increase in
the 1994 tax rate was due primarily to a reduction in the ratio of foreign
trade income to overall revenue and foreign losses in 1994.
Net income for 1994 reflects an extraordinary charge of $717,000 or $0.04
per share, which reflects the immediate recognition and expense of deferred
debt discount and debt issue costs associated with NABI's early retirement of
its 11% senior subordinated notes in October 1994.
1993 as Compared to 1992
NABI experienced record sales, operating income and net income for the year
ended December 31, 1993. Operating income increased to $8.5 million or 8.3% of
sales for 1993, compared to $1.9 million or 2.2% of sales for 1992. Net income
was $3.5 million or $0.26 per share in 1993, compared to a net loss of
$573,000, or ($0.04) per share, in 1992.
Sales. Sales for 1993 increased 23.3% to $101.6 million compared to $82.4
million for 1992, reflecting an increase in plasma sales of $15.5 million, an
increase in sales of therapeutic products of $5.2 million and a decrease in
sales of diagnostic products and services of $1.5 million. Sales of source and
specialty plasmas were $85.2 million in 1993 compared to $69.7 million in
1992. The 22.3% increase in plasma sales is primarily attributable to an
increase in unit shipments and improved pricing of source and specialty
plasmas in response to the continued worldwide demand for plasma products.
Sales of therapeutic products increased to $6.6 million in 1993, compared to
$1.4 million in the prior year, primarily as a result of a full year of sales
of H-BIG. Sales of diagnostic products and services decreased to $9.8 million
compared to $11.3 million in the prior year, due to a decline in revenues from
testing under government contracts.
Gross Margin. Gross margin improved to 19.7% for 1993, from 13.6% in 1992.
The improved margin resulted primarily from sales of H-BIG, increased sales of
higher margin specialty plasmas and overall improved pricing on plasma
products.
Selling, General and Administrative Expense. Selling, general and
administrative expense was $8.1 million or 8.0% of sales in 1993, as compared
to $6.9 million or 8.4% of sales in 1992. While expenses decreased as a
percentage of sales, the dollar increase was primarily attributable to the
fact that NABI paid no management incentive compensation in 1992.
Other Operating Expense. Other operating expense was $3.4 million or 3.4% of
sales in 1993, compared to $2.4 million or 3.0% of sales in 1992. The increase
was principally due to amortization expense associated with the March 1992
acquisition from Continental Pharma Cryoson Inc. ("CPCI") of certain operating
assets of CPCI's Biologicals Division and royalties associated with the
September 1992 acquisition of H-BIG.
Interest Expense. Interest expense was $3.1 million in 1993, compared to
$2.4 million in 1992. The increase was principally due to indebtedness
incurred as a result of the acquisition in March 1992 from CPCI of its
Biologicals Division and a controlling interest in NABI's capital stock.
77
<PAGE>
Other Factors. The effective tax rate for 1993 was 36.9%, which differs from
the federal statutory rate of 35.0% principally due to state income taxes,
goodwill and other amortization, offset by the effects of foreign trade
income. Effective January 1, 1993, NABI changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." The cumulative effect of adopting this Statement was an increase in
net income of $100,000, or $0.01 per share, in 1993.
NABI incurred a net operating loss in 1992 and, accordingly, no provision
for federal or state income taxes was recorded. The effective tax rate
differed from the federal statutory rate in 1992, principally due to goodwill
amortization and net operating loss benefits not utilized, offset by the
effects of foreign trade income.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, NABI's current assets exceeded current liabilities by
$30 million as compared to a net working capital position of $25.6 million at
December 31, 1994. Approximately $8.7 million in a term loan and $6.1 million
in revolving credit loans, under the existing $12 million revolving credit
facility, were outstanding under a credit agreement with NABI's principal
lender at June 30, 1995. On July 17, 1995, in connection with the acquisition
of nine plasma centers, NABI's principal lender extended its commitment under
the revolving line of credit to $18 million through December 31, 1995. In
addition, NABI had $15 million in flexible term notes outstanding, the
proceeds of which were used to finance the construction of a new
biopharmaceutical facility. The flexible term note agreement provides for a
maximum outstanding principal amount of $18 million.
Projected capital expenditures for the remainder of 1995 include the
completion of construction of the new biopharmaceutical manufacturing
facility, which also includes NABI's executive offices; plasma center
renovations and relocations; and recurring improvements and continued
automation of NABI's laboratories and warehouse facilities. NABI expects that
these expenditures and NABI's working capital requirements will be furnished
by a combination of funds on hand, borrowings under the term note agreement,
cash flow from operations and bank borrowings, as required, under NABI's
credit agreement.
PRICING
Sales of NABI's plasma, therapeutic products, and diagnostic products and
services are made on a negotiated price basis, except with respect to large
volume testing for the U.S. Government. Such negotiations are influenced by
existing industry conditions at the time, including inflationary and
supply/demand conditions. Most of NABI's plasma is sold pursuant to long term
contracts generally with annual repricing provisions which fix prices for a
year. This limits NABI's vulnerability to short term declines in pricing, but
also limits its short term opportunities to increase prices during periods of
high demand. In addition, NABI may be adversely or beneficially affected if
its costs of producing and selling plasma rise or fall during the contract
year for which pricing is fixed. No central or established market exists which
would provide a reasonable basis for the prediction of changing prices with
any certainty.
INFLATION
Management believes that inflation generally produces a favorable trend on
sales with offsetting unfavorable effects on the cost of products sold and
other operating expenses. As a result, with the possible exception of
borrowing costs, inflation has no significant effect on NABI's results of
operations or financial condition.
78
<PAGE>
NABI MANAGEMENT AND EXECUTIVE COMPENSATION
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of NABI as of October 20, 1995, and
their ages as of such date, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David J. Gury............. 56 Chairman of the Board, President and Chief
Executive Officer
John C. Carlisle.......... 49 Executive Vice President, Chief Operating
Officer and Director
Alfred J. Fernandez....... 46 Vice President, Finance and Chief Financial
Officer
Pinya Cohen, Ph.D......... 59 Vice President, Quality Assurance and Regulatory
Affairs
Raj Kumar, D.Sc........... 48 Senior Vice President
Stephen W. Weston......... 47 Vice President, Plasma Operations
Paul W. Bogikes........... 83 Director
David L. Castaldi......... 55 Director
Richard A. Harvey, Jr..... 46 Director
David A. Thompson......... 53 Director
</TABLE>
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 ("Alpha") (formerly Abbott
Scientific Products) 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 was elected a director in August 1995. Mr. Carlisle joined
NABI in January 1994 and was elected Executive Vice President and Chief
Operating Officer in March 1994. From August 1989 to January 1994 he was
President and Chief Executive Officer of PBI. From June 1981 to August 1989 he
served as Director of Plasma Supply for Alpha.
ALFRED J. FERNANDEZ is Vice President, Finance and Chief Financial Officer
of NABI and has served in that capacity 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.
PINYA COHEN, PH.D. joined NABI in August 1992 as Vice President, Quality
Assurance and Regulatory Affairs. From 1990 to 1992, he was Vice President,
Regulatory Affairs for Connaught Laboratories, Inc. From 1976 to 1990, Dr.
Cohen was Vice President, Quality Control and Regulatory Affairs at Merieux
Institute, Inc. Prior to that time, from 1972 to 1976, he was Director of the
Plasma Derivatives Branch, Bureau of Biologics, FDA and from 1964 to 1972, he
was Director of the Plasma Derivatives Branch, Division of Biologics
Standards, NIH.
RAJ KUMAR, D.SC. has been Senior Vice President since May 1990. Prior to
that time, since March 1986, he was Vice President, Operations of NABI.
Previously, he was Director of Operations of NABI and has been with NABI since
1974.
79
<PAGE>
STEPHEN W. WESTON joined NABI as Vice President, Plasma Operations in March
1992. Prior to that time, he was Vice President, Finance and Chief Financial
Officer for TSI Security Acquisition Corporation in Deerfield Beach, Florida
since August 1990. From September 1988 to July 1990, Mr. Weston was employed
by ConPharma Home Healthcare, Inc. in Buffalo, New York as Vice President,
Finance and Chief Financial Officer. For more than four years prior to that
time, Mr. Weston served as Vice President, Finance and Chief Financial Officer
of NABI.
PAUL BOGIKES has been a director of NABI since 1987. He has been active
since 1977 in the operations of Medical Implements Company, a company owned by
him that supplies blood related reagents, components and fractions. For more
than forty years, Mr. Bogikes has been involved in businesses relating to
human and animal blood, including establishing plasma collection operations.
DAVID L. CASTALDI has been a Director of NABI since July 1994. Mr. Castaldi
is currently acting as a consultant for Genzyme Tissue Repair, Inc. He was one
of the founders of BioSurface Technology, Inc. ("BioSurface"), and served as
its President and Chief Executive Officer and as a director since March 1987.
Genzyme Corporation acquired BioSurface in December 1994. From 1971 to 1987,
Mr. Castaldi worked for Baxter Travenol Laboratories, Inc. where he served,
from 1977 to 1987, as President of the Hyland Therapeutics Division, a
worldwide manufacturer and marketer of therapeutic biological pharmaceuticals.
RICHARD A. HARVEY, JR. has been a director of NABI since 1992. He has been
President of BNYA, a Boston investment banking firm, since November 1991.
Previously, from April 1988 to November 1991, he was a Managing Director of
BNYA, and from April 1980 to April 1988 he was a Senior Vice President of
Shearson Lehman Brothers.
DAVID A. THOMPSON has been a director of NABI since 1990. In June 1995, he
retired as Senior Vice President of Abbott Laboratories and as President of
its Diagnostics Division, positions he had held since August 1983. Prior to
that time he served in various capacities at Abbott and its Ross Laboratories
Division, including Vice President of Personnel, Vice President of the
Materials Management Division, Vice President of Operations and Director of
Manufacturing and Engineering.
Officers of NABI serve at the pleasure of the Board of Directors, subject to
the terms of any employment agreement with NABI. See "Employment Agreements."
The term of office of each director of NABI ends at the next annual meeting of
NABI's stockholders or when his successor is elected and qualified. There are
no family relationships among any of NABI's officers and directors.
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<PAGE>
SUMMARY COMPENSATION TABLE
The following table contains a summary of the annual, long-term and other
compensation of NABI's executive officers at December 31, 1994, including its
Chief Executive Officer, for each of NABI's fiscal years ended December 31,
1994, 1993 and 1992.
<TABLE>
<CAPTION>
ANNUAL LONG TERM COMPENSATION
COMPENSATION AWARDS
------------------------------------- -----------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARDS($) OPTIONS (#) COMPENSATION($)
------------------ ---- --------- -------- ------------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
David J. Gury........... 1994 288,750 407,826 27,460 -- 78,555 33,253(3)
Chairman of the Board, 1993 244,712 203,350 -- 27,750(2) 67,627 44,739
President and Chief 1992 218,484 -- 43,396 89,000(2) 60,000 36,380
Executive Officer
John C. Carlisle(4)..... 1994 175,270 184,630 45,144 -- 46,830 2,682(3)
Executive Vice 1993 -- -- -- -- -- --
President and Chief 1992 -- -- -- -- -- --
Operating Officer
Alfred J. Fernandez..... 1994 153,115 147,283 -- -- 24,125 4,104(3)
Vice President-- 1993 137,500 76,450 -- -- 30,000 4,589
Finance and Chief 1992 129,250 -- -- 35,600(2) 35,000 1,783
Financial Officer
Raj Kumar, D.Sc......... 1994 170,196 130,304 -- -- 26,380 3,754(3)
Senior Vice President 1993 161,942 83,600 -- -- 35,000 5,376
1992 141,250 -- -- 12,460(2) 40,000 4,201
Stephen W. Weston(4).... 1994 138,317 110,054 -- -- 21,350 3,059(3)
Vice President-- 1993 121,000 67,650 -- -- 25,000 3,387
Operations 1992 89,086 -- -- -- 30,000 292
</TABLE>
- --------
(1) Includes $38,544 paid for moving expenses for Mr. Carlisle in 1994 and
$15,000 paid for a club membership for Mr. Gury in 1992.
(2) The number and value of restricted stock holdings as of December 31, 1994
for each of Messrs. Gury, Fernandez and Kumar were, respectively, 37,000
shares ($277,500), 10,000 shares ($75,000) and 3,500 shares ($26,250).
Values reflected in the table were determined using per share values of
$3.56 and $2.31, the closing prices of NABI Common Stock on Nasdaq on
April 6, 1992 and February 26, 1993, respectively, the dates of the
grants. The closing price of NABI Common Stock on Nasdaq on December 31,
1994 was $7.50. Such shares of restricted stock vest not less than three
years from the grant date, were granted under terms which require their
forfeiture to NABI in the event that the holder leaves the employment of
NABI prior to vesting and may not be transferred while they are subject to
forfeiture. In the case of Mr. Gury, however, if his employment is
terminated without cause (as defined), his shares of restricted stock
cease to be subject to forfeiture and to restrictions on transfer. See
"Employment Agreements." No cash dividends have been previously paid on
NABI Common Stock and none are currently anticipated.
(3) Includes premiums for life insurance in the amounts of $31,003, $782,
$1,854, $1,504 and $809 paid by NABI on behalf of, respectively, Messrs.
Gury, Carlisle, Fernandez, Kumar and Weston. Also includes contributions
under NABI's 401(k) plan in the amounts of $2,250, $1,900, $2,250, $2,250
and $2,250 on behalf of Messrs. Gury, Carlisle, Fernandez, Kumar and
Weston, respectively.
(4) Mr. Carlisle and Mr. Weston became executive officers in March 1994 and
April 1992, respectively.
81
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information with respect to stock options
granted to the Chief Executive Officer and the named executive officers during
1994. NABI has not granted SARs.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERMS
--------------------------------------------------- ----------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
GRANTED(#)(1) FISCAL YEAR PRICE ($/SH) DATE 5%($) 10%($)
------------- ------------- ------------ ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
David J. Gury........... 78,555 19.0% 6.75 3/02/2004 333,469 845,076
John C. Carlisle........ 46,830 11.3% 6.75 3/02/2004 198,795 503,786
Alfred J. Fernandez..... 24,125 5.8% 6.75 3/02/2004 102,412 259,531
Raj Kumar, D.Sc......... 26,380 6.4% 6.75 3/02/2004 111,984 283,790
Stephen W. Weston....... 21,350 5.2% 6.75 3/02/2004 90,632 229,678
</TABLE>
- --------
(1) Each option becomes exercisable with respect to 25% of the shares subject
to the option on each of March 3, 1995, 1996, 1997 and 1998. The
Compensation Committee may at any time accelerate the exercisability of
any option. In addition, in the event of a change in control of NABI (as
determined by the Compensation Committee), the Committee may take such
actions with respect to the options as it considers equitable and in the
best interests of NABI. Under the terms of certain of the officers'
employment agreements, if any such officer is terminated without cause (as
defined), one-half or more of his unvested options will immediately become
exercisable. See "Employment Agreements."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table shows certain information concerning the aggregate
number and dollar value of all options exercised and the total number of
unexercised options held by the Chief Executive Officer and the named
executive officers as of December 31, 1994.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERICSED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1994(#) DECEMBER 31, 1994($)
SHARES -------------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(2)
----------- -------------- -------------------- --------------------
<S> <C> <C> <C> <C>
David J. Gury........... 66,666 333,330 421,956/192,626 2,667,562/653,069
John C. Carlisle........ -- -- 65,528/46,830 318,466/35,123
Alfred J. Fernandez..... 20,000 116,250 72,000/77,125 408,646/286,773
Raj Kumar, D.Sc......... 54,000 248,468 41,750/85,630 207,201/317,766
Stephen W. Weston....... -- -- 21,250/55,100 91,522/172,378
</TABLE>
- --------
(1) Value is calculated based on the difference between the option exercise
price and the closing market price of NABI Common Stock on the date of
exercise multiplied by the number of shares to which the exercise relates.
(2) Calculated using the difference between the option exercise prices and
$7.50, the closing price of NABI Common Stock on Nasdaq on December 31,
1994.
EMPLOYMENT AGREEMENTS
NABI has employment agreements (collectively, the "Employment Agreements,"
and each individually, an "Employment Agreement") with each of the named
executive officers other than Dr. Kumar. The Employment Agreements with
Messrs. Fernandez and Weston were effective on August 1, 1995 and have terms
expiring on July 31, 1998. The Employment Agreement with Mr. Carlisle,
effective January 27, 1994, expires on December 31, 1996. The base salaries
paid under the Employment Agreements to Messrs. Fernandez and
82
<PAGE>
Weston are $171,000 and $159,000, respectively, through the one-year period
ending March 31, 1996. The base salary under the Employment Agreement with Mr.
Carlisle is $225,000 per year through March 31, 1996. Under the Employment
Agreements, each of the employees is entitled to receive additional
compensation and annual bonuses as determined by the Compensation Committee,
term life insurance and a monthly automobile allowance, and is eligible to
participate in NABI's benefit plans and programs. Each of the Employment
Agreements provides that it may be terminated by either the employee or NABI
prior to the expiration of the term of the Agreement; however, if the employee
is terminated without cause (as defined) he is entitled to receive a severance
payment in the amount of 100% of his then-current annual salary and the
continuation of certain benefits for specified periods following termination.
In addition, for Messrs. Fernandez and Weston, all of the employee's then-
unvested stock options will vest and become exercisable. Each of the
Employment Agreements provides that the employee will not compete with NABI
for a period of one year after his employment terminates.
Mr. Gury's Employment Agreement was effective January 1, 1993 and expires
December 31, 1997, and continues thereafter for successive one-year terms
unless at least 180 days' prior notice of termination is given by either Mr.
Gury or NABI. Mr. Gury's base salary under the Employment Agreement is
$365,000 through the one-year period ending March 31, 1996. Mr. Gury's base
salary is subject to increase at the discretion of the Compensation Committee.
Mr. Gury is entitled to participate in bonus plans maintained by NABI for
senior executives and may receive additional bonuses at the discretion of the
Compensation Committee. The Agreement also provides that Mr. Gury shall
receive other specified benefits. NABI may terminate Mr. Gury's employment at
any time prior to the expiration of the original term of the Employment
Agreement. If this termination is without cause (as defined in the Employment
Agreement), for the longer of the balance of the initial five-year term or
three years, Mr. Gury will be entitled to receive each year an amount equal to
his salary at the time of termination plus his average bonus for the last
three fiscal years. In addition, all restricted stock awarded to Mr. Gury will
no longer be subject to forfeiture or contractual restrictions on transfer and
one-half of his then-unvested stock options will vest and become exercisable.
During such period, Mr. Gury shall continue to receive all benefits that he is
otherwise entitled to receive under the Employment Agreement and professional
out-placement services at NABI's expense. The Agreement also provides for
severance benefits in the event either NABI or Mr. Gury terminates Mr. Gury's
employment following the initial five-year term. Mr. Gury's Employment
Agreement provides that he will not compete with NABI during any period in
which he is receiving severance payments.
DIRECTOR COMPENSATION
During 1994, NABI paid its directors other than Mr. Gury an annual fee of
$7,000 plus a fee of $300 for each meeting of the NABI Board of Directors or
any committee thereof attended by the director, unless the director
participated in any such meeting by conference telephone, in which case the
fee was $100. In August 1995, the Board of Directors voted to increase the
annual fee paid to non-employee directors to $10,000. No directors' fees are
paid to directors for attendance at committee meetings which are scheduled in
connection with meetings of the Board of Directors. Directors are also
reimbursed for out-of-pocket expenses incurred in connection with attendance
at meetings of the Board of Directors and its committees. Non-employee
directors are also eligible to receive options under NABI's Stock Plan for
Non-Employee Directors.
83
<PAGE>
NABI PRINCIPAL STOCKHOLDERS
The following table sets forth information as of October 20, 1995 with
respect to (i) each director of NABI, (ii) the named executive officers, (iii)
all officers and directors of NABI as a group and (iv) each person who is
known by NABI to be the beneficial owner of more than five percent of NABI
Common Stock as of such date. This information has been furnished by the
persons listed in the table.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OF BENEFICIAL OWNER OWNED(1) SHARES OWNED
------------------------ ------------ ------------
<S> <C> <C>
Directors
David J. Gury................................. 664,849(2) 3.3%
Paul Bogikes.................................. 15,000(3) (4)
John C. Carlisle.............................. 98,809(5) (4)
David L. Castaldi............................. 7,001(3) (4)
Richard A. Harvey, Jr......................... 5,000(6) (4)
David A. Thompson............................. 10,000(3) (4)
Named Executive Officers
David J. Gury................................. 664,849(2) 3.3%
John C. Carlisle.............................. 98,809(5) (4)
Alfred J. Fernandez........................... 137,281(7) (4)
Raj Kumar, D.Sc............................... 117,695(8) (4)
Stephen W. Weston............................. 40,337(9) (4)
All Officers and Directors as a Group (10
Persons)..................................... 1,110,339(10) 5.5%
Five Percent or Greater Stockholders
Abbott Laboratories........................... 2,000,000(11) 10.2%
One Abbott Park Road
Abbott Park, IL 60064-3500
FMR Corp...................................... 1,424,061(12) 7.3%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- --------
(1) Unless otherwise noted, the nature of beneficial ownership consists of
sole voting and investment power.
(2) Includes (a) an aggregate of 72,100 shares of NABI Common Stock owned by
Mr. Gury's wife and 9,000 shares held by Mr. Gury as trustee under a trust
for the benefit of his mother, as to all of which Mr. Gury disclaims
beneficial ownership, (b) an aggregate of 346,851 shares of NABI Common
Stock which may be acquired under stock options which are presently
exercisable or may be exercised within 60 days of October 20, 1995 and (c)
12,000 shares of NABI Common Stock which may not be transferred until the
shares vest and which are subject to forfeiture to NABI in the event that
Mr. Gury leaves the employment of NABI before the shares vest, which
occurs with respect to one-third of the shares on each of February 26,
1996, 1997 and 1998. The restrictions on transfer and the forfeiture
provisions described above lapse in the event that Mr. Gury's employment
with NABI is terminated without cause (as defined).
(3) Includes 5,000 shares of NABI Common Stock which may be acquired under
stock options exercisable within 60 days of October 20, 1995.
(4) Percentage of NABI Common Stock beneficially owned is less than 1%.
(5) Includes 11,707 shares of NABI Common Stock which may be acquired under
stock options which are presently exercisable or may be exercised within
60 days of October 20, 1995.
(6) Shares of NABI Common Stock which may be acquired under stock options
exercisable within 60 days of October 20, 1995.
(7) Includes an aggregate of 107,281 shares of NABI Common Stock which may be
acquired under stock options which are presently exercisable or may be
exercised within 60 days of October 20, 1995. Mr. Fernandez owns 30,000
shares jointly with his wife.
(8) Includes an aggregate of 54,095 shares of NABI Common Stock which may be
acquired under stock options which are presently exercisable or may be
exercised within 60 days of October 20, 1995.
(9) Shares of NABI Common Stock which may be acquired under stock options
which are presently exercisable or may be exercised within 60 days of
October 20, 1995.
(10) See notes 2, 3, 5, 6, 7, 8 and 9 above.
(11) Based upon a Schedule 13D dated October 15, 1992 filed by Abbott. See
"NABI Certain Transactions" with respect to voting and other agreements
concerning these shares.
(12) Based upon information provided by FMR Corp., which only has sole
dispositive power with respect to the shares.
84
<PAGE>
NABI CERTAIN TRANSACTIONS
ABBOTT LABORATORIES
In 1992 NABI acquired certain assets from Abbott relating to H-BIG, a
proprietary FDA-licensed product currently used to provide passive immunity
from exposure to hepatitis B. In consideration for the acquisition of the
assets, NABI issued to Abbott 2,000,000 shares of NABI Common Stock (which
Abbott continued to hold as of October 20, 1995) and agreed to pay Abbott
royalties based upon sales of H-BIG. NABI accrued approximately $1,426,000 to
Abbott in 1994 in respect of this royalty. In the H-BIG transaction, Abbott
also agreed to manufacture H-BIG for NABI under a license from NABI and to act
as NABI's exclusive distributor in specified Latin American and Far East
territories. NABI accrued approximately $120,000 in distribution fees to
Abbott in 1994.
In connection with the H-BIG acquisition, Abbott and NABI entered into a
shareholder agreement (the "Shareholder Agreement") which governs the rights
of Abbott and the companies Abbott controls (collectively, the "Abbott Group")
with respect to all shares of NABI Common Stock from time to time held by the
Abbott Group. The Shareholder Agreement requires the Abbott Group to vote its
shares of NABI Common Stock both for NABI's nominees to NABI's Board of
Directors and, unless NABI otherwise consents in writing or the stockholders
are voting on a "significant event," on all other matters to be voted on by
NABI's stockholders in the same proportion as the votes cast by NABI's other
stockholders. For purposes of the Shareholder Agreement, the Merger
constitutes a "significant event." The Shareholder Agreement also imposes
certain restrictions on the right of the Abbott Group to acquire or transfer
any shares of NABI Common Stock, provides NABI with certain repurchase rights
and obligations with respect to the shares of NABI Common Stock held by the
Abbott Group and requires NABI to register the resale of such shares under the
Securities Act upon notice from the Abbott Group after September 30, 1995.
Such registration rights terminate on September 30, 1998. The Shareholder
Agreement terminates on the earlier of September 30, 2002 or two years from
the date the voting power of the Abbott Group falls below five percent. The
voting power of the Abbott Group will not fall below 5% as a result of the
Merger.
In November 1992, NABI acquired Abbott's rights and assets associated with
HIV-IG. In consideration for the sale of these rights and assets, Abbott will
receive a royalty based on commercial sales of HIV-IG. To date, no royalties
have been paid or are owing to Abbott with respect to HIV-IG.
In 1992 NABI and Abbott entered into a Plasma Data Management System License
and Lease Agreement under which Abbott agreed to develop for and lease to NABI
a proprietary computer system for managing data from NABI's testing of blood
and blood components. The agreement has a term of seven years commencing on
the date that Abbott certifies that the system has been installed and is
operational, at which time monthly lease payments become due aggregating
approximately $970,000 per year (depending upon the number of NABI's
facilities using the system). NABI accrued approximately $167,000 in lease
payments under this agreement during 1994.
During 1994, NABI also sold approximately $6,103,000 of plasma, diagnostic
and other products and testing services to Abbott and purchased approximately
$11,260,000 of reagents, testing supplies and other products from Abbott.
PREMIER BIORESOURCES, INC.
On January 27, 1994, NABI acquired PBI by means of a merger in which PBI
became a wholly owned subsidiary of NABI. In connection with the merger, NABI
issued 1,771,584 shares of NABI Common Stock and paid $222,119 in cash to the
stockholders of PBI.
John C. Carlisle, the President, Chief Executive Officer and a stockholder
of PBI immediately before its acquisition by NABI, became the Executive Vice
President and Chief Operating Officer of NABI after the acquisition.
Pursuant to the terms of the PBI acquisition, William A. Davies became a
director of NABI; however, Mr. Davies resigned as a director of NABI on
February 7, 1995. Before the PBI acquisition and during his tenure as
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a director of NABI, Mr. Davies held an interest in the general partner of CGW
Southeast Partners I, L.P. ("CGWSP"), which was the controlling stockholder of
PBI prior to its acquisition by NABI. As a result of the PBI acquisition,
CGWSP owned 1,176,680 shares (or approximately 7.6%) of the outstanding NABI
Common Stock. In connection with a public offering of NABI Common Stock
consummated on October 6, 1994 (the "1994 Offering"), CGWSP sold 1,176,680
shares of NABI Common Stock, representing all its shares of NABI Common Stock,
at the public offering price of $6.50 per share (before underwriting discounts
and commissions).
Richard A. Harvey, Jr., a director of NABI, is President of BNYA, a Boston
investment banking firm. During 1994, BNYA provided investment banking
services to NABI in connection with the PBI acquisition. NABI paid BNYA a
financial advisory fee of $261,660 for its services.
Expenses incurred in connection with the 1994 Offering as a result of
CGWSP's participation in the offering were paid by NABI.
CONTINENTAL PHARMA CRYOSAN INC.
In 1992, NABI purchased from CPCI certain operating assets of CPCI's
Biologicals Division and repurchased from CPCI and ConPharma Home HealthCare,
Inc., a subsidiary of CPCI, certain shares of NABI's capital stock. Since
before the CPCI acquisition, Thomas O. Hecht has been Chairman of the Board,
Chief Executive Officer and the controlling shareholder of CPCI and, until his
resignation on February 7, 1995, he was a director of NABI.
As additional purchase price in connection with the CPCI acquisition, NABI
agreed to make annual payments to CPCI based upon a percentage of NABI's net
sales of source plasma (excluding specialty plasmas) for a period of seven
years, subject to extension in the event CPCI was not paid at least $11.0
million over the seven-year period (the "Contingent Payments"). On January 27,
1994, in connection with the acquisition of PBI, the percentage of net sales
payable to CPCI as Contingent Payments was amended to reduce the percentage
after CPCI has received Contingent Payments equal to $11.0 million.
In August 1994, CPCI and NABI agreed to modify the additional purchase price
agreement to provide for a single lump sum payment of $6.5 million plus
accrued additional payments through September 30, 1994, in full satisfaction
of NABI's obligations to make Contingent Payments. This amount was paid to
CPCI from NABI's proceeds from the 1994 Offering. Also in connection with the
1994 Offering, CPCI purchased 750,000 shares of NABI Common Stock under a
warrant for a price per share of $3.25, all of which it sold in the 1994
Offering.
Expenses incurred in connection with the 1994 Offering as a result of CPCI's
participation in the offering were paid by NABI.
MERGER TRANSACTIONS
BNYA provided investment banking services to NABI in connection with the
Merger. NABI has incurred fees associated with the Merger to BNYA totalling
$120,000 plus expenses as of October 20, 1995.
Mr. Castaldi has performed consulting services in connection with the
Merger. Fees accrued through October 20, 1995 totalled $52,000.
OTHER MATTERS
Mr. Gury was indebted to NABI during 1994 primarily under notes previously
issued to NABI to purchase shares of NABI Common Stock under a stock purchase
plan in effect at the time of the purchase. Since January
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1, 1994, the largest amount of such indebtedness was $187,492. In February
1994 the indebtedness was paid in full. Such indebtedness was secured by a
pledge of shares of NABI Common Stock and accrued interest, during 1994, at a
weighted average interest rate of 6.1% during such period of indebtedness.
Mr. Carlisle was indebted to NABI under a note issued to NABI on September
12, 1994. The largest amount of such indebtedness during 1994 was $131,337. In
March 1995, the indebtedness was paid in full. Such indebtedness was secured
by a pledge of shares of NABI Common Stock and accrued interest, during 1994
and 1995, at a weighted average interest rate of 8.5% during such period of
indebtedness.
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UNIVAX BUSINESS
GENERAL
Univax is a biopharmaceutical company whose mission is to develop and market
products for the prevention and treatment of serious infectious diseases and
their associated complications through activation and targeting of the human
immune system. In pursuing this mission, Univax is developing two broad-based
product lines--vaccines for long-term protection and specific polyclonal
antibodies for immediate, short-term protection and therapeutic intervention.
Univax currently has one product licensed for marketing by the FDA and seven
additional products under development, three of which are in human clinical
trials.
Within its overall mission, Univax's primary strategic focus is the
prevention and treatment of serious bacterial infections, particularly those
that are hospital-acquired or associated with chronic disease. In recent years
there has been a dramatic increase both in the overall incidence of these
infections and in bacterial resistance to the antibiotics used to treat them.
The increase in overall infection incidence has been caused by a number of
factors, including an increase in the number of lengthy, sophisticated
surgeries, greater use of invasive medical devices and longer-term survival of
patients with chronic conditions, as well as a dramatic rise in the number of
severely immune-compromised patients. Antibiotic resistance is becoming more
prevalent, primarily because the massive and frequent use of antibiotics
places bacteria under intense selective pressure to mutate in order to resist
and survive the antibiotics. Because many bacteria can easily transfer
resistance traits to other bacteria, resistance can quickly spread both within
and between bacterial populations. The combination of increased infection
incidence and greater antibiotic resistance has led to the need for new
products to prevent and treat serious bacterial infections.
Univax's two product lines aimed at infectious diseases are derived from
Univax's extensive technology base for developing advanced immunizing agents
that can be used to stimulate the body's production of antibodies against
specific infectious diseases. Univax's vaccine products rely on these
immunizing agents to stimulate "active immunity" so that individuals will
develop their own antibodies to fight off infections. Univax's SPA products
are derived from the plasma of healthy individuals whose antibody levels
against a specific infectious disease have been heightened through stimulation
using Univax's immunizing agents. These specific polyclonal antibodies are
administered to provide "passive immunity" against infection in immune-
compromised patients or patients who are immediately at risk and therefore do
not have time to mount their own antibody response.
Univax's lead product, WinRho SD, was recently licensed for marketing by the
FDA. WinRho SD is an SPA product designed for the treatment of ITP and the
suppression of Rh isoimmunization. ITP is a blood disorder characterized by
abnormally low platelet levels. Because platelets are required for blood
clotting, the disorder can result in uncontrolled bleeding, which in certain
cases can be life-threatening. Rh isoimmunization can complicate the pregnancy
of an Rh-negative mother who is exposed to the blood of her Rh-positive baby
during birth or the last trimester of pregnancy. WinRho SD already has
received marketing approval in Canada and is being sold there for the
suppression of Rh isoimmunization. WinRho SD is under marketing review by
Canadian regulatory authorities for the treatment of ITP. Univax obtained
exclusive United States marketing rights to WinRho SD from Rh Pharmaceuticals,
a Canadian pharmaceutical company, in late 1992. Univax plans to initiate at
least three Phase IV clinical trials for WinRho SD. At least one of the trials
is expected to begin in the fourth quarter of 1995 and the others are expected
to begin in 1996.
Within Univax's primary focus on bacterial infections, two complementary
products are under development for the prevention and treatment of
Staphylococcus aureus ("Staph A") infections. One of these products, StaphVAX,
is a vaccine which has recently completed a Phase II clinical trial in
peritoneal dialysis patients who are at chronic risk of Staph A infections.
The clinical trial showed the vaccine to be safe but ineffective against Staph
A peritonitis. As a result, Univax is designing a Phase II clinical trial with
StaphVAX in hemodialysis patients and expects to begin dosing studies in early
1996. Univax also intends to utilize its Staph A immunizing agent as a
stimulant to develop StaphGAM, an SPA product for use in trauma and certain
surgery patients to combat infections caused by Staph A bacteria. A
preliminary donor stimulation trial with this immunizing agent
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which began in July 1994 was recently concluded, and a six month follow-on
donor stimulation trial was initiated in September 1995.
Also within its bacterial infection program, Univax is developing
HyperGAM+CF, an SPA product directed at Pseudomonas infections, which are a
major cause of bronchitis, pulmonary failure and death in cystic fibrosis
patients. A donor stimulation program with the immunizing agent is ongoing and
a Phase I/II clinical trial of HyperGAM+CF was completed in 1994. The Phase
I/II study demonstrated that HyperGAM+CF had a good safety profile and a
circulating half-life consistent with a monthly dosing regimen. Based on these
results, a Phase II clinical trial was initiated in the first quarter of 1995.
Univax is developing HyperGAM+CF in collaboration with Genzyme, which has
agreed to provide Univax with milestone payments and development funding, as
well as profit sharing payments.
Univax is expected to commence Phase I/II clinical trials in 1996 on a CMV
immunoglobulin product by stimulating donors with Chiron's CMV vaccine, for
which Univax has been granted exclusive, worldwide rights in humans.
Univax has four additional products in the early stages of development,
including vaccine and SPA products for preventing bacterial infections caused
by Staphylococcus epidermidis ("Staph epi"), Enterococcus ("Enterococci") and
three types of Gram-negative bacteria.
In addition to its collaborations with Rh Pharmaceuticals, Genzyme and
Chiron, Univax has also entered into agreements with other collaborators,
including NIH.
BACKGROUND
Infectious Diseases. Infectious diseases were once considered among the most
problematic of all medical conditions. However, medical advances made during
the middle of the twentieth century, including the development of vaccines for
viral infections and antibiotics for bacterial infections, significantly
reduced the incidence and seriousness of these often fatal diseases.
Antibiotics, in particular, were considered a major breakthrough because they
were capable of killing the bacteria responsible for such serious diseases as
tuberculosis and blood poisoning. Unfortunately, in recent years there has
been a significant increase both in the incidence of bacterial infections and
in the percentage of bacteria that are resistant to one or more antibiotics.
The increase in infectious disease incidence has been caused by a number of
factors, including an increase in the number of lengthy, sophisticated
surgeries, greater use of invasive medical devices and longer-term survival of
patients with chronic conditions. The increase over the last 10 to 15 years in
the number of severely immune-compromised patients has also contributed to the
increased incidence of infectious disease. The most obvious reason for this
trend is the AIDS epidemic. However, also contributing to the increase in
severely immune-compromised patients is the development of aggressive
chemotherapy techniques for treating a variety of cancers, which deplete the
bone marrow of infection-fighting white blood cells. Immune-compromised
patients present a particularly difficult clinical challenge in that they can
be infected by organisms that are present in the environment but rarely cause
disease in persons with a functional immune system.
Antibiotic resistance is increasing primarily because of the massive and
frequent use of antibiotics. Frequent prescription of antibiotics by
physicians, self-treatment in countries where antibiotics are available on an
over-the-counter basis and heavy antibiotic use to prevent infections in
animals place bacteria under intense selective pressure to mutate in an effort
to resist and survive the antibiotic. Many bacteria also can transfer
resistance traits to other bacteria, thereby rapidly spreading resistance both
within and between bacterial populations.
Vaccines. When invaded by viruses, bacteria or other disease-causing
organisms, the human body mounts an immune response, producing antibodies that
target and help kill the invading pathogen. This natural immune response to an
infection is termed "active immunity." Vaccines induce active immunity in the
absence of an actual infection by presenting to the immune system dead or
disabled organisms or purified components derived
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from the organism's surface. The immune system develops an active immune
response to the vaccine and "remembers" that response just as it does for a
natural infection. Because this "immune memory" results in a stronger and more
rapid immune response upon subsequent exposure to the pathogen, vaccines can
provide significant long-term protection. Vaccines are powerful tools in the
fight against infectious disease and have been largely responsible for the
elimination of small pox, polio, diphtheria, whooping cough and certain other
diseases as major causes of death in the United States.
Vaccines traditionally have been developed with the goal of protecting
entire populations against highly contagious viral infections through mass
vaccination in childhood. However, for many bacterial infections, although the
population at large is not at significant risk, certain hospitalized or
chronically ill patients have a critical need for the immune protection
afforded by a vaccine. Included in these risk groups are individuals with an
underlying disease such as chronic kidney failure, which puts them at long-
term risk of infection, and individuals who are at severe risk of infection
due to exposure associated with serious shock/trauma or surgery. Univax is
actively developing vaccine products that fall into this new generation of
"adult" and "therapeutic" vaccines.
Specific Polyclonal Antibodies. Despite the many successes that traditional
pharmaceutical firms have had with vaccines, there are a number of infectious
disease situations in which the usefulness of vaccines is limited. Vaccines
are generally not effective in immune-compromised individuals--precisely those
people at greatest risk of infection. In addition, because protective immune
response requires weeks or months to develop, vaccines often cannot be used in
patients who are at immediate risk of infection. In these situations, immune
protection can be achieved by "passive immunity" in which the patient is
treated with a polyclonal antibody preparation which contains high levels of
specific antibodies against the targeted infectious disease agent. These
specific antibodies can be harvested from the plasma of individuals who were
either previously exposed to or actively immunized against the infectious
agent.
Plasma, the non-cellular, liquid portion of blood, contains a variety of
medically useful proteins, including albumin, AHF and antibodies. Human plasma
obtained from donors has been used for over half a century as a source of
these valuable proteins. The majority of the plasma-derived polyclonal
antibody products sold today are "standard immunoglobulins" obtained from a
non-stimulated donor population. Although these products are quite useful as
antibody replacement therapy for various immune deficiencies, their usefulness
in fighting infectious diseases is limited to those infections for which the
normal population has a high level of naturally occurring antibodies.
Polyclonal antibody products for specific infectious disease pathogens can
be obtained by screening the normal donor population for individuals who have
a level of the desired antibody due to previous exposure to the pathogen. This
screening approach is only feasible if high concentrations of the desired
antibodies occur naturally in a significant percentage of the donor
population. An alternative approach is to stimulate donors with an immunizing
agent specifically directed at the targeted pathogen. Such donor stimulation
can create a steadier supply of plasma with high levels of the desired types
of antibodies. Donor stimulation has already been used successfully by other
pharmaceutical companies for the development of SPA products active against
tetanus, rabies, hepatitis B and Rh incompatibility. All of Univax's SPA
products under development are produced by donor stimulation.
Univax believes that specific polyclonal antibody preparations offer
important advantages over monoclonal antibodies in preventing and treating
bacterial infections. Because bacteria possess complex surface antigens which
contain many different epitopes and can exist in several variant forms, it is
difficult for a monoclonal antibody, which binds to a single epitope, to
provide adequate protection. In contrast, specific polyclonal antibodies can
be produced by stimulation of donors with the surface antigen or a mixture of
variant antigens. This results in antibody populations capable of recognizing
both multiple epitopes and variant antigens. Several different monoclonal
antibodies would need to be administered simultaneously to achieve the same
effect. To date, there are no monoclonal antibody products licensed in the
U.S. for treatment of an infectious disease, whereas several SPA products have
already been licensed by the FDA for the prevention of infectious diseases.
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UNIVAX TECHNOLOGY
Bacterial Vaccines. Most viral vaccines are based on dead or disabled
organisms. In contrast, bacterial vaccines generally cannot be based on dead
or disabled organisms because bacteria produce many toxins that are dangerous
even if the bacteria are no longer infective. Moreover, because bacteria
generally do not possess a single key surface protein analogous to viral coat
proteins, protein-based bacterial vaccines are not likely to be broadly
useful. Therefore, Univax believes that the most rational scientific approach
to bacterial vaccine development is to exploit the complex polysaccharides
present on the surface of most bacteria. Because vaccine companies have
historically focused primarily on viral rather than bacterial diseases, only
four polysaccharide-based bacterial vaccines are currently on the market in
the U.S. It is in this field of modern bacterial polysaccharide vaccines that
Univax has focused its principal development efforts.
Although it is possible to generate an immune response to a vaccine
containing only a purified polysaccharide, polysaccharides are not inherently
good at stimulating an immune response. This low inherent immunogenicity is at
least partially responsible for the fact that individuals often do not have
high natural antibody levels following a bacterial infection. One method for
increasing the immunogenicity of a polysaccharide vaccine is to link it
chemically to a highly immunogenic carrier protein. The resulting conjugate
can elicit an enhanced immune response to the polysaccharide component and
also enhance the production of immune cells that remember the vaccine, thereby
activating a rapid response to a subsequent exposure, and significantly
improving the protective immune response elicited by the vaccine.
Bacterial Vaccine Capabilities. Univax believes it is at the forefront in
the development of bacterial vaccines based on polysaccharides and
polysaccharide/protein conjugates. Univax's specific capabilities in the
development of polysaccharide and polysaccharide/protein conjugate bacterial
vaccines include:
. broad microbiological expertise in the epidemiology, clinical pathology
and molecular and cellular biology of bacterial pathogens;
. development of cell lines and fermentation processes that maximize the
production of polysaccharides and proteins;
. development of efficient, commercial-scale processes for the purification
of polysaccharides and proteins in accordance with cGMP for
pharmaceutical products;
. development of efficient, commercial-scale processes for conjugating
polysaccharides to immunogenic carrier proteins that produce biologically
active conjugate vaccines and can be performed in accordance with cGMP
requirements;
. development of chemical, physical, biological and immunological assays
and animal models for characterization of polysaccharides, proteins and
conjugates and to establish parameters of purity, potency and stability;
and
. formulation development for both liquid and lyophilized vaccines.
Univax has complemented these internal research and development capabilities
by collaborating with several of the major academic and government research
laboratories active in this area.
In addition to the vaccine development capabilities described above, Univax
has in-licensed proprietary carrier proteins and adjuvants which it believes
will be important enhancements for the development of highly immunogenic
vaccines. These include the QS-21 Stimulon adjuvant, which Univax has
exclusively in-licensed from Cambridge Biotech Corporation ("Cambridge
Biotech") for use in donor stimulation with a wide range of bacterial
immunizing agents; Chiron's adjuvant, MF 59; and Novasome, an adjuvant in-
licensed from IGI Inc. for use with Univax's Staph A vaccine.
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WINRHO SD
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 even 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. Unless associated with HIV infection, ITP in
children is generally an acute condition which resolves itself within six
months with or without therapy. In adults, whether primary or secondary to HIV
infection, the disease is generally chronic in nature.
In the United States, there are currently approximately 67,000 individuals
who suffer from primary ITP or ITP secondary to HIV infection. Approximately
17,000 of these cases are primary ITP; the remaining 50,000 patients suffer
from chronic ITP secondary to HIV infection, which represents 5% of the
estimated one million HIV-positive individuals in the United States today.
There are approximately 30,000 additional patients with ITP secondary to lupus
and other conditions.
Current therapies for ITP include steroids, standard IVIG, splenectomy and
chemotherapeutic agents. These therapies all have significant drawbacks.
Steroids and chemotherapy result in many undesirable side effects and cannot
be used for long-term maintenance. Standard IVIG must be given in large doses,
which are expensive, require several hours to administer and often lead to
adverse reactions. Splenectomy procedures subject patients to the inherent
risks of surgery plus a resulting life-long susceptibility to severe
infection. AZT or other antiviral drugs also can be used to treat ITP in HIV-
positive patients, but only 50% of treated patients show a significant
platelet response to these drugs.
Rh isoimmunization occurs when a woman with Rh negative blood type becomes
pregnant with an Rh positive fetus. The woman's immune system recognizes the
fetal blood cells as foreign and develops antibodies that can attack the fetus
and threaten future Rh pregnancies. Rh isoimmunization can be suppressed by
treating the mother with antibodies that suppress this toxic reaction.
Approximately 500,000 pregnancies are complicated by Rh-incompatibility each
year in the United States. There are currently three intramuscular, non-
virally inactivated anti-Rho(D) immune globulin products on the market in the
United States for the suppression of Rh isoimmunization.
WinRho SD is an SPA product containing high levels of antibodies against the
Rh factor present on the surface of red blood cells. WinRho SD is manufactured
using a solvent detergent viral inactivation step licensed by Rh
Pharmaceuticals from the New York Blood Center and currently is sold in Canada
by Rh Pharmaceuticals for the prevention of Rh isoimmunization. Rh
Pharmaceuticals performed Phase III clinical trials with WinRho SD involving
300 adults and children with primary ITP or ITP secondary to HIV infection. In
these trials, WinRho SD was administered in low doses over three to five
minutes and was well-tolerated in repeated administrations to chronic
patients. Based on these trials, Rh Pharmaceuticals, with Univax's assistance,
submitted a PLA and an ELA in June 1993 for treatment of ITP and suppression
of Rh isoimmunization.
Univax plans to initiate at least three Phase IV clinical trials for WinRho
SD. At least one of the trials is expected to begin in the fourth quarter of
1995, and the others are expected to begin in 1996.
Total Univax sales of WinRho SD as of June 30, 1995 were approximately
$600,000 and as of September 30, 1995 were approximately $2,000,000.
Under the terms of the collaborative arrangement between Rh Pharmaceuticals
and Univax (the "Rh Agreement"), Univax has been granted exclusive United
States marketing rights for WinRho SD. Rh Pharmaceuticals is manufacturing the
product for Univax and, accordingly, is the holder of the FDA licenses. See
"Collaborative Agreements." Rh Pharmaceuticals has an Orphan Drug designation
for WinRho SD for treatment of ITP which confers seven years of marketing
exclusivity.
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PRODUCTS UNDER DEVELOPMENT
The table below summarizes the status of Univax's principal products under
development, three of which are in human clinical trials.
<TABLE>
<CAPTION>
PRODUCTS POTENTIAL APPLICATIONS STATUS (1) COLLABORATOR
-------- ---------------------- ---------- ------------
<S> <C> <C> <C>
WinRho SD............... Additional autoimmune Phase IV clinical trials Rh Pharmaceuticals
conditions to commence in 1995 and
1996
StaphVAX................ A vaccine for prevention Phase II clinical trial; NIH
of staphylococcal follow-on donor
infections stimulation with
immunizing agent began
in September 1995
StaphGAM................ An SPA product for Donor stimulation in NIH
prevention and progress; Phase I/II to
treatment of begin in 1996
staphylococcal
infections
HyperGAM+CF............. An SPA product for Phase II clinical trial Genzyme
prevention and in progress
treatment of chronic
Pseudomonas infections
in cystic fibrosis
patients
CMV NeutraGAM........... An SPA product for Phase I/II clinical Chiron
prevention and trial to begin in 1996
treatment of CMV in
renal transplant
patients
</TABLE>
- --------
(1) "Donor stimulation" with an immunizing agent provides plasma with high
levels of antibodies for production of SPA products and also provides
evidence for the safety and immunogencity of the immunizing agent in
subjects who donate plasma. "Phase I/II clinical trials" are designed to
provide evidence of safety and pharmacokinetics in a small number of human
subjects with the targeted disease. "Phase II clinical trials" are
designed to provide additional safety and dosing information and
preliminary information regarding efficacy in a somewhat larger number of
human subjects with the targeted disease. "Phase IV clinical trials" are
additional studies conducted following receipt of marketing approval from
the FDA. See "Government Regulation and Product Approvals."
STAPHVAX AND STAPHGAM
Staphylococcal bacteria, especially Staph A and Staph epi, are an increasing
cause of serious bacterial infections in hospitalized patients and patients
with chronic disease. These two species are responsible for the vast majority
of all staphylococcal infections. In the early 1980s, the majority of
hospital-acquired bloodstream infections were due to gram-negative bacteria
such as Escherichia coli ("E. coli") and Pseudomonas. However, by 1989, the
combined incidence of Staph A and Staph epi bloodstream infections had
increased over five-fold to a level nearly twice that seen for gram-negative
infections.
It currently is estimated that up to 40-60% of the staphylococcal infections
occurring in United States hospitals are caused by bacterial strains that are
resistant to every currently available antibiotic except vancomycin. Of even
greater concern is the increase in the Enterococci bacterial isolates that are
resistant to all current antibiotics, including vancomycin. The percentage of
hospital-acquired enterococcal infections that are resistant to vancomycin has
increased from 0.3% in 1989 to nearly 10% in 1993, with the rate approaching
15% in intensive care units ("ICUs"). Because, like Staphylococci, Enterococci
is a gram-positive bacterium, this vancomycin resistance could at any time be
transferred to the staphylococcal bacteria present in hospitals. Such transfer
has, in fact, recently been demonstrated in the research laboratory. If
vancomycin resistance continues to
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grow, many clinicians fear a return to the situation that existed before the
advent of antibiotics, when most bacterial infections were untreatable.
StaphVAX is intended for patients, such as those undergoing long-term kidney
dialysis, who are at high risk of Staph A infection over an extended period of
time and who are immune-competent and thus able to respond to a vaccine. In
contrast, StaphGAM is designed to provide immediate, on-demand protection for
patients, such as those experiencing serious shock/trauma or major surgery,
who suddenly find themselves at high, short-term risk of Staph A infection, or
for patients who are immune-compromised and cannot respond effectively to a
vaccine. Both the vaccine and the SPA product might be used in patients who
are at short- and long-term risk of contracting Staph A infections. Even in
those patient groups in which the incidence of staphylococcal infection is
relatively low, such as cardiac surgery patients, the consequences of an
infection can be so severe that Univax believes that administration of the
vaccine and/or SPA product to all patients may be deemed medically
appropriate.
Persons who are at a high risk of contracting staphylococcal infections
include the following patient groups:
Kidney Dialysis Patients. Patients on chronic dialysis due to kidney failure
are constantly at risk for staph infections due to their in-dwelling
catheters. Continuous ambulatory peritoneal dialysis ("CAPD") patients have a
50% risk of contracting an infection each year, of which 50% are due to
staphylococcal bacteria (15% Staph A and 35% Staph epi). Hemodialysis patients
have a significantly lower risk of only 15% each year, but over time these
infections are considered serious. In the hemodialysis patient group, 75% of
the infections are due to Staphylococci (50% Staph A and 25% Staph epi). In
the United States there are currently 30,000 CAPD patients and 160,000
hemodialysis patients.
Severe Trauma Patients. Patients suffering from severe trauma (i.e., Level I
trauma center ICU admissions) are at a 40% risk of acquiring an infection
while in the hospital. Approximately 30% of these infections are due to
staphylococcal bacteria (20% Staph A and 10% Staph epi). The majority of these
infections occur within the first week after admission, but there is also a
substantial long-term risk of infection in these patients due to the extended
hospital stays often required. It is currently estimated that approximately 3%
of the 2.8 million trauma victims admitted to hospitals each year in the
United States are Level I trauma center ICU admissions.
Cardiac Surgery Patients. Approximately 500,000 patients undergo cardiac
surgery each year in the United States. Sternal infections appear in
approximately 6% of patients following cardiac surgery, of which about 25%, or
1.5% overall, are serious deep sternal infections requiring major
intervention. Approximately 60% of sternal infections are due to
staphylococcal bacteria (40% Staph A and 20% Staph epi). The majority of these
infections occur within one to two weeks of surgery, but the use of prosthetic
devices such as valve replacements in cardiac surgery and the use of synthetic
dacron grafts in arterial replacements present long-term infection risk.
Vascular Graft Patients. Approximately 180,000 patients undergo vascular
graft surgery annually in the United States. The incidence of infection
following vascular graft surgery is approximately 2%, of which 60% are due to
Staphylococci (30% Staph A and 30% Staph epi). Although this rate of infection
is reasonably low compared to other risk groups, the consequences of infection
in this population can be severe. There is nearly a 25% mortality associated
with vascular graft infections and another 25% of patients require amputation
of the affected limb. Moreover, in this patient group, there is a demonstrated
risk of late stage infections appearing 11 to 12 months after surgery.
Prosthetic Surgery Patients. There are approximately 420,000 orthopedic
joint replacement surgeries performed in the United States each year. These
patients run a 1% to 5% risk of contracting an infection while recovering from
surgery, 60% of which are due to staphylococcal bacteria (30% Staph A and 30%
Staph epi). Again, although the incidence is very low, the consequences can be
severe and often require removal of the artificial joint. Moreover, there is a
significant long-term risk that prosthetic joints will become infected even
several years after surgery.
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StaphVAX is composed of the capsular polysaccharides isolated from two
strains of Staph A coupled to a highly immunogenic carrier protein,
recombinant exoprotein A from Pseudomonas. The resulting bivalent conjugate
vaccine elicits high levels of opsonic antibodies against the two bacterial
strains responsible for over 90% of clinically important Staph A infections.
StaphVAX is based on patented vaccine technology in-licensed by Univax from
NIH, and development of the vaccine is partially covered by a Cooperative
Research and Development Agreement ("CRADA") with NIH. See "--Collaborative
Agreements." The vaccine has recently completed a Phase II trial in CAPD
patients. The clinical trial showed the vaccine to be safe but ineffective
against Staph A peritonitis. Two possible explanations for the inability of
StaphVAX to prevent infections related to peritoneal dialysis in vaccinated
patients are that the immunogenicity of the vaccine was lower at the dose used
or that antibodies in the bloodstream are unable to affect infection in
certain anatomic areas, such as the peritoneum. Like peritoneal dialysis
patients, hemodialysis patients with kidney disease also have high Staph A
infection rates. However, the Staph A infections contracted by hemodialysis
patients are primarily bloodborne and may be more accessible to Staph A
antibodies. As a result, Univax is designing a Phase II clinical trial with
StaphVAX in hemodialysis patients and expects to begin dosing studies in early
1996.
StaphGAM is an SPA product which contains high levels of antibodies against
the two most important clinical strains of Staph A. StaphGAM will be produced
by stimulating healthy plasma donors with the same immunizing agent used in
the StaphVAX vaccine. Univax began a preliminary donor stimulation program
with this immunizing agent in July 1994, which was recently concluded. A six-
month follow-on donor stimulation trial was initiated in September 1995.
HYPERGAM+CF
Cystic fibrosis ("CF") is a genetic defect which, according to the
International Cystic Fibrosis Foundation, is currently found in more than
25,000 individuals in the United States and an estimated 60,000 worldwide.
This defect inhibits an individual's ability to secrete fluids of proper
viscosity on the mucous membranes of the gastrointestinal and respiratory
tracts. The fluids secreted by CF patients are thick and tend to trap bacteria
in the lungs. Studies by the Cystic Fibrosis Foundation have shown that
approximately 60% of CF patients harbor Pseudomonas bacteria in their lungs,
and up to 90% of CF patients who survive to adulthood will experience chronic
obstructive bronchitis associated with Pseudomonas. Once the lungs are
infected, Pseudomonas secretes a mucoid polysaccharide that leads to enhanced
mucus accumulation. The resulting thick, bacteria-laden discharge inflames and
damages lung tissue causing the breathing difficulties common in CF patients.
The damage is exacerbated by the attack of white blood cells on the bacteria
which often results in the accumulation of cellular debris in the lungs and
further breathing difficulty.
HyperGAM+CF is an SPA product which contains high levels of antibodies
against the Pseudomonas mucoid exopolysaccharide ("MEP"). The SPA product is
designed to be administered prophylactically on a monthly basis to provide
passive immunity against Pseudomonas. The immunizing agent used to produce
HyperGAM+CF entered safety and immunogenicity trials in July 1991. Those
trials indicated that the immunizing agent is well tolerated and elicits
antibodies in normal adults. A 200-person donor stimulation program with the
immunizing agent was initiated in December 1992. Approximately 33% of the
donors responded with sufficiently high levels of antibodies, and plasma is
being collected from these responding donors. Additional donors have been and
continue to be enrolled in the stimulation program. A clinical lot of
HyperGAM+CF was prepared in the Fall of 1993 and a Phase I/II clinical trial
with CF patients began in March 1994. The Phase I/II trial was completed in
September 1994. It demonstrated that HyperGAM+CF had a good safety profile and
a circulating half-life consistent with a monthly dosing regimen. Based on
these results, a Phase II trial was initiated in the first quarter of 1995
designed to evaluate HyperGAM+CF's efficacy in reducing the number of acute
exacerbations suffered by CF patients. Univax has received two Orphan Drug
designations for this product, for both the prevention and the treatment of
Pseudomonas infections associated with CF. Univax has entered into an
agreement with Genzyme under which Genzyme has agreed to provide funding
support for development and clinical trials of HyperGAM+CF in exchange for
marketing rights. See "--Collaborative Agreements."
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CMV NEUTRAGAM
CMV, a member of the herpes virus family, is widely prevalent throughout the
world. Although most infections are asymptomatic, CMV causes significant
clinical disease in immuno-compromised individuals including transplant
recipients and HIV infected individuals, and is the most common cause of viral
produced birth defects (such as congenital deafness and mental retardation).
CMV is a major pathogen in renal transplant recipients and is a significant
risk factor which could result in fever after a transplant, leukopenia, graft
failure and death. There were approximately 10,000 kidney transplants
performed in the United States in 1994 and approximately 9,000 in Europe. It
is estimated that 60% to 80% of these patients can develop CMV infection. In
addition, CMV infection is a known complication in bone marrow transplant
recipients, of which there were approximately 3,500 in the United States and
3,500 in Europe in 1994. CMV is also a major risk in other solid organ
transplant patients, including those undergoing heart and liver transplants.
Approximately 8,500 people underwent solid organ transplants (excluding kidney
transplants) in the United States in 1994, and approximately 2,000 in Europe.
In heart transplant recipients, CMV may play a role in the development of
accelerated coronary graft atherosclerosis which is responsible for the
majority of late cardiac allograft failure and patient morbidity and
mortality.
Preliminary laboratory evaluation of antibody titers in plasma of subjects
immunized with Chiron candidate CMV vaccine indicates that the plasma could
contain significantly higher levels of CMV neutralizing antibodies than
currently available screened plasma. The higher levels of specific antibody
may allow the product to be administered in lower doses with a potential for
fewer side effects, shorter infusion times and improved efficacy. The higher
titer product might also allow the product to be used intramuscularly. Univax
expects to begin Phase I/II clinical trials with CMV NeutraGAM in 1996.
OTHER DEVELOPMENT PROGRAMS
StaphVAX II and StaphGAM II
Univax plans to develop a second vaccine product, StaphVAX II, which is
directed at Staph epi, the second most clinically significant Staphylococcus
species. The Staph epi product is in the preclinical testing and process
development stage and is intended to be a conjugate vaccine comprising one to
three antigens present on the surface of Staph epi bacteria. It has been
recently shown that antibodies to one of these antigens bind not only the two
strains responsible for over 90% of Staph epi infections, but also
Staphylococcus hemolyticus, another clinically important staphylococcal
bacteria.
Univax also plans to develop a second-generation SPA product, StaphGAM II,
containing antibodies to both Staph A and Staph epi. Development of this
product is expected to involve stimulating donors with immunizing agents
against both Staph A and Staph epi.
StaphVAX IIE and StaphGAM IIE
In 1994, Univax began a program directed at Enterococci, in which
epidemiology studies are underway to identify the most clinically important
strains for use in developing a vaccine. Once an effective immunizing agent
against Enterococci has been developed, Univax plans to add it to the Staph A
and Staph epi components to create both a combination vaccine, StaphVAX IIE,
and a combination SPA product, StaphGAM IIE.
NeoGAM/OmniGAM
NeoGAM and OmniGAM are potential SPA products for the prevention of both
Gram-positive and Gram-negative bacterial infections. They represent future
generation products for the prevention of serious hospital-acquired
infections. The strategy for NeoGAM is to stimulate plasma donors with
immunizing agents against Staph A, Staph epi, E. coli and perhaps Klebsiella
pneumoniae ("Klebsiella"). NeoGAM is targeted at the prevention of infections
in low birth weight neonates who have a 25% overall rate of infection and a
60% rate of progression to sepsis. NeoGAM is being designed to contain
antibodies against the bacteria responsible for approximately 50% of these
infections. OmniGAM is envisioned to involve donor stimulation with these four
immunizing agents plus an immunizing agent against Pseudomonas and
Enterococci. OmniGAM is targeted at the prevention of infections in high risk
ICU patients, particularly patients recovering from major gastrointestinal,
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head or neck surgery and/or trauma, patients who have specific risk factors
such as diabetes, alcoholism, chronic liver disease, severely impaired
cardiovascular and/or pulmonary function, and patients who are already
infected upon ICU admission.
Univax technology for addressing Gram-negative bacterial infections is in
the advanced stages of preclinical development. An E. coli vaccine against the
12 most clinically important strains is ready for the clinical trial stage of
development; a vaccine against the three most important Klebsiella strains is
in late-stage process development, and a multi-component Pseudomonas vaccine
is in preclinical research. Due to the size and complexity of the
NeoGAM/OmniGAM program, Univax intends actively to pursue development of these
products when a collaborator is found to fund at least a portion of the
program. There can be no assurance that such a collaborator will be found.
PRODUCT DEVELOPMENT RISKS
During the course of clinical testing of Univax's products under
development, Univax may experience delays or encounter difficulties. There is
no assurance that data from such studies will be usable by Univax or
acceptable to the FDA in support of any approval applications. There also can
be no assurance that the FDA will approve any of Univax's products under
development for marketing or, in the event they are approved, that they will
be approved on a timely basis. After approval, the FDA may require post-
marketing approval testing and surveillance programs to monitor the effects of
Univax's products. In addition, product approvals may be withdrawn for non-
compliance with regulatory standards or the occurrence of unforeseen problems
following initial marketing.
COLLABORATIVE AGREEMENTS
Strategic alliances have been an important element of Univax's overall
corporate strategy. In its research and development programs, Univax has
established collaborations with a number of leading infectious disease
specialists, and Univax has CRADAs with United States Government laboratories.
This collaborative approach to research and development allows Univax to make
efficient use of its research resources and leverage the fundamental
discoveries emerging from basic research institutions throughout the United
States. These collaborations are instrumental in the ongoing development of
StaphVAX, StaphGAM and HyperGAM+CF. Strategic in-licensing of products in
various stages of clinical development has been a key element in Univax's
effort to complement its research and development programs with products in
stages of development.
Univax's key strategic alliances are described below.
Chiron. In August 1995, Univax entered into a binding heads of agreement
with Chiron. The definitive agreement is expected to be signed in November
1995. Under the Agreement, Univax has an exclusive, worldwide license to use
Chiron's CMV vaccine as an immunizing agent in humans to produce
immunoglobulin products. Univax also has an option to license certain other
Chiron vaccines which are suitable for use as immunizing agents in humans such
as herpes and hepatitis C, and a right of first negotiation with regard to
other such vaccines. In total, Univax will have exclusive rights to 15
proprietary and non-proprietary Chiron vaccines, and access to Chiron's
adjuvant, MF 59. Univax is obligated to make an upfront payment and certain
milestone payments to Chiron and to share profits from the sale of the
immunoglobulin products. Univax will be responsible for all development,
manufacturing and worldwide distribution of the products. Univax may terminate
its licenses and future payment obligations on a product-by-product basis upon
six months' notice.
Rh Pharmaceuticals, Inc. In October 1992, Univax entered into a license and
distribution agreement with Rh Pharmaceuticals which was subsequently amended
and restated on June 20, 1995. Under the agreement, Rh Pharmaceuticals granted
Univax exclusive marketing rights for WinRho SD in the United States. Rh
Pharmaceuticals is responsible for obtaining FDA approval of a PLA and ELA.
Upon approval by the FDA of the PLA and ELA, Univax is required to meet
mutually agreed sales targets for WinRho SD in the United States, and Rh
Pharmaceuticals is required to supply the necessary quantities of WinRho SD to
support such sales. In addition, Univax granted Rh Pharmaceuticals a license
to sell in Canada certain of Univax's current products in development.
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Contingent upon a matching contribution from Rh Pharmaceuticals, Univax has
agreed to pay Rh Pharmaceuticals $500,000 for polyclonal antibody process
development, clinical testing and improvements to Rh Pharmaceuticals'
manufacturing facility. In addition, Univax paid Rh Pharmaceuticals $100,000
upon the execution of the Rh Agreement and an additional $400,000 upon PLA
approval by the FDA. Univax also is obligated to spend $3,000,000 in each of
the first two years following such approval for marketing and selling expenses
related to WinRho SD. Univax also has agreed to make available to Rh
Pharmaceuticals in the form of a loan one-half of the cost to expand the
manufacturing facility up to a maximum of $3,000,000. Univax will receive 40%
of the profits from sales of WinRho SD in the United States until cumulative
profits reach a certain level, after which point Univax and Rh Pharmaceuticals
will share profits equally. The term of the Rh Agreement is ten years from the
date Rh Pharmaceuticals obtains all regulatory approvals necessary for sale of
WinRho SD in the United States.
Genzyme Corporation. In August 1993, Univax entered into a collaborative
agreement with Genzyme (the "Genzyme Agreement") to develop and commercialize
products based on MEP antigen for treatment of infections in cystic fibrosis
patients. The terms of the collaboration include Genzyme's $5 million equity
investment in Univax, milestone payments to Univax totaling up to $6 million,
development funding by Genzyme, estimated to be more than $12 million over the
life of the agreement, and profit-sharing payments.
Univax will be responsible for manufacturing the products developed pursuant
to the Genzyme Agreement. In the event that Univax fails to supply Genzyme
with products meeting specifications, Genzyme will have the right to
manufacture the products or have the products manufactured. Genzyme will be
responsible for sales of the products worldwide. All terms of sale will be set
by Genzyme. Univax will receive a manufacturing allowance and Genzyme will
receive a marketing allowance, and the net pretax profit from sales of the
products will be divided in proportion to the development funding.
The exclusive license granted to Genzyme for use and sale of products, and
Univax's manufacturing rights, will terminate on a country-by-country basis
upon the later of the expiration of the last patent or ten years after the
first commercial sale in each country. Either party may terminate the Genzyme
Agreement upon 90 days written notice to the other, in which event the non-
terminating party may, at its option, purchase over time all of the
terminating party's rights to the products.
National Institutes of Health. In July 1992, Univax obtained certain license
rights to patent applications relating to a polysaccharide/protein conjugate
vaccine. Under a CRADA entered into in August 1991 with one of the National
Institutes of Health, the National Institute of Diabetes, Digestive, and
Kidney Diseases ("NIDDK"), Univax and NIDDK are collaborating to develop a
polysaccharide/protein conjugate vaccine against the Staph A bacteria.
Cambridge Biotech Corporation. In April 1993, Univax entered into a
licensing agreement with Cambridge Biotech (the "Cambridge Biotech
Agreement"). The Cambridge Biotech Agreement provides Univax exclusive rights
to incorporate Cambridge Biotech's patented QS-21 Stimulon adjuvant in a wide
range of bacterial immunizing agents used to stimulate plasma donors to
produce antibodies. Univax will be responsible for completing product
development, conducting clinical trials, obtaining regulatory approvals and
marketing products resulting from use of the adjuvant. Cambridge Biotech will
be responsible for manufacturing the adjuvant. Univax paid an initial license
fee and will pay milestone fees on a per product basis if development of any
product reaches certain development phases, and royalty payments once any
products are commercialized. Univax has the right to manufacture the adjuvant
and obtain from Cambridge Biotech all information necessary to engage in such
manufacturing in the event that Cambridge Biotech fails to satisfy its
obligations under the Cambridge Biotech Agreement.
Genentech, Inc. Under a development agreement entered into in September 1992
(the "Genentech Agreement"), Univax and Genentech, Inc. ("Genentech") have
been cooperating in the development of an SPA preparation using Genentech's
gp120 immunizing agent, which SPA preparation is designed to neutralize the
virus that causes HIV (the "gp120 Product"). Pursuant to the Genentech
Agreement, when the final data analysis
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is completed from a human clinical trial with the gp 120 Product, Univax and
Genentech will make a determination as to the advisability of proceeding with
a definitive efficacy trial necessary to file a PLA. If both parties wish to
proceed, they will negotiate a commercial development agreement. If either
party chooses not to proceed, the other party may take over the development of
the gp 120 Product.
Univax recently terminated collaboration agreements with ImmuCell
Corporation and Farma Biagini, S.p.A. Univax currently intends to seek the
termination of the Genentech Agreement.
MANUFACTURING AND SUPPLY
Manufacturing of Univax's vaccines is a complex process. For most of
Univax's vaccines, manufacture involves growth of the target bacteria, heat or
chemical inactivation of such bacteria and purification of the desired
antigens. These antigens may then be chemically conjugated to carrier
molecules in formulating the final product. Univax's vaccine production
process involves the use of proprietary technologies. Univax has built a pilot
production facility which currently is being used for the manufacture of
vaccines for clinical trials.
Manufacture of Univax's SPA products requires human plasma. It is
anticipated that Rh Pharmaceuticals will obtain substantially all of the
plasma necessary for manufacture of WinRho SD. Univax believes that Rh
Pharmaceuticals has contracts in place for the amounts of plasma necessary to
meet Univax's first year sales targets. No assurance can be given, however,
that Rh Pharmaceuticals will be able to obtain sufficient plasma to satisfy
Univax's orders for subsequent years.
Univax also requires human plasma for its immunization programs. While
Univax believes that sufficient plasma for Univax's foreseeable needs will be
available, there can be no assurance that Univax will be able to enlist
sufficient numbers of donors to provide plasma for those programs.
MARKETING AND SALES
Univax currently has a marketing and sales staff of approximately 20
individuals for WinRho SD. Of this number, 13 people are part of the field
sales force and the remainder are responsible for marketing, reimbursement and
customer service activities. Inventory maintenance and distribution to
pharmacies is handled by regional stocking distributors that specialize in the
sale and distribution of blood products and other biologics. These
distributors have extensive telemarketing operations, have been trained in the
sale of WinRho SD by the Univax sales and marketing staff and have a combined
field sales force of approximately 40 individuals. Univax is also seeking to
develop distribution arrangements with selected homecare companies.
Although Univax believes that the WinRho SD market can be addressed
effectively with a relatively small sales force, to the extent that Univax
itself undertakes to market other products or is unable to continue third-
party marketing of such other products, significant additional expenditures,
management resources and time may be required to develop a larger sales force.
There can be no assurance that Univax will be able to enter into additional
marketing agreements or that it will be successful in gaining market
acceptance for its products.
PATENTS AND PROPRIETARY RIGHTS
Univax'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. Univax has acquired title or licenses to a number of patents or patent
applications of others and has filed two patent applications of its own. In
particular, Univax has in-licensed Patent No. 4,578,458 entitled "Mucoid
Exopolysaccharide Vaccine Against Pseudomonas Aeruginosa" which expires on
March 25, 2003, from the Brigham and Women's Hospital, Boston, Massachusetts,
and Patent No. 5,204,098 entitled "Polysaccharide/Protein Conjugates" which
expires on April 20, 2010, from the NIH, Rockville, Maryland. Univax also has
in-licensed Patent No. 4,285,936 related to Pseudomonas from the U.S. Army
which expires on August 25, 1998. There can be no assurance that existing
patent applications will mature into issued patents, that Univax will be able
to obtain additional licenses to patents of others or that Univax will be able
to develop additional patentable technology of its own.
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The patent positions of biotechnology firms generally are highly uncertain
and involve complex legal and factual questions. 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, Univax 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 assurance that any patents issued to Univax
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 Univax,
will not 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
Univax. Some of these applications or patents may be competitive with Univax's
applications, or conflict in certain respects with claims made under Univax's
applications. Such a conflict could result in a significant reduction of the
coverage of Univax'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, Univax 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 Univax will be able to
obtain any such licenses on commercially favorable terms, if at all. Univax's
failure to obtain a license to any technology that it may require to
commercialize its products may have a material adverse impact on Univax.
Litigation, which could result in substantial cost to Univax, may also be
necessary to enforce any patents issued to Univax or to determine the scope
and validity of third-party proprietary rights.
Univax also relies on secrecy to protect its technology, especially where
patent protection is not believed to be appropriate or obtainable. Univax
protects its proprietary technology and processes, in part, by confidentiality
agreements with its employees, consultants and certain contractors. In
addition, Univax maintains strict controls and procedures regarding access to
and use of its proprietary technology and processes. However, there can be no
assurance that these agreements, controls or procedures will not be breached,
that Univax would have adequate remedies for any breach, or that Univax's
trade secrets will not otherwise become known or be independently discovered
by competitors.
GOVERNMENT REGULATION AND PRODUCT APPROVALS
Univax's research, preclinical development, clinical trials, manufacturing
and marketing of its products are subject to extensive regulation by numerous
governmental authorities in the United States and other countries. In the
United States, vaccines and SPA products are subject to rigorous FDA review
for safety and efficacy. The Federal Food, Drug, and Cosmetic Act, the Public
Health Service Act and other federal statutes and regulations govern or
influence the testing, manufacture, safety, labeling, storage, record keeping,
approval, advertising and promotion of such products. In addition to obtaining
FDA approval for each vaccine or SPA product, an ELA must be filed to obtain
FDA approval of the manufacturing process and the manufacturing facility.
Product sales may commence only if the PLA and ELA are approved.
The process of obtaining FDA and other required regulatory approvals is
lengthy and expensive, and the time required for such approval is uncertain.
Most of Univax's clinical trials are at a relatively early stage and, except
for WinRho SD, no approval from the FDA or any other governmental agency for
the manufacturing or marketing of any of its products under development has
been granted. There can be no assurance that Univax will be able to obtain the
necessary approvals for manufacturing or marketing of any of its products
under development.
Preclinical studies involve laboratory evaluation of product characteristics
and animal studies to assess the efficacy and safety of the product. Human
clinical trials are typically conducted in sequential phases, but the phases
may overlap. Phase I trials consist of testing the product in a small number
of healthy persons, primarily for safety at one or more dose levels. Phase
I/II trials provide safety and initial efficacy data on a product in a
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small number of patients with the targeted disease. In Phase II, the safety
and efficacy of the product is evaluated in a somewhat larger number of
patients with the targeted disease. Phase III trials typically involve testing
for safety and clinical efficacy in an expanded population at geographically
dispersed test sites in a manner that can yield statistically significant
results. A clinical plan, or "protocol," accompanied by the approval of the
institution(s) participating in the trials, must be submitted to the FDA prior
to commencement of each clinical trial. The FDA may order the temporary or
permanent discontinuation of a clinical trial at any time.
Univax anticipates following different regulatory approval paths for
immunizing agents to be used solely to stimulate antibody production for SPA
products as contrasted with immunizing agents it is developing as vaccine
products. For immunizing agents to be used solely to stimulate antibody
production for SPA products, Univax intends to conduct donor stimulation
trials to demonstrate the safety and immunogenicity of the immunizing agents
in subjects who donate plasma. Upon satisfactory completion of such trials,
donor stimulation programs will be initiated to provide SPA products to be
used in Phase I/II and Phase III clinical trials conducted by Univax. Upon
satisfactory completion of the Phase III polyclonal antibody trials, PLA
approval would be sought concurrently for the SPA product for the applicable
disease indication and for the immunizing agent used to produce the SPA
product, with donor stimulation as the only approved indication requested for
the immunizing agent. Univax intends to follow the customary Phase I through
Phase III approval procedures for immunizing agents it is developing as
vaccine products. Univax has received permission to conduct donor stimulation
programs using the HyperGAM+CF immunizing agent, the gp120 immunizing agent
and the staph A immunizing agent. No assurance can be given, however, that the
FDA will permit Univax 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 Univax to secure such regulatory
approvals for the immunizing agents to be used in donor stimulation before
commencing clinical trials on the SPA products to be produced using such
immunizing agents, the overall regulatory approval process for Univax's SPA
products could be longer than that normally required for biological products.
The results of the preclinical and clinical studies on biological drugs are
submitted to the FDA in the form of a PLA for approval to commence commercial
sales. In responding to a PLA, the FDA may grant marketing approval, require
additional testing or information, or deny the application. There can be no
assurance that Univax will be able to obtain the necessary approvals for
clinical testing of products developed internally or in-licensed at an early
stage of development, or for the manufacturing or marketing of any of its
products under development. Continued compliance with all FDA requirements and
the conditions in an approved application, including product specification,
manufacturing process, labeling and promotional material and record keeping
and reporting requirements, is necessary for all products. Failure to comply,
or the occurrence of unanticipated adverse effects during the commercial
marketing, could lead to the need for product recall or other FDA-initiated
action, which could delay further marketing until the products are brought
into compliance.
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
fewer 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 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 is
eligible to receive marketing exclusivity for a period of time, currently
seven years. There may be multiple designations of Orphan Drug status for a
given product and for different indications. However, only the sponsor of the
first approved PLA for a given product for its use in treating a given rare
disease may receive marketing exclusivity.
Sales of pharmaceutical products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country.
Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities of foreign countries must be obtained prior
to the commencement of marketing the product in those countries. The time
required to obtain such approval may be longer or shorter than that required
for FDA approval.
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Univax is also subject to regulation by OSHA and the EPA and to regulation
under the Toxic Substances Control Act, the Resource Conservation and Recovery
Act and other regulatory statutes, and may in the future be subject to other
federal, state or local regulations. Either or both of OSHA or the EPA may
promulgate regulations concerning biotechnology that may affect Univax's
research and development programs. Univax is unable to predict whether any
agency will adopt any regulation which would have a material adverse effect on
Univax's operations. Univax voluntarily complies with NIH guidelines regarding
research involving recombinant DNA molecules. Such guidelines, among other
things, restrict or prohibit certain recombinant DNA experiments and establish
levels of biological and physical containment that must be met for various
types of research.
COMPETITION
Univax is engaged in a rapidly evolving field. Competition from other
biotechnology and pharmaceutical companies is intense and expected to
increase. Many of Univax's competitors have substantially greater financial
resources and larger research and development staffs than Univax, as well as
substantially greater experience in developing products, in obtaining
regulatory approvals, and in 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. Univax also competes with universities
and other institutions in the development of products, technologies and
processes. Competitors have developed or are in the process of developing
technologies that are, or in the future may be, the basis for competitive
products. Some of these products may have an entirely different approach or
means of accomplishing the desired effect than products being developed by
Univax. There can be no assurance that Univax's competitors will not succeed
in developing technologies and products that are more effective or affordable
than those being developed by Univax. In addition, one or more of Univax's
competitors may achieve product commercialization or patent protection earlier
than Univax.
Because of the specialized nature of Univax's business, Univax is highly
dependent upon its ability to attract and retain qualified scientific and
technical personnel. There is intense competition for qualified personnel in
the areas of Univax's activities, and there can be no assurance that Univax
will be able to continue to attract and retain the qualified personnel
necessary for the development of its business. In addition, because many key
responsibilities within Univax have been assigned to a relatively small number
of individuals, loss of the services of any of these individuals would be
significantly detrimental to Univax's development.
EMPLOYEES
In May 1995, Univax restructured its business operations in order to
optimize its marketing and drug development efforts and reduce expenses. As a
result of the restructuring, Univax reduced its personnel by approximately
25%, which resulted in the termination of approximately 40 employees.
As of October 20, 1995, Univax had 146 full-time employees, of whom 21 hold
Ph.D. or M.D. degrees. Approximately 85 employees are engaged in research,
development and related functions. The balance of Univax's employees are in
selling, general and administrative positions. Univax considers its relations
with its employees to be good.
PROPERTIES
Univax leases office, laboratory and warehouse space aggregating 73,000
square feet in Rockville, Maryland. Univax leases all its facilities. In 1992,
Univax completed construction and validation of a 3,000 square foot pilot
production facility for vaccines in its Rockville location. The pilot
production facility is currently being used for the manufacture of IND
products necessary to conduct clinical trials. Univax believes that these
facilities will be sufficient for Univax's planned activities through 1996.
Univax has leased from third parties two collection facilities in Louisiana
where its collects plasma.
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LEGAL PROCEEDINGS
Univax anticipates filing a demand for arbitration in the event settlement
discussions are not successful against Wells Fargo Bank, N.A., the former
investment portfolio manager for Univax, in connection with approximately
$400,000 in losses sustained by Univax in its investment portfolio.
Univax has received a notice of a claim from a plasma donor that the plasma
donor sustained bruising on his arm after donating plasma at one of Univax's
plasma collection facilities in Louisiana. Univax does not believe that an
unfavorable outcome of the claim would have a material adverse effect on its
financial position.
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UNIVAX SELECTED HISTORICAL FINANCIAL INFORMATION
The selected statement of operations data set forth below for each of the
three years in the period ended December 31, 1994 and the selected balance
sheet data at December 31, 1994 and 1993 are derived from financial statements
of Univax audited by Price Waterhouse LLP, independent accountants, which are
included elsewhere in this Proxy Statement/Prospectus and are qualified by
reference to such financial statements. The selected statement of operations
data set forth below for each of the two years in the period ended December
31, 1991 and the selected balance sheet data set forth below at December 31,
1991 and 1990 are derived from financial statements audited by Price
Waterhouse LLP but which are not included herein. The selected statement of
operations data for the six months ended June 30, 1995 and 1994, and the
selected balance sheet data at June 30, 1995 are derived from unaudited
financial statements of Univax which are also included elsewhere in this Proxy
Statement/Prospectus and which, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation of the financial position and the results of operations for
the unaudited interim periods. Operating results for the six months ended June
30, 1995 are not necessarily indicative of the results that may be expected
for the entire year ending December 31, 1995. The selected financial data set
forth below should be read in conjunction with the financial statements and
"Univax Management's Discussion and Analysis of Financial Condition and
Results of Operations," both appearing elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
-------------------------- ------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $ 4,001,903 $ 1,362,950 $ 2,782,657 $ 1,181,406 $ 973,000 $ 1,194,135 $ 664,180
Expenses:
Cost of goods sold.... 384,924 -- -- -- -- -- --
Research and product
development costs.... 11,031,438 8,916,478 19,494,184 18,065,359 12,051,201 4,473,674 1,287,149
General and
administrative....... 4,088,233 2,613,564 5,206,783 4,382,154 3,326,645 1,056,236 475,885
------------ ------------ ------------ ------------ ------------ ----------- -----------
Total expenses........ 15,504,595 11,530,042 24,700,967 22,447,513 15,377,846 5,529,910 1,763,034
------------ ------------ ------------ ------------ ------------ ----------- -----------
Operating loss......... (11,502,692) (10,167,092) (21,918,310) (21,266,107) (14,404,846) (4,335,775) (1,098,854)
Investment income
(expense), net........ 663,620 (268,224) 97,289 960,970 1,410,507 13,541 (106,011)
------------ ------------ ------------ ------------ ------------ ----------- -----------
Net loss............... $(10,839,072) $(10,435,316) $(21,821,021) $(20,305,137) $(12,994,339) $(4,322,234) $(1,204,865)
============ ============ ============ ============ ============ =========== ===========
Net loss per share(1).. $ (0.63) $ (0.80) $ (1.52) $ (1.74) $ (1.19) $ (0.57) $ (0.17)
============ ============ ============ ============ ============ =========== ===========
Shares used in
calculation of net
loss per share(1)..... 17,091,709 13,011,473 14,357,551 11,688,532 10,888,979 7,629,313 7,159,562
============ ============ ============ ============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
-------------------------- ----------------------------------------------------
1995 1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 2,972,048 $ 10,149,911 $ 12,423,497 $ 5,373,179 $ 6,592,702 $ 641,795
Short-term investments.. 13,941,996 18,697,575 16,547,992 22,828,290 -- --
Long-term investments... -- -- -- 4,983,206 -- --
Working capital......... 16,546,852 26,656,738 27,248,135 26,703,960 5,068,686 240,623
Total assets............ 28,906,915 38,272,412 38,571,244 42,438,035 9,878,637 936,129
Long-term debt, net of
current portion(2)..... 1,354,171 1,341,291 2,016,703 925,578 897,977 1,500,000
Accumulated deficit..... (72,508,978) (61,669,906) (39,848,885) (19,543,748) (6,549,409) (2,227,175)
Stockholders' equity
(deficit).............. 22,973,065 33,554,543 33,653,086 38,760,838 7,295,323 (1,466,275)
</TABLE>
- --------
(1) See Note 1 of Notes to Financial Statements for information concerning the
computation of net loss per share.
(2) See Note 3 of Notes to Financial Statements for information concerning
Univax's long-term debt.
104
<PAGE>
UNIVAX MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Univax received its first revenues from the sale of product in the second
quarter of 1995. Univax has been unprofitable since inception, incurring a
cumulative net loss from inception through June 30, 1995 of approximately
$72.5 million. Univax expects to incur additional losses over the next few
years.
Six Months Ended June 30, 1995 as Compared to 1994
Revenues for the six months ended June 30, 1995 totaled $4 million versus
$1.4 million in the comparable period in 1994. Revenues for the six months in
1995 included $3.3 million from Genzyme pursuant to the Genzyme Agreement.
Virtually all the 1994 revenue was from Genzyme pursuant to the Genzyme
Agreement. Product sales of WinRho SD accounted for $664,000 of revenues for
the six months ended June 30, 1995.
Total expenses for the first six months of 1995 increased approximately
thirty percent from the comparable 1994 period. Total expenses for the six
months ended June 30, 1995 included cost of sales of $385,000 related to the
sale of WinRho SD. Research and development expenses increased in the six
months ended June 30, 1995 as compared to the same period of 1994 as Univax
added required resources and increased clinical trials expenditures to advance
its programs, including the program covered under the Genzyme Agreement. In
addition, Univax incurred $666,000 in expenses related to its agreement with
Rh Pharmaceuticals for the first six months of 1995 which included a $400,000
milestone payment which became due upon licensure of WinRho SD by the FDA
during the first quarter of 1995. Selling, general and administrative expenses
increased in the six months ended June 30, 1995 as a result of increased
marketing and selling expenses related to the launch of WinRho SD in May 1995.
Univax implemented a strategic restructuring and reduction in force in May
1995 which is expected to provide cost savings of $5 million dollars on an
annualized basis. Univax incurred $500,000 in related expenses, which were
allocated in the Statement of Operations based on the activities affected.
Employment had increased from 145 full time positions at June 30, 1994 to a
peak of 161 employees in early 1995 as Univax began to increase its sales and
marketing staff for the launch of WinRho SD, and then declined to 131 at June
30, 1995 as a result of the reductions.
Univax's return on its investment portfolio during the first six months of
1995 as compared to the same period in 1994 increased as a result of higher
interest rates during the 1995 period and improved market value of the
portfolio. Interest expense decreased during the first six months of 1995 as
compared to the same period in 1994 as a result of maturing equipment term
notes and capitalized leases which were at higher interest rates than the more
current equipment term notes outstanding.
Comparison of Years ended December 31, 1994, 1993 and 1992
Revenues for 1994 included $2.8 million in payments from Genzyme pursuant to
the Genzyme Agreement. Revenues for 1993 consisted of $1.1 million in payments
from Genzyme and $66,500 in sponsored-research grants. In 1992, revenues
included $922,000 from Alpha pursuant to a now-terminated product development
agreement, and $51,000 in sponsored-research grants.
Total operating expenses in 1994 increased ten percent to $24.7 million from
$22.4 million spent in 1993. In 1993 expenses had increased more than 45% over
the $15.4 million incurred in 1992. The increases were due to the addition of
employees and facilities and the cost of obtaining outside services as Univax
accelerated its research and development programs. Employment increased from
115 full-time positions in 1992, to 135 in 1993 and to 155 by the end of 1994.
During 1992 and 1993, Univax occupied 61,000 square feet of laboratory and
office space. In 1994, Univax leased additional office space, increasing the
total laboratory and office space
105
<PAGE>
leased to 73,000 square feet. Clinical trial expenses increased as Univax
expanded its donor stimulation programs and advanced products in human
clinical trials.
Univax incurred holding losses of $180,000 and earned $496,000 in investment
income (net of realized losses) on its portfolio of trading securities in 1994
compared to investment income of $1.2 million in 1993 and $1.6 million in
1992. In 1994, as interest rates rose, Univax's investment portfolio lost
value and Univax recognized both holding losses and realized losses on the
sale of investments. The realized losses sharply reduced investment income.
The holding losses are recognized for financial statement purposes in
accordance with Statement of Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," which Univax adopted
on December 31, 1993. The decrease in investment income from 1992 to 1993
reflects both a decrease in Univax's cash and investments and lower yields on
investments. Univax incurred interest expenses of $219,000 in 1994, $205,000
in 1993, and $192,000 in 1992 related primarily to equipment financing and
capitalized equipment leases.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, Univax had $16.9 million in cash and investments. Net cash
used in operating activities, net of trading securities transactions, was
$11.6 million for the first six months of 1995. Capital expenditures of
$505,000 during the same period were primarily on laboratory and office
equipment. Univax expects to incur minimal additional capital expenditures in
the remainder of 1995. Univax finances most of its equipment purchases under a
$4.5 million master lease agreement, under which approximately $850,000
remains available for use until December 30, 1995. Univax has a commitment to
contribute $500,000 and loan up to an additional $3 million toward plant
improvements at Rh Pharmaceuticals provided Rh Pharmaceuticals spends an equal
amount. As of June 30, 1995 Univax has paid Rh Pharmaceuticals approximately
half of the required contribution, which has been included in Research and
Development expenses.
Since its inception, Univax has financed its operations principally from
private and public sales of equity securities and from collaborative
arrangements with corporate partners. Although Univax is now generating
revenue from the sale of WinRho SD, it will continue to require external
funding to support its operations. There can be no assurance that any such
financings or corporate arrangements will be available on terms favorable to
Univax or at all. Univax expects to incur substantial additional expenses in
the pursuit of its product development programs. Such expenses may include
costs of expanded research and development, clinical trials, renovation of
manufacturing facilities, establishment of a marketing and sales organization
and payments required under collaborative agreements. If additional financing
is not available, Univax anticipates that its existing capital resources will
enable it to maintain its current and planned operations into the second
quarter of 1996.
106
<PAGE>
UNIVAX MANAGEMENT AND EXECUTIVE COMPENSATION
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of Univax as of October 20, 1995, and
their ages as of such date, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas P. Stagnaro.............. 52 President, Chief Executive Officer and
Director
Cabot R. Caskie................. 51 Vice President, Chief Financial Officer and
Secretary
Janet M. Hanlon................. 41 Treasurer
Robert B. Naso.................. 50 Vice President of Research and Development
Samuel W. Shakespeare........... 51 Vice President of Sales
Robert Venteicher............... 49 Vice President of Quality
Brian H. Dovey.................. 53 Chairman of the Board of Directors
Joe C. Cook, Jr................. 53 Director
A. Barr Dolan................... 46 Director
George W. Ebright............... 57 Director
Joseph S. Lacob................. 39 Director
Richard S. Schweiker............ 69 Director
Nelson N.H. Teng................ 49 Director
</TABLE>
THOMAS P. STAGNARO has served as a director and as President of Univax since
October 1989, and as Chief Executive Officer of Univax since October 1990.
From 1982 to 1989, Mr. Stagnaro was with Alpha. During his tenure with Alpha,
Mr. Stagnaro served as Vice President of Sales and Marketing as well as
President of Alpha Home Care Company, an affiliate of Alpha.
CABOT R. CASKIE has served as Vice President and Chief Financial Officer of
Univax since January 1991 and as Secretary since August 1991. Mr. Caskie also
served as Treasurer of Univax from January 1991 to July 1993. During 1990, Mr.
Caskie was President and Chief Executive Officer of Therapeutic Immunology,
Inc., an immunotherapeutic service company. From 1989 to 1990, Mr. Caskie was
an independent consultant to medical device companies. From 1975 to 1989, Mr.
Caskie held various positions with Survival Technology, Inc., a pharmaceutical
and medical services company, serving as Executive Vice President and Chief
Operating Officer from 1984 to 1989.
JANET M. HANLON joined Univax as Controller in October 1992 and was promoted
to Treasurer in July 1993. From 1987 to 1992, Ms. Hanlon was Director of
Finance at the law firm of Wilmer, Cutler & Pickering. From 1981 to 1987, Ms.
Hanlon held various financial positions at Communications Satellite
Corporation, a telecommunications company.
ROBERT B. NASO, PH.D. joined Univax as Vice President of Research 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.
SAMUEL W. SHAKESPEARE joined Univax as Vice President of Sales in October
1994. From 1976 to 1994, Mr. Shakespeare held a variety of sales management,
sales support and marketing positions with Baxter including co-managing the
U.S. sales operations of the Hyland Division of Baxter Biotech from 1990 until
1994.
ROBERT VENTEICHER, PH.D. joined Univax in February 1992 as Director, Quality
Assurance and Quality Control and was promoted to Vice President of Quality in
January 1994. Dr. Venteicher was Associate Director
107
<PAGE>
of Bioprocess and Analytical Development at Centocor, Inc., a
biopharmaceutical company, from 1988 to 1992. From 1978 to 1988, Dr.
Venteicher held various positions with Hoffmann LaRoche, Inc., a
pharmaceutical company, serving as Assistant Director of Biotechnology Quality
Control from 1987 to 1988.
BRIAN H. DOVEY has been a director of Univax since February 1991 and
Chairman of the Board of Directors since October 1991. Mr. Dovey has been a
general partner of One Palmer Square Associates II, L.P., a venture capital
investment firm that is the general partner of Domain Partners II, L.P., since
1988. From 1986 to 1988, Mr. Dovey was President of Rorer Group, Inc., a
pharmaceutical company. Mr. Dovey also serves on the Board of Directors of
Athena Neurosciences, Inc., ReSound Corporation, Creative Biomolecules, Inc.
and Virus, Inc.
JOSEPH C. COOK, JR. has been a director of Univax since September 1994. Mr.
Cook is a founder of Life Sciences Advisors, Inc., a senior level management
consulting firm focusing on high technology businesses engaged in the health
care industries. Mr. Cook is also President of Cambrian Associates, Inc., a
management consulting firm. In addition, Mr. Cook has served as a director and
Chairman of the Executive Committee of Amylin Pharmaceuticals, Inc., since
November 1994. Mr. Cook retired as Group Vice President, Global Manufacturing,
Engineering and Corporate Quality at Eli Lilly and Co. ("Lilly"), a
pharmaceutical company, in 1993. During his 28 years with Lilly, Mr. Cook was
Vice President of Sales and Marketing and Chief Financial Officer, Elanco
Products Company, and General Business Manager, Worldwide Capsule Business
Unit.
A. BARR DOLAN has been a director of Univax since Univax's inception in 1988
and was Chairman of the Board of Directors from 1988 to October 1991. Mr.
Dolan has served as President of Charter Venture Capital, a venture capital
management firm, and as general partner of Charter Ventures, a venture capital
investment firm, from 1982 to the present.
GEORGE W. EBRIGHT has been a director of Univax since May 1992. Until
December 1994, Mr. Ebright was Chairman of the Board of Cytogen Corporation
("Cytogen"), a biopharmaceutical company, which he joined in February 1989 as
President, Chief Executive Officer and director. For 26 years prior to joining
Cytogen, Mr. Ebright held various management positions at SmithKline Beckman
Corporation, including President and Chief Operating Officer from 1987 to
1989. Mr. Ebright also serves on the Board of Directors of Cytogen, the West
Company and Arrow International.
JOSEPH S. LACOB has been a director of Univax since February 1991. Mr. Lacob
is a partner of KPCB V Associates, which is the general partner of Kleiner
Perkins Caufield & Byers V, which he joined in 1987. He is also Chairman of
the Board of CellPro Incorporated.
RICHARD S. SCHWEIKER has been a director of Univax since March 1992. Mr.
Schweiker was President of the American Council of Life Insurance from
February 1983 to December 1994. Mr. Schweiker formerly served as Secretary of
Health and Human Services and as a United States Senator. He also serves on
the Board of Directors of National Medical Enterprises, Inc.
NELSON N.H. TENG is a founder of Univax and has served as a director since
Univax's inception in 1988. From 1981 to the present, Dr. Teng has been an
Associate Professor of Gynecology and Obstetrics at Stanford University
Medical Center, where he is also Director of Gynecologic Oncology.
Officers of Univax serve at the pleasure of the Board of Directors. The term
of office of each director of Univax ends at the next annual meeting of
Univax's stockholders or when his or her successor is elected and qualified.
There are no family relationships among any of the directors or executive
officers of Univax.
108
<PAGE>
SUMMARY COMPENSATION TABLE
Set forth below is information on the annual and long-term compensation for
services in all capacities for the fiscal year ended December 31, 1994 of
those persons who were, at December 31, 1994, (i) the Chief Executive Officer
and (ii) the other four most highly compensated executive officers of Univax
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------- ------------
OTHER ALL OTHER
ANNUAL SECURITIES COMPEN-
COMPENS- UNDERLYING SATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ATION($) OPTIONS(#) ($) (1)
- --------------------------- ---- --------- -------- -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Stagnaro....... 1994 205,000 40,000 -- 20,000(3) 825
Chief Executive Officer 1993 185,000 65,000 -- 25,000 915
1992 135,000 25,000 -- 0 756
Cabot R. Caskie.......... 1994 130,000 20,000 -- 8,000(3) 785
Vice President and 1993 124,000 12,000 -- 10,000 908
Chief Financial Officer 1992 118,000 0 -- 0 756
W. Scott Harkonen (2).... 1994 150,000 25,000 -- 8,000(3) 810
Vice President of
Medical 1993 130,000 25,000 -- 10,000 915
and Regulatory Affairs 1992 121,000 0 -- 0 756
Robert B. Naso (4)....... 1994 145,000 15,000 -- 0 805
Vice President, Research 1993 132,500 20,000 -- 10,000 915
and Development 1992 75,000 0 56,085 85,000 504
Scott E. Winston (5)..... 1994 125,000 5,000 -- 8,000(3) 761
Vice President,
Development 1993 114,000 15,000 -- 10,000 834
1992 110,000 0 -- 0 739
</TABLE>
- --------
(1) Represents premiums paid on life insurance policies for the named
individual's benefit.
(2) Dr. Harkonen's employment as Vice President, Medical and Regulatory
Affairs of Univax ended in August 1995.
(3) Consists of options held by the named individuals that were repriced
during the year ended December 31, 1994.
(4) Dr. Naso joined Univax in May 1992. Other Annual Compensation of Dr. Naso
in 1992 includes moving expense reimbursements.
(5) Dr. Winston's employment as Vice President, Development ended in May 1995.
Univax's efforts to attract and retain qualified executive officers may
result in certain incidental personal benefits to such officers not otherwise
described in this Proxy Statement/Prospectus. The incremental cost to Univax
of providing such incidental benefits did not, for the year ended December 31,
1994, exceed the lesser of $50,000 or 10% of the total salary and bonus
reported in the above compensation table for any individual named in the
table.
109
<PAGE>
OPTION GRANTS IN LAST YEAR
Set forth below is information on grants of stock options to the Named
Executive Officers during the year ended December 31, 1994.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM(2)
------------------------------------------------- ----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#)(3) FISCAL YEAR ($/SHARE) DATE 5% ($) 10%($)
---- ------------- ------------ ----------- ---------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Stagnaro...... 20,000 3.23% $6.00 11/01/04 $ 75,467 $ 191,249
Cabot R. Caskie......... 8,000 1.29% 6.00 11/01/04 30,187 76,500
W. Scott Harkonen....... 8,000 1.29% 6.00 11/01/04 30,187 76,500
Robert B. Naso.......... 0 N/A N/A N/A N/A N/A
Scott E. Winston........ 8,000 1.29% 6.00 11/01/04 30,187 76,500
</TABLE>
- --------
(1) Univax's 1989 Stock Plan is administered by the Compensation Committee of
the Board of Directors which has the authority to determine the
individuals to whom and the terms at which option grants shall be made,
and the number of shares subject to options. To date, all options granted
have had ten year terms and have initially vested 12.5% after the first
six months and ratably thereafter on a quarterly basis over an additional
42 months. In the event of a change in control of Univax, vesting of
options may be affected depending on, among other things, the treatment of
options in such change in control. If an employee's employment is
terminated, vesting of options ceases and the employee has a specified
number of days from the date of termination to exercise his or her
options: 30 days in the case of termination for reasons other than total
and permanent disability, or 180 days in the case of such disability.
(2) The potential realizable value portion of this table illustrates the value
that might be realized upon exercise of the options immediately prior to
the expiration of their terms, assuming the specified compounded rates of
appreciation in value of Univax Common Stock over the terms of the
options. Actual gains, if any, on stock option exercise are dependent upon
a number of factors, including the future performance of Univax Common
Stock, overall stock market conditions, and the timing of option
exercises, if any. There can be no assurance that the amounts specified in
this table will be realized.
(3) Consists of options held by the named individuals that were repriced
during the year ended December 31, 1994.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
Set forth below is information on the stock options exercised during the
year ended December 31, 1994 by the Named Executive Officers and the
unexercised stock options held by the Named Executive Officers at the end of
1994.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-
OPTIONS AT MONEY OPTIONS AT
FISCAL YEAR-END(#) FISCAL YEAR-END($)(2)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Stagnaro...... 0 0 258,750 36,250 1,017,562 52,187
Cabot R. Caskie......... 19,000 128,900 12,312 15,188 21,604 19,845
W. Scott Harkonen....... 18,500 139,600 19,312 15,188 50,304 19,845
Robert B. Naso.......... 0 0 57,500 37,500 0 0
Scott E. Winston........ 12,500 76,562 35,625 19,875 73,125 24,375
</TABLE>
- --------
(1) Based on the per share price of Univax Common Stock on the date of
exercise, less the exercise price.
(2) Based on the $4.25 per share price of Univax Common Stock on December 31,
1994, less the exercise price.
110
<PAGE>
DIRECTOR COMPENSATION
Directors do not receive any fees for service on the Board of Directors.
Non-employee directors are reimbursed for their expenses for each Board and
Committee meeting attended. Non-employee directors of Univax are also eligible
to receive options under Univax's 1995 Directors' Stock Option Plan. Mr. Cook
was granted an option to purchase 25,000 shares of Univax Common Stock under
Univax's 1989 Stock Option Plan following his election to the Board of
Directors in September 1994. Mr. Cook also earned $28,500 in 1994 under a
consulting agreement with Univax.
111
<PAGE>
UNIVAX PRINCIPAL STOCKHOLDERS
The following table sets forth information as of October 20, 1995 with
respect to (i) each person known by Univax to be the beneficial owner of more
than five percent of outstanding Univax Common Stock and Univax Preferred
Stock, (ii) each of the directors of Univax, and (iii) all officers and
directors of Univax as a group. Except as otherwise indicated, Univax believes
that the beneficial owners of the Univax Capital Stock listed below, based on
information furnished by such owners, have sole investment and voting power
with respect to such shares, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER PERCENT OF
BENEFICIAL OWNER OF SHARES CLASS (1)
------------------- --------- ----------
<S> <C> <C>
TITLE OF CLASS: UNIVAX PREFERRED STOCK(2)
Genzyme Corporation....................................... 502,512 100%
One Kendall Square
Cambridge, Massachusetts 02139
TITLE OF CLASS: UNIVAX COMMON STOCK
Domain Partners II, L.P. ................................. 1,163,707 6.8%
One Palmer Square
Princeton, New Jersey 08542
Kleiner Perkins Caufield & Byers V (3).................... 2,350,360 13.7%
2750 Sand Hill Road
Menlo Park, California 94025
Wellington Management Co. ................................ 1,077,500 6.3%
75 State Street
Boston, Massachusetts 02109
Brian H. Dovey (4)........................................ 1,748,327 10.1%
One Palmer Square
Princeton, New Jersey 08542
Joseph S. Lacob (5)....................................... 2,383,360 13.8%
2750 Sand Hill Road
Menlo Park, California 94025
Joseph C. Cook, Jr. (6)................................... 14,250 *
A. Barr Dolan (7)......................................... 580,078 3.3%
George W. Ebright (8)..................................... 26,875 *
Richard S. Schweiker (9).................................. 28,437 *
Nelson N.H. Teng, MD, Ph.D. (10).......................... 520,000 3.0%
Thomas P. Stagnaro (11)................................... 354,825 2.0%
Cabot R. Caskie (12)...................................... 46,875 *
Robert B. Naso (13)....................................... 83,125 *
All officers and directors as a group
(13 persons) (1)(4)-(13)(14)............................. 5,885,194 32.6%
</TABLE>
- --------
* Less than 1%.
(1) Percentage beneficially owned is based on 17,239,410 shares of Univax
Common Stock outstanding on October 20, 1995 and 502,512 shares of Univax
Preferred Stock outstanding on October 20, 1995.
(2) Conversion ratio is subject to adjustment.
112
<PAGE>
(3) Includes 83,280 shares owned by KPCB Zaibatsu Fund I. Excludes options to
purchase 30,000 shares exercisable within 60 days by Mr. Joseph Lacob,
who is a partner of KPCB V Associates, the general partner of Kleiner
Perkins Caufield & Byers V. Kleiner Perkins Caufield & Byers V disclaims
beneficial ownership of such options.
(4) Includes 1,163,707 shares owned by Domain Partners, II, L.P. Mr. Dovey is
a general partner of One Palmer Square Associates II, L.P., the general
partner of Domain Partners II, L.P. Mr. Dovey has indirect beneficial
ownership of these shares. Also includes 567,570 shares owned by
Biotechnology Investments Limited ("BIL"). Pursuant to a contractual
arrangement, Domain Associates is the U.S. venture capital advisor to
BIL. Domain Associates has neither voting nor investment power over BIL,
and both Domain Associates and Mr. Dovey disclaim beneficial ownership of
these shares.
(5) Includes options to purchase 30,000 shares exercisable within 60 days and
shares owned by Kleiner Perkins Caufield & Byers V and KPCB Zaibatsu Fund
I. Mr. Lacob is a partner of KPCB V Associates, the general partner of
Kleiner Perkins Caufield & Byers V. Mr. Lacob disclaims beneficial
ownership of shares owned by Kleiner Perkins Caufield & Byers V and KPCB
Zaibatsu Fund I.
(6) Includes options to purchase 11,250 shares exercisable within 60 days.
(7) Includes shares held by Charter Ventures. Mr. Dolan is President of
Charter Venture Capital and a general partner of Charter Ventures. Mr.
Dolan disclaims beneficial ownership of these shares.
(8) Includes options to purchase 26,875 shares exercisable within 60 days.
(9) Includes options to purchase 28,437 shares exercisable within 60 days.
(10) Includes options to purchase 220,000 shares exercisable within 60 days.
(11) Includes options to purchase 285,625 shares exercisable within 60 days.
(12) Includes options to purchase 13,875 shares exercisable within 60 days.
(13) Includes options to purchase 83,125 shares exercisable within 60 days.
(14) Includes options to purchase an additional 799,311 shares exercisable
within 60 days by officers and directors of Univax.
AMENDMENT TO THE NABI 1990 EQUITY INCENTIVE PLAN
The 1990 Equity Incentive Plan (the "1990 Plan") was adopted by NABI's
stockholders in July 1990 and, as amended in May 1995, provides for the award
of up to 2,745,000 shares of NABI Common Stock in the form of incentive stock
options ("ISOs"), non-qualified stock options, restricted stock, stock
appreciation rights, performance shares or stock units (each, an "Award"). To
date, NABI has awarded only ISOs, non-qualified stock options and restricted
stock under the 1990 Plan. NABI has not awarded, and presently does not intend
to award, stock appreciation rights, performance shares or stock units under
the 1990 Plan.
On October 10, 1995, the Board of Directors approved an amendment to the
1990 Plan, subject to stockholder approval, increasing the maximum number of
shares of NABI Common Stock which may be issued under the Plan by 1,500,000
shares to a total of 4,245,000 shares of NABI Common Stock contingent upon
consummation of the Merger. Currently, 531,288 shares of NABI Common Stock
remain available for Awards under the 1990 Plan. The NABI Board of Directors
believes that approval by its stockholders of the Plan Amendment Proposal to
increase the number of shares available under the 1990 Plan is an important
component of the Merger transaction. Following the Merger, equity incentive
Awards of shares of NABI Common Stock will be made under the 1990 Plan to
employees and consultants of the combined company. New grants of options will
no longer be made under any of the Univax Stock Option Plans. Because of the
anticipated addition of certain Univax employees as 1990 Plan participants,
the Board has determined that the number of shares of NABI Common Stock
currently available for Awards under the 1990 Plan will be insufficient to
provide for all the Awards that the Compensation Committee is likely to make
in the coming year to employees of the combined company. The Board believes
that the ability to grant Awards under the 1990 Plan is necessary to attract
and retain those highly competent individuals upon whose judgment, initiative
and leadership the combined company's success in large measure depends.
113
<PAGE>
The following is a summary of the material provisions of the 1990 Plan and
is qualified in its entirety by reference to the complete text of the 1990
Plan, which is attached to this Proxy Statement/Prospectus as Appendix D as it
is proposed to be amended.
The 1990 Plan is administered by the Compensation Committee of the Board of
Directors whose members are ineligible to participate in the 1990 Plan. The
Compensation Committee determines those employees and consultants (including
directors who are employees or consultants) who shall receive Awards and the
size and type of Awards. The Compensation Committee has authority to adopt,
alter and repeal rules and guidelines governing the 1990 Plan, interpret
provisions of the 1990 Plan and decide all disputes arising in connection with
the 1990 Plan.
Options. The Compensation Committee may award ISOs and non-qualified stock
options (collectively, the "Options") and determine the number of shares to be
covered by each Option, the Option price therefor, the term of the Option,
when an Option becomes exercisable, and the other conditions and limitations
applicable to the exercise of the Option. As required by the Code, the Option
price per share of NABI Common Stock purchasable under an ISO cannot be less
than 100% of the fair market value of the NABI Common Stock on the date of
grant. The 1990 Plan provides that the Option price per share of NABI Common
Stock purchasable under a non-qualified stock option will be determined by the
Compensation Committee, and may be less than, equal to or greater than the
fair market value of the NABI Common Stock on the date of grant, provided that
it cannot be less than 85% of the fair market value on the date of grant.
Options may be exercisable for not more than ten years after the date the
Option is granted. The Compensation Committee may at any time accelerate the
exercisability of all or any portion of any Option.
For federal income tax purposes, no taxable income results to the optionee
upon the grant of an ISO or upon the issuance of shares to him or her upon the
exercise of the ISO. Correspondingly, no deduction is allowed to NABI upon
either the grant or the exercise of an ISO. However, if the aggregate fair
market value (determined at the time the Option is granted) of the NABI Common
Stock covered by ISOs which are exercisable for the first time by an
individual in a calendar year exceeds $100,000, the amount of the excess will
not be treated as shares acquired through exercise of an ISO.
If shares acquired upon the exercise of an ISO are not disposed of within
the two-year period following the date the ISO is granted or within the one-
year period following the date the shares are transferred to the optionee
pursuant to exercise of the ISO, the difference between the amount realized on
any disposition thereafter and the Option price will be treated as long-term
capital gain or loss to the optionee. If a disposition occurs before the
expiration of either of the requisite holding periods, then the lower of (i)
any excess of the fair market value of the shares at the time of exercise of
the ISO over the Option price or (ii) the actual gain realized on disposition
will be deemed to be compensation to the optionee and will be taxed at
ordinary income rates. In such event, NABI will be entitled to a corresponding
deduction from its income, provided NABI satisfies applicable reporting
requirements with respect to such income in a timely manner. Any such increase
in the income of the optionee or deduction from the income of NABI
attributable to such disposition is treated as an increase in income or a
deduction from the income in the taxable year in which the disposition occurs.
Any excess of the amount realized by the optionee on disposition over the fair
market value of the shares at the time of exercise will be treated as capital
gain.
"Alternative minimum taxable income" in excess of a taxpayer's exemption
amount is subject to the alternative minimum tax, which is imposed at rates of
26% to 28% on individuals and is payable to the extent it exceeds the regular
income tax. The excess of the fair market value on the date of exercise over
the Option price of shares acquired on exercise of ISOs generally constitutes
an item of alternative minimum taxable income for the purpose of the
alternative minimum tax. The payment of any alternative minimum tax resulting
therefrom will not increase the optionee's basis in the shares acquired for
regular income tax purposes.
Under the Code, a person who is granted a non-qualified stock option will
not have taxable income at the date of grant; however, an optionee who
thereafter exercises such an option will be deemed to have received
114
<PAGE>
compensation income in an amount equal to the excess, if any, of the fair
market value of the shares on the date of exercise over the Option price. The
optionee's basis for such shares will be increased by the amount which is
deemed compensation income. Subject to the limitations of Section 162(m) of
the Code, for the year in which a non-qualified stock option is exercised,
NABI will be entitled to a deduction in the same amount as the optionee is
required to include in his or her income, provided NABI satisfies applicable
reporting requirements with respect to such income in a timely manner. When
the optionee disposes of such shares, he or she will recognize capital gain or
loss.
Restricted Stock. An Award of restricted stock ("Restricted Stock") entitles
the participant to acquire shares of NABI Common Stock for a purchase price
equal to or greater than par value, subject to such conditions and
restrictions, including a right of NABI, during a specified period or periods,
to repurchase such shares at their original purchase price (or to require
forfeiture of such shares) upon the participant's termination of employment.
Subject to the provisions of the 1990 Plan, the Compensation Committee may
award shares of Restricted Stock and determine the cash purchase price (if
any) or other consideration therefor, the duration of the restricted period
(which may not be less than three years) during which, and the conditions
under which, the shares may be forfeited to or repurchased by NABI, and the
other terms and conditions of such Awards. The Compensation Committee may
modify or waive the restrictions with respect to any Restricted Stock. Shares
of Restricted Stock may be issued for no cash consideration or such minimum
consideration as may be required by applicable law. A participant has all the
rights of a stockholder with respect to his or her Restricted Stock including
voting and dividend rights, subject to any applicable restrictions on transfer
and NABI repurchase or forfeiture rights, and subject to any other conditions
contained in the Award.
A recipient of Restricted Stock generally will be subject to tax at ordinary
income rates on the fair market value of the Restricted Stock at the time the
Restricted Stock is no longer subject to forfeiture, less any amount paid for
such stock. However, a recipient who makes an election under Section 83(b) of
the Code within 30 days of the date of issuance of the Restricted Stock will
realize ordinary income on the date of issuance equal to the fair market value
of the shares of Restricted Stock at that time (measured as if the shares were
unrestricted and could be sold immediately), less any amount paid for such
stock. If the election is made, no taxable income will be recognized when the
shares subject to such election are no longer subject to forfeiture. If the
shares subject to such election are forfeited, the recipient will not be
entitled to any deduction, refund or loss for tax purposes with respect to
amounts previously included in income with respect to the shares. The holding
period to determine whether the recipient has long-term or short-term capital
gain or loss begins when the restriction period expires (or upon earlier
issuance of the shares, if the recipient elected immediate recognition of
income under Section 83(b) of the Code).
General. The Compensation Committee shall determine whether Awards are
settled in whole or in part in cash, NABI Common Stock, other securities of
NABI, Awards or other property. The Compensation Committee may permit a
participant to defer all or any portion of a payment under the 1990 Plan,
including the crediting of interest on deferred amounts denominated in NABI
Common Stock. Such a deferral may have no effect for purposes of determining
the timing of taxation of payments. The Compensation Committee may amend,
modify or terminate any outstanding Award, including substituting therefor
another Award of the same or a different type, changing the date of exercise
or realization, and converting an ISO to a non-qualified stock option, if the
participant consents to such action or the Compensation Committee determines
that the action would not materially and adversely affect the participant.
Awards may not be made under the 1990 Plan after May 7, 2000, but outstanding
Awards may extend beyond such date.
The number of shares of NABI Common Stock issuable pursuant to the 1990 Plan
may not be changed except by approval of the stockholders. However, in the
event that the Compensation Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, split-up, spin-off, combination,
exchange of shares, warrants or rights offering to purchase NABI Common Stock
at a price substantially below fair market value, or other similar transaction
affects the NABI Common Stock such that an adjustment is required in order to
preserve the benefits intended to
115
<PAGE>
be made available under the 1990 Plan, the Compensation Committee may adjust
equitably the number and kind of shares of stock or securities in respect of
which Awards may be made under the 1990 Plan, the number and kind of shares
subject to outstanding Awards, and the award, exercise or conversion price
with respect to any of the foregoing, and if considered appropriate, the
Compensation Committee may make provision for a cash payment with respect to
an outstanding Award. Except pursuant to the preceding sentence and except for
Options covering shares of NABI Common Stock aggregating no more than five
percent of the shares of NABI Common Stock reserved for issuance under the
1990 Plan at the time, the Compensation Committee may not reprice outstanding
Options under the 1990 Plan without approval by the stockholders. NABI Common
Stock subject to Awards which expire or are terminated prior to exercise or
NABI Common Stock which has been forfeited under the 1990 Plan will be
available for future Awards under the Plan. Any proceeds received by NABI from
transactions under the 1990 Plan will be used for the general purposes of
NABI.
In order to preserve a participant's rights under an Award in the event of a
change in control of NABI, the Compensation Committee in its discretion may,
at the time an Award is made or at any time thereafter, take one or more of
the following actions with respect to any such change of control: (i) provide
for the acceleration of any time period relating to the exercise or
realization of the Award, (ii) provide for the purchase of the Award upon the
participant's request for an amount of cash or other property that could have
been received upon the exercise or realization of the Award had the Award been
currently exercisable or payable, (iii) adjust the terms of the Award in a
manner determined by the Compensation Committee, (iv) cause the Award to be
assumed, or new rights substituted therefor, by another entity, or (v) make
such other provision as the Compensation Committee may consider equitable and
in the best interests of NABI.
The 1990 Plan may be amended from time to time by the Board of Directors or
terminated in its entirety, provided that no amendment may be made without
stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirement for
stockholder approval under Rule 16b-3. NABI is seeking stockholder approval of
the Plan Amendment Proposal in order to satisfy the requirements of Rule 16b-3
promulgated under the Exchange Act and the requirements of Section 422 of the
Code. The Compensation Committee may award Options at less than 85% (but not
less than 50%) of fair market value on the date of grant and may award
Restricted Stock with a restricted period of less than three years, provided
that the number of such Options and shares of Restricted Stock at the time
shall not exceed five percent of the shares of NABI Common Stock reserved for
issuance under the 1990 Plan at the time.
Future Awards under the 1990 Plan are subject to the discretion of the
Compensation Committee. Therefore, it is impossible to indicate the specific
Awards which will be granted to or benefits which will be received by any
individual participant or group of participants under the 1990 Plan. The
following table, however, provides certain information about Awards made
during the fiscal year ended December 31, 1994 through the grant of Options to
the named executive officers, all current executive officers as a group, all
current directors who are not executive officers as a group and all employees,
including all current officers who are not executive officers, as a group.
<TABLE>
<CAPTION>
1990 EQUITY INCENTIVE PLAN
-----------------------------------
NAME DOLLAR VALUE ($)(1) NUMBER OF UNITS
---- ------------------- ---------------
<S> <C> <C>
David J. Gury............................. 58,916 78,555
John C. Carlisle.......................... 35,123 46,830
Alfred J. Fernandez....................... 18,094 24,125
Raj Kumar, D.Sc........................... 19,785 26,380
Stephen W. Weston......................... 16,013 21,350
Executive Group (7 Persons)............... 163,459 217,945
Non-Executive Officer Director Group (4
Persons)................................. -- --
Non-Executive Officer Employee Group (121
Persons)................................. 146,141 194,855
</TABLE>
- --------
(1) Calculated using the difference between the exercise price per share under
the Options ($6.75) and the closing price of NABI Common Stock as reported
on Nasdaq on December 31, 1994 ($7.50).
THE BOARD URGES THE STOCKHOLDERS TO VOTE FOR THE PLAN AMENDMENT PROPOSAL,
INCREASING BY 1,500,000 SHARES THE TOTAL NUMBER OF SHARES WHICH MAY BE AWARDED
UNDER THE 1990 PLAN.
116
<PAGE>
LEGAL MATTERS
The validity of the shares of NABI Common Stock to be issued in connection
with the Merger in exchange for Univax Capital Stock will be passed upon for
NABI by Nutter, McClennen & Fish, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of NABI as of December 31, 1994 and
1993, and for each of the three years in the period ended December 31, 1994,
included in this Proxy Statement/Prospectus, have been so included in reliance
on the report of Price Waterhouse LLP, certified independent public
accountants, given on the authority of said firm as experts in accounting and
auditing.
Representatives of Price Waterhouse LLP are expected to be present at the
NABI Meeting and will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
The financial statements of Univax as of December 31, 1994 and 1993, and for
each of the three years in the period ended December 31, 1994, included in
this Proxy Statement/Prospectus, have been so included in reliance on the
report of Price Waterhouse LLP, certified independent accountants, given on
the authority of said firm as experts in accounting and auditing.
Representatives of Price Waterhouse LLP are expected to be present at the
Univax Meeting and will have the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
PROPOSALS OF STOCKHOLDERS
Proposals of NABI stockholders intended to be presented at the next annual
meeting of stockholders must be received by NABI at its principal executive
offices by December 28, 1995 for inclusion in the proxy statement and form of
proxy relating to that meeting and must comply with the applicable
requirements of the federal securities laws.
117
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NORTH AMERICAN BIOLOGICALS, INC.
Report of Certified Independent Public Accountants...................... F-2
Consolidated Balance Sheet as of June 30, 1995 (unaudited) and December
31, 1994 and 1993...................................................... F-3
Consolidated Statement of Operations for the six months ended June 30,
1995 and 1994 (unaudited) and the years ended December 31, 1994, 1993
and 1992............................................................... F-4
Consolidated Statement of Changes in Stockholders' Equity for the six
months ended June 30, 1995 (unaudited) and the years ended December 31,
1994, 1993 and 1992.................................................... F-5
Consolidated Statement of Cash Flows for the six months ended June 30,
1995 and 1994 (unaudited) and the years ended December 31, 1994, 1993
and 1992............................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
UNIVAX BIOLOGICS, INC.
Report of Independent Accountants....................................... F-20
Balance Sheet as of June 30, 1995 (unaudited) and December 31, 1994 and
1993................................................................... F-21
Statement of Operations, for the six months ended June 30, 1995 and 1994
(unaudited) and the years ended December 31, 1994, 1993 and 1992....... F-22
Statement of Changes in Stockholders' Equity, for the six months ended
June 30, 1995 (unaudited) and the years ended December 31, 1994, 1993
and 1992............................................................... F-23
Statement of Cash Flows, for the six months ended June 30, 1995 and 1994
(unaudited) and the years ended December 31, 1994, 1993 and 1992....... F-24
Notes to Financial Statements........................................... F-25
</TABLE>
F-1
<PAGE>
REPORT OF CERTIFIED INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
and Stockholders of
North American Biologicals, Inc.
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of North
American Biologicals, Inc. and its subsidiaries at December 31, 1994 and 1993,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial 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.
As discussed in Note 9, the Company adopted a new accounting standard for
income taxes in 1993.
Price Waterhouse LLP
Miami, Florida
March 7, 1995
F-2
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------
1995 1994 1993
----------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash........................................... $ 1,863 $ 1,982 $ 824
Trade accounts receivable, net................. 26,047 22,875 13,019
Inventories.................................... 20,167 20,713 10,770
Prepaid expenses and other assets.............. 3,055 2,485 1,882
-------- ------- -------
TOTAL CURRENT ASSETS......................... 51,132 48,055 26,495
PROPERTY AND EQUIPMENT, NET...................... 24,369 14,225 6,563
OTHER ASSETS
Excess of acquisition cost over net assets ac-
quired, net................................... 16,407 16,696 9,083
Intangible assets, net......................... 9,908 10,616 8,217
Other.......................................... 4,610 4,225 2,530
-------- ------- -------
TOTAL ASSETS..................................... $106,426 $93,817 $52,888
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable......................... $ 3,863 $ 6,559 $ 4,692
Accrued expenses............................... 10,776 10,465 5,074
Notes payable.................................. 6,471 5,479 3,027
Contingent purchase price obligation........... -- -- 1,144
-------- ------- -------
TOTAL CURRENT LIABILITIES.................... 21,110 22,503 13,937
NOTES PAYABLE.................................... 27,007 19,549 15,057
CONTINGENT PURCHASE PRICE OBLIGATION............. -- -- 5,912
-------- ------- -------
TOTAL LIABILITIES................................ 48,117 42,052 34,906
-------- ------- -------
COMMITMENTS AND CONTINGENCIES.................... -- -- --
STOCKHOLDERS' EQUITY
Convertible preferred stock, par value $.10 per
share: 5,000 shares authorized; no shares out-
standing...................................... -- -- --
Common stock, par value $.10 per share; 50,000
shares authorized; 19,487 (unaudited), 19,308
and 12,965 shares issued, respectively........ 1,949 1,931 1,297
Common stock warrants.......................... -- -- 2,314
Capital in excess of par value................. 37,701 37,781 9,187
Retained earnings.............................. 18,659 12,179 5,350
-------- ------- -------
58,309 51,891 18,148
Note receivable from stockholder............... -- (126) (166)
-------- ------- -------
TOTAL STOCKHOLDERS' EQUITY....................... 58,309 51,765 17,982
-------- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $106,426 $93,817 $52,888
======== ======= =======
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
F-3
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ---------------------------
1995 1994 1994 1993 1992
------- ------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales
Customers..................... $91,373 $74,565 $158,575 $ 97,138 $75,719
Related parties............... 2,079 2,715 6,103 4,436 6,635
------- ------- -------- -------- -------
93,452 77,280 164,678 101,574 82,354
Cost and expenses:
Costs of products sold........ 74,201 61,507 131,368 81,607 71,137
Selling, general & administra-
tion expense................. 5,941 6,132 12,224 8,107 6,910
Other operating expense, prin-
cipally amortization, royal-
ties and freight............. 2,324 1,863 3,660 3,387 2,448
------- ------- -------- -------- -------
Operating income................ 10,986 7,778 17,426 8,473 1,859
Interest expense, net........... (533) (1,766) (3,025) (3,080) (2,427)
------- ------- -------- -------- -------
Income (loss) before provision
for income taxes, extraordinary
charge and cumulative effect of
change in accounting for income
taxes.......................... 10,453 6,012 14,401 5,393 (568)
Provision for income taxes...... (3,973) (2,302) (5,774) (1,988) (5)
------- ------- -------- -------- -------
Income (loss) before extraordi-
nary charge and cumulative ef-
fect of change in accounting
for income taxes............... 6,480 3,710 8,627 3,405 (573)
Extraordinary charge............ -- -- (717) -- --
Cumulative effect of change in
accounting for income taxes.... -- -- -- 100 --
------- ------- -------- -------- -------
Net income (loss)............... $ 6,480 $ 3,710 $ 7,910 $ 3,505 $ (573)
======= ======= ======== ======== =======
Earnings (loss) per share:
Income (loss) before
extraordinary charge and
cumulative effect of change
in accounting for income
taxes........................ $ 0.32 $ 0.22 $ 0.49 $ 0.25 $ (0.04)
Extraordinary charge............ -- -- (0.04) -- --
Cumulative effect of change in
accounting for income taxes.... -- -- -- 0.01 --
------- ------- -------- -------- -------
Net income (loss)............... $ 0.32 $ 0.22 $ 0.45 $ 0.26 $ (0.04)
======= ======= ======== ======== =======
Weighted average number of
shares and common share equiva-
lents.......................... 20,347 16,670 17,590 13,540 13,328
======= ======= ======== ======== =======
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
F-4
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED) AND THE YEARS ENDED DECEMBER
31, 1994, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED COMMON STOCK
STOCK COMMON STOCK WARRANTS CAPITAL IN RECEIVABLE
------------- -------------- -------------- EXCESS OF RETAINED FROM STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS STOCKHOLDERS EQUITY
------ ------ ------ ------ ------ ------ ---------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1991................... 792 $ 79 14,933 $1,493 205 -- $ 11,336 $ 2,418 $(209) $ 15,117
Acquisition and retire-
ment of treasury
stock.................. (792) (79) (6,181) (618) (12,027) (12,724)
Issuance of common
stock.................. 3,692 369 8,802 9,171
Issuance of warrants.... 1,516 $2,314 2,314
Issuance of restricted
stock under employee
stock plan............. 39 4 30 34
Warrants exercised...... 160 16 (160) -- 124 140
Stock options exer-
cised.................. 215 22 147 169
Tax benefit from war-
rants and stock options
exercised.............. 226 226
Collections of note re-
ceivable............... 43 43
Net loss for the year... (573) (573)
---- ---- ------ ------ ----- ------ -------- ------- ----- --------
Balance at December 31,
1992................... -- -- 12,858 1,286 1,561 2,314 8,638 1,845 (166) 13,917
Warrants exercised...... 10 1 (10) -- 10 11
Issuance of restricted
stock under employee
stock plan............. 12 1 50 51
Warrants expired........ (35) --
Stock options exer-
cised.................. 85 9 95 104
Tax benefit from war-
rants and stock options
exercised.............. 394 394
Net income for the
year................... 3,505 3,505
---- ---- ------ ------ ----- ------ -------- ------- ----- --------
Balance at December 31,
1993................... -- -- 12,965 1,297 1,516 2,314 9,187 5,350 (166) 17,982
Issuance of common
stock.................. 5,291 529 24,762 25,291
Compensation related to
restricted stock issued
under employee stock
plan................... 51 51
Stock options exer-
cised.................. 302 30 125 155
Warrants exercised...... 750 75 (750) (908) 3,270 2,437
Tax benefit from stock
options exercised...... 368 368
Repurchase of warrants.. (766) (1,406) (1,081) (2,487)
Collection of note re-
ceivable............... 166 166
Issuance of note receiv-
able................... (126) (126)
Net income for the
year................... 7,910 7,910
Other................... 18 18
---- ---- ------ ------ ----- ------ -------- ------- ----- --------
Balance at December 31,
1994................... -- -- 19,308 1,931 -- -- 37,781 12,179 (126) 51,765
Stock options exer-
cised.................. 240 24 225 249
Acquisition and retire-
ment of treasury
shares................. (61) (6) (385) (391)
Compensation related to
restricted stock issued
under employee stock
plan................... 14 14
Collection of note re-
ceivable............... 126 126
Other................... 66 66
Net income for period... 6,480 6,480
---- ---- ------ ------ ----- ------ -------- ------- ----- --------
Balance at June 30, 1995
(unaudited)............ -- -- 19,487 $1,949 -- -- $ 37,701 $18,659 -- $ 58,309
==== ==== ====== ====== ===== ====== ======== ======= ===== ========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
F-5
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
----------------- --------------------------
1995 1994 1994 1993 1992
-------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss).............. $ 6,480 $ 3,710 $ 7,910 $ 3,505 $ (573)
Adjustments to reconcile net
income (loss) to net cash
(used) provided by operating
activities:
Depreciation and amortization.. 2,229 2,252 4,398 2,958 2,207
Extraordinary charge........... -- -- 717 -- --
Imputed interest and
amortization of debt
discount...................... 18 568 876 1,158 877
Provision for doubtful
accounts...................... (116) 134 422 22 146
Compensation under employee
stock plan.................... 14 26 51 51 34
Deferred income taxes.......... -- -- (197) 135 --
Cumulative effect of change in
accounting for income taxes... -- -- -- (100) --
Change in assets and
liabilities:
Decrease (increase) in accounts
receivable.................... (3,056) (1,654) (8,976) (5,143) (60)
Decrease (increase) in
inventories................... 546 (2,694) (7,673) (1,130) (1,162)
Decrease (increase) in prepaid
expenses...................... (581) (1,423) (363) 298 (588)
Decrease (increase) in other
assets........................ (742) (258) (1,593) (746) (1,117)
Increase in accounts payable
and accrued expenses.......... (2,604) (1,171) 3,914 1,987 3,209
-------- ------- ------- ------- --------
Total adjustments.............. (4,292) (4,220) (8,424) (510) 3,546
-------- ------- ------- ------- --------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES........... 2,188 (510) (514) 2,995 2,973
-------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash of businesses acquired,
net of transaction costs...... -- 614 614 -- --
Cash consideration for business
acquisitions.................. -- -- -- -- (6,248)
Capital expenditures........... (11,024) (1,599) (6,760) (1,710) (2,181)
Collections on note receivable
from stockholder.............. 126 166 166 -- 43
Other, net..................... -- -- -- -- 70
-------- ------- ------- ------- --------
NET CASH USED BY INVESTING
ACTIVITIES..................... (10,898) (819) (5,980) (1,710) (8,316)
-------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Acquisition of capital stock... -- -- -- -- (12,724)
Net proceeds from sale and
issuance of common stock...... -- -- 16,895 -- 5,317
Proceeds from the issuance of
warrants...................... -- -- -- -- 1,406
Proceeds from the issuance of
subordinated debt............. -- -- -- -- 5,594
Proceeds from exercise of
options and warrants.......... 161 113 2,610 175 534
Repurchase of warrants......... -- -- (2,487) -- --
(Repayments) borrowings under
line of credit, net........... (1,288) (477) (488) 315 3,277
Borrowings of term debt........ -- 6,125 8,175 -- 7,000
Repayment of term debt......... (1,167) (5,250) (8,050) (1,250) (3,500)
Repayment of subordinated
debt.......................... -- -- (7,000) -- --
Borrowings of flexible term
notes......................... 9,936 -- 5,063 -- --
Contingent purchase price
obligation payments........... -- (612) (8,213) (817) (367)
Other debt..................... 949 2,007 1,147 145 (555)
-------- ------- ------- ------- --------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES........... 8,591 1,906 7,652 (1,432) 5,982
-------- ------- ------- ------- --------
NET INCREASE (DECREASE) IN
CASH........................... (119) 577 1,158 (147) 639
CASH AT BEGINNING OF PERIOD..... 1,982 824 824 971 332
-------- ------- ------- ------- --------
CASH AT END OF PERIOD........... $ 1,863 $ 1,401 $ 1,982 $ 824 $ 971
======== ======= ======= ======= ========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Interest paid.................. $ 953 $ 986 $ 2,219 $ 1,634 $ 1,160
======== ======= ======= ======= ========
Income taxes paid.............. $ 4,038 $ 2,340 $ 4,247 $ 945 $ 443
======== ======= ======= ======= ========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
F-6
<PAGE>
NORTH AMERICAN BIOLOGICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 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.
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:
<TABLE>
<CAPTION>
ASSET LIFE
----- ----
<S> <C>
Buildings.............................. 35 years
Furniture and fixtures................. 4-8 years
Machinery and equipment................ 3-10 years
Leasehold improvements................. Lesser of lease term or economic life
</TABLE>
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 ten to 25 years. The carrying value of goodwill 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 three to 25 years.
Revenue Recognition: Revenue is recognized when title and risk of loss is
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.
Income Taxes: Effective January 1, 1993, NABI adopted statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which requires a
change in the method of accounting for income taxes from the deferred method
to an asset and liability approach. NABI recognized the cumulative effect of
the accounting change as of January 1, 1993. The provision for income taxes
includes federal, state and foreign income taxes currently payable and the
change in amounts deferred because of temporary differences between financial
statement and tax bases of assets and liabilities.
Earnings Per Share: Earnings per share is determined based on the weighted
average number of common shares and common share equivalents outstanding
during the year. Anti-dilutive common share equivalents are excluded from the
calculation.
F-7
<PAGE>
Presentation and Reclassifications: All dollar amounts, except amounts
related to per share data, are expressed in thousands of dollars. Certain
items in the 1993 and 1992 Consolidated Financial Statements have been
reclassified for comparative purposes.
Unaudited Financial Statements: The interim financial data is unaudited;
however, in the opinion of NABI, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and the results of operations for the
interim periods.
NOTE 2 TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- -------
<S> <C> <C>
Trade accounts receivable.................................. $23,422 $13,144
Allowance for doubtful accounts............................ (547) (125)
------- -------
$22,875 $13,019
======= =======
</TABLE>
From May 1992 until July 1993, NABI discounted certain foreign trade
receivables under discounting and standby letter of credit agreements with
foreign banks. Under the terms of the agreements, receivables were discounted
at face value and were subject to recourse for up to 20% of face value. During
1993 and 1992, NABI incurred $192 and $397, respectively, in factoring expense
related to these agreements.
NOTE 3 INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1993
------- -------
<S> <C> <C>
Finished goods............................................... $15,328 $ 7,847
Work in process.............................................. 1,343 435
Raw materials................................................ 4,042 2,488
------- -------
$20,713 $10,770
======= =======
</TABLE>
NOTE 4 PROPERTY AND EQUIPMENT
Property and equipment and related allowances for depreciation and
amortization are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- -------
<S> <C> <C>
Land and buildings......................................... $ 2,998 $ 464
Furniture and fixtures..................................... 2,287 1,594
Machinery and equipment.................................... 9,635 8,127
Leasehold improvements..................................... 5,420 4,543
Construction in progress................................... 3,133 402
------- -------
Total property and equipment............................... 23,473 15,130
Less accumulated depreciation and amortization............. (9,248) (8,567)
------- -------
$14,225 $ 6,563
======= =======
</TABLE>
F-8
<PAGE>
NOTE 5 OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- -------
<S> <C> <C>
Excess of acquisition cost over net assets acquired........ $19,155 $10,793
Less accumulated amortization.............................. (2,459) (1,710)
------- -------
$16,696 $ 9,083
======= =======
Intangible assets:
Customer and donor lists................................. $ 3,987 $ 3,437
Trademarks and trademark registrations................... 2,204 2,222
Non-competition agreements............................... 3,423 2,210
Other.................................................... 3,757 1,555
------- -------
13,371 9,424
Less accumulated amortization.............................. (2,755) (1,207)
------- -------
$10,616 $ 8,217
======= =======
Other...................................................... $ 5,894 $ 3,686
Less accumulated amortization.............................. (1,669) (1,156)
------- -------
$ 4,225 $ 2,530
======= =======
</TABLE>
NOTE 6 ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1994 1993
------- ------
<S> <C> <C>
Employee compensation and benefits........................... $ 3,853 $1,952
Deferred revenue............................................. 1,983 126
Other........................................................ 4,629 2,996
------- ------
$10,465 $5,074
======= ======
</TABLE>
F-9
<PAGE>
NOTE 7 NOTES PAYABLE
Notes payable consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1993
------- -------
<S> <C> <C>
Bank indebtedness:
Term loan.............................................. $ 9,875 $ 5,250
Revolving credit facility.............................. 7,386 5,361
Flexible term notes.................................... 5,063 --
Other.................................................. 2,355 1,172
------- -------
24,679 11,783
Notes payable to institutional lenders, net of unamor-
tized debt discount of $1,054, based on imputed interest
rate of 17.30%.......................................... -- 5,946
Note payable to customer, net of unamortized debt dis-
count of $26, based on imputed interest rate of 12%..... 349 349
Other.................................................... -- 6
------- -------
Total notes payable...................................... 25,028 18,084
Current maturities....................................... (5,479) (3,027)
------- -------
Notes payable, long-term................................. $19,549 $15,057
======= =======
</TABLE>
The annual aggregate maturities of debt through 1999 and thereafter are
$5,479, $10,527, $3,167, $792, $2,400, and $2,663, respectively.
NABI's average short-term bank indebtedness was $2,000 and $4,576 for the
years ended December 31, 1994 and 1993, respectively, with weighted average
interest rates of 7.84% and 7.08% for the respective periods.
At December 31, 1994, NABI's bank loan agreement provides for a $9,875 term
loan, a $12,000 revolving credit facility, under which NABI may borrow to
satisfy its working capital requirements and an irrevocable letter of credit
in the amount of $18,175 as more fully discussed below. The term loan requires
quarterly principal payments plus accrued interest at prime. Final payment
plus accrued interest is due on January 31, 1998. The revolving credit
facility, under which maximum borrowings were increased from $9,000 to $12,000
through an amended bank loan agreement dated January 27, 1994, requires
quarterly interest payments on outstanding balances at prime and has a due
date of January 31, 1996 subject to extensions of up to two additional periods
of one year each. Under the provisions of the term loan and the revolving
credit facility NABI may elect LIBOR based borrowings, in which case interest
accrues at LIBOR plus 1.75% and interest payments are due at the expiration
date of the LIBOR commitment period.
At December 31, 1994 NABI had $5,063 outstanding in flexible term notes
("Flex Notes") under an agreement entered into on December 1, 1994 with a
Trustee to issue the Flex Notes up to a maximum aggregate principal amount of
$18,000. The proceeds will be used to finance the construction of a new
biopharmaceutical manufacturing facility which will also include NABI's
executive offices. The Flex Notes may have varying interest rates, not to
exceed 125% of the 30 day prime commercial rate, are redeemable by the
borrower with the lender's prior consent and are subject to mandatory sinking
fund redemptions of $2,400 annually beginning January 1, 1999 through 2003 and
$1,200 annually thereafter.
Repayment of the principal and interest on the Flex Notes is secured by an
irrevocable letter of credit ("LOC") issued by NABI's principal lender in the
amount of $18,175 under NABI's existing bank loan agreement, as amended. The
LOC expires on the due date of the revolving credit facility and provides for
a fee of 1.75% per annum of the outstanding balances and an unused commitment
fee of .5% per annum. In connection with the LOC, NABI's term loan facility
was reduced to $9,875, representing the outstanding balance as of December 1,
1994.
F-10
<PAGE>
Other bank indebtedness includes amounts due for transactional float under
the revolving credit facility.
On January 27, 1994, in connection with the acquisition discussed in Note
12, NABI amended its existing credit agreement with its principal lender,
effectively increasing its term loans to $14 million and the availability
under its revolving line of credit to $12 million, which availability is
subject to certain financial formulas which NABI currently satisfies. The
credit agreement, which is secured by substantially all of the assets of NABI,
contains covenants prohibiting dividend payments and requiring the maintenance
of various financial ratios.
Effective March 31, 1992, in connection with the business acquisition
discussed in Note 12, NABI entered into an agreement with a group of
institutional lenders for $7,000 of unsecured 11% senior subordinated notes
("Notes"). The Notes required repayment of principal in five equal annual
installments beginning in April 1995 with final maturity in 1999. Warrants to
purchase 766,000 shares of NABI Common Stock were issued in connection with
the Notes which were exercisable through April 15, 1999. In October 1994, NABI
prepaid the Notes at face value and repurchased the warrants for $2.5 million
(Note 8).
NOTE 8 STOCKHOLDERS' EQUITY
Convertible Preferred Stock
Effective March 31, 1992, NABI purchased all the outstanding shares of
NABI's Series A Convertible Preferred Stock as more fully discussed in Note
12.
Common Stock
Effective January 1995, NABI increased its authorized Common Stock from 20
million to 50 million shares.
In October 1994, NABI completed an underwritten public offering of its
Common Stock in which approximately 2.9 million shares were sold by NABI and
1.9 million shares were sold by two selling stockholders. NABI's utilization
of the proceeds is presented below:
<TABLE>
<S> <C>
PROCEEDS:
Net proceeds to NABI from offering............................... $16,895
Proceeds to NABI from the exercise of warrants by selling stock-
holder.......................................................... 2,437
-------
$19,332
=======
USE OF PROCEEDS:
Prepayment of 11% senior subordinated notes...................... $ 7,000
Prepayment of contingent purchase price obligation............... 6,500
Repurchase of warrants........................................... 2,487
Reduction of bank debt and other liabilities..................... 3,345
-------
$19,332
=======
</TABLE>
In connection with the prepayment of the Notes, NABI incurred an
extraordinary charge of $717 or $.04 per share resulting from the immediate
recognition and expense of the subordinated debt discount and deferred debt
issue costs associated with the issuance of the Notes.
On January 27, 1994, NABI issued approximately 2.3 million shares of Common
Stock in connection with the acquisition discussed in Note 13.
On March 31, 1992, NABI acquired approximately 6.2 million shares of its
Common Stock and issued approximately 1.7 million shares of Common Stock to
unrelated third parties in connection with the business acquisition discussed
in Note 12. On September 30, 1992, NABI issued 2 million shares of Common
Stock in connection with the product acquisition as discussed in Note 12.
F-11
<PAGE>
The note receivable from stockholder in the amount of $126 at December 31,
1994 bears interest at prime and is secured by a pledge of 36,783 shares of
NABI Common Stock.
Warrants
At December 31, 1993, NABI had warrants outstanding for the purchase of
approximately 1.5 million shares of its Common Stock, with exercise prices of
$3.25 per share, subject to antidilution adjustments. In connection with the
public offering discussed above, warrants to purchase 750,000 shares were
exercised and warrants to purchase 766,000 shares were repurchased by NABI.
Stock Options
NABI maintains two stock option plans for its employees. Under these plans,
NABI has granted options to certain employees entitling them to purchase
shares of NABI Common Stock within ten years, vesting ratably over periods
ranging from one to five years from the date of grant, at option prices equal
to or greater than their fair market value on the date of grant.
At December 31, 1994, there were options outstanding under these plans to
acquire 1.6 million common shares of which 742,000 were then exercisable. At
December 31, 1994, the plans have reserved 355,000 common shares for future
issuance. Information with respect to stock options granted to purchase Common
Stock (thousands) under these plans as of December 31, 1994 is presented
below:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS EXERCISED OR OPTIONS OPTION
YEAR GRANTED CANCELED OUTSTANDING PRICE
---- ------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
1991 and prior............... 2,675 2,080 595 $ .63 to $2.25
1992......................... 271 32 239 $3.31 to $3.56
1993......................... 307 16 291 $2.31 to $2.88
1994......................... 483 4 479 $2.64 to $6.75
----- ----- -----
3,736 2,132 1,604
===== ===== =====
</TABLE>
NOTE 9 INCOME TAXES
Effective January 1, 1993, NABI changed its method of accounting for income
taxes from the deferred method to the liability method required by Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As
permitted under the Statement, the 1992 financial statements have not been
restated. The cumulative effect of adopting this Statement was an increase in
net income of $100 or $.01 per share in 1993.
Income (loss) before provision for income taxes, extraordinary charge and
cumulative effect of change in accounting for income taxes was taxed under the
following jurisdictions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993 1992
-------- ------- -------
<S> <C> <C> <C>
Domestic........................................... $ 15,209 $ 5,393 $(596)
Foreign............................................ (808) -- 28
-------- ------- ------
Total............................................ $ 14,401 $ 5,393 $(568)
======== ======= ======
</TABLE>
F-12
<PAGE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Current:
Federal....................................... $ 4,928 $ 1,506 --
State......................................... 657 266 --
Foreign....................................... -- -- $ 5
-------- -------- ------
5,585 1,772 $ 5
-------- -------- ------
Deferred:
Federal....................................... (180) (385) --
State......................................... (17) (6) --
-------- -------- ------
(197) (391) --
-------- -------- ------
Benefit from utilization of net operating loss
carryforward................................... -- 526 --
Benefit charged directly to equity for exercise
of stock options and warrants.................. 368 59 --
Acquired tax benefit used to reduce intangible
assets......................................... 18 22 --
-------- -------- ------
386 607 --
-------- -------- ------
$ 5,774 $ 1,988 $ 5
======== ======== ======
</TABLE>
NABI incurred a net operating loss in 1992 and accordingly, no federal or
state income taxes were provided.
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1993
------- ------
<S> <C> <C>
Gross Deferred Tax Assets:
Amortization.............................................. $ 911 $ 409
Bad Debt.................................................. 197 --
Depreciation.............................................. 142 --
Inventory reserve......................................... 290 133
Inventory capitalization.................................. 162 145
Accrued vacation.......................................... 151 207
Loss carryforward......................................... 1,336 --
Foreign tax credits....................................... 111 111
Other..................................................... 61 89
------- ------
3,361 1,094
Valuation allowance......................................... (1,519) (182)
------- ------
Deferred Tax Asset.......................................... 1,842 912
Gross Deferred Tax Liabilities:
Depreciation.............................................. -- (87)
Amortization.............................................. (533) (145)
Other..................................................... (27) --
------- ------
Deferred Tax Liabilities.................................... (560) (232)
------- ------
Net Deferred Tax Assets..................................... $ 1,282 $ 680
======= ======
</TABLE>
In 1994, general business credits of $42 were utilized to reduce the
provision for income taxes and taxes currently payable. During 1993, the loss
carryforward from 1992 was fully utilized to offset taxable income resulting
in a current tax benefit of approximately $526.
F-13
<PAGE>
At December 31, 1994, the valuation allowance relates primarily to loss
carryforwards available in connection with the acquisition discussed in Note
13 which expire through 2008, loss carryforwards attributable to foreign
operations and foreign tax credits which expire in 1995.
The significant elements contributing to the difference between the federal
statutory tax rate and the effective tax rate are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- -----
<S> <C> <C> <C>
Federal statutory rate................................... 35.0% 35.0% (34.0%)
State income taxes, net of federal benefit............... 2.9 3.4 --
Goodwill and other amortization.......................... 0.9 3.0 36.2
Unutilized NOL benefit................................... -- -- 14.3
Foreign trade income..................................... (1.8) (3.1) (18.4)
Foreign loss............................................. 2.0 -- --
Other, net............................................... 1.1 (1.4) 2.8
---- ---- -----
40.1% 36.9% 0.9%
==== ==== =====
</TABLE>
The Internal Revenue Service completed its audit of NABI's 1990 income tax
returns during 1993 without material change.
NOTE 10 LEASES
NABI conducts substantially all its operations under operating lease
agreements. The majority of the related lease agreements contain renewal
options which enable NABI at the end of the initial lease term to renew the
leases for periods of two to five years at the then fair rental value.
Management expects that the leases will be renewed or replaced in the normal
course of business.
Rent expense was approximately $2,891, $1,522 and $1,399 for the years ended
December 31, 1994, 1993 and 1992, respectively.
As of December 31, 1994, the aggregate future minimum lease payments under
all noncancelable operating leases with initial or remaining lease terms in
excess of one year are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1995................................................................ $ 2,990
1996................................................................ 2,585
1997................................................................ 2,260
1998................................................................ 1,974
1999................................................................ 1,661
Thereafter.......................................................... 3,365
-------
Total minimum lease commitments................................... $14,835
=======
</TABLE>
F-14
<PAGE>
NOTE 11 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The business and product acquisitions described in Notes 12 and 13 resulted
in the following non-cash financing and investing activities:
<TABLE>
<CAPTION>
1994 1992
------ ------
<S> <C> <C>
Contingent purchase price obligation......................... $1,164 $6,646
Issuance of NABI Common Stock warrants....................... -- 908
Application of note receivable from related party as partial
consideration for business acquisition...................... -- 1,642
Issuance of NABI Common Stock................................ 8,395 3,854
Bank and other indebtedness assumed.......................... 6,920 --
Liabilities assumed.......................................... 4,174 --
</TABLE>
NOTE 12 RELATED PARTY TRANSACTIONS
CPCI was a significant customer for plasma products and as of March 30,
1992, owned 100% of NABI's outstanding shares of Series A Convertible
Preferred Stock and approximately 6,181,000 shares of NABI Common Stock.
CPCI's ownership of the Series A Convertible Preferred Stock entitled CPCI to
elect a majority of NABI's Board of Directors.
Effective March 31, 1992, NABI purchased from CPCI certain assets related to
CPCI's international-based biologicals division, and also acquired all of
CPCI's interest in NABI Common Stock and Series A Convertible Preferred Stock.
The acquisition of the biologicals division was accounted for as a purchase in
accordance with Accounting Principles Board Opinion No. 16 and accordingly,
its results of operations are included in NABI's operating results for all
periods subsequent to the date of acquisition. NABI has valued the
consideration for this transaction at approximately $27,000 with the excess of
acquisition cost over the net assets acquired being amortized ratably over 25
years. Intangible assets, including customer lists and non-competition
agreements, are being amortized over the expected useful lives ranging from 5
to 25 years.
The acquisition was funded through a combination of $7,000 in senior debt,
$7,000 in senior subordinated notes issued with warrants expiring in 1999 to
acquire approximately 766,000 shares of NABI Common Stock and $5,317 in net
proceeds from the issuance of NABI Common Stock to unrelated third parties. In
addition to the cash consideration, NABI forgave its March 31, 1990 note
receivable from CPCI with a residual balance of $1,642, issued a warrant to
CPCI to purchase 750,000 common shares exercisable for a period of five years
beginning March 31, 1994, and also entered into a contingent purchase price
agreement with CPCI based on sales of source plasma over a minimum of 7 years
with a net present value of approximately $6,646 on March 31, 1992. This
agreement was amended in January 1994 in connection with the acquisition
discussed in Note 13. In August 1994, CPCI and NABI agreed to modify the
additional purchase price agreement to provide for a single lump sum payment
of $6.5 million plus accrued additional payments through September 30, 1994,
in full satisfaction of NABI's obligations to make contingent payments. In
October 1994, NABI used $6.5 million of proceeds from a public offering to
prepay its obligations under the agreement (Note 8). Accordingly, the excess
of acquisition cost over net assets acquired was reduced by the remaining
carrying value of the contingent obligation.
Information concerning sales of plasma products to CPCI is presented in Note
15. NABI paid management fees of $15 to CPCI in 1992 and interest income
related to CPCI notes receivable was approximately $28 in 1992.
Effective September 30, 1992, NABI acquired H-BIG, a proprietary plasma-
based product, from Abbott, in consideration of 2 million shares of NABI
Common Stock valued at $3,854 (representing approximately 16% of the total
outstanding shares of NABI Common Stock at the time) and future royalties
based upon product sales.
F-15
<PAGE>
The shares of NABI Common Stock issued to Abbott were not registered under the
federal securities laws and therefore are 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.
The acquired intangible assets, including trademarks, trademark
registrations and non-competition agreements, are being amortized over their
expected useful lives ranging from 10 to 25 years.
In November 1992, Abbott transferred to NABI all of its rights to HIV-IG, an
experimental product which may prevent the transmission of AIDS to unborn
infants whose mothers are HIV-positive. Consideration for the product will be
future royalties based upon commercial sales. HIV-IG is currently in Phase III
clinical trials.
Related party transactions with Abbott for the years ended December 31, 1994
and 1993 and the three months ended December 31, 1992 are summarized below:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
Sales of plasma-related products and testing servic-
es.................................................. $ 6,103 $4,436 $1,371
Purchases of diagnostic, therapeutic and testing
products............................................ 11,260 8,735 1,720
Product royalty obligations.......................... 1,426 1,545 347
Product distribution fees............................ 120 136 25
</TABLE>
At December 31, 1994 and 1993, trade accounts receivable from Abbott totaled
$1,465 and $665, respectively, and accounts payable to Abbott aggregated $625
and $1,354, respectively.
NOTE 13 BUSINESS ACQUISITION
On January 27, 1994, NABI acquired PBI. PBI's principal business activities
have been the collection and sale of human plasma. The acquisition was
accounted for by the purchase method and accordingly, the results of
operations of PBI are included with those of NABI for periods subsequent to
the date of acquisition.
The acquisition cost of PBI aggregated approximately $21 million and was
funded through the issuance of approximately 2.3 million shares of NABI Common
Stock valued at approximately $8 million, the assumption of various
liabilities of PBI aggregating approximately $12 million and additional
contingent purchase price obligations to CPCI (Note 12) of approximately $1
million. In connection with the acquisition, NABI amended its bank credit
agreement with its principal lender, as more fully discussed in Note 7, the
proceeds of which were used to repay PBI's existing bank indebtedness of
approximately $6.5 million. Approximately $8.1 million in acquisition cost
over net assets acquired is being amortized ratably over 25 years.
In connection with the acquisition, NABI entered into a five-year contract
to supply a substantial portion of plasma produced by PBI to a single
customer. This customer has also entered into a three-year contract to
purchase additional plasma from NABI.
The following unaudited pro forma combined condensed statement of operations
of NABI and PBI for the years ended December 31, 1994 and 1993 has been
prepared as if PBI had been acquired on January 1, 1993 and gives effect to
certain pro forma adjustments:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Sales.................................................... $167,000 $141,000
Income before extraordinary charge/cumulative effect of
change in accounting for income taxes................... $ 8,619 $ 3,674
Net income............................................... $ 7,902 $ 3,774
Earnings per share....................................... $ 0.45 $ 0.24
</TABLE>
F-16
<PAGE>
NOTE 14 COMMITMENTS AND CONTINGENCIES
At December 31, 1994, NABI and its subsidiaries were parties to certain
routine claims and litigation occurring in the normal course of business.
At December 31, 1994, NABI had outstanding purchase commitments with a
principal supplier which expire through September 1999. Under the agreement,
NABI is obligated to purchase goods from the supplier aggregating
approximately $21,220 in fiscal 1995, $21,942 in fiscal 1996 through fiscal
1998, and $16,457 in fiscal 1999.
NABI is committed to purchase the entire plasma production of certain
contract centers through 1999.
NOTE 15 INDUSTRY SEGMENT INFORMATION
NABI operates in three principal industry segments. Plasma consists of the
operation of plasma collection centers for the collection and processing of
source and specialty plasmas. Therapeutic Products consists of proprietary
plasma-based immune globulin therapeutic products. Diagnostic Products and
Services is comprised primarily of the production and sale of human plasma-
based control and diagnostic products and the performance of laboratory
testing services. Corporate and other includes the elimination of income on
intersegment sales, unallocated general corporate expenses, interest,
including amortization of debt discount, and research and development
expenses.
Net export sales in 1994, 1993 and 1992 were $62,122, $51,722 and $47,142,
respectively and represented 38%, 51% and 57% of consolidated sales for those
years, respectively. Export sales are primarily to Europe. Plasma sales to
unaffiliated customers (Baxter, Immuno, Behringwerke and Miles for 1994,
Immuno and Behringwerke for 1993, Immuno, Amerca Associates, and Behringwerke
for 1992) exceeding 10% of consolidated sales aggregated 59%, 34% and 46% of
sales in 1994, 1993 and 1992, respectively. CPCI was a principal stockholder
and major customer until March 31, 1992, representing 6% of sales in 1992
(Note 12).
F-17
<PAGE>
Information regarding NABI's operations and identifiable assets in the
different industry segments is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Sales to Unaffiliated Customers:
Plasma........................................... $140,427 $ 82,129 $63,648
Therapeutic Products............................. 8,697 5,876 856
Diagnostic Products and Services................. 9,451 9,133 11,215
-------- -------- -------
158,575 97,138 75,719
Sales to Affiliated Customers:
Plasma........................................... 3,512 3,071 6,034
Therapeutic Products............................. 598 681 532
Diagnostic Products and Services................. 1,993 684 69
-------- -------- -------
6,103 4,436 6,635
Intersegment Sales:
Diagnostic Products and Services................. 12,414 10,211 8,338
Eliminations..................................... (12,414) (10,211) (8,338)
-------- -------- -------
Total Sales.................................... $164,678 $101,574 $82,354
======== ======== =======
Operating Profit (Cost):
Plasma........................................... $ 19,500 $ 10,997 $ 5,190
Therapeutic Products............................. 4,433 2,942 347
Diagnostic Products and Services................. 2,910 (140) 211
Corporate and Other.............................. (9,417) (5,326) (3,889)
-------- -------- -------
$ 17,426 $ 8,473 $ 1,859
======== ======== =======
Identifiable Assets:
Plasma........................................... $ 72,250 $ 38,936 $33,518
Therapeutic Products............................. 11,108 6,521 4,355
Diagnostic Products and Services................. 6,210 4,965 6,447
Corporate and Other.............................. 4,249 2,466 3,200
-------- -------- -------
$ 93,817 $ 52,888 $47,520
======== ======== =======
Capital Expenditures:
Plasma........................................... $ 2,576 $ 816 $ 1,702
Therapeutic Products............................. 1,620 365 2
Diagnostic Products and Services................. 282 377 227
Corporate and Other.............................. 2,282 152 250
-------- -------- -------
$ 6,760 $ 1,710 $ 2,181
======== ======== =======
Depreciation and Amortization Expenses:
Plasma........................................... $ 3,254 $ 1,825 $ 1,481
Therapeutic Products............................. 252 232 55
Diagnostic Products and Services................. 411 405 433
Corporate and Other.............................. 481 496 238
-------- -------- -------
$ 4,398 $ 2,958 $ 2,207
======== ======== =======
</TABLE>
F-18
<PAGE>
NOTE 16 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
PER SHARE DATA
------------------------------------------------
INCOME BEFORE INCOME BEFORE
EXTRAORDINARY EXTRAORDINARY CUMULATIVE
CHARGE AND CHARGE AND EFFECT OF
CUMULATIVE CUMULATIVE CHANGE IN
EFFECT OF CHANGE EFFECT OF CHANGE ACCOUNTING
GROSS IN ACCOUNTING NET IN ACCOUNTING EXTRAORDINARY FOR INCOME NET
SALES MARGIN FOR INCOME TAXES INCOME FOR INCOME TAXES CHARGE TAXES INCOME
-------- ------- ---------------- ------ ---------------- ------------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995
1st Quarter............. $ 46,477 $ 9,342 $3,055 $3,055 $0.15 -- -- $0.15
2nd Quarter............. 46,975 9,909 3,425 3,425 0.17 -- -- 0.17
-------- ------- ------ ------ ----- ------ ----- -----
$ 93,452 $19,251 $6,480 $6,480 $0.32 -- -- $0.32
======== ======= ====== ====== ===== ====== ===== =====
1994
1st Quarter............. $ 35,636 $ 7,337 $1,617 $1,617 $0.10 -- -- $0.10
2nd Quarter............. 41,644 8,436 2,093 2,093 0.12 -- -- 0.12
3rd Quarter............. 43,501 8,653 2,110 2,110 0.12 -- -- 0.12
4th Quarter............. 43,897 8,884 2,807 2,090 0.14 $(0.04) -- 0.10
-------- ------- ------ ------ ----- ------ ----- -----
$164,678 $33,310 $8,627 $7,910 $0.49(1) $(0.04) -- $0.45(1)
======== ======= ====== ====== ===== ====== ===== =====
1993
1st Quarter............. $ 21,503 $ 3,812 $ 324 $ 424 $0.02 -- $0.01 $0.03
2nd Quarter............. 22,636 4,677 749 749 0.06 -- -- 0.06
3rd Quarter............. 27,628 5,336 988 988 0.07 -- -- 0.07
4th Quarter............. 29,807 6,142 1,344 1,344 0.10 -- -- 0.10
-------- ------- ------ ------ ----- ------ ----- -----
$101,574 $19,967 $3,405 $3,505 $0.25 -- $0.01 $0.26
======== ======= ====== ====== ===== ====== ===== =====
</TABLE>
- --------
(1) The quarterly per share amounts do not aggregate to the total per share
amounts for 1994 due to fluctuations in the weighted average shares
outstanding.
F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Univax Biologics, Inc.
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Univax
Biologics, Inc. at December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits 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.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting and reporting certain investments in debt securities in
1993.
Price Waterhouse LLP
Washington, D.C.
February 10, 1995
F-20
<PAGE>
UNIVAX BIOLOGICS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------
1995 1994 1993
------------ ------------ ------------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 2,972,048 $ 10,149,911 $ 12,423,497
Short-term investments............. 13,941,996 18,697,575 16,547,992
Receivables........................ 2,429,107 508,731 503,606
Inventory.......................... 417,184 -- --
Prepaid expenses................... 997,999 497,814 450,200
Other.............................. 147,088 -- --
------------ ------------ ------------
Total current assets............. 20,905,422 29,854,031 29,925,295
Property and equipment, net.......... 7,177,194 7,703,159 8,455,451
Other................................ 824,299 715,222 190,498
------------ ------------ ------------
Total assets..................... $ 28,906,915 $ 38,272,412 $ 38,571,244
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ 2,129,184 $ 1,162,795 $ 893,878
Accrued expenses................... 1,112,339 846,797 682,130
Current portion of long-term debt.. 1,117,047 1,187,701 1,101,152
------------ ------------ ------------
Total current liabilities........ 4,358,570 3,197,293 2,677,160
Long-term debt....................... 1,354,171 1,341,291 2,016,703
Other................................ 221,109 179,285 224,295
------------ ------------ ------------
Total liabilities................ 5,933,850 4,717,869 4,918,158
------------ ------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value,
10,000,000 shares authorized:
Series E, 502,512 (unaudited) and
502,512 shares issued and
outstanding, respectively,
convertible into 502,512 shares of
Common Stock subject to
adjustment........................ 5,025 5,025 5,025
Common Stock, $.01 par value,
30,000,000 shares authorized,
17,149,537 (unaudited), 17,040,074
and 12,965,160 shares issued and
outstanding, respectively......... 171,495 170,400 129,651
Additional paid-in capital......... 95,305,523 95,049,024 73,367,295
Accumulated deficit................ (72,508,978) (61,669,906) (39,848,885)
------------ ------------ ------------
Total stockholders' equity....... 22,973,065 33,554,543 33,653,086
------------ ------------ ------------
Total liabilities and
stockholders' equity............ $ 28,906,915 $ 38,272,412 $ 38,571,244
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
UNIVAX BIOLOGICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------
1995 1994 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Research and
development
agreements........... $ 3,338,241 $ 1,362,950 $ 2,782,657 $ 1,114,906 $ 922,000
Product sales......... 663,662 -- -- -- --
Other................. -- -- -- 66,500 51,000
------------ ------------ ------------ ------------ ------------
Total revenues...... 4,001,903 1,362,950 2,782,657 1,181,406 973,000
------------ ------------ ------------ ------------ ------------
Operating costs and
expenses:
Cost of goods sold.... 384,924 -- -- -- --
Research and product
development costs.... 11,031,438 8,916,478 19,494,184 18,065,359 12,051,201
General and
administrative....... 4,088,233 2,613,564 5,206,783 4,382,154 3,326,645
------------ ------------ ------------ ------------ ------------
Total expenses...... 15,504,595 11,530,042 24,700,967 22,447,513 15,377,846
------------ ------------ ------------ ------------ ------------
Operating loss.......... (11,502,692) (10,167,092) (21,918,310) (21,266,107) (14,404,846)
Gain (loss) of market
value of trading
securities............. 145,424 (458,714) (179,451) -- --
Investment income....... 613,333 308,294 496,074 1,166,103 1,602,915
Interest expense........ (95,137) (117,804) (219,334) (205,133) (192,408)
------------ ------------ ------------ ------------ ------------
Net loss................ $(10,839,072) $(10,435,316) $(21,821,021) $(20,305,137) $(12,994,339)
============ ============ ============ ============ ============
Net loss per share...... $ (0.63) $ (0.80) $ (1.52) $ (1.74) $ (1.19)
============ ============ ============ ============ ============
Weighted average number
of Common Shares
outstanding............ 17,091,709 13,011,473 14,357,551 11,688,532 10,888,979
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
UNIVAX BIOLOGICS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
AND THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------------- -------------------- PAID-IN ACCUMULATED
SHARES PAR VALUE SHARES PAR VALUE CAPITAL DEFICIT TOTAL
---------- --------- ---------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1991................... 6,398,000 $63,980 676,103 $ 6,761 $13,773,991 $ (6,549,409) $ 7,295,323
Conversion of Preferred
Stock to Common Stock.. (6,398,000) (63,980) 6,398,000 63,980 -- -- --
Issuance of Common Stock
pursuant to initial
public offering (net of
offering costs of
$3,935,385)............ -- -- 4,000,000 40,000 44,024,615 -- 44,064,615
Common Stock issued for
exercise of warrant.... -- -- 60,000 600 8,400 -- 9,000
Issuance of Common Stock
pursuant to contractual
agreement.............. -- -- 100,000 1,000 299,000 -- 300,000
Issuance of Common Stock
pursuant to employee
stock purchase plan.... -- -- 1,330 13 7,052 -- 7,065
Exercise of stock
options................ -- -- 135,792 1,357 77,817 -- 79,174
Net loss for the year
ended
December 31, 1992...... -- -- -- -- -- (12,994,339) (12,994,339)
---------- ------- ---------- -------- ----------- ------------ ------------
Balance at December 31,
1992................... -- -- 11,371,225 113,711 58,190,875 (19,543,748) 38,760,838
Issuance of Common Stock
pursuant to employee
stock purchase plan.... -- -- 8,471 85 54,112 -- 54,197
Exercise of stock
options................ -- -- 199,803 1,998 169,363 -- 171,361
Common Stock issued for
exercise of warrant.... -- -- 80,358 804 (804) -- --
Issuance of Series E
Preferred Stock........ 502,512 5,025 -- -- 4,994,975 -- 5,000,000
Issuance of Common Stock
pursuant to private
offering (net of
offering expenses of
$796,933).............. -- -- 1,305,303 13,053 9,958,774 -- 9,971,827
Net loss for the year
ended
December 31, 1993...... -- -- -- -- -- (20,305,137) (20,305,137)
---------- ------- ---------- -------- ----------- ------------ ------------
Balance at December 31,
1993................... 502,512 5,025 12,965,160 129,651 73,367,295 (39,848,885) 33,653,086
Exercise of stock
options................ -- -- 116,755 1,168 97,404 -- 98,572
Issuance of Common Stock
pursuant to employee
stock purchase plan.... -- -- 15,432 154 89,772 -- 89,926
Issuance of Common Stock
pursuant to public
offering (net of
offering expenses of
$151,019).............. -- -- 3,942,727 39,427 21,494,553 -- 21,533,980
Net loss for the year
ended
December 31, 1994...... -- -- -- -- -- (21,821,021) (21,821,021)
---------- ------- ---------- -------- ----------- ------------ ------------
Balance at December 31,
1994................... 502,512 5,025 17,040,074 170,400 95,049,024 (61,669,906) 33,554,543
Exercise of stock
options (unaudited).... -- -- 93,044 931 197,390 -- 198,321
Issuance of Common Stock
pursuant to employee
stock purchase plan
(unaudited)............ -- -- 16,419 164 59,109 -- 59,273
Net loss for the six
months ended June 30,
1995 (unaudited)....... -- -- -- -- -- (10,839,072) (10,839,072)
---------- ------- ---------- -------- ----------- ------------ ------------
Balance at June 30, 1995
(unaudited)............ 502,512 $ 5,025 17,149,537 $171,495 $95,305,523 $(72,508,978) $ 22,973,065
========== ======= ========== ======== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
UNIVAX BIOLOGICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------
1995 1994 1994 1993 1992
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss................ $(10,839,072) $(10,435,316) $(21,821,021) $(20,305,137) $(12,994,339)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization.......... 1,030,176 926,749 1,920,521 1,664,823 921,503
Write-off of
construction in
progress.............. -- 401,287 401,287 -- --
Amortization of bond
premiums and
discounts............. 25,360 40,137 51,546 59,602 50,366
Loss (gain) on sale of
securities............ -- 58,403 370,046 (164,903) (37,500)
(Gain) loss of market
value of trading
securities............ (145,424) 458,714 179,451 -- --
Loss on disposal of
equipment............. 308 -- -- 1,003 --
(Increase) decrease in
receivables........... (1,920,376) (34,044) (5,125) 465,335 (947,783)
Increase in inventory.. (417,184) -- -- -- --
Increase in prepaid
expenses.............. (500,185) (10,834) (47,614) (364,035) (20,085)
Increase in other
asset................. (147,088) -- -- -- --
Increase (decrease) in
accounts payable...... 966,390 58,782 268,917 (570,717) 1,271,407
Increase (decrease) in
accrued expenses...... 265,542 (9,834) 164,667 (3,608) 38,591
Decrease in advance
under product
development
agreement............. -- -- -- -- (500,000)
Increase (decrease) in
other liabilities..... 41,824 (108,507) (45,010) 25,291 124,921
Purchase of trading
securities............ (4,036,440) (19,096,460) (27,925,960) -- --
Sales and redemptions
of trading
securities............ 8,912,083 16,978,107 25,175,333 -- --
------------ ------------ ------------ ------------ ------------
Net cash used in
operating activities.. (6,764,086) (10,772,816) (21,312,962) (19,192,346) (12,092,919)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of
investments............ -- -- -- (22,041,817) (41,761,774)
Sales and redemption of
investments............ -- -- -- 33,410,622 13,937,412
Purchases of property
and equipment.......... (505,419) (932,546) (1,569,516) (2,320,678) (6,002,221)
Sales of property and
equipment.............. 900 -- -- -- 478,464
Increase in other
assets................. (109,077) (15,639) (524,723) (44,366) (130,437)
------------ ------------ ------------ ------------ ------------
Net cash (used in)
provided by investing
activities............ (613,596) (948,185) (2,094,239) 9,003,761 (33,478,556)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments on long-term
debt................... (658,080) (583,165) (1,195,044) (806,709) (408,978)
Proceeds from long-term
borrowings............. 600,305 167,984 606,181 2,596,704 232,965
Proceeds from issuance
of
Preferred Stock......... -- -- -- 5,000,000 --
Proceeds from issuance
of Common Stock........ 257,594 101,795 21,722,478 10,197,385 44,459,854
Decrease in deferred
offering expenses...... -- -- -- 251,523 68,111
------------ ------------ ------------ ------------ ------------
Net cash provided by
(used in) financing
activities............ 199,819 (313,386) 21,133,615 17,238,903 44,351,952
------------ ------------ ------------ ------------ ------------
Net (decrease) increase
in cash and cash
equivalents............ (7,177,863) (12,034,387) (2,273,586) 7,050,318 (1,219,523)
Cash and cash
equivalents, at
beginning of period.... 10,149,911 12,423,497 12,423,497 5,373,179 6,592,702
------------ ------------ ------------ ------------ ------------
Cash and cash
equivalents, at end of
period................. $ 2,972,048 $ 389,110 $ 10,149,911 $ 12,423,497 $ 5,373,179
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Univax Biologics, Inc. ("Univax"), is a biopharmaceutical company whose
mission is to develop and market products for the prevention and treatment of
serious infectious diseases and their associated complications through
activation and targeting of the human immune system. In pursuing this mission,
Univax is developing two broad-based product lines--vaccines for long-term
protection against infections and specific polyclonal antibodies for
immediate, short-term protection and therapeutic intervention. Univax
currently has one product under FDA review for marketing approval and eight
additional products in development, three of which are in human clinical
trials.
Cash equivalents and investments
Cash equivalents and investments consist of money market funds invested in
securities issued or guaranteed by the U.S. Treasury and debt instruments
including U.S. Treasury securities, U.S. Government Agency securities and high
quality commercial paper and corporate debt.
Univax considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. Effective December
31, 1993, Univax adopted Statement of Financial Accounting Standards (SFAS)
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
and changed its method of accounting and reporting for investments in debt
securities. All investments as of December 31, 1993 were classified as trading
securities based upon the active and frequent buying and selling of these
securities and were classified as short-term investments. The investments are
stated at market, and unrealized holding gains and losses are included in
earnings. The adoption of SFAS No. 115 did not have a material effect on
Univax's operations or accumulated deficit in 1993.
Furniture and equipment
Furniture and equipment are recorded at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of these assets
of five years. Equipment held under capital leases and leasehold improvements
are amortized using the straight-line method based on the shorter of the
estimated useful life or the term of the lease. Expenditures for maintenance
and repairs which do not significantly prolong the useful lives of the assets
are charged to expense.
Revenues
Research and product development agreements provide for periodic payments in
support of some of Univax's research activities and additional payments upon
the attainment of specified milestones. Revenue from research support payments
are recognized as the related expenses are incurred. Milestone payments are
included in revenues in the period in which the applicable milestone is
achieved.
Research and product development costs
Research and product development costs are expensed as incurred. Univax
records expenses under collaborative product development agreements at the
earlier of the achievement of milestones or when payments are contractually
due.
Income taxes
Univax uses the liability method to account for income taxes which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amount and the
tax basis of assets and liabilities.
F-25
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Net loss per share
Net loss per common share is based on the weighted average number of common
shares outstanding during the period plus the number of shares of Univax
Common Stock issued upon conversion of the preferred stock into shares of
Univax Common Stock on the initial public offering date, from the date the
preferred stock was issued. In addition, pursuant to Securities and Exchange
Commission Staff Accounting Bulletin No. 83, all common and preferred shares
issued and options and warrants granted by Univax during the 12 months
preceding the initial public offering date (using the treasury stock method
and a public offering price of $12.00 per share) have been included in the
calculation of common and common equivalent shares outstanding as if they were
outstanding for all periods presented prior to the initial public offering.
All other options, warrants, and preferred stock have been excluded from the
calculation of common and common equivalent shares outstanding since they
would serve to reduce the net loss per share.
Reclassifications
Certain reclassifications have been made to the prior years' financial
statements in order to conform to the 1994 presentation.
Unaudited Financial Statements
The interim financial data is unaudited; however, in the opinion of Univax,
the interim data includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
the results of operations for the interim periods.
NOTE 2--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Laboratory equipment.............................. $ 6,081,507 $ 5,402,933
Furniture and office equipment.................... 1,926,785 1,334,774
Leasehold improvements............................ 4,333,552 4,039,686
Construction in progress.......................... -- 401,287
----------- -----------
12,341,844 11,178,680
Less: accumulated depreciation and amortization... (4,638,685) (2,723,229)
----------- -----------
$ 7,703,159 $ 8,455,451
=========== ===========
</TABLE>
Depreciation and amortization expense during 1994, 1993 and 1992 includes
capital lease amortization of approximately $308,000, $309,000 and $208,000,
respectively.
Included in laboratory equipment and furniture and office equipment are
assets which have been accounted for as capital leases totaling $1.4 million
at December 31, 1994 and 1993.
F-26
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Equipment term notes, interest at rates from
12.2% to 13.1%, payable in installments through
1998, secured by equipment with a net book
value of $2,148,000 and $2,267,000,
respectively................................... $ 2,211,755 $ 2,452,187
Capitalized lease obligations (Note 7).......... 317,237 665,668
----------- -----------
2,528,992 3,117,855
Less: current portion........................... (1,187,701) (1,101,152)
----------- -----------
Long-term debt.................................. $ 1,341,291 $ 2,016,703
=========== ===========
</TABLE>
Minimum annual principal payments of equipment term notes are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1995............................................................ $ 884,812
1996............................................................ 770,829
1997............................................................ 459,047
1998............................................................ 97,067
----------
$2,211,755
==========
</TABLE>
NOTE 4--STOCKHOLDERS' EQUITY
Preferred Stock
During 1988 and 1989, Univax issued a total of 600,000 shares of its Series
A Preferred Stock at $1.25 per share. In 1991, Univax issued an additional
3,600,000 shares of its Series A Preferred Stock at $1.25 per share in
exchange for $3,500,000 in cash and $1,000,000 in notes payable to a
stockholder; 800,000 shares of its Series B Preferred Stock at $2.50 per share
for $2,000,000 in cash; 778,000 shares of Series C Preferred Stock at $4.50
per share in exchange for $3,501,000 in cash; and 620,000 shares of Series D
Preferred Stock at $5.00 per share in exchange for $3,100,000 in cash. The
Series A, B, C and D Preferred Stock is voting, carries a $.10 per share
noncumulative dividend and is convertible, at the option of the stockholder,
into Univax Common Stock on a share-for-share basis. The Series A, B, C and D
Preferred Stock carries a liquidation preference plus declared and unpaid
dividends. Each share of Series A, B, C and D Preferred Stock was
automatically converted into one share of Univax Common Stock upon
consummation of Univax's initial public offering in February 1992. There are
no shares of Series A, B, C and D Preferred Stock outstanding.
In August 1993, Univax issued 502,512 shares of Univax Series E Preferred
Stock to Genzyme for $5 million. The Univax Series E Preferred Stock
participates ratably in any dividends declared and paid on Univax Common Stock
and carries a liquidation preference subject to adjustment. Holders of Univax
Series E Preferred Stock have no preemptive rights. Each share of Univax
Series E Preferred Stock is initially convertible into one share of Univax
Common Stock, subject to adjustment to prevent dilution. The conversion price
was $9.95 per share as of December 31, 1993, and was adjusted to $9.04 per
share in 1994 as a result of Univax's September 1994 sale of Univax Common
Stock. On or after August 15, 1997, Univax at its option may redeem all of the
shares of Univax Series E Preferred Stock then outstanding or require that all
such shares be converted into Univax Common Stock. The redemption price for
each share of Univax Series E Preferred Stock redeemed is
F-27
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
equal to the greater of (i) 125% of the fair market value of a share of
Univax's Common Stock multiplied by the number of shares of Univax Common
Stock into which each share of Univax Series E Preferred Stock is then
convertible and (ii) $12.44, with certain exceptions. Holders of Univax Series
E Preferred Stock are entitled to the number of votes equal to the number of
shares of Univax Common Stock into which the shares of Univax Series E
Preferred Stock held by each such holder are convertible (as adjusted). Except
as required by law, holders of Univax Series E Preferred Stock vote together
with the holders of Univax Common Stock as a single class.
Common Stock
In February 1992, Univax successfully completed an initial public offering
of 4,000,000 shares of Univax Common Stock at $12.00 per share, net of
offering expenses totaling $3,935,385. In December 1993, Univax sold 1,305,303
shares of Univax Common Stock in private placement transactions at $8.25 per
share, net of offering expenses of $796,933. In September 1994, Univax sold
3,942,727 shares of Univax Common Stock in a public offering to institutional
investors at $5.50 per share, net of offering expenses of $151,019.
Stock options
In 1989, Univax adopted the 1989 Stock Plan (the "Stock Plan"), which
provides both for the direct award or sale of shares of Univax Common Stock
and for the grant of options to purchase shares of Univax Common Stock.
Options granted under the Stock Plan may include incentive stock options, as
described in the Code, as well as options which do not qualify as incentive
stock options. The vesting and the term of any option shall be determined by
the Board of Directors at its discretion; however, the term of an incentive
stock option shall not exceed ten years. The aggregate number of shares which
may be issued under the Stock Plan shall not exceed the 2,500,000 shares
reserved. Shares and options may be issued under the Stock Plan only to
employees, consultants and directors of Univax. The purchase or exercise price
for sales of shares under the Stock Plan shall be determined by the Board of
Directors, subject to certain limitations, and at its discretion, options may
be granted for which the exercise price is payable in shares of Univax Common
Stock which have been owned by the purchaser for more than 12 months. Awards
of shares may be made in consideration for services rendered prior to the
award.
In addition, Univax has reserved 400,000 shares for the grant of
nonqualified options to purchase shares of Univax Common Stock to consultants
and directors of Univax. Univax has granted 380,000 nonqualified options at
December 31, 1994, under terms and conditions similar to the Stock Plan.
The following table summarizes the activity in Univax's stock options. As of
December 31, 1994, all stock options granted have four-year vesting periods.
<TABLE>
<CAPTION>
OPTIONS EXERCISE PRICE
--------- --------------
<S> <C> <C>
$ 0.15-
Balance at December 31, 1991....................... 1,236,239 4.00
5.75-
Granted.......................................... 502,100 12.50
0.15-
Exercised........................................ (135,792) 0.30
0.15-
Cancelled........................................ (26,125) 12.50
--------- ---------
0.15-
Balance at December 31, 1992....................... 1,576,422 8.00
6.75-
Granted.......................................... 355,700 10.25
0.15-
Exercised........................................ (199,803) 7.25
0.15-
Cancelled........................................ (73,280) 10.25
--------- ---------
0.15-
Balance at December 31, 1993....................... 1,659,039 10.25
5.50-
Granted.......................................... 642,775 8.50
0.15-
Exercised........................................ (116,755) 8.25
0.15-
Cancelled........................................ (348,867) 10.25
--------- ---------
$ 0.15-
Balance at December 31, 1994....................... 1,836,192 10.25
========= =========
</TABLE>
F-28
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1994, 1993 and 1992, options to purchase 953,037, 731,148
and 466,019 shares, respectively, were exercisable at prices ranging from
$0.15 to $10.25 per share.
In November 1994, the Board of Directors authorized Univax to give its
employees the opportunity to reprice any of their stock option grants to $6.00
dollars per share (fair market value as of the date of grant). The stock
options which were repriced were surrendered to Univax and cancelled in
exchange for new stock option grants which began vesting as of November 1994.
Officers who elected to reprice their stock options were issued four stock
options for each five stock options cancelled.
Subsequent to December 31, 1994, Univax granted an additional 377,800
options under the stock plan at $4.25 per share (fair market value as of the
date of grant), 7,625 options were exercised at prices ranging from $0.15 to
$4.00 per share and 5,770 options were cancelled.
Univax has recorded compensation expense for the difference between the
exercise price of the stock options and the deemed fair value for accounting
purposes of Univax Common Stock. The compensation expense will be amortized
ratably over the four-year vesting period ($54,000, $65,000 and $76,000 in
1994, 1993 and 1992, respectively) and will not exceed approximately $245,000
in total.
Stock purchase plan
During 1991, Univax adopted the Employee Stock Purchase Plan. The Plan
provides for the purchase of Univax Common Stock by employees at a price equal
to 85% of the fair market value of such stock. The maximum number of common
shares which will be available under the Plan is 200,000 shares. As of
December 31, 1994, 25,233 shares were issued to employees under this plan and
another 6,736 shares were issued subsequent to December 31, 1994.
Warrants
In connection with the issuance of Series A Preferred Stock in 1991, Univax
issued a warrant to purchase 60,000 shares of Univax Common Stock at $0.15 per
share at any time prior to February 1996. This warrant was exercised in
February 1992. During 1991, Univax also issued a warrant to purchase 94,000
shares of preferred stock at $1.25 per share at any time prior to May 2000 and
11,400 shares of preferred stock at $5.00 per share at any time prior to
December 2000 in connection with entering into the master lease obligation
(Note 7). These warrants were converted into warrants to purchase Univax
Common Stock upon the closing of Univax's initial public offering in February
1992. In June 1993, the holder of the warrant to purchase 94,000 shares
exercised and received 80,358 shares of Univax Common Stock, and the remaining
13,642 warrants were cancelled. During 1990, Univax granted a collaborator the
option to purchase 100,000 shares of Univax Common Stock at a price of $3.00
per share any time prior to May 1993 in connection with entering into a
product development agreement (Note 5). This option was exercised in March
1992.
NOTE 5--PRODUCT DEVELOPMENT AND LICENSING AGREEMENTS
Univax has entered into product development and licensing agreements with
the following collaborators.
Rh Pharmaceuticals Inc.
In October 1992, Univax entered into a license and distribution agreement
with Rh Pharmaceuticals. The agreement grants Univax exclusive rights to sell
in the United States a product developed by Rh Pharmaceuticals, and grants Rh
Pharmaceuticals rights to manufacture and sell in Canada certain of Univax's
current and future products. The agreement terminates ten years after the date
Rh Pharmaceuticals obtains all regulatory approvals in the U.S. for its
product. Univax paid Rh Pharmaceuticals $100,000 upon execution of the
agreement and is
F-29
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
obligated to make an additional $400,000 payment upon regulatory approval to
market and sell the product in the U.S. Univax is also obligated to expend
$750,000 in each of the first two years following such approval for marketing
and selling expenses related to this product. In addition, Univax is obligated
to pay Rh Pharmaceuticals $500,000 for process development, clinical testing
and improvements to Rh Pharmaceuticals' manufacturing facility, provided that
Rh Pharmaceuticals matches such funding. Univax will receive 40% of the
profits from the sale of the product in the U.S. until cumulative profits
reach a specified threshold, after which Univax and Rh Pharmaceuticals will
share profits equally.
Genzyme Corporation
In August 1993, Univax entered into an agreement with Genzyme to develop and
commercialize products based on MEP antigen for treatment of infections
associated with cystic fibrosis. The agreement provides for milestone payments
totaling up to $6 million as well as development cost reimbursements of more
than $12 million and profit sharing payments. Univax retains manufacturing
rights to any products developed under this agreement and Genzyme receives
worldwide marketing rights. The agreement terminates on a country-by-country
basis after the later of the expiration of the last patent included in the
agreement, either owned by or licensed to Univax, or ten years after the date
of the first commercial sale. Univax recognized approximately $2,759,000 and
$1,100,000 in revenues under this agreement in 1994 and 1993, respectively,
which consisted primarily of development cost reimbursements. Univax incurred
direct development costs related to these products in excess of the revenues
recognized.
ImmuCell Corporation
In May 1992, Univax entered into a 15-year licensing and distribution
agreement with ImmuCell Corporation ("ImmuCell") that provides Univax with
exclusive worldwide rights to an oral polyclonal antibody therapy for treating
an infection associated with HIV. Under the terms of the agreement, Univax
will assume the responsibility for clinical trials and marketing and selling
the product. In addition, Univax provided ImmuCell with monthly development
funding during 1992 and 1993 that continued at $10,000 per month through April
1994. Univax made a payment of $100,000 upon execution of the agreement, paid
$210,000 in May 1994 and will pay $1,200,000 upon the earlier of December 31,
1995, or the achievement of certain milestones. Univax may terminate this
agreement at any time without penalty upon ninety days notice to ImmuCell.
Univax expensed $250,000, $260,000 and $340,000 in 1994, 1993, and 1992,
respectively, under this agreement.
Farma Biagini S.p.A
In January 1992, Univax entered into license and distribution agreements
with Farma Biagini, S.p.A ("Biagini"). The agreements grant Biagini exclusive
license to manufacture and sell in certain territories certain of Univax's
products provided Biagini obtains an Establishment License from the FDA by
January 31, 1996. Biagini is required to fund the development of these
products and help to perform clinical trials. Biagini is obligated to make
payments to Univax of approximately $1,500,000, in $250,000 installments, on
completion of certain milestones. In addition, Biagini is required to pay
royalties based on net sales of the products. The royalty term for each
product will extend for a period of ten years from the date of final
regulatory approval for such product in the territory. As of December 31,
1994, Univax has not recorded any revenue under these agreements. The
agreements also grant Univax exclusive rights to market and sell in the U.S.
and Canada certain products owned by Biagini. Univax must maintain certain
annual minimum sales targets to maintain its exclusive rights. Univax is
responsible for all expenses relating to clinical and regulatory work required
for regulatory approval to market and sell these products in the U.S. and
Canada. Univax is also required to make future royalty payments to Biagini
based on net sales of these products.
F-30
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cambridge Biotech Corporation
In April 1993, Univax entered into a licensing agreement with Cambridge
Biotech. The agreement provides Univax the rights to incorporate Cambridge
Biotech's patented QS-21 Stimulon adjuvant in Univax's proprietary vaccines
used to stimulate plasma donors to produce antibodies. Univax is responsible
for completing product development, conducting clinical trials, obtaining
regulatory approvals and marketing products resulting from use of the
adjuvant. Cambridge Biotech is responsible for manufacturing the adjuvant.
Univax paid an initial license fee and will pay milestone fees on a per
product basis if development of any product reaches certain development
phases, and royalty payments once any products are commercialized. The
agreement terminates on a country-by-country basis after the expiration of the
last patent included in the agreement, either owned or controlled by Cambridge
Biotech. Univax expensed approximately $1,400,000 in 1993 for the acquisition
of rights to and the study of the adjuvant.
Other agreements
Univax has entered into several other licensing agreements which require
Univax to pay minimum annual payments and a royalty based upon a percentage of
net sales. In addition, Univax has agreed to sponsor research which will be
performed by other entities through 1995. Univax has also contracted with a
number of medical centers to conduct clinical trials in 1994 and 1995.
Commitments for research activities at December 31, 1994 totaled approximately
$420,000. Research and development costs included expenses relating to
contract research of approximately $1,425,000, $1,530,000 and $965,000 in
1994, 1993 and 1992, respectively.
In September 1993, following arbitration under the Commercial Arbitration
Rules of the American Arbitration Association, Univax's agreement with Alpha
was terminated. Revenues totaling $922,000 were recognized under this
agreement during 1992.
The United States Army has assigned or licensed rights throughout the world
to Univax for inventions and the uses thereof as vaccines through the term of
the applied-for United States patents covering these inventions. The
inventions are the base technology for certain of Univax's products under
development. The U.S. Army assigned or licensed its rights to the inventions
in exchange for nominal consideration and future royalties based upon a
percentage of net sales.
NOTE 6--INCOME TAXES
Deferred tax assets are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Net operating losses............................. $ 22,354,000 $ 15,200,000
Research tax credits............................. 2,190,000 1,200,000
Other............................................ 613,000 273,000
------------ ------------
Deferred tax assets.............................. 25,157,000 16,673,000
------------ ------------
Valuation allowance.............................. (25,157,000) (16,673,000)
------------ ------------
Net deferred tax assets.......................... -- --
============ ============
</TABLE>
Univax has provided a full valuation allowance for deferred tax assets since
realization of these future benefits cannot be reasonably assured. The change
in the valuation allowance for deferred tax assets was an increase of
$8,484,000 during the year and relates to the current year losses which will
be carried forward.
At December 31, 1994, Univax had net operating loss and research and
development tax credit carryforwards of approximately $58,000,000 and
$2,190,000, respectively, for income tax purposes which expire in various
years through 2009.
F-31
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
If Univax achieves profitability, these losses and credits will be available
to offset future income tax liabilities, subject to certain limitations
resulting from significant changes in Univax's ownership.
NOTE 7--COMMITMENTS
Univax leases laboratory and office equipment and office space under capital
and operating leases. Under the terms of the leases, Univax is responsible for
utilities, taxes and insurance. Certain leases provide for rent increases
based upon changes in the Consumer Price Index. In addition, one of the office
leases contains a five-year renewal option at terms similar to the original
lease. Future minimum lease payments for these capital leases and operating
leases (with initial or remaining terms in excess of one year) are
approximately as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ----------
<S> <C> <C>
Year ending December 31,
1995............................................... $ 321,329 $ 869,000
1996............................................... 14,602 742,000
1997............................................... -- 739,000
1998............................................... -- 758,000
1999............................................... -- 808,000
2000 and thereafter................................ -- 3,215,000
--------- ----------
Total payments under lease obligations........... 335,931 $7,131,000
==========
Less amount representing interest (imputed at rates
ranging from 12.2% to 13.1%)........................ (18,694)
---------
Total obligation under lease......................... 317,237
Less current portion................................. (302,889)
---------
Long-term obligation at December 31, 1994............ $ 14,348
=========
</TABLE>
Rental expense for operating leases in 1994, 1993, and 1992 was
approximately $963,000, $729,000, and $710,000, respectively.
During 1991, Univax entered into a master lease arrangement whereby Univax
obtained a commitment to finance up to $1,800,000 in laboratory and office
equipment over terms of three to four years. At December 31, 1992 and 1993,
Univax had leased assets accounted for as capital leases totaling $1,298,000,
and financed equipment under term notes totaling $469,000 under this
agreement. This commitment expired in March 1993.
In March 1993, Univax entered into a new master lease agreement whereby
Univax obtained a commitment to finance up to $3,000,000 in laboratory and
office equipment over a term of three to four years. In January 1994, the
master lease agreement commitment was increased to $4.5 million. At December
31, 1994, Univax financed equipment under term notes totaling $3,056,000 under
this agreement. This commitment expires in December 1995.
NOTE 8--SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid
Net cash flows used in operating activities include cash payments for
interest of $217,000, $222,000 and $176,000 during 1994, 1993, and 1992,
respectively.
F-32
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Non-cash investing and financing activities
In 1992, Univax exchanged 6,398,000 shares of preferred stock for the same
number of shares of Univax Common Stock.
Univax entered into capital lease agreements for laboratory and office
equipment totaling approximately $335,000 during 1992.
NOTE 9--EMPLOYEE RETIREMENT PLAN
Univax maintains an employee retirement plan in accordance with Section
401(k) of the Code. Under this plan, at the discretion of the Board of
Directors, Univax may match a portion of the employees' contributions.
Univax's matching contributions to the plan in 1994 and 1993 were
approximately $58,000 and $52,000, respectively. There were no matching
contributions in 1992.
NOTE 10--ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1993
-------- --------
<S> <C> <C>
Accrued compensation...................................... $470,207 $449,890
Accrued clinical trial costs.............................. 373,085 230,282
Other..................................................... 3,505 1,958
-------- --------
$846,797 $682,130
======== ========
</TABLE>
Other long-term liabilities at December 31, 1994 and 1993 consist of
deferred rent expenses.
F-33
<PAGE>
UNIVAX BIOLOGICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 11 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1995
Revenues................. $ 1,824,973 $ 2,176,930 $ -- $ --
Expenses................. 7,090,297 8,414,295 -- --
----------- ----------- ----------- -----------
Operating loss........... (5,265,324) (6,237,365) -- --
Other income, net........ 380,612 283,009 -- --
----------- ----------- ----------- -----------
Net loss................. $(4,884,712) $(5,954,356) $ -- $ --
=========== =========== =========== ===========
Net loss per share....... $ (0.29) $ (0.35) $ -- $ --
=========== =========== =========== ===========
1994
Revenues................. $ 822,479 $ 540,471 $ 584,278 $ 835,429
Expenses................. 5,175,131 6,354,911 6,532,869 6,638,056
----------- ----------- ----------- -----------
Operating loss........... (4,352,652) (5,814,440) (5,948,591) (5,802,627)
Other (expenses) income,
net..................... (197,325) (70,899) 133,975 231,538
----------- ----------- ----------- -----------
Net loss................. $(4,549,977) $(5,885,339) $(5,814,616) $(5,571,089)
=========== =========== =========== ===========
Net loss per share....... $ (0.35) $ (0.45) $ (0.40) $ (0.32)
=========== =========== =========== ===========
1993
Revenues................. $ 16,500 $ -- $ 550,668 $ 614,238
Expenses................. 6,438,439 5,006,470 5,511,613 5,490,991
----------- ----------- ----------- -----------
Operating loss........... (6,421,939) (5,006,470) (4,960,945) (4,876,753)
Other income, net........ 335,039 222,822 264,398 138,711
----------- ----------- ----------- -----------
Net loss................. $(6,086,900) $(4,783,648) $(4,696,547) $(4,738,042)
=========== =========== =========== ===========
Net loss per share....... $ (0.53) $ (0.41) $ (0.40) $ (0.40)
=========== =========== =========== ===========
1992
Revenues................. $ 211,000 $ 711,000 $ 26,000 $ 25,000
Expenses................. 2,510,774 3,779,537 4,373,790 4,713,745
----------- ----------- ----------- -----------
Operating loss........... (2,299,774) (3,068,537) (4,347,790) (4,688,745)
Other income, net........ 255,250 522,040 272,458 360,759
----------- ----------- ----------- -----------
Net loss................. $(2,044,524) $(2,546,497) $(4,075,332) $(4,327,986)
=========== =========== =========== ===========
Net loss per share....... $ (0.21) $ (0.23) $ (0.37) $ (0.38)
=========== =========== =========== ===========
</TABLE>
F-34
<PAGE>
APPENDIX A
----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
NORTH AMERICAN BIOLOGICALS, INC.
AND
UNIVAX BIOLOGICS, INC.
----------------
DATED AS OF AUGUST 28, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I--THE MERGER
<TABLE>
<C> <S> <C>
1.1 The Merger.......................................................... A-1
1.2 Effective Time...................................................... A-1
1.3 Effects of the Merger............................................... A-1
1.4 Conversion of Univax Common Stock and Preferred Stock............... A-1
1.5 NABI Common Stock................................................... A-2
1.6 Options............................................................. A-2
1.7 Warrant............................................................. A-3
1.8 Certificate of Incorporation........................................ A-3
1.9 By-laws............................................................. A-3
1.10 Tax Consequences.................................................... A-3
1.11 Board of Directors and Officers..................................... A-4
1.12 Voting Agreements................................................... A-4
<CAPTION>
ARTICLE II--EXCHANGE OF SHARES
<C> <S> <C>
2.1 NABI to Make Shares Available....................................... A-4
2.2 Exchange of Shares.................................................. A-4
<CAPTION>
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF UNIVAX
<C> <S> <C>
3.1 Corporate Organization.............................................. A-5
3.2 Capitalization...................................................... A-6
3.3 Authority; No Violation............................................. A-7
3.4 Consents and Approvals.............................................. A-7
3.5 Financial Statements................................................ A-8
3.6 Broker's Fees....................................................... A-8
3.7 Absence of Certain Changes or Events................................ A-8
3.8 Legal Proceedings................................................... A-9
3.9 Tax Matters......................................................... A-9
3.10 Patents, Trademarks and Trade Names................................. A-10
3.11 Employees........................................................... A-10
3.12 SEC Reports......................................................... A-11
3.13 Compliance with Applicable Law...................................... A-12
3.14 Certain Contracts................................................... A-12
3.15 Undisclosed Liabilities............................................. A-12
3.16 Pooling of Interests; Tax-Free Reorganization....................... A-13
3.17 Fairness Opinion.................................................... A-13
<CAPTION>
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF NABI
<C> <S> <C>
4.1 Corporate Organization.............................................. A-13
4.2 Capitalization...................................................... A-13
4.3 Authority; No Violation............................................. A-14
4.4 Consents and Approvals.............................................. A-14
4.5 Financial Statements................................................ A-15
4.6 Broker's Fees....................................................... A-15
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
4.7 Absence of Certain Changes or Events............................... A-15
4.8 Legal Proceedings.................................................. A-16
4.9 Tax Matters........................................................ A-16
4.10 Patents, Trademarks and Trade Names................................ A-17
4.11 Employees.......................................................... A-17
4.12 SEC Reports........................................................ A-18
4.13 Compliance with Applicable Law..................................... A-18
4.14 Certain Contracts.................................................. A-19
4.15 Undisclosed Liabilities............................................ A-19
4.16 Pooling of Interests; Tax-Free Reorganization...................... A-19
4.17 Fairness Opinion................................................... A-19
<CAPTION>
ARTICLE V--COVENANTS RELATING TO CONDUCT OF BUSINESSES
<C> <S> <C>
5.1 Conduct of Businesses Prior to the Effective Time.................. A-19
5.2 Forbearances....................................................... A-20
<CAPTION>
ARTICLE VI--ADDITIONAL AGREEMENTS
<C> <S> <C>
6.1 No Univax Solicitation............................................. A-21
6.2 No NABI Solicitation............................................... A-22
6.3 Regulatory Matters................................................. A-22
6.4 Access to Information.............................................. A-24
6.5 Stockholders' Approvals............................................ A-24
6.6 Legal Conditions to Merger......................................... A-24
6.7 Affiliates; Publication of Combined Financial Results.............. A-25
6.8 Indemnification.................................................... A-25
6.9 Advice of Changes.................................................. A-26
6.10 Public Announcements............................................... A-26
6.11 NASDAQ Listing..................................................... A-26
6.12 Treatment as Tax-Free Reorganization............................... A-26
6.13 Employees and Employee Benefits.................................... A-26
<CAPTION>
ARTICLE VII--CONDITIONS PRECEDENT
<C> <S> <C>
7.1 Conditions to Each Party's Obligation to Effect the Merger......... A-27
7.2 Conditions to Obligations of NABI.................................. A-27
7.3 Conditions to Obligations of Univax................................ A-28
<CAPTION>
ARTICLE VIII--TERMINATION AND AMENDMENT
<C> <S> <C>
8.1 Termination........................................................ A-28
8.2 Effect of Termination.............................................. A-29
8.3 Amendment.......................................................... A-30
8.4 Extension; Waiver.................................................. A-30
<CAPTION>
ARTICLE IX--GENERAL PROVISIONS
<C> <S> <C>
9.1 Closing............................................................ A-30
</TABLE>
ii
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<TABLE>
<C> <S> <C>
9.2 Nonsurvival of Representations, Warranties and Agreements.......... A-31
9.3 Expenses........................................................... A-31
9.4 Notices............................................................ A-31
9.5 Interpretation..................................................... A-31
9.6 Counterparts....................................................... A-32
9.7 Entire Agreement................................................... A-32
9.8 Governing Law...................................................... A-32
9.9 Severability....................................................... A-32
9.10 Assignment......................................................... A-32
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of August 28, 1995, by and between
North American Biologicals, Inc., a Delaware corporation ("NABI"), and Univax
Biologics, Inc., a Delaware corporation ("Univax").
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined in Section 1.2 hereof), Univax shall merge with and
into NABI (the "Merger"). NABI shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") in the Merger, and shall
continue its corporate existence under the laws of the State of Delaware. At
the Effective Time (as hereinafter defined), the separate corporate existence
of Univax shall terminate.
1.2 Effective Time. In order to effectuate the Merger, on or before the
Closing Date (as hereinafter defined), NABI and Univax will cause a
Certificate of Merger (the "Certificate of Merger") to be filed with the
Secretary of State of the State of Delaware as provided in Section 251 of the
DGCL. The Merger will become effective at the time that the Certificate of
Merger is filed with the Secretary of State of the State of Delaware in
accordance with Section 251 of the DGCL (the "Effective Time"), unless NABI
and Univax agree that a later time shall be the Effective Time, in which case
such time shall be specified in the Certificate of Merger as required by
Section 103 of the DGCL.
1.3 Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in Sections 259, 260 and 261 of the DGCL.
1.4 Conversion of Univax Common Stock and Preferred Stock. At the Effective
Time, in each case subject to Sections 1.4(e) and 2.2(e) hereof, by virtue of
the Merger and without any action on the part of NABI, Univax or the holder of
any of the following securities:
(a) Each share of the common stock, par value $0.01 per share, of Univax
(the "Univax Common Stock"; the Univax Common Stock and the Univax Preferred
Stock, as defined below, being referred to herein as the "Univax Capital
Stock") issued and outstanding immediately prior to the Effective Time (other
than shares of Univax Common Stock held (x) in Univax's treasury or (y)
directly or indirectly by NABI or any Subsidiary (as defined below) of NABI or
Univax) shall be converted into the right to receive 0.79 share (the "Common
Exchange Ratio") of fully paid and nonassessable shares of the common stock,
par value $0.10 per share, of NABI (the "NABI Common Stock").
(b) Each share of the preferred stock, par value $0.01 per share, of Univax
(the "Univax Preferred Stock") issued and outstanding immediately prior to the
Effective Time (other than shares of Univax Preferred Stock held (x) in
Univax's treasury or (y) directly or indirectly by NABI or any Subsidiary of
NABI or Univax), shall be converted into the right to receive such number of
shares of NABI Common Stock (the "Preferred Exchange Ratio") as is determined
by dividing $9.95 by the closing price of NABI Common Stock on the Nasdaq
National Market ("NASDAQ") on the date on which the Effective Time occurs.
(c) All of the shares of Univax Capital Stock converted into NABI Common
Stock pursuant to this Article I shall no longer be outstanding and shall
automatically be canceled and shall cease to exist as of the Effective Time,
and each certificate (each a "Certificate") previously representing any such
shares of Univax Capital Stock shall thereafter represent the right to receive
shares of NABI Common Stock and cash in lieu of a fractional share as provided
in Section 2.2(e). Certificates previously representing shares of Univax
Capital Stock shall be exchanged for certificates representing whole shares of
NABI Common Stock and cash in lieu of
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fractional shares issued in consideration therefor upon the surrender of such
Certificates in accordance with Section 2.2 hereof, without any interest
thereon. If prior to the Effective Time the outstanding shares of NABI Common
Stock or Univax Capital Stock shall have been increased, decreased, changed
into or exchanged for a different number or kind of shares or securities as a
result of a reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar change in
capitalization, then an appropriate and proportionate adjustment shall be made
to the Common Exchange Ratio and the Preferred Exchange Ratio.
(d) At the Effective Time, all shares of Univax Capital Stock that are owned
by Univax as treasury stock and all shares of Univax Capital Stock that are
owned directly or indirectly by NABI or any Subsidiary of NABI or Univax shall
be canceled and shall cease to exist and no stock of NABI or other
consideration shall be delivered in exchange therefor. All shares of NABI
Common Stock that are owned by Univax or its Subsidiary shall become treasury
stock of NABI.
(e) Notwithstanding anything in this Agreement to the contrary, shares of
Univax Preferred Stock which are outstanding immediately prior to the
Effective Time, the holders of which shall not have voted to approve this
Agreement and shall have delivered to Univax a written demand for appraisal of
such shares in the manner provided in Section 262 of the DGCL (the "Dissenting
Preferred Shares"), shall not be converted into the right to receive or be
exchangeable for, the shares of NABI Common Stock otherwise issuable in
exchange for such shares of Univax Preferred Stock pursuant to this Section
1.4, but instead the holders hereof shall be entitled to payment of the
appraised value of such Dissenting Preferred Shares in accordance with the
provisions of Section 262 of the DGCL; provided, however, that (i) if any
holder of Dissenting Preferred Shares tenders to the Exchange Agent (as
hereinafter defined) a Certificate representing such shares together with a
duly executed letter of transmittal pursuant to Section 2.2, (ii) if any
holder of Dissenting Preferred Shares shall subsequently deliver a written
withdrawal of his demand for appraisal of such shares (with the written
approval of the Surviving Corporation, if such withdrawal is not tendered
within 60 days after the Effective Time), (iii) if any holder fails to
establish his entitlement to appraisal rights as provided in Section 262 of
the DGCL or (iv) if neither any holder of Dissenting Preferred Shares nor the
Surviving Corporation has filed a petition demanding a determination of the
value of all Dissenting Preferred Shares within the time provided in Section
262 of the DGCL, such holder shall forfeit the right to appraisal of such
Dissenting Preferred Shares and each of such shares shall thereupon be deemed
to have been converted into the right to receive, and to have become
exchangeable for, as of the Effective Time, the shares of NABI Common Stock
and cash in lieu of any fractional share otherwise issuable in exchange for
such shares of Univax Preferred Stock pursuant to this Section 1.4, without
any interest thereon.
1.5 NABI Common Stock. At and after the Effective Time, each share of NABI
Common Stock issued and outstanding immediately prior to the Closing Date
shall remain an issued and outstanding share of common stock of the Surviving
Corporation and shall not be affected by the Merger.
1.6 Options. (a) At or prior to the Effective Time, Univax and NABI shall
take all action necessary to cause the assumption by NABI as of the Effective
Time of the options to purchase Univax Common Stock, whether vested or
unvested, issued under Univax's 1989 Stock Plan and 1995 Stock Option Plan
(the "Stock Option Plans") or pursuant to separate option agreements (other
than options under Univax's 1995 Director's Stock Option Plan) outstanding as
of the Effective Time (collectively, the "Outstanding Options"). Each of the
Outstanding Options shall be converted without any action on the part of the
holder thereof into an option to purchase shares of NABI Common Stock as of
the Effective Time. The number of shares of NABI Common Stock that the holder
of an assumed Outstanding Option shall be entitled to receive upon the
exercise of such option shall be that whole number of shares (rounded to the
nearest whole share) determined by multiplying the number of shares of Univax
Common Stock subject to such option, determined immediately before the
Effective Time, by the Common Exchange Ratio. The option price of each share
of NABI Common Stock subject to an Outstanding Option shall be the amount
(rounded up to the nearest whole cent) obtained by dividing the exercise price
per share of Univax Common Stock at which such option is exercisable
immediately before the Effective Time by the Common Exchange Ratio. Except as
set forth in this Section 1.6(a), each Outstanding Option assumed by NABI
pursuant to this Section 1.6(a) shall be exercisable upon and subject to the
same terms and
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conditions as are set forth in the applicable Stock Option Plan and/or the
applicable option agreement. After the Effective Time, the Stock Option Plans
shall be continued in effect by NABI subject to amendment, modification,
suspension, abandonment or termination as provided therein, and the Stock
Option Plans as so continued (a) shall relate solely to Outstanding Options
and (b) thereafter shall relate only to the issuance of NABI Common Stock as
provided in this Section 1.6(a). The adjustment provided herein with respect
to any Outstanding Options which are "incentive stock options" (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"))
shall be and is intended to be effected in a manner which is consistent with
Section 424(a) of the Code. NABI shall reserve for issuance the number of
shares of NABI Common Stock that will be issuable upon the exercise of the
Outstanding Options.
(b) In accordance with the terms of Univax's 1995 Directors' Stock Option
Plan, (i) all options outstanding thereunder at the Effective Time shall
terminate and no such options shall be exercisable after the Effective Time,
be assumed by NABI or be converted into the right to purchase NABI Common
Stock and (ii) from and after the date hereof, all options outstanding under
the such plan shall become fully exercisable without regard to the vesting
schedule of such options.
(c) Promptly after the Effective Time, NABI shall file and keep current for
so long as there remain any Outstanding Options a registration statement on
Form S-8 or other appropriate registration statement registering under the
Securities Act of 1933, as amended (the "Securities Act"), the offer and sale
of the shares of NABI Common Stock issuable upon the exercise of the
Outstanding Options.
1.7 Warrant. At or prior to the Effective Time, Univax and NABI shall take
all action necessary to cause the assumption by NABI as of the Effective Time
of the outstanding warrant to purchase 11,400 shares of Univax Common Stock
(the "Outstanding Warrant"). The Outstanding Warrant shall be converted
without any action on the part of the holder thereof into a warrant to
purchase shares of NABI Common Stock as of the Effective Time. The number of
shares of NABI Common Stock that the holder of the assumed Outstanding Warrant
shall be entitled to receive upon the exercise of such warrant shall be that
number of whole shares (rounded up to the nearest whole share) determined by
multiplying the number of shares of Univax Common Stock subject to such
warrant, determined immediately before the Effective Time, by the Common
Exchange Ratio. The exercise price for each share of NABI Common Stock subject
to the Outstanding Warrant shall be the amount (rounded up to the nearest
whole cent) obtained by dividing the exercise price per share of Univax Common
Stock at which the Outstanding Warrant is exercisable immediately before the
Effective Time by the Common Exchange Ratio. Except as set forth in this
Section 1.7, the Outstanding Warrant assumed by NABI pursuant to this Section
1.7 shall be exercisable upon and subject to the same terms and conditions as
it is currently subject. NABI shall reserve for issuance the number of shares
of NABI Common Stock that will be issuable upon exercise of the Outstanding
Warrant.
1.8 Certificate of Incorporation. At the Effective Time, the Certificate of
Incorporation of NABI, as in effect at the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended in accordance with applicable law, except that Article Fourth shall be
amended to delete the first sentence thereof and to substitute therefor the
following:
"Fourth: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 80,000,000 shares, consisting
of (a) 5,000,000 shares of Preferred Stock, par value $0.10 per share, and
(b) 75,000,000 shares of Common Stock, par value $0.10 per share."
1.9 By-laws. At the Effective Time, the By-laws of NABI, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
1.10 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code and that this
Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
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<PAGE>
1.11 Board of Directors and Officers. At the Effective Time, the Board of
Directors of the Surviving Corporation shall consist of the persons set forth
on Schedule 1.11 hereto. In addition to the other officers of NABI at the
Effective Time and such additional persons as shall be elected officers of the
Surviving Corporation after the Effective Time, the persons listed on Schedule
1.11 shall hold and be elected to the indicated offices of the Surviving
Corporation from and after the Effective Time. The persons so selected as
officers and directors shall be officers and directors of the Surviving
Corporation, as the case may be, until their respective successors are duly
elected and qualified.
1.12 Voting Agreements. Simultaneously with the execution and delivery of
this Agreement, each of the holders of Univax Common Stock listed on Schedule
1.12 hereto shall furnish to NABI an agreement substantially in the form of
Exhibit 1.12 hereto pursuant to which such holders shall have agreed, among
other things, to vote their shares of Univax Common Stock to approve this
Agreement.
ARTICLE II
EXCHANGE OF SHARES
2.1 NABI to Make Shares Available. At or prior to the Effective Time, NABI
shall deposit, or shall cause to be deposited, with Registrar and Transfer
Company (the "Exchange Agent"), for the benefit of the holders of
Certificates, for exchange in accordance with this Article II, certificates
representing the shares of NABI Common Stock and the cash in lieu of any
fractional share (such cash and certificates for shares of NABI Common Stock,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 1.4 and paid pursuant to Section 2.2(e) in exchange for outstanding
shares of Univax Capital Stock.
2.2 Exchange of Shares. (a) As soon as practicable after the Effective Time,
and in no event later than ten business days thereafter, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates a form
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing the shares of NABI Common Stock and the cash in lieu of any
fractional share into which the shares of Univax Capital Stock represented by
such Certificates shall have been converted pursuant to this Agreement. Upon
proper surrender of a Certificate or Certificates for exchange and
cancellation to the Exchange Agent, together with such properly completed
letter of transmittal and any other documentation required thereby, duly
executed, the holder of such Certificate(s) shall be entitled to receive in
exchange therefor, as applicable, (i) a certificate representing that number
of whole shares of NABI Common Stock to which such holder of Univax Capital
Stock shall have become entitled pursuant to the provisions of Article I
hereof and (ii) a check representing the amount of cash in lieu of any
fractional share which such holder has the right to receive in respect of the
Certificate(s) surrendered pursuant to the provisions of this Article II, and
the Certificate(s) so surrendered shall forthwith be canceled. No interest
will be paid or accrued on the cash paid in lieu of any fractional share to
holders of Certificates.
(b) No dividends or other distributions declared after the Effective Time
with respect to NABI Common Stock shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate in accordance with this Article II. After the surrender of a
Certificate in accordance with this Article II, the record holder thereof
shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable with
respect to shares of NABI Common Stock represented by such Certificate.
(c) If any certificate representing shares of NABI Common Stock is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange
A-4
<PAGE>
shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing shares of
NABI Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish
to the satisfaction of the Exchange Agent that such tax has been paid or is
not payable.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of Univax of the shares of Univax Capital Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for
transfer to the Exchange Agent, they shall be canceled and exchanged for
certificates representing shares of NABI Common Stock as provided in this
Article II.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of NABI Common Stock
shall be issued upon the surrender for exchange of Certificates, no dividend
or distribution with respect to NABI Common Stock shall be payable on or with
respect to any fractional share and such fractional share interests shall not
entitle the owner thereof to vote or to any other rights of a stockholder of
NABI. In lieu of the issuance of any such fractional shares, NABI shall pay to
each former stockholder of Univax who otherwise would be entitled to receive a
fractional share of NABI Common Stock (after taking into account all shares of
NABI Common Stock into which such stockholder's shares of Univax Capital Stock
were converted pursuant to Article I) an amount in cash (rounded to the
nearest whole cent) determined by multiplying (i) the average of the closing
sale of NABI Common Stock on NASDAQ as reported by The Wall Street Journal for
the twenty (20) trading days immediately preceding the Effective Time by (ii)
the fraction of a share of NABI Common Stock which such holder would otherwise
be entitled to receive pursuant to Section 1.4 hereto.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Univax for twelve (12) months after the Effective Time shall
be paid or returned to NABI. Any stockholders of Univax who have not
theretofore complied with this Article II shall thereafter look only to NABI
for payment of the shares of NABI Common Stock, cash in lieu of any fractional
shares, and unpaid dividends and distributions on NABI Common Stock
deliverable in respect of each share of Univax Capital Stock such stockholder
holds as determined pursuant to this Agreement, in each case, without any
interest thereon. Notwithstanding the foregoing, none of NABI, Univax, the
Exchange Agent or any other person shall be liable to any former holder of
shares of Univax Capital Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by NABI, the
posting by such person of a bond in such amount as NABI may determine is
reasonably necessary as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the shares of NABI Common Stock
and cash in lieu of any fractional share deliverable in respect thereof
pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF UNIVAX
Univax hereby represents and warrants to NABI as follows:
3.1 Corporate Organization. (a) Univax is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Univax has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary, except as set forth in
Section 3.1(a) of the disclosure schedule of Univax delivered to
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NABI concurrently herewith (the "Univax Disclosure Schedule") or except in
those jurisdictions in which the failure to be so licensed or qualified would
not have a Material Adverse Effect (as defined below) on Univax. As used in
this Agreement, the term "Material Adverse Effect" means, with respect to
NABI, Univax or the Surviving Corporation, as the case may be, a material
adverse effect on the business, results of operations, properties or assets or
financial condition (whether or not covered by insurance) of such party and
its Subsidiaries taken as a whole. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation which
is consolidated with such party for financial reporting purposes. The
Certificate of Incorporation and By-laws of Univax and its Subsidiary, copies
of which have previously been delivered to NABI, are true, complete and
correct copies of such documentation as in effect as of the date of this
Agreement.
(b) Univax's sole Subsidiary, Univax Plasma, Inc., is (i) duly organized and
validly existing as a corporation under the laws of the State of Delaware,
(ii) is duly licensed or qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except in those jurisdictions in
which the failure to be so licensed or qualified would not have a Material
Adverse Effect on Univax, and (iii) has all requisite corporate power and
authority to own or lease its properties and assets and to carry on its
business as now conducted. There are no provisions, whether in the Certificate
of Incorporation, By-laws or otherwise, limiting or otherwise restricting the
ability of Univax to control its Subsidiary.
(c) Section 3.1(c) of the Univax Disclosure Schedule contains a complete and
correct list of all equity or debt securities owned by Univax on July 31,
1995, which list indicates, as to any equity investment, all entities in which
Univax holds directly or indirectly 5% or more of the outstanding shares of
any class of capital stock or other equity or voting interest.
(d) True, correct and complete copies of the minutes of all meetings and all
actions by written consent of Univax's stockholders and Board of Directors
(including committees of the Board of Directors), held or taken since January
1, 1992, have been made available to NABI.
3.2 Capitalization. (a) The authorized capital stock of Univax consists of
30,000,000 shares of Univax Common Stock and 10,000,000 shares of Univax
Preferred Stock. At the close of business on July 31, 1995 there were
17,192,306 shares of Univax Common Stock outstanding and 502,512 shares of
Univax Preferred Stock outstanding (comprised of 502,512 shares of Series E
Preferred Stock). On July 31, 1995, no shares of Univax Common Stock or Univax
Preferred Stock were reserved for issuance except as set forth in Section
3.2(a) of the Univax Disclosure Schedule. All of the issued and outstanding
shares of Univax Capital Stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of preemptive rights. As of the
date of this Agreement, except as set forth in Section 3.2(a) of the Univax
Disclosure Schedule, Univax does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Univax Capital
Stock or any other equity securities of Univax or any securities representing
the right to purchase or otherwise receive any shares of Univax Capital Stock.
Univax has previously provided NABI with a list of the option holders, the
date of each option to purchase Univax Common Stock granted, the number of
shares subject to each such option, the vesting restrictions applicable to
each such option and the price at which each such option may be exercised.
Except as set forth in Section 3.2(a) of the Univax Disclosure Schedule, since
July 31, 1995, Univax has not issued any shares of its capital stock or
securities convertible into or exercisable for any shares of its capital
stock, other than pursuant to the exercise of employee stock options granted
prior to such date and as disclosed in Section 3.2(a) of the Univax Disclosure
Schedule. Except as set forth in Section 3.2(a) of the Univax Disclosure
Schedule, the right of a holder to exercise or otherwise receive benefits
under any Univax stock option will not be accelerated by reason of the Merger,
whether such acceleration will occur pursuant to the plan under which the
option was granted, the terms of the option itself, action taken or to be
taken by the Board of Directors of Univax or any committee thereof, or
otherwise. Section 3.2(a) of the Univax Disclosure Schedule lists all
outstanding agreements, commitments or understandings under which Univax is
obligated to register under the Securities Act any shares of Univax Capital
Stock.
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(b) Univax owns, all of the issued and outstanding shares of capital stock
of its Subsidiary, free and clear of any liens, charges, encumbrances and
security interests whatsoever, and all of such shares are duly authorized and
validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. No
Subsidiary of Univax has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any character calling
for the purchase or issuance of any shares of capital stock or any other
equity security of such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other equity
security of such Subsidiary.
(c) Assuming compliance by NABI with Sections 1.6 and 1.7 hereof, at the
Effective Time, there will not be any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character by which Univax or
its Subsidiary will be bound calling for the purchase or issuance of any
shares of the capital stock of Univax or its Subsidiary or any other equity
securities or any securities representing the right to purchase or otherwise
receive any shares of capital stock of Univax or its Subsidiary.
3.3 Authority; No Violation. (a) Univax has full corporate power and
authority to execute and deliver this Agreement and, except for the approval
of its stockholders, to consummate the transactions contemplated hereby. The
execution and delivery or this Agreement and the consummation of the
transactions contemplated hereby have been duly, validly and unanimously
approved by the Board of Directors of Univax. The Board of Directors of Univax
has directed that this Agreement and the transactions contemplated hereby be
submitted to Univax's stockholders for approval at a meeting of such
stockholders and, except for the adoption of this Agreement by the
stockholders of Univax, no other corporate proceedings on the part of Univax
are necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Univax and (assuming due authorization, execution and delivery by
NABI) constitutes a valid and binding obligation of Univax, enforceable
against Univax in accordance with its terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Except as set forth in Section 3.3(b) of the Univax Disclosure Schedule,
neither the execution and delivery of this Agreement by Univax nor the
consummation by Univax of the transactions contemplated hereby, nor compliance
by Univax with any of the terms or provisions hereof, will (i) violate any
provision of the Certificate of Incorporation or By-laws of Univax or (ii)
assuming that the consents and approvals referred to in Section 3.4 are duly
obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Univax or its
Subsidiary or any of their respective properties or assets, or (y) violate,
conflict with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the respective properties or assets of
Univax or its Subsidiary under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement
or other instrument or obligation to which Univax or its Subsidiary is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except for such violations, conflicts, breaches or defaults
which, either individually or in the aggregate, will not have or be reasonably
likely to have a Material Adverse Effect on Univax.
3.4 Consents and Approvals. Except for (i) the pre-merger filing and waiting
period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) the filings with the Securities and
Exchange Commission (the "SEC") of a joint proxy statement in preliminary and
definitive form relating to the meetings of NABI's and Univax's stockholders
to approve this Agreement and the transactions contemplated hereby (such
definitive proxy statement being referred to as the "Joint Proxy Statement")
and a Registration Statement on Form S-4 (the "S-4") in which the Joint Proxy
Statement will be included as a prospectus, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware
pursuant to the DGCL, (iv) such filings and approvals as are required to be
made or obtained under the securities or "Blue Sky" laws of various states in
connection with the issuance of the shares of NABI Common Stock pursuant to
this Agreement, (v) the approval of this Agreement by the requisite vote of
the stockholders of NABI
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and Univax, (vi) the filing of an additional listing application with NASDAQ
to list the shares of NABI Common Stock to be issued as a part of the Exchange
Fund, (vii) such filings as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and (viii) the consents and approvals
set forth in Section 3.4 of the Univax Disclosure Schedule, no consents or
approvals of or filings or registrations with any court, administrative
agency, commission or other governmental authority or instrumentality (each a
"Government Entity") or with any third party are necessary in connection with
(A) the execution and delivery by Univax of this Agreement and (B) the
consummation by Univax of the Merger and the other transactions contemplated
hereby. To the best of Univax's knowledge, no state takeover statute or
similar statute or regulation applies or purports to apply to the Merger or
the transactions contemplated by this Agreement.
3.5 Financial Statements. Univax has previously delivered to NABI copies of
(a) the balance sheets of Univax as of December 31, for the fiscal years 1991,
1992, 1993 and 1994 (the December 31, 1994 balance sheet being hereinafter
referred to as the "Univax Base Balance Sheet"), and the related statements of
income, changes in stockholders' equity and cash flows for the fiscal years
1990 through 1994, inclusive, all as reported in Univax's Annual Reports on
Form10-K for the fiscal years ended December 31, 1992, 1993 and 1994 filed
with the SEC under the Exchange Act, in each case accompanied by the audit
report of Price Waterhouse, LLP, independent public accountants with respect
to Univax, and (b) the unaudited balance sheet of Univax as of June 30, 1994,
the unaudited consolidated balance sheet of Univax and its Subsidiary as of
June 30, 1995, the related unaudited statements of income, cash flows and
changes in stockholders' equity for the six-month period ended June 30, 1994
and the related unaudited consolidated statements of income, cash flows and
changes in stockholders' equity for the six-month period ended June 30, 1995
as reported in Univax's Quarterly Report on Form 10-Q for the period ended
June 30, 1995 filed with the SEC under the Exchange Act. Except as set forth
in Section 3.5 of the Univax Disclosure Schedule, the foregoing balance sheets
(including the related notes, where applicable) fairly present in all material
respects the financial position of Univax (and its Subsidiary in the June 30,
1995 balance sheet) as of the respective dates thereof, and the other
foregoing financial statements referred to in this Section 3.5 (including the
related notes, where applicable) fairly present in all material respects
(subject, in the case of the unaudited statements, to recurring audit
adjustments normal in nature and amount) the results of the operations and
changes in stockholders' equity and financial position of Univax (and its
Subsidiary for the period ended June 30, 1995) for the respective fiscal
periods therein set forth; all of such financial statements (including the
related notes, where applicable) comply in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto and each of such financial
statements (including the related notes, where applicable) has been prepared
in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except in each case as
indicated in such financial statements or in the notes thereto or, in the case
of unaudited statements, as permitted by Form 10-Q. The books and records of
Univax and its Subsidiary have been, and are being, maintained in all material
respects in accordance with GAAP and reflect only actual transactions.
3.6 Broker's Fees. Except as set forth in Section 3.6 of the Univax
Disclosure Schedule, neither Univax nor its Subsidiary has employed any
broker, finder, investment banker or financial adviser in connection with the
transactions contemplated by this Agreement or incurred any liability for any
broker's fees, finder's fees, financial advisor's fees, investment banker's
fees or other similar fees or commissions in connection with any of the
transactions contemplated by this Agreement.
3.7 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in the Univax Reports (as defined in Section 3.12) filed prior to the date
hereof or in press releases (copies of which have been delivered to NABI), and
except as set forth in Section 3.7(a) of the Univax Disclosure Schedule, since
December 31, 1994, (i) neither Univax nor its Subsidiary has incurred any
material liability, except in the ordinary course of their business consistent
with their past practices, and (ii) no event has occurred which has had or
will have, individually or in the aggregate, a Material Adverse Effect
(whether or not covered by insurance) on Univax.
(b) Except as publicly disclosed in the Univax Reports or in press releases
(copies of which have been delivered to NABI), and except as set forth in
Section 3.7(b) of the Univax Disclosure Schedule, since
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December 31, 1994, Univax and its Subsidiary have carried on their respective
businesses in the ordinary and usual course consistent with their past
practices.
(c) Except as set forth in Section 3.7(c) of the Univax Disclosure Schedule,
since December 31, 1994, neither Univax nor its Subsidiary has (i) except for
normal increases in the ordinary course of business consistent with past
practice or except as required by applicable law, increased the wages,
salaries, compensation, pension or other fringe benefits or perquisites
payable to any executive officer, employee or director from the amount thereof
in effect as of December 31, 1994, granted any severance or termination pay,
entered into any contract to make or grant any severance or termination pay,
or paid any bonuses other than customary year-end bonuses for fiscal 1993 and
1994 or (ii) suffered any strike, work stoppage, slow-down or other labor
disturbance.
3.8 Legal Proceedings. (a) Except as set forth in Section 3.8(a) of the
Univax Disclosure Schedule, neither Univax nor its Subsidiary is a party to
any, and there are no pending or, to the best of Univax's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
Univax or its Subsidiary, or challenging the validity or propriety of the
transactions contemplated by this Agreement, as to which there is a reasonable
probability of an adverse determination and which, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect on
Univax.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon Univax, its Subsidiary or the assets of Univax or its
Subsidiary which has had, or might reasonably be expected to have, a Material
Adverse Effect on Univax.
3.9 Tax Matters. (a) Each of Univax, its Subsidiary, and any affiliated,
combined or unitary group of which any such corporation is or was a member, as
the case may be (individually, a "Tax Affiliate" of Univax and collectively,
Univax's "Tax Affiliates"), has in all material respects, except as listed in
Section 3.9 of the Univax Disclosure Schedule, (i) correctly prepared and
timely filed all returns, declarations, reports, estimates, information
returns and statements ("Returns") required to have been filed or sent by or
with respect to them in respect of any Taxes (as hereinafter defined); (ii)
timely and properly paid all Taxes that are due and payable; (iii) established
on its books and records reserves that are adequate for the payment of all
Taxes accrued but not yet due and payable; and (iv) complied with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and timely and properly withheld from employee wages and paid over to
the proper governmental authorities all amounts required to be so withheld and
paid over under all applicable laws.
(b) Except as set forth in Section 3.9(b) of the Univax Disclosure Schedule,
(i) there are no liens for Taxes upon the assets of Univax or any of its Tax
Affiliates except liens for Taxes not yet due; (ii) neither Univax nor any of
its Tax Affiliates has requested any extension of time within which to file
any Return which Return has not since been filed; (iii) no deficiency for any
Taxes has been proposed, asserted or assessed against Univax or any of its Tax
Affiliates which has not been resolved and paid in full; (iv) there are no
outstanding waivers or consents given by Univax or any of its Tax Affiliates
regarding the application of the statute of limitations with respect to any
Taxes or Returns; and (v) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Returns.
(c) Neither Univax nor any of its Tax Affiliates, except as disclosed in
Section 3.9(c) of the Univax Disclosure Schedule, (i) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Univax or any of its Tax
Affiliates; or (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by Univax or a Tax Affiliate nor does Univax have any
knowledge that the Internal Revenue Service (the "IRS") has proposed any such
adjustment or change in accounting method. No property of Univax or any of its
Tax Affiliates is property that Univax, any of its Tax Affiliates or any party
to this transaction is or will be required to treat as being owned by another
person pursuant to Section 168(f)(8) of the Code (prior to its
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amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(d) Univax has established and until the Effective Time will maintain on its
books and records reserves adequate to pay all Taxes accrued but not yet due
and payable in accordance with GAAP, and such reserves are reflected on
Univax's financial statements to the extent required. All transactions that
could give rise to an understatement of federal income tax within the meaning
of Section 6662 of the Code have been adequately disclosed in accordance with
Section 6662 of the Code. Neither Univax nor any of its Tax Affiliates is a
party to any agreement, contract or arrangement that would result, separately
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code.
(e) For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
fees, levies or other assessments, including without limitation all net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, property or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign).
(f) As of December 31, 1994, to Univax's knowledge, it had available net
operating loss carryforwards in the amounts, and expiring in the years, set
forth in the notes to the Univax Base Balance Sheet, and, to Univax's
knowledge, such loss carryforwards will be available to offset future income
tax liabilities without limitation, except as set forth in Section 3.9(f) of
the Univax Disclosure Schedule.
3.10 Patents, Trademarks and Trade Names. Section 3.10 of the Univax
Disclosure Schedule contains a complete and correct list of (i) all patents
and applications for patents and all material trademarks, service marks, trade
names and copyrights ("Intellectual Property") owned by or registered in the
name of Univax or its Subsidiary, (ii) all material licenses in respect of
Intellectual Property or trade secrets or proprietary information to which
Univax or its Subsidiary is a party and (iii) all names under which Univax
does business (all of such rights and properties listed on such Section 3.10
and all material trade secrets and proprietary information relating to
Univax's business are collectively referred to herein as "Univax Intellectual
Property"). Except as disclosed in such Section 3.10, (A) neither Univax nor
its Subsidiary is obligated to pay any royalty in respect of Univax
Intellectual Property under any agreement to which Univax or its Subsidiary is
a party; (B) to Univax's knowledge, there is no infringement by third parties
of any Intellectual Property of Univax; (C) to Univax's knowledge, there are
no valid enforceable patents which are infringed by the conduct by Univax or
its Subsidiary of their respective businesses, to Univax's knowledge, neither
Univax nor its Subsidiary is wrongfully utilizing any trade secret or
proprietary information of any third party, and there is no pending or, to
Univax's knowledge, threatened action, suit, proceeding or claim by others
that Univax or its Subsidiary infringes or otherwise violates any Intellectual
Property, trade secret or proprietary information of others; (D) there is no
pending or, to Univax's knowledge, threatened action, suit, proceeding or
claim by others challenging Univax's or its Subsidiary's license or ownership
rights in or to any Intellectual Property or any trade secret or proprietary
information; and (E) there is no pending or, to Univax's knowledge, threatened
action, suit, proceeding or claim by others challenging the validity or scope
of any Univax Intellectual Property. To Univax's knowledge, no person employed
by or affiliated with Univax or its Subsidiary has utilized or proposes to
utilize any trade secret or other information or documentation proprietary to
any former employer or third party, and to Univax's knowledge, no person
employed by or affiliated with Univax or its Subsidiary has violated any
confidential relationship which such person may have had with any third party
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of Univax or its Subsidiary. All current employees of Univax have signed a
confidentiality and inventions agreement in substantially the form previously
delivered to NABI.
3.11 Employees. (a) Section 3.11(a) of the Univax Disclosure Schedule sets
forth a true and complete list of each benefit plan, arrangement or agreement
under which benefits are provided to employees or other providers of services
that is maintained as of the date of this Agreement (the "Plans") by Univax or
its
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Subsidiary or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), all of which together with Univax would be deemed a "single
employer" within the meaning of Sections 414(b), (c), (m) or (o) of the Code
or Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) Univax has heretofore delivered to NABI true and complete copies of each
of the Plans and all related documents, including but not limited to (i) the
actuarial report for such Plan (if applicable) for each of the last two years,
(ii) the annual report for such plan (if applicable) for each of the last two
years and (iii) the most recent determination letter from the Internal Revenue
Service (if applicable) for such Plan (and any application for such
determination letter, if one is pending).
(c) Except as set forth in Section 3.11(c) of the Univax Disclosure
Schedule, to Univax's knowledge (i) each of the Plans has been operated and
administered in all material respects with applicable laws, including but not
limited to ERISA and the Code, (ii) each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified
and each Plan which is intended to meet the requirements for tax-favored
treatment under Subchapter B of Chapter 1 of Subtitle A of the Code meets such
requirements in all material respects, (iii) with respect to each Plan which
is subject to Title IV of ERISA, the present value of accrued benefits under
such Plan, based upon the actuarial assumptions used for funding purposes in
the most recent actuarial report prepared by such Plan's actuary with respect
to such Plan, did not, as of its latest valuation date, exceed the then
current value of the assets of such Plan allocable to such accrued benefits,
(iv) no Plan provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former employees
of Univax, its Subsidiary or any ERISA Affiliate beyond their retirement or
other termination of service, other than (w) coverage mandated by applicable
law, (x) death benefits or retirement benefits under any "employee pension
plan", as that term is defined in Section 3(2) of ERISA, (y) deferred
compensation benefits accrued as liabilities on the books of Univax, its
Subsidiary or the ERISA Affiliates or (z) benefits the full cost of which is
borne by the current or former employee (or his beneficiary), (v) no liability
under Title IV of ERISA has been incurred by Univax, its Subsidiary or any
ERISA Affiliate that has not been satisfied in full, and no condition exists
that presents a material risk to Univax, its Subsidiary or any ERISA Affiliate
of incurring a material liability thereunder; (vi) no Plan is a "multiemployer
pension plan," as such term is defined in Section 3(37) or 4001(a)(3) of
ERISA, (vii) all contributions or other amounts payable by Univax or its
Subsidiary as of the Effective Time with respect to each Plan in respect of
current or prior plan years have been paid or accrued in accordance with
generally accepted accounting practices, Section 302 of ERISA and Section 412
of the Code, and there is no accumulated funding deficiency with respect to
any Plan, (viii) neither Univax, its Subsidiary nor any ERISA Affiliate has
engaged in a transaction in connection with which Univax, its Subsidiary or
any ERISA Affiliate, or any other person or entity, could be subject to a
material liability under Section 409 of ERISA, a material civil penalty
assessed pursuant to Section 502(i) or (l) of ERISA or a material tax imposed
pursuant to Section 4975 of the Code, (ix) no event has occurred and no
condition exists with respect to any Plan that could subject Univax, its
Subsidiary or any ERISA Affiliate to any material tax, fine or penalty imposed
by the Code or ERISA, and (x) to the best knowledge of Univax, there are no
pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto.
(d) Except as set forth in Section 3.11(d) of the Univax Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
material payment (including, without limitation, deferred compensation,
severance, unemployment compensation, golden parachute or otherwise) becoming
due to any director or any employee of Univax or any of its affiliates from
Univax or any of its affiliates under any Plan or otherwise, (ii) materially
increase any benefits otherwise payable under any Plan or otherwise, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefits to any material extent.
3.12 SEC Reports. Univax has previously made available to NABI an accurate
and complete copy of each final registration statement, prospectus, report,
schedule and definitive proxy statement (including any
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amendment or supplement thereto) filed since January 1, 1992 by Univax with
the SEC pursuant to the Securities Act or the Exchange Act (the "Univax
Reports"), and no such Univax Report contained as of its date of filing with
the SEC any untrue statement of a material fact or omitted as of its date of
filing with the SEC to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading, except that information
as of a later date shall be deemed to modify information as of an earlier
date. Section 3.12 of the Univax Disclosure Schedule contains a complete list
of all Univax Reports. Univax has timely filed all Univax Reports and other
documents required to be filed by it under the Securities Act and the Exchange
Act, and, as of their respective dates, all Univax Reports complied as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto.
3.13 Compliance with Applicable Law. Except as disclosed in Section 3.13 of
the Univax Disclosure Schedule, Univax and its Subsidiary hold, and have at
all times held, all licenses, franchises, permits and authorizations necessary
for the lawful conduct of their respective businesses under and pursuant to
all, and have complied with and are not in default under any, applicable law,
statute, order, rule, regulation, policy and/or guideline of any Governmental
Entity relating to Univax or its Subsidiary, except where the failure to hold
such license, franchise, permit or authorization or such noncompliance or
default would not, individually or in the aggregate, have a Material Adverse
Effect on Univax, and neither Univax nor its Subsidiary knows of, or has
received notice of, any material violations of any of the above.
3.14 Certain Contracts. Except as set forth in Section 3.14(a) of the Univax
Disclosure Schedule, neither Univax nor its Subsidiary is a party to or bound
by any contract, arrangement, commitment, plan or understanding (whether
written or oral) which materially restricts the conduct of any line of
business by Univax or its Subsidiary. Univax has delivered to NABI true,
complete and correct copies of any contract, arrangement, commitment, plan of
understanding (whether written or oral) (i) which, upon the consummation of
the transactions contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from NABI, Univax, the Surviving
Corporation, or any of their respective Subsidiaries, to any officer, director
or employee thereof, (ii) which is a material contract (as defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of
this Agreement that has not been filed or incorporated by reference in the
Univax Reports, or (iii) with or to a labor union or guild (including any
collective bargaining agreement). Univax has previously delivered to NABI true
and correct copies of all employment, consulting and deferred compensation
agreements which are in writing and to which Univax or its Subsidiary is a
party. Each contract, arrangement, commitment or understanding of the type
described in this Section 3.14(a), whether or not set forth in Section 3.14(a)
of the Univax Disclosure Schedule, and any other contract, arrangement,
commitment or understanding to which Univax or its Subsidiary is a party or to
which their properties are subject and which is material to the business of
Univax and its Subsidiary taken as a whole, is referred to herein as a "Univax
Contract." Neither Univax nor its Subsidiary has received notice that any
Univax Contract is not in full force and effect, and neither Univax nor its
Subsidiary has received notice of any violation or default under any Univax
Contract by any party thereto, which, individually or in the aggregate, could
have a Material Adverse Effect on Univax.
(b) (i) Univax and its Subsidiary have performed all obligations required to
be performed by them to date under each Univax Contract, except where such
nonperformance, individually or in the aggregate, would not have a Material
Adverse Effect on Univax, and (ii) neither Univax nor its Subsidiary has
knowledge of any event or condition which constitutes or, after notice or
lapse of time or both, would constitute a default on the part of Univax or its
Subsidiary under any such Univax Contract, except where such default,
individually or in the aggregate, would not have a Material Adverse Effect on
Univax.
3.15 Undisclosed Liabilities. Except for those liabilities that are fully
reflected on the Univax Base Balance Sheet and for liabilities incurred in the
ordinary course of business consistent with past practice, since December 31,
1994, neither Univax nor its Subsidiary has incurred any liability of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either alone or when
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combined with all similar liabilities, has had, or could reasonably be
expected to have, a Material Adverse Effect on Univax.
3.16 Pooling of Interests; Tax-Free Reorganization. As of the date of this
Agreement, Univax has no reason to believe that the Merger will not qualify as
a pooling of interests for accounting purposes or a reorganization within the
meaning of Section 368 of the Code.
3.17 Fairness Opinion. Univax has received the opinion of Robertson,
Stephens & Company to the effect that the consideration to be received in the
Merger by the holders of Univax Capital Stock is fair, from a financial point
of view, to such holders.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NABI
NABI hereby represents and warrants to Univax as follows:
4.1 Corporate Organization. (a) NABI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
NABI has the corporate power and authority to own or lease all of its
properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business and in good
standing in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary, except in those
jurisdictions in which the failure to be so licensed or qualified would not
have a Material Adverse Effect on NABI. The Certificate of Incorporation and
By-laws of NABI and its Subsidiaries, copies of which have previously been
delivered to Univax, are true, complete and correct copies of such
documentation as in effect as of the date of this Agreement.
(b) Each of NABI's Subsidiaries is (i) duly organized and validly existing
as a corporation under the laws of its jurisdiction of organization, (ii) is
duly licensed or qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except in those jurisdictions in
which the failure to be so licensed or qualified would not have a Material
Adverse Effect on NABI, and (iii) has all requisite corporate power and
authority to own or lease its properties and assets and to carry on its
business as now conducted. There are no provisions, whether in the charter,
By-laws or otherwise, limiting or otherwise restricting the ability of NABI to
control its Subsidiaries.
(c) Section 4.1(c) of the disclosure schedule of NABI delivered to Univax
concurrently herewith (the "NABI Disclosure Schedule") contains a complete and
correct list of all NABI's Subsidiaries and equity or debt securities owned by
NABI on the date hereof, which list indicates, as to any equity investment,
all entities in which NABI holds directly or indirectly 5% or more of the
outstanding shares of any class of capital stock or other equity or voting
interest.
(d) True, correct and complete copies of the minutes of all meetings and all
actions by written consent of NABI's stockholders and Board of Directors
(including committees of the Board of Directors), held or taken from January
1, 1992 through January 1, 1995, have been made available to Univax.
4.2 Capitalization. (a) The authorized capital stock of NABI consists of
50,000,000 shares of NABI Common Stock and 5,000,000 shares of NABI Preferred
Stock, par value $0.10 per share. At the close of business on July 31, 1995
there were 19,486,910 shares of NABI Common Stock outstanding and no shares of
NABI Preferred Stock outstanding. On July 31, 1995, no shares of NABI Common
Stock or NABI Preferred Stock were reserved for issuance, except as set forth
in Section 4.2(a) of the NABI Disclosure Schedule. All of the issued and
outstanding shares of NABI Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights. As of
the date of this Agreement, except as set forth in
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Section 4.2(a) of the NABI Disclosure Schedule, NABI does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issuance of any
shares of NABI Common Stock or NABI Preferred Stock or any other equity
securities of NABI or any securities representing the right to purchase or
otherwise receive any shares of NABI Common Stock or NABI Preferred Stock.
Except as set forth in Section 4.2(a) of the NABI Disclosure Schedule, since
July 31, 1995, NABI has not issued any shares of its capital stock, other than
pursuant to the exercise of employee stock options granted prior to such date
and as disclosed in Section 4.2(a) of the NABI Disclosure Schedule. The right
of a holder to exercise any NABI employee stock option will not be accelerated
by reason of the Merger, whether such acceleration will occur pursuant to the
plan under which the option was granted, the terms of the option itself, action
taken or to be taken by the Board of Directors of NABI or any committee
thereof, or otherwise. Section 4.2(a) of the NABI Disclosure Schedule lists all
outstanding agreements, commitments or understandings under which NABI is
obligated to register under the Securities Act any shares of NABI Capital
Stock.
(b) Except as set forth in Section 4.2(b) of the NABI Disclosure Schedule,
NABI owns, directly or indirectly, all of the issued and outstanding shares of
capital stock of each of NABI's Subsidiaries, free and clear of any liens,
charges, encumbrances and security interests whatsoever, and all of such shares
are duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights, with no personal liability attaching to the
ownership thereof. No Subsidiary of NABI has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital stock
or any other equity security of such Subsidiary or any securities representing
the right to purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary.
4.3 Authority; No Violation. (a) NABI has full corporate power and authority
to execute and deliver this Agreement and, except for the approval of its
stockholders, to consummate the transactions contemplated hereby. The execution
and delivery or this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of NABI. The Board of Directors of NABI has directed that this
Agreement and the transactions contemplated hereby be submitted to NABI's
stockholders for approval at a meeting of such stockholders and, except for the
adoption of this Agreement by the stockholders of NABI, no other corporate
proceedings on the part of NABI are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by NABI and (assuming due authorization,
execution and delivery by Univax) constitutes a valid and binding obligation of
NABI, enforceable against NABI in accordance with its terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 4.3(b) of the NABI Disclosure Schedule,
neither the execution and delivery of this Agreement by NABI nor the
consummation by NABI of the transactions contemplated hereby, nor compliance by
NABI with any of the terms or provisions hereof, will (i) violate any provision
of the Certificate of Incorporation or By-laws of NABI or (ii) assuming that
the consents and approvals referred to in Section 4.4 are duly obtained, (x)
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to NABI or any of its Subsidiaries or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of NABI or any of
its Subsidiaries under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which NABI or any of its Subsidiaries is a party,
or by which they or any of their respective properties or assets may be bound
or affected, except for such violations, conflicts, breaches or defaults which,
either individually or in the aggregate, will not have or be reasonably likely
to have a Material Adverse Effect on NABI.
4.4 Consents and Approvals. Except for (i) the pre-merger filing and waiting
period requirements of the HSR Act, (ii) the filings with the SEC of the Joint
Proxy Statement (and the preliminary form thereof) and the
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S-4 in which the Joint Proxy Statement will be included as a prospectus, (iii)
the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware pursuant to the DGCL, (iv) such filings and approvals as are
required to be made or obtained under the securities or "Blue Sky" laws of
various states in connection with the issuance of the shares of NABI Common
Stock pursuant to this Agreement, (v) the approval of this Agreement by the
requisite vote of the stockholders of Univax and NABI, (vi) the filing of an
additional listing application with NASDAQ to list the shares of NABI Common
Stock to be issued as part of the Exchange Fund, (vii) such filings as are
required under the Exchange Act and (viii) the consents and approvals set
forth in Section 4.4 of the NABI Disclosure Schedule, no consents or approvals
of or filings or registrations with any Government Entity or with any third
party are necessary in connection with (A) the execution and delivery by NABI
of this Agreement and (B) the consummation by NABI of the Merger and the other
transactions contemplated hereby. To the best of NABI's knowledge, no state
takeover statute or similar statute or regulation applies or purports to apply
to the Merger or the transactions contemplated by this Agreement.
4.5 Financial Statements. NABI has previously delivered to Univax copies of
(a) the consolidated balance sheets of NABI and its Subsidiaries as of
December 31, for the fiscal years 1991, 1992, 1993 and 1994 (the December 31,
1994 consolidated balance sheet being hereinafter referred to as the "NABI
Base Balance Sheet"), and the related consolidated statements of income,
changes in stockholders' equity and cash flows for the fiscal years 1990
through 1994, inclusive, all as reported in NABI's Annual Reports on Form 10-K
for the fiscal years ended December 31, 1992, 1993 and 1994 filed with the SEC
under the Exchange Act, in each case accompanied by the audit report of Price
Waterhouse, LLP, independent public accountants with respect to NABI, and (b)
the unaudited consolidated balance sheet of NABI and its Subsidiaries as of
June 30, 1994 and June 30, 1995 and the related unaudited consolidated
statements of income, cash flows and changes in stockholders' equity for the
six-month periods then ended as reported in NABI's Quarterly Report on Form
10-Q for the period ended June 30, 1995 filed with the SEC under the Exchange
Act. The foregoing consolidated balance sheets (including the related notes,
where applicable) fairly present in all material respects the consolidated
financial position of NABI and its Subsidiaries as of the respective dates
thereof, and the other foregoing financial statements referred to in this
Section 4.5 (including the related notes, where applicable) fairly present in
all material respects (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount), the results of the
consolidated operations and changes in stockholders' equity and consolidated
financial position of NABI and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of such
financial statements (including the related notes, where applicable) comply in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto and each of
such financial statements (including the related notes, where applicable) has
been prepared in accordance with GAAP consistently applied during the periods
involved, except in each case as indicated in such financial statements or in
the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q. The books and records of NABI and its Subsidiaries have been, and
are being, maintained in all material respects in accordance with GAAP and
reflect only actual transactions.
4.6 Broker's Fees. Except as set forth in Section 4.6 of the NABI Disclosure
Schedule, neither NABI nor any of its Subsidiaries has employed any broker,
finder, investment banker or financial advisor in connection with the
transactions contemplated by this Agreement or incurred any liability for any
broker's fees, finder's fees, financial advisor's fees, investment banker's
fees or other similar fees or commissions in connection with any of the
transactions contemplated by this Agreement.
4.7 Absence of Certain Changes or Events. (a) Except as publicly disclosed
in the NABI Reports (as defined in Section 4.12) filed prior to the date
hereof or in press releases (copies of which have been previously delivered to
Univax), and except as set forth in Section 4.7(a) of the NABI Disclosure
Schedule, since December 31, 1994, (i) neither NABI nor any of its
Subsidiaries has incurred any material liability, except in the ordinary
course of their business consistent with their past practices, and (ii) no
event has occurred which has had or will have, individually or in the
aggregate, a Material Adverse Effect (whether or not covered by insurance) on
NABI.
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(b) Except as publicly disclosed in the NABI Reports filed prior to the date
hereof or in press releases (copies of which have been previously delivered to
Univax), and except as set forth in Section 4.7(b) of the NABI Disclosure
Schedule, since December 31, 1994, NABI and its Subsidiaries have carried on
their respective businesses in the ordinary and usual course consistent with
their past practices.
(c) Except as set forth in Section 4.7(c) of the NABI Disclosure Schedule,
since December 31, 1994, neither NABI nor any of its Subsidiaries has (i)
except for normal increases in the ordinary course of business consistent with
past practice or except as required by applicable law, increased the wages,
salaries, compensation, pension or other fringe benefits or perquisites
payable to any executive officer, employee or director from the amount thereof
in effect as of December 31, 1994, granted any severance or termination pay,
entered into any contract to make or grant any severance or termination pay,
or paid any bonuses other than customary year-end bonuses for fiscal 1993 and
1994 or (ii) suffered any strike, work stoppage, slow-down or other labor
disturbance.
4.8 Legal Proceedings. (a) Except as set forth in Section 4.8 of the NABI
Disclosure Schedule, neither NABI nor any of its Subsidiaries is a party to
any, and there are no pending or, to the best of NABI's knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against NABI or any of
its Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement as to which there is a reasonable probability
of an adverse determination and which, if adversely determined, would,
individually or in the aggregate, have a Material Adverse Effect on NABI.
(b) There is no injunction, order, judgment, decree or regulatory
restriction imposed upon NABI, any of its Subsidiaries or the assets of NABI
or any of its Subsidiaries which has had, or might reasonably be expected to
have, a Material Adverse Effect on NABI.
4.9 Tax Matters. (a) Each of NABI, its Subsidiaries, and any affiliated,
combined or unitary group of which any such corporation is or was a member, as
the case may be (individually, a "Tax Affiliate" of NABI and collectively,
NABI's "Tax Affiliates"), has in all material respects, except as listed in
Section 4.9 of the NABI Disclosure Schedule, (i) correctly prepared and timely
filed all Returns required to have been filed or sent by or with respect to
them in respect of any Taxes; (ii) timely and properly paid all Taxes that are
due and payable; (iii) established on its books and records reserves that are
adequate for the payment of all Taxes accrued but not yet due and payable; and
(iv) complied with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes and timely and properly withheld from
employee wages and paid over to the proper governmental authorities all
amounts required to be so withheld and paid over under all applicable laws.
(b) Except as set forth in Section 4.9(b) of the NABI Disclosure Schedule,
(i) there are no liens for Taxes upon the assets of NABI or any of its Tax
Affiliates except liens for Taxes not yet due; (ii) neither NABI nor any of
its Tax Affiliates has requested any extension of time within which to file
any Return which Return has not since been filed; (iii) no deficiency for any
Taxes has been proposed, asserted or assessed against NABI or any of its Tax
Affiliates which has not been resolved and paid in full; (iv) there are no
outstanding waivers or consents given by NABI or any of its Tax Affiliates
regarding the application of the statute of limitations with respect to any
Taxes or Returns; and (v) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Returns.
(c) Neither NABI nor any of its Tax Affiliates, except as disclosed in
Section 4.9(c) of the NABI Disclosure Schedule, (i) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by NABI or any of its Tax
Affiliates; or (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by NABI or a Tax Affiliate nor does NABI have any knowledge
that the IRS has proposed any such adjustment or change in accounting method.
No property of NABI or any of its Tax Affiliates is property that NABI, any of
its Affiliates or any party to this transaction is or will be required to
treat as being owned by another person pursuant to Section 168(f)(8) of the
Code (prior to its amendment by the Tax Reform Act of 1986) or is "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
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(d) NABI has established and until the Effective Time will maintain on its
books and records reserves adequate to pay all Taxes accrued but not yet due
and payable in accordance with GAAP, and such reserves are reflected on NABI's
financial statements to the extent required. All transactions that could give
rise to an understatement of federal income tax within the meaning of Section
6662 of the Code have been adequately disclosed in accordance with Section
6662 of the Code. Neither NABI nor any of its Tax Affiliates is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
4.10 Patents, Trademarks and Trade Names. Section 4.10 of the NABI
Disclosure Schedule contains a complete and correct list of (i) all
Intellectual Property owned by or registered in the name of NABI or any of its
Subsidiaries, (ii) all licenses in respect of Intellectual Property or trade
secrets or proprietary information to which NABI or any of its Subsidiaries is
a party and (iii) all names under which NABI does business (all of such rights
and properties listed on such Section 4.10 and all material trade secrets and
proprietary information relating to NABI's business are collectively referred
to herein as "NABI Intellectual Property"). Except as disclosed in such
Section 4.10, (A) neither NABI nor any of its Subsidiaries is obligated to pay
any royalty in respect of NABI Intellectual Property under any agreement to
which NABI or any of its Subsidiaries is a party; (B) to NABI's knowledge,
there is no infringement by third parties of any Intellectual Property of
NABI; (C) to NABI's knowledge, there are no valid enforceable patents which
are infringed by the conduct by NABI or any of its Subsidiaries of their
respective businesses, to NABI's knowledge, neither NABI nor any of its
Subsidiaries is wrongfully utilizing any trade secret or proprietary
information of any third party, and there is no pending or, to NABI's
knowledge, threatened action, suit, proceeding or claim by others that NABI or
any of its Subsidiaries infringes or otherwise violates any Intellectual
Property, trade secret or proprietary information of others; (D) there is no
pending or, to NABI's knowledge, threatened action, suit, proceeding or claim
by others challenging NABI's or any of its Subsidiaries' license or ownership
rights in or to any Intellectual Property or any trade secret or proprietary
information; and (E) there is no pending or, to NABI's knowledge, threatened
action, suit, proceeding or claim by others challenging the validity or scope
of any NABI Intellectual Property. To NABI's knowledge, no person employed by
or affiliated with NABI or any of its Subsidiaries has utilized or proposes to
utilize any trade secret or other information or documentation proprietary to
any former employer or third party, and to NABI's knowledge, no person
employed by or affiliated with NABI or any of its Subsidiaries has violated
any confidential relationship which such person may have had with any third
party in connection with the development, manufacture or sale of any product
or proposed product or the development or sale of any service or proposed
service of NABI or any of its Subsidiaries.
4.11 Employees. (a) Section 4.11(a) of the NABI Disclosure Schedule sets
forth a true and complete list of each Plan that is maintained as of the date
of this Agreement by NABI or any of its ERISA Affiliates, all of which
together with NABI would be deemed a "single employer" within the meaning of
Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.
(b) NABI has heretofore delivered to Univax true and complete copies of each
of the Plans and all related documents, including but not limited to (i) the
actuarial report for such Plan (if applicable) for each of the last two years,
(ii) the annual report for such plan (if applicable) for each of the last two
years, and (iii) the most recent determination letter from the Internal
Revenue Service (if applicable) for such Plan (and any application for such
determination letter, if one is pending).
(c) Except as set forth in Section 4.11(c) of the NABI Disclosure Schedule,
to NABI's knowledge (i) each of the Plans has been operated and administered
in all material respects with applicable laws, including but not limited to
ERISA and the Code, (ii) each of the Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified and each Plan which
is intended to meet the requirements for tax-favored treatment under
Subchapter B of Chapter 1 of Subtitle A of the Code meets such requirements in
all material respects, (iii) with respect to each Plan which is subject to
Title IV of ERISA, the present value of accrued benefits under such Plan,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Plan's actuary with respect to such
Plan, did not, as of its latest valuation date,
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exceed the then current value of the assets of such Plan allocable to such
accrued benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees, its Subsidiaries or any ERISA Affiliate beyond their
retirement or other termination of service, other than (w) coverage mandated
by applicable law, (x) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the books of NABI,
its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost of
which is borne by the current or former employee (or his beneficiary), (v) no
liability under full Title IV of ERISA has been incurred by NABI, its
Subsidiaries or any ERISA Affiliate that has not been satisfied in full, and
no condition exists that presents a material risk to NABI, its Subsidiaries or
any ERISA Affiliate of incurring a material liability thereunder; (vi) no Plan
is a "multiemployer pension plan", as such term is defined in Section 3(37) or
4001(a)(3) of ERISA, (vii) all contributions or other amounts payable by NABI
or its Subsidiaries as of the Effective Time with respect to each Plan in
respect of current or prior plan years have been paid or accrued in accordance
with generally accepted accounting practices, Section 302 or ERISA and Section
412 of the Code, and there is no accumulated funding deficiency with respect
to any Plan, (viii) neither NABI, its Subsidiaries nor any ERISA Affiliate has
engaged in a transaction in connection with which NABI, its Subsidiaries or
any ERISA Affiliate, or any other person or entity, could be subject to a
material liability under Section 409 of ERISA, a material civil penalty
assessed pursuant to Section 502(i) or (l) of ERISA or a material tax imposed
pursuant to Section 4975 of the Code, (ix) no event has occurred and no
condition exists with respect to any Plan that could subject NABI, its
Subsidiaries or any ERISA Affiliate to any material tax, fine or penalty
imposed by the Code or ERISA, and (x) to the best knowledge of NABI, there are
no pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Plans or any trusts related
thereto.
(d) Except as set forth in Section 4.11(d) of the NABI Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any material payment
(including, without limitation, deferred compensation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any director or
any employee of NABI or any of its affiliates from NABI or any of its
affiliates under any Plan or otherwise, (ii) materially increase any benefits
otherwise payable under any Plan or otherwise, or (iii) result in any
acceleration of the time of payment or vesting of any such benefits to any
material extent.
4.12 SEC Reports. NABI has previously made available to Univax an accurate
and complete copy of each final registration statement, prospectus, report,
schedule and definitive proxy statement (including any amendment or supplement
thereto) filed since January 1, 1992 by NABI with the SEC pursuant to the
Securities Act or the Exchange Act (the "NABI Reports"), and no such NABI
Report contained as of its date of filing with the SEC any untrue statement of
a material fact or omitted as of its date of filing with the SEC to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, except that information as of a later date shall be deemed to
modify information as of an earlier date. Section 4.12 of the NABI Disclosure
Schedule contains a complete list of all NABI Reports. NABI has timely filed
all NABI Reports and other documents required to be filed by it under the
Securities Act and the Exchange Act, and, as of their respective dates, all
NABI Reports complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto.
4.13 Compliance with Applicable Law. Except as disclosed in Section 4.13 of
the NABI Disclosure Schedule, NABI and each of its Subsidiaries hold, and have
at all times held, all licenses, franchises, permits and authorizations
necessary for the lawful conduct of their respective businesses under and
pursuant to all, and have complied with and are not in default under any,
applicable law, statute, order, rule, regulation, policy and/or guideline of
any Governmental Entity relating to NABI or any of its Subsidiaries, except
where the failure to hold such license, franchise, permit or authorization or
such noncompliance or default would not, individually or in the aggregate,
have a Material Adverse Effect on NABI, and neither NABI nor any of its
Subsidiaries knows of, or has received notice of, any material violations of
any of the above.
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4.14 Certain Contracts. Except as set forth in Section 4.14 (a) of the NABI
Disclosure Schedule, neither NABI nor any of its Subsidiaries is a party to or
bound by any contract, arrangement, commitment, plan or understanding (whether
written or oral) which materially restricts the conduct of any line of
business by NABI or which would materially restrict the conduct of any line of
business of the Surviving Corporation. NABI has delivered to Univax true,
complete and correct copies of any contract, arrangement, commitment, plan or
understanding (whether written or oral), (i) which, upon the consummation of
the transactions contemplated by this Agreement will (either alone or upon the
occurrence of any additional acts or events) result in any payment (whether of
severance pay or otherwise) becoming due from Univax, NABI, the Surviving
Corporation, or any of their respective Subsidiaries, to any officer, director
or employee thereof, (ii) which is a material contract (as defined in Item
601(b)(10) of RegulationS-K of the SEC) to be performed after the date of this
Agreement that has not been filed or incorporated by reference in the NABI
Reports, or (iii) with or to a labor union or guild (including any collective
bargaining agreement). NABI has previously delivered to Univax true and
correct copies of all employment, consulting and deferred compensation
agreements which are in writing and to which NABI or any of its Subsidiaries
is a party. Each contract, arrangement, commitment or understanding of the
type described in this Section 4.14(a), whether or not set forth in Section
4.14(a) of the NABI Disclosure Schedule, is referred to herein as a "NABI
Contract," and neither NABI nor any of its Subsidiaries has any notice that
any NABI's contract is not in full force and effect, or has received notice of
any violation of any NABI Contract by any of the other parties thereto, which,
individually or in the aggregate, would have a Material Adverse Effect on
NABI.
(b) (i) NABI and each of its Subsidiaries has performed all obligations
required to be performed by it to date under each NABI Contract, except where
such nonperformance, individually or in the aggregate, would not have a
Material Adverse Effect on NABI, and (ii) neither NABI nor any of its
Subsidiaries has knowledge of any event or condition exists which constitutes
or, after notice or lapse of time or both, would constitute a default on the
part of NABI or any of its Subsidiaries under any such NABI Contract, except
where such default, individually or in the aggregate, would not have a
Material Adverse Effect on NABI.
4.15 Undisclosed Liabilities. Except for those liabilities that are fully
reflected on the NABI Base Balance Sheet and for liabilities incurred in the
ordinary course of business consistent with past practice, since December 31,
1994, neither NABI nor any of its Subsidiaries has incurred any liability of
any nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether due or to become due) that, either alone or when combined with all
similar liabilities, has had, or could reasonably be expected to have, a
Material Adverse Effect on NABI.
4.16 Pooling of Interests; Tax-Free Reorganization. As of the date of this
Agreement, NABI has no reason to believe that the Merger will not qualify as a
pooling of interests for accounting purposes or as a reorganization within the
meaning of Section 368 of the Code.
4.17 Fairness Opinion. NABI has received the opinion of Raymond James &
Associates, Inc. to the effect that the Common Exchange Ratio and the
Preferred Exchange Ratio are fair, from a financial point of view, to the
holders of NABI Common Stock.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESSES
5.1 Conduct of Businesses Prior to the Effective Time. During the period
from the date of this Agreement to the Effective Time, except as expressly
contemplated or permitted by this Agreement, each of NABI and Univax shall,
and shall cause each of their respective Subsidiaries to, (i) conduct its
business in the usual, regular and ordinary course consistent with past
practice, (ii) use reasonable efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees (provided, however, that
the failure (after taking such reasonable efforts) to retain the services
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of officers and key employees shall not constitute a breach of this Section
5.1 or a failure by either party to perform the obligations required to be
performed by it under this Agreement), (iii) take no action which would
adversely affect or delay the ability of either NABI or Univax to obtain any
necessary approvals of any governmental authority required for the
transactions contemplated hereby or to perform its covenants and agreements
under this Agreement, (iv) use reasonable efforts to (x) perform and fulfill,
or have performed or fulfilled, all of the conditions set forth in Article VII
and perform and fulfill the obligations to be performed and fulfilled by it
under this Agreement, (y) ensure that, to the extent that the same is within
its control, no breach of any of its respective representations, warranties
and agreements hereunder occurs or exists on or prior to the Effective Time,
all to the end that the transactions contemplated by this Agreement shall be
fully carried out in a timely fashion, and (z) preserve and protect its
Intellectual Property and all technology, know-how and processes necessary for
the conduct of its business as now conducted and presently proposed to be
conducted, and (v) maintain in force at comparable levels of coverage all
insurance policies now in effect.
5.2 Forbearances. During the period from the date of this Agreement to the
Effective Time, except as set forth in Section 5.2 of the NABI Disclosure
Schedule or Section 5.2 of the Univax Disclosure Schedule, as the case may be,
and, except as expressly contemplated or permitted by this Agreement, neither
NABI nor Univax shall, nor shall they permit any of their respective
Subsidiaries to, without the prior written consent of the other:
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or make
any loan or advance other than to a direct or indirect wholly-owned
Subsidiary;
(b) adjust, split, combine or reclassify any capital stock, declare, set
aside or pay any dividend or make any other distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for
any shares of its capital stock; or grant any stock appreciation rights or
grant any individual, corporation or other entity any stock option or other
right to acquire any shares of its capital stock or any security
exchangeable for or convertible into any such shares of capital stock; or
issue any additional shares of capital stock, except pursuant to (i) the
exercise of stock options and the Outstanding Warrant or (ii) the
conversion of shares of the Univax Preferred Stock;
(c) sell, transfer, mortgage, encumber, license or otherwise dispose of
any of its material properties or assets to any individual, corporation or
other entity other than a direct or indirect wholly owned Subsidiary, or
cancel, release or assign any indebtedness to any such person or any claims
held by any such person, except in the ordinary course of business
consistent with past practice or pursuant to contracts or agreements in
force at the date of this Agreement;
(d) except for transactions in the ordinary course of business consistent
with past practice, make any material investment either by purchase of
stock or securities, contributions to capital, property transfers, merger
or consolidation or purchase of any property or assets of any other
individual, corporation or other entity other than a wholly owned
Subsidiary thereof;
(e) except for transactions in the ordinary course of business consistent
with past practice, enter into or terminate any material contract or
agreement, or make any change in any of its material leases, licenses or
contracts, other than renewals of contracts, licenses and leases without
material changes of terms;
(f) increase in any manner the compensation or fringe benefits of any of
its employees or pay any pension or retirement allowance not required by
any existing plan or agreement to any such employees or become a party to,
amend or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee other than in the ordinary course of business
consistent with past practice, or accelerate the vesting of or otherwise
modify the terms of any stock options or other stock-based compensation;
(g) settle any material claim, action or proceeding involving money
damages, except in the ordinary course of business consistent with past
practice;
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(h) take any action that would prevent or impede the Merger from
qualifying (i) for pooling of interests accounting treatment or (ii) as a
reorganization within the meaning of Section 368(a) of the Code;
(i) amend its Certificate of Incorporation or its By-laws; or
(j) fail to duly and timely (by the due date or any duly granted
extension thereof) file all Returns required to be filed with the proper
governmental authorities; or make any tax election except in the ordinary
course of business consistent with immediate past practice;
(k) unless it is contesting the same in good faith and, if appropriate,
has established reasonable reserves therefor, fail to (i) promptly pay all
Taxes indicated by such Returns or otherwise lawfully levied or assessed
upon it or any of its properties and (ii) withhold or collect and pay to
the proper governmental authorities or hold in separate bank accounts for
such payment all Taxes and other assessments which it believes in good
faith to be required by law to be so withheld or collected;
(l) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in Article VII not being satisfied or in a violation of any provision
of this Agreement, except, in every case, as may be required by applicable
law;
(m) change any material accounting principle used by it, except for such
changes as may be required by GAAP or the rules and regulations of the SEC
promulgated following the date hereof; or
(n) agree to, or make any commitment to, take any of the actions
prohibited by this Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Univax Solicitation. Univax shall not, and shall not authorize or
permit any of its officers, directors, agents, representatives or advisors to,
(a) solicit, initiate or knowingly encourage or take any action knowingly to
facilitate the submission of inquiries, proposals or offers from any person
relating to (i) any acquisition or purchase of any material asset or assets of
Univax or any class of equity securities of Univax, (ii) any tender offer
(including a self tender offer) or exchange offer involving shares of Univax
Capital Stock, (iii) any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or
similar transaction involving Univax other than the transactions contemplated
by this Agreement, or (iv) any other transaction the consummation of which
would or could reasonably be expected to impede, interfere with, prevent or
materially delay the Merger or which would or could reasonably be expected to
materially dilute the benefits to NABI of the transactions contemplated hereby
(the transactions referred to in clauses (i)-(iv) are collectively referred to
herein as "Univax Transaction Proposals"), or agree to or endorse any Univax
Transaction Proposal, or (b) enter into or participate in any discussions or
negotiations regarding any Univax Transaction Proposal, or furnish to any
other person any information with respect to its business, properties or
assets or any Univax Transaction Proposal, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any person to make or seek any Univax Transaction Proposal;
provided, however, that the foregoing shall not prohibit Univax from (x)
furnishing information pursuant to a confidentiality agreement substantially
similar to the Confidentiality Agreement (as hereinafter defined) to a third
party who has initiated contact with Univax regarding a bona fide unsolicited
Univax Transaction Proposal under circumstances not constituting a breach of
the foregoing provisions of this section 6.1 (a "Permitted Univax Contact"),
(y) engaging in discussions or negotiations with a third party who has
initiated a Permitted Univax Contact regarding a Univax Transaction Proposal,
and/or (z) following receipt of a Univax Transaction Proposal, taking and
disclosing to its stockholders a position contemplated by Rule14e-2(a) under
the Exchange Act or otherwise make disclosure to its stockholders, but in each
case referred to in the foregoing clauses (x) through (z) only to the extent
that the Board of Directors of Univax shall have concluded in good faith in
the exercise of its fiduciary duties, after consultation with its outside
counsel and financial advisor, that such actions are more likely than not to
result in a bona fide Univax Transaction Proposal,
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the terms of which would be more favorable to Univax's stockholders than the
Merger (a "Superior Univax Proposal"); provided, further, that the Board or
Directors of Univax shall not take any of the foregoing actions referred to in
clauses (x) through (z) until after reasonable notice to and consultation with
NABI with respect to any such actions and that such Board of Directors shall
continue to consult with NABI after taking any such actions, except to the
extent that it receives the opinion of its outside counsel that such continued
consultation would constitute a breach of its fiduciary duties to the
stockholders of Univax under Delaware law. If Univax receives a Univax
Transaction Proposal, Univax shall within one business day of its receipt of
such proposal inform NABI of the terms and conditions of such proposal and
identity of the person making it. Immediately from and after the date hereof,
Univax will cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Univax Transaction Proposal.
6.2 No NABI Solicitation. NABI shall not, and shall not authorize or permit
any of its officers, directors, agents, representatives or advisors to, (a)
solicit, initiate or knowingly encourage or take any action knowingly to
facilitate the submission of inquiries, proposals or offers from any person
relating to any (i) acquisition or purchase of any material asset or assets of
NABI or any class of equity securities of NABI, (ii) any tender offer
(including a self tender offer) or exchange offer involving shares of NABI
Capital Stock, (iii) any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or
similar transaction involving NABI other than the transactions contemplated by
this Agreement, or (iv) any other transaction the consummation of which would
or could reasonably be expected to impede, interfere with, prevent or
materially delay the Merger or which would or could reasonably be expected to
materially dilute the benefits to Univax of the transactions contemplated
hereby (the transactions referred to in clauses (i)-(iv) are collectively
referred to herein as "NABI Transaction Proposals"), or agree to or endorse
any NABI Transaction Proposal, or (b) enter into or participate in any
discussions or negotiations regarding any NABI Transaction Proposal, or
furnish to any other person any information with respect to its business,
properties or assets or any NABI Transaction Proposal, or otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any person to make or seek any NABI Transaction Proposal;
provided, however, that the foregoing shall not prohibit NABI from (x)
furnishing information pursuant to a confidentiality agreement substantially
similar to the Confidentiality Agreement to a third party who has initiated
contact with NABI regarding a bona fide unsolicited NABI Transaction Proposal
under circumstances not constituting a breach of the foregoing provisions of
this section 6.2 (a "Permitted NABI Contact"), (y) engaging in discussions or
negotiations with a third party who has initiated a Permitted NABI Contact
regarding a NABI Transaction Proposal, and/or (z) following receipt of a NABI
Transaction Proposal, taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) under the Exchange Act or otherwise make
disclosure to its stockholders, but in each case referred to in the foregoing
clauses (x) through (z) only to the extent that the Board of Directors of NABI
shall have concluded in good faith in the exercise of its fiduciary duties,
after consultation with its outside counsel and financial advisor that such
actions are more likely than not to result in a bona fide NABI Transaction
Proposal, the terms of which would be more favorable to Univax's stockholders
than the Merger (a "Superior NABI Proposal"); provided, further, that the
Board or Directors of NABI shall not take any of the foregoing actions
referred to in clauses (x) through (z) until after reasonable notice to and
consultation with Univax with respect to any such actions and that such Board
of Directors shall continue to consult with Univax after taking any such
actions, except to the extent that it receives the opinion of its outside
counsel that such continued consultation would constitute a breach of its
fiduciary duties to the stockholders of NABI under Delaware law. If NABI
receives a NABI Transaction Proposal, NABI shall within one business day of
its receipt of such proposal inform Univax of the terms and conditions of such
proposal and identity of the person making it. Immediately from and after the
date hereof, NABI will cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any NABI Transaction Proposal.
6.3 Regulatory Matters. (a) NABI and Univax shall promptly prepare and file
with the SEC the Joint Proxy Statement (including the preliminary form
thereof) and NABI shall promptly prepare and file with the SEC the S-4, in
which the Joint Proxy Statement will be included as a prospectus. Each of NABI
and Univax shall use all reasonable efforts to have the S-4 declared effective
under the Securities Act as promptly as
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practicable after such filing, and NABI and Univax shall thereafter as
promptly as practicable mail the Joint Proxy Statement to their respective
stockholders. NABI shall use all reasonable efforts to obtain all necessary
state securities law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement, and Univax shall furnish all
information concerning Univax and the holders of Univax Capital Stock as may
be reasonably requested in connection with any such action. Each party shall
promptly notify the other of the receipt by it of any comments of the SEC or
state securities laws regulators and will promptly supply the other with
copies of all correspondence between it and its representatives, on the one
hand, and the SEC or state securities laws regulators or the members of their
respective staffs, on the other hand, with respect to the Joint Proxy
Statement, the S-4 or such "Blue Sky" permits and approvals.
(b) NABI and Univax shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Joint Proxy Statement, the S-4 or any other
statement, filing, notice or application made by or on behalf of NABI, Univax
or any of their respective Subsidiaries to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(c) Univax represents and warrants to NABI that when the Joint Proxy
Statement is issued and at the date of its stockholder meeting to act upon
approval of this Agreement and the transactions contemplated hereby, the Joint
Proxy Statement will comply as to form in all material respects with the
Exchange Act and the rules and regulations of the SEC thereunder, and the
Joint Proxy Statement will not at the time of its issuance and at the date of
its stockholder meeting to act upon approval of this Agreement and the
transactions contemplated hereby, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading, except that no representation or warranty is made with respect
to information set forth in the Joint Proxy Statement concerning NABI or any
Subsidiary thereof or the meeting of NABI's stockholders to act upon approval
of this Agreement and the transactions contemplated hereby. Univax will
promptly advise NABI in writing if at any time prior to the date of its
stockholder meeting to act upon approval of this Agreement and the
transactions contemplated hereby, it shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the Joint Proxy
Statement in order to make the statements contained or incorporated by
reference therein not misleading or to comply with applicable law and agrees
to correct any statements that are or have become misleading.
(d) NABI represents and warrants to Univax that the S-4, at the time it
becomes effective and at the date of its stockholder meeting to act upon
approval of this Agreement and the transactions contemplated hereby, and the
Joint Proxy Statement, at the time of its issuance and at the date of its
stockholder meeting to act upon approval of this Agreement and the
transactions contemplated hereby, will comply as to form in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the SEC thereunder, and will not at any such time
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading, except that no
representation or warranty is made with respect to information set forth in
the Joint Proxy Statement concerning Univax or the meeting of Univax's
stockholders to act upon approval of this Agreement and the transactions
contemplated hereby. NABI will promptly advise Univax in writing if at any
time prior to the meeting of Univax's stockholders to act upon approval of
this Agreement and the transactions contemplated hereby NABI shall obtain
knowledge of any facts that might make it necessary or appropriate to amend or
supplement the S-4 or the Joint Proxy Statement in order to make the
statements contained or incorporated by reference therein not misleading or to
comply with applicable law and agrees to correct any statements that are or
have become misleading.
(e) Each of NABI and Univax shall promptly prepare and file the applicable
notices (if any) required to be filed by it under the HSR Act and comply
promptly with any requests to it from the Federal Trade Commission or United
States Department of Justice for additional information.
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(f) The parties hereto shall cooperate with each other and use their best
efforts to (i) promptly prepare and file all necessary documentation to effect
all required applications, notices, petitions and filings; (ii) obtain as
promptly as practicable all permits, consents, approvals and authorizations of
all third parties and Governmental Entities which are necessary or advisable
to consummate the transactions contemplated by this Agreement (including
without limitation the Merger), other than any such permit, consent, approval
or authorization of any third party the failure to obtain which would not have
a Material Adverse Effect on NABI or Univax, as the case may be, for which
reasonable efforts will be used to obtain the same at the request of the other
party hereto; and (iii) comply with the terms and conditions of all such
permits, consents, approvals and authorizations of all such Governmental
Entities. NABI and Univax shall have the right to review in advance, and to
the extent practicable each will consult the other on, in each case subject to
applicable laws relating to the exchange of information, all the information
relating to Univax or NABI, as the case may be, and any of their respective
Subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with
the transactions contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto shall act reasonably and as promptly as
practicable. The parties hereto agree that they will consult with each other
with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(g) Each party shall use its best efforts to take all action necessary for
the Merger not to be subject to any state takeover statute or similar statute
or regulation which is purported to apply to the Merger or the transactions
contemplated by this Agreement.
6.4 Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, each of NABI and
Univax shall, and shall cause each of their respective Subsidiaries to, afford
to the officers, employees, accountants, counsel and other representatives of
the other party, access, during normal business hours during the period prior
to the Effective Time, to all its properties, books, contracts, commitments
and records and, during such period, each of NABI and Univax shall, and shall
cause their respective Subsidiaries to, make available to the other party (i)
a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
federal securities laws and (ii) all other information concerning its
business, properties and personnel as such party may reasonably request.
(b) Each of NABI and Univax shall hold all information furnished by the
other party or any of such party's Subsidiaries or representatives pursuant to
Section 6.4(a) in confidence to the extent required by, and in accordance
with, the provisions of the confidentiality agreement, dated June 27, 1995
between NABI and Univax (the "Confidentiality Agreement").
(c) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other
set forth herein.
6.5 Stockholders' Approvals. Each of NABI and Univax shall call a meeting of
its stockholders to be held as soon as practicable for the purpose of voting
upon the requisite stockholder approvals required in connection with this
Agreement and the Merger, and each shall use its best efforts to cause such
meetings to occur on the same date. NABI and Univax shall cause the Joint
Proxy Statement to be mailed to their respective stockholders as soon as
practicable in accordance with applicable federal and state law. The Boards of
Directors of NABI and Univax will recommend to the shareholders of their
respective corporations that they vote to approve the Agreement and the
Merger.
6.6 Legal Conditions to Merger. Each of NABI and Univax shall, and shall
cause its Subsidiaries to, use their best efforts to take, or cause to be
taken, all actions necessary, proper or advisable (a) to comply promptly with
all legal requirements which may be imposed on such party or its Subsidiaries
with respect to the Merger and (b) to consummate the transactions contemplated
by this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth in Article VII hereof).
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6.7 Affiliates; Publication of Combined Financial Results. (a) Each of NABI
and Univax shall use its best efforts to cause each director, executive
officer and other person who is an "affiliate" (for purposes of Rule 145 under
the Securities Act and for purposes of qualifying the Merger for "pooling-of-
interests" accounting treatment) of such party to deliver to the other party
hereto, as soon as practicable after the date of this Agreement, and prior to
the date of the stockholders meetings called by NABI and Univax to approve
this Agreement, a written agreement, in the form of Exhibit 6.7(a) hereto,
providing that such person will not sell, pledge, transfer or otherwise
dispose of any shares of NABI Common Stock or Univax Capital Stock held by
such "affiliate" and, in the case of the "affiliates" of Univax, the shares of
NABI Common Stock to be received by such "affiliate" in the Merger: (1) in the
case of shares of NABI Common Stock to be received by "affiliates" of Univax
in the Merger, except in compliance with the applicable provisions of the
Securities Act and the rules and regulations thereunder; and (2) during the
period commencing 30 days prior to the Effective Time and ending at the time
of the publication of financial results covering at least 30 days of combined
operations of NABI and Univax.
(b) NABI shall use all reasonable efforts to publish no later than ninety
(90) days after the end of the first month after the Effective Time in which
there are at least thirty (30) days of post-Merger combined operations (which
month may be the month in which the Effective Time occurs), combined sales and
net income figures as contemplated by and in accordance with the terms of SEC
Accounting Series Release No. 135.
6.8 Indemnification. (a) After the Effective Time, NABI shall indemnify and
hold harmless and advance expenses to any person who was a director or officer
of Univax, and the heirs, executors and administrators of any such person
(individually, an "Indemnified Party," and collectively, the "Indemnified
Parties"), to the fullest extent authorized or permitted by the By-laws of
NABI in effect at the Effective Time, against any liability, cost or expense
(including, without limitation, attorneys' fees) imposed upon or reasonably
incurred by him by reason of the fact that he was a director or officer of
Univax, or that he took or failed to take any action as a director or officer
of Univax. Such obligations shall apply to any action, suit or proceeding
whether commenced before or after the Effective Time. Any person entitled to
indemnity under this Section 6.8 shall promptly give notice to NABI of the
facts giving rise to such right to indemnity (provided that the failure to
give such notice shall not affect the Indemnified Party's rights hereunder
except to the extent that the failure to give such notice actually prejudices
NABI's position), and NABI shall thereafter have the right to defend, settle
or compromise such matter, including selection of counsel, subject to the
consent of a majority of the Indemnified Parties seeking indemnification with
respect to such matters, which consent shall not be unreasonably withheld;
provided, however, that no settlement of any claim involving any Indemnified
Party shall be entered into without the consent of such Indemnified Party
(which consent shall not be unreasonably withheld), except that no such
consent shall be required if such settlement imposes no liability on and
provides a complete release of such Indemnified Party. In no event may the
Indemnified Parties be entitled to the representation of more than one law
firm to represent them in any matter unless there is, under applicable
standards of professional conduct, a conflict requiring separate
representation. Nothing contained herein shall prohibit any Indemnified Party,
at its expense, from retaining separate counsel to participate in the matter.
NABI shall not be liable for any settlement of any claim effected without its
written consent.
(b) NABI shall cause to be maintained in effect for a period of not less
than six (6) years subsequent to the Effective Time the current policies of
the directors' and officers' liability insurance maintained by NABI and shall
cause coverage to be provided to the former directors and officers of Univax
thereunder (provided that NABI may substitute therefor policies of at least
the same coverage containing terms and conditions that are no less
advantageous to the former directors and officers of Univax) with respect to
matters occurring prior to the Effective Time; provided, however, that NABI
shall not be required to pay an annual premium therefor in excess of two (2)
times the last annual premium paid prior to the date of this Agreement.
(c) Promptly after the Effective Time, NABI shall enter into indemnification
agreements with directors and officers of Univax who become directors or
officers of the Surviving Corporation, which agreements shall be substantially
identical to those which NABI has entered into with its current directors and
officers.
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(d) This Section 6.8 shall survive the Closing (as hereinafter defined), is
intended to benefit Univax and each of the Indemnified Parties (each of whom
shall be entitled to enforce this Section 6.8 against NABI), and shall be
binding on all successors and assigns of the Surviving Corporation; provided,
however, that this paragraph shall not create any rights in any person other
than the Indemnified Parties and their heirs, executors and administrators,
and no such other person shall become a third party beneficiary of this
Agreement by virtue of serving as a member of the Board of Directors of the
Surviving Corporation.
6.9 Advice of Changes. NABI and Univax shall promptly advise the other party
of any change or event having a Material Adverse Effect on it or which it
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained
herein.
6.10 Public Announcements. NABI and Univax will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public statement prior to
such consultation, except as may be required by applicable law (including any
fiduciary duty of disclosure), court process or the rules and regulations of
NASDAQ. The parties agree that the initial press release or releases to be
issued with respect to the transactions contemplated by this Agreement shall
be mutually agreed upon prior to the issuance thereof.
6.11 NASDAQ Listing. NABI shall file an additional listing application with
NASDAQ to list the shares of NABI Common Stock to be issued as a part of the
Exchange Fund, and shall use its best efforts to cause such application to be
approved prior to the Effective Time.
6.12 Treatment as Tax-Free Reorganization. Each party shall use its best
efforts to comply with the representations, warranties and covenants made by
such party in connection with the issuance of the tax opinions referred to in
Section 7.1(e) regarding the intended status of the Merger as a tax-free
reorganization under Section 368(a) of the Code.
6.13 Employees and Employee Benefits. (a) The Surviving Corporation will
honor and perform all obligations of Univax under all agreements set forth on
Section 6.13 of the Univax Disclosure Schedule. From and after the Effective
Time, the Surviving Corporation shall grant all employees of Univax or its
Subsidiary who become employees of the Surviving Corporation or a Subsidiary
of the Surviving Corporation credit for all service with Univax or its
Subsidiary prior to the Effective Time for all purposes as if such service was
service with NABI. The Surviving Corporation shall waive any pre-existing
condition exclusion and actively-at-work requirements under any medical or
dental benefit plan; provided, however, that no such waiver shall apply to a
pre-existing condition of any employee of Univax or its Subsidiary who was, as
of the Effective Time, excluded from participation in such a plan by virtue of
such pre-existing condition. The Surviving Corporation shall provide that any
covered expenses incurred on or before the Effective Time by an employee of
Univax or its Subsidiary or such an employee's covered dependent shall be
taken into account for purposes of satisfying applicable deductible,
coinsurance and maximum out-of-pocket provisions after the Effective Time to
the same extent as such expenses are taken into account for the benefit of
employees of NABI.
(b) At the request of NABI, Univax shall terminate its Employee Stock
Purchase Plan and any such termination shall be effective at or before the
Effective Time.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement and the transactions contemplated
hereby shall have been approved and adopted by the requisite vote of the
holders of Univax Capital Stock and NABI Common Stock.
(b) HSR Act. All applicable waiting periods under the HSR Act shall have
expired or early termination shall have been granted by both the Federal Trade
Commission and the United States Department of Justice.
(c) NationsBank Consent. NABI shall have obtained the consent of NationsBank
of Florida, National Association ("NationsBank") under the Third Amended and
Restated Revolving Credit, Term Loan and Reimbursement Agreement dated
December 1, 1994 between NABI and NationsBank, as amended, and any related
agreements and instruments (collectively the "Credit Facility"), and such
consent and any amendment to the Credit Facility required in connection with
such consent (i) shall not directly prohibit the research and development
expenditures currently planned for the Surviving Corporation with respect to
WinRho SD (TM), StaphVAX (TM), StaphGAM (TM), HyperGAM+CF, H-BIG (R), H-
CIG (R), HIV-IG (R) and a CMV IGIV product and (ii) shall be otherwise
satisfactory to NABI in its sole judgment.
(d) S-4. The S-4 shall have become effective under the Securities Act and no
stop order suspending the effectiveness of the S-4 shall have been issued and
no proceedings for that purpose shall have been initiated or threatened by the
SEC. All necessary state securities or "Blue Sky" authorizations shall have
been received.
(e) No Injunctions or Restraints; Illegality. No order, injunction or decree
issued by any court or agency of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger or any of
the transactions contemplated by this Agreement shall be in effect. No
statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger or any of the
transactions contemplated by this Agreement.
(f) Federal Tax Opinion. NABI shall have received an opinion of Nutter,
McClennen & Fish, counsel to NABI, and Univax shall have received an opinion
of Venture Law Group, counsel to Univax, in form and substance reasonably
satisfactory to NABI and Univax, respectively, dated as of the Effective Time,
to the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts existing at
the Effective Time, the Merger will be treated for Federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code and that
NABI and Univax will each be a party to that reorganization within the meaning
of Section 368(b) of the Code. In rendering such opinion, counsel may require
and rely upon representations contained in certificates of officers of NABI,
Univax and others.
(g) Pooling of Interests. NABI and Univax shall each have received a letter
from Price Waterhouse LLP, addressed to each of them and dated not earlier
than five (5) days prior to the Closing Date, to the effect that the Merger
will qualify for "pooling of interests" accounting treatment.
7.2 Conditions to Obligations of NABI. The obligations of NABI to effect the
Merger is also subject to the satisfaction or waiver by NABI at or prior to
the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Univax set forth in this Agreement shall be true and correct as of the Closing
Date as though made on and as of the Closing Date (except to the extent such
representations and warranties speak as of an earlier date); provided,
however, that notwithstanding anything herein to the contrary, this Section
7.2(a) shall be deemed to have been satisfied even
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if such representations and warranties are not true and correct as of the
Closing Date or as of such other date, as the case may be, unless the failure
to be so true and correct would, individually or in the aggregate, have a
Material Adverse Effect on Univax. NABI shall have received a certificate
signed on behalf of Univax by the Chief Executive Officer and the Chief
Financial Officer of Univax to the foregoing effect.
(b) Performance of Obligations of Univax. Univax shall have performed all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date; provided, however, that notwithstanding anything herein to
the contrary, this Section 7.2(b) shall be deemed to have been satisfied even
where Univax has not so performed such obligations unless the failure to so
perform would, individually or in the aggregate, have a Material Adverse
Effect on Univax. NABI shall have received a certificate signed on behalf of
Univax by the Chief Executive Officer and the Chief Financial Officer of
Univax to such effect.
(c) Fairness Opinion. NABI shall have received the written opinion of
Raymond James & Associates, Inc. or a written confirmation of the continued
effectiveness of an opinion previously delivered, dated as of the date of the
Joint Proxy Statement, to the effect that, as of such date, the Common
Exchange Ratio and the Preferred Exchange Ratio are fair, from a financial
point of view, to the holders of NABI Common Stock.
7.3 Conditions to Obligations of Univax. The obligation of Univax to effect
the Merger is also subject to the satisfaction or waiver by Univax at or prior
to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and warranties of
NABI set forth in this Agreement shall be true and correct as of the Closing
Date as though made on and as of the Closing Date (except to the extent such
representations and warranties speak as of an earlier date); provided,
however, that notwithstanding anything herein to the contrary, this Section
7.3(a) shall be deemed to have been satisfied even if such representations and
warranties are not true and correct as of the Closing Date or as of such other
date, as the case may be, unless the failure to be so true and correct would,
individually or in the aggregate, have a Material Adverse Effect on NABI.
Univax shall have received a certificate signed on behalf of NABI by the Chief
Executive Officer and the Chief Financial Officer of NABI to the foregoing
effect.
(b) Performance of Obligations of NABI. NABI shall have performed all
obligations required to performed by it under this Agreement at or prior to
the Closing Date; provided, however, that notwithstanding anything herein to
the contrary, this Section 7.3(b) shall be deemed to have been satisfied even
where NABI has not so performed such obligations unless the failure to so
perform would, individually or in the aggregate, have a Material Adverse
Effect on NABI. Univax shall have received a certificate signed on behalf of
NABI by the Chief Executive Officer and the Chief Financial Officer of NABI to
such effect.
(c) Fairness Opinion. Univax shall have received the written opinion of
Robertson, Stephens & Company or a written confirmation of the continued
effectiveness of an opinion previously delivered, dated as of the date of the
Joint Proxy Statement, to the effect that, as of such date, the consideration
to be received in the Merger by holders of Univax Capital Stock is fair, from
a financial point of view, to such holders.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of NABI and Univax:
(a) by mutual consent of the Boards of Directors of NABI and Univax;
(b) by either party if the Merger shall not have been consummated on or
before January 31, 1996, unless the failure of the Closing to occur by such
date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;
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(c) by Univax if there has been a misrepresentation or breach on the part of
NABI in the representations, warranties, covenants or obligations of NABI set
forth herein and such misrepresentation or breach has resulted or would result
in a Material Adverse Effect on NABI, provided that in the case of a breach of
any such covenant or obligation, such breach has not been cured within ten
(10) business days after Univax has notified NABI of such breach;
(d) by NABI if there has been a misrepresentation or breach on the part of
Univax in the representations, warranties, covenants and obligations of Univax
set forth herein and such misrepresentation or breach has resulted or would
result in a Material Adverse Effect on Univax, provided that in the case of a
breach of any such covenant or obligation, such breach has not been cured
within ten (10) business days after NABI has notified Univax of such breach;
(e) by Univax if prior to the consummation of the Merger, (i) Univax
receives a bona fide written Univax Transaction Proposal from a third party,
(ii) the Board of Directors of Univax determines in good faith pursuant to
Section 6.1 that such Univax Transaction Proposal is a Superior Univax
Proposal and (iii) Univax has provided NABI with at least five (5) business
days' written notice of such Univax Transaction Proposal, including a copy
thereof, and of the determination of its Board of Directors referred to in
clause (ii) above; provided, however, that a condition to the effectiveness of
the termination of this Agreement and the abandonment of the Merger pursuant
to this subsection (e) is the payment to NABI in same day funds of the sum of
Five Million Dollars ($5,000,000) (the "Termination Fee");
(f) by NABI if prior to the consummation of the Merger, (i) NABI receives a
bona fide written NABI Transaction Proposal from a third party, (ii) the Board
of Directors of NABI determines in good faith pursuant to Section 6.2 that
such NABI Transaction Proposal is a Superior NABI Proposal and (iii) NABI has
provided Univax with at least five (5) business days' written notice of such
NABI Transaction Proposal, including a copy thereof, and of the determination
of its Board of Directors referred to in clause (ii) above; provided, however,
that a condition to the effectiveness of the termination of this Agreement and
the abandonment of the Merger pursuant to this subsection (f) is the payment
to Univax in same day funds of the Termination Fee;
(g) by either party if any court shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and non-appealable;
(h) by Univax, if the approval of its stockholders shall not have been
obtained by reason of the failure to obtain the required vote upon a vote
taken at a duty held meeting of stockholders or any adjournment thereof; or
(i) by NABI, if the approval of its stockholders shall not have been
obtained by reason of the failure to obtain the required vote upon a vote
taken at a duly held meeting of stockholders or any adjournment thereof.
The power of termination provided for by this Section 8.1 may be exercised
for NABI or Univax only by their respective Boards of Directors and will be
effective only after written notice thereof, signed on behalf of the party for
which it is given by its Chairman of the Board, President or other duly
authorized officer, shall have been given to the other. If this Agreement is
terminated in accordance with this Section 8.1, the Merger shall be abandoned
without further action by NABI or Univax.
8.2 Effect of Termination. (a) In the event of termination of this Agreement
by either NABI or Univax as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, and none of NABI, Univax, any of
their respective Subsidiaries or any of the officers or directors of any of
them shall have any liability of any nature whatsoever hereunder, or in
connection with the transactions contemplated hereby, except (i) Sections
6.4(b), 8.2, 9.2 and 9.3, shall survive any termination of this Agreement, and
(ii) notwithstanding anything to the contrary contained in this Agreement,
neither NABI nor Univax shall be relieved of or released from any liabilities
or damages arising out of its breach of any provision of this Agreement.
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(b) If this Agreement shall be terminated pursuant to Section 8.1(e) or
8.1(f), the terminating party shall pay to the other, in addition to the
Termination Fee, the other party's Expenses within five (5) business days
after receipt of a written request therefor, in same day funds. "Expenses"
shall mean documented out-of-pocket fees and expenses incurred or paid by or
on behalf of a party in connection with the Merger or any of the transactions
contemplated by this Agreement, including, without limitation, all printing
costs, all reasonable fees and expenses of counsel, commercial banks,
investment banking firms, accountants, experts and consultants, and all filing
fees with any Governmental Entities.
(c) Univax shall pay, or cause to be paid, in same day funds to NABI the
Termination Fee and NABI's Expenses upon demand if prior to termination of
this Agreement (other than by Univax pursuant to Section 8.1(c)) a Univax
Transaction Proposal shall have been made and within nine (9) months of such
termination (i) such Univax Transaction Proposal or any other transaction
constituting a Univax Transaction Proposal (a "Univax Alternative
Transaction") is consummated involving Univax and the party (or an affiliate
of such party) which made the Univax Transaction Proposal prior to the
termination of this Agreement or (ii) Univax enters into an agreement with
respect to, approves or recommends or takes any action to facilitate any such
Univax Transaction Proposal or Univax Alternative Transaction.
(d) NABI shall pay, or cause to be paid, in same day funds to Univax the
Termination Fee and Univax's Expenses upon demand if prior to termination of
this Agreement (other than by NABI pursuant to Section 8.1(d)) an NABI
Transaction Proposal shall have been made and within nine (9) months of such
termination (i) such NABI Transaction Proposal or any other transaction (an
"NABI Alternative Transaction") constituting an NABI Transaction Proposal is
consummated involving NABI and the party (or an affiliate of such party) which
made the NABI Transaction Proposal prior to the termination of this Agreement
or (ii) NABI enters into an agreement with respect to, approves or recommends
or takes any action to facilitate any such NABI Transaction Proposal or NABI
Alternative Transaction.
8.3 Amendment. Subject to compliance with applicable law, this Agreement may
be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of either
party; provided, however, that after any approval of the transactions
contemplated by this Agreement by a party's stockholders, there may not be,
without further approval of such stockholders, any amendment of this Agreement
which is not in compliance with Section 251(d) of the DGCL. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed, subject to Section 8.3, (a) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party, but such extension or waiver or failure to insist on
strict compliance with an obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place at 11:00 a.m. at the
offices of Nutter, McClennen & Fish, One International Place, Boston,
Massachusetts, on a date to be specified by the parties, which shall be no
later than two business days after the satisfaction or waiver (subject to
applicable laws) of the latest to occur of the conditions set forth in
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Article VII hereof, unless another date, time or place is agreed to in writing
by the parties. The date on which the Closing shall occur in accordance with
the preceding sentence is referred to in this Agreement as the "Closing Date."
The Effective Time shall occur on the Closing Date.
9.2 Nonsurvival of Representations, Warranties and Agreements. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein
which by their terms apply in whole or in part after the Effective Time.
9.3 Expenses. Subject to the provisions of Section 8.2, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense,
provided, however, that subject to the provisions of Section 8.2, the costs
and expenses of printing and mailing the Joint Proxy Statement, and all filing
and other fees paid to the SEC and the Federal Trade Commission in connection
with the Merger, shall be borne equally by NABI and Univax.
9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or delivered by an express courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to NABI, to:
North American Biologicals, Inc.
5800 Park of Commerce Boulevard, N.W.
Boca Raton, FL 33487
Attn: David J. Gury
with a copy to:
Nutter, McClennen & Fish
One International Place
Boston, MA 02110-2699
Attn: Constantine Alexander, Esq.
(b) if to Univax, to:
Univax Biologics, Inc.
12280 Wilkins Avenue
Rockville, MD 20852
Attn: Thomas P. Stagnaro
with a copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Attn: Joshua W. R. Pickus, Esq.
9.5 Interpretation. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require
NABI, Univax or any of their respective Subsidiaries or affiliates to take any
action which would violate any applicable law, rule or regulation.
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9.6 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.7 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, other than the
Confidentiality Agreement.
9.8 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to any
applicable principles concerning conflicts of law.
9.9 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction, shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
9.10 Assignment. Neither this Agreement nor any of the rights, interests or
obligations shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns. Except as otherwise specifically provided
in Section 6.7(b) and Section 6.8 hereof, this Agreement (including the
documents and instruments referred to herein) is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
In Witness Whereof, NABI and Univax have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
North American Biologicals, Inc.
By /s/ David J. Gury
---------------------------------
Its Chairman of the Board
Univax Biologics, Inc.
By /s/ Thomas P. Stagnaro
----------------------------------
Its President
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APPENDIX B
August 26, 1995
STRICTLY CONFIDENTIAL
The Board of Directors
North American Biologicals, Inc.
P.O. Box 310701
Boca Raton, FL 33431-0701
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to North American Biologicals, Inc. ("NABI" or the "Company") of the
consideration to be paid to the shareholders of Univax Biologics, Inc.
("UNIVAX") in connection with the proposed merger (the "Merger") of the
Company with UNIVAX pursuant and subject to the Merger Agreement (the "Merger
Agreement") between NABI and UNIVAX.
The Merger will be accomplished through the exchange of shares of NABI
Common Stock, which is determined as follows: (a) each share of UNIVAX Common
Stock will be exchanged for 0.79 shares of NABI Common Stock (the "Exchange
Ratio"); (b) each share of UNIVAX Preferred Stock will be converted into the
right to receive such number of shares of NABI Common Stock as is determined
by dividing $9.95 by the closing price of NABI Common Stock on the NASDAQ
National Market at the effective time of the merger (the "Preferred Exchange
Ratio"); and (c) each outstanding option to purchase UNIVAX Common Stock,
except for the outstanding options under the 1995 Director's Stock Option
Plan, will be converted into the right to acquire shares of NABI Common Stock,
with the number and exercise price adjusted based on the applicable exchange
ratio for the underlying UNIVAX Common Stock and with no additional benefits
or additional vesting rights accruing to the holders of such options. For
purposes of this opinion, we have assumed that (i) the Merger will qualify as
a tax-free reorganization under the United States Internal Revenue Code of
1986, as amended; (ii) the Merger will be accounted for as a pooling of
interests; (iii) no adjustment will be made to the Exchange Ratio or Preferred
Exchange Ratio; and (iv) all material liabilities (contingent or otherwise,
known or unknown) of NABI and UNIVAX required under GAAP to be set forth have
been set forth in the consolidated financial statements of NABI and UNIVAX.
In connection with our review of the Merger and the preparation of our
opinion herein, we have examined (i) the Exchange Ratio and the Preferred
Exchange Ratio of the Merger as described above; (ii) the publicly available
financial statements of NABI and UNIVAX for recent years and interim periods
to date; (iii) certain financial and operating data made available to us from
the internal records of NABI and UNIVAX; (iv) certain internal financial
forecasts prepared by the respective managements of NABI and UNIVAX; and (v)
certain other publicly available information on NABI and UNIVAX. We have also
held discussions with members of the senior management of NABI and UNIVAX and
have considered other matters which we have deemed relevant to our inquiry,
including information relating to certain strategic implications and operating
benefits anticipated from the Merger.
We have been advised by the managements of NABI and UNIVAX to rely upon the
accuracy and completeness of all such information and have not attempted to
verify independently any of such information, nor have we made or obtained an
independent appraisal of the assets or liabilities (contingent or otherwise)
of either company. With respect to financial forecasts, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of NABI's and UNIVAX's respective
managements, and we have relied upon each company to advise us promptly if any
information previously provided became inaccurate or was required to be
updated during the period of our review.
Our opinion is based upon market, economic, financial and other
circumstances and conditions existing and disclosed to us as of August 26,
1995, and any change in such circumstances and conditions would require a
<PAGE>
re-evaluation of this opinion. We express no opinion as to the underlying
business decision of NABI to effect the Merger, the availability or
advisability of any alternatives to the Merger or as to the price at which
NABI Common Stock will trade subsequent to the effective time of the Merger.
In conducting our investigation and analyses and in arriving at our opinion
expressed herein, we have taken into account such accepted financial and
investment banking procedures and considerations as we have deemed relevant,
including the review of (i) historical and projected revenues, operating
earnings, net income and capitalization of NABI and UNIVAX and certain other
publicly held companies in businesses we believe to be comparable to NABI and
UNIVAX; (ii) the current financial position and results of operations of NABI
and UNIVAX and forecasted results of such companies, respectively; (iii) the
historical market prices and trading activity of the common stock of NABI and
UNIVAX; (iv) the potential pro forma financial effects of the Merger; (v)
information concerning selected completed business combinations that we deemed
comparable; and (vi) the general condition of the securities markets.
Raymond James & Associates, Inc. is actively engaged in the investment
banking business and regularly undertakes the valuation of investment
securities in connection with public offerings, private placements, business
combinations and similar transactions. For our services, including the
rendering of this opinion, the Company has paid us a retainer fee and will pay
us a further fee upon the issuance of this opinion. In addition, the Company
has agreed to indemnify us against certain liabilities arising out of the
rendering of this opinion.
In the ordinary course of our business, we actively trade in the equity
security of NABI for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such security.
Raymond James has acted in various investment banking capacities for NABI,
including as a managing underwriter in NABI's most recent secondary public
offering. Raymond James also currently publishes investment research on NABI.
It is understood that this letter is for the information of the Board of
Directors of the Company only in evaluating the proposed Merger and is not
intended to confer rights upon UNIVAX or the shareholders of UNIVAX or the
Company. This letter is not to be quoted or referred to, in whole or in part,
without our written consent; provided, however, that we hereby consent to the
inclusion of this opinion in the Company's Proxy Statement used in connection
with the Merger, so long as the opinion is quoted in full in such Proxy
Statement.
Based upon and subject to the foregoing, it is our opinion that, as of
August 26, 1995, the consideration to be paid to the shareholders of UNIVAX
pursuant to the Merger Agreement is fair, from a financial point of view, to
the Company.
Very truly yours,
/s/ Raymond James & Associates, Inc.
Raymond James & Associates, Inc.
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APPENDIX C
August 27, 1995
PRIVILEGED AND CONFIDENTIAL
Board of Directors
Univax Biologics Incorporated
12280 Wilkins Avenue
Rockville, MD 20852
Members of the Board:
You have asked our opinion with respect to the fairness to the Common
Stockholders of Univax Biologics Incorporated ("Univax"), from a financial
point of view and as of the date hereof, of the consideration to be received
by such stockholders, in the proposed merger of Univax with and into North
American Biologicals, Inc. ("NABI"), pursuant to the Agreement and Plan of
Merger, dated as of August 27, 1995 (the "Agreement").
Under the terms of the Agreement, Univax will merge with and into NABI, and
thereafter NABI will be the surviving corporation in accordance with the
Agreement (the "Merger"). In the Merger, each outstanding share of the Common
Stock of Univax will be converted into the right to receive 0.79 shares of the
Common Stock of NABI (the "Exchange Ratio"). Outstanding options to acquire
shares of Univax (other than options issued pursuant to the Directors' Plan)
will be converted into substantially equivalent options to acquire shares of
NABI, adjusted by the Exchange Ratio. The Merger is intended to qualify as a
tax-free reorganization and to be accounted for as a "pooling of interests."
The terms and conditions of the Merger are set out more fully in the
Agreement.
For purposes of this opinion we have: (i) reviewed financial information on
Univax and NABI furnished to us by both companies, including certain internal
financial analyses and forecasts prepared by Univax's and NABI's management;
(ii) reviewed publicly available information; (iii) held discussions with the
management of Univax and NABI concerning the businesses, past and current
business operations, certain regulatory effects on each business, the status
and likelihood of respective product development efforts, financial condition
and future prospects of both companies, independently and combined, including
discussions with both the management of Univax and NABI concerning potential
cost savings and synergies that could result from this merger; (iv) reviewed
the Agreement; (v) reviewed the stock price and trading histories of both
companies; (vi) reviewed the exchange ratio implied by historical stock prices
of the two companies; (vii) reviewed the contribution by each company to pro
forma combined revenue, gross income, research and development expenditures,
operating income, pretax income and net income; (viii) reviewed the valuations
of publicly traded companies which we deemed comparable to Univax and NABI;
(ix) compared the financial terms of the Merger with other transactions which
we deemed relevant; (x) prepared discounted cash flow analyses of both
companies; (xi) analyzed the pro forma earnings per share of the combined
company; and (xii) made such other studies and inquiries, and reviewed such
other data, as we deemed relevant.
In connection with our opinion, we have not however independently verified
any of the foregoing information and have relied on all such information being
complete and accurate in all material respects. Furthermore, we did not obtain
any independent appraisal of the properties or assets and liabilities of
Univax or NABI or of any of their subsidiaries. With respect to the financial
and operating forecasts (and the assumptions and bases therefor) of Univax and
NABI which we have reviewed, we have assumed that such forecasts have
<PAGE>
been reasonably prepared and reflect the best available estimates and
judgments of such respective management and that such projections and
forecasts will be realized in the amounts and in the time periods currently
estimated by the management of Univax and NABI. In addition, we have relied
upon estimates and judgments of Univax and NABI management as to the future
financial performance of both companies, including the cost savings and
synergies likely to result from the Merger. We also have assumed, that the
Merger will be accounted for as a pooling of interests under generally
accepted accounting principles. While we believe that our review, as described
within, is an adequate basis for the opinion that we express, this opinion is
necessarily based upon market, economic, and other conditions that exist and
can be evaluated as of the date of this letter, and on information available
to us as of the date hereof.
Robertson, Stephens & Company maintains a market in shares of the Common
Stock of Univax. Furthermore, Robertson, Stephens & Company has acted as
financial advisor to Univax in connection with the Merger for which fees are
due and payable contingent upon the closing of the Merger.
It is understood that this letter is for the information of the Board of
Directors of Univax and may not be used for any other purpose without prior
written consent. Based upon and subject to the foregoing considerations, it is
our opinion, as investment bankers, that, as of the date hereof, the
consideration to be received by the Common Stockholders of Univax in the
Merger is fair from a financial point of view.
Very truly yours,
Robertson, Stephens & Company, L.P.
By: Robertson, Stephens & Company,
Inc.
/s/ Michael G. McCaffry
-------------------------------------
Authorized Signatory
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<PAGE>
APPENDIX D
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NORTH AMERICAN BIOLOGICALS, INC.
1990 EQUITY
INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the 1990 Equity Incentive Plan (the "Plan") of North American
Biologicals, Inc. (the "Company") is to enable the Company and its
subsidiaries to attract, retain and motivate their employees and consultants
and to enable these employees and consultants to participate in the long-term
growth of the Company by providing for or increasing the proprietary interests
of such persons in the Company, thereby assisting the Company to achieve its
long-range performance goals.
SECTION 2. DEFINITIONS
As used in the Plan:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" means any Option, Stock Appreciation Right, Performance Share,
Restricted Stock or Stock Unit awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Committee" means a committee of not fewer than three members of the
Board appointed by the Board to administer the Plan, each of whom is a
"disinterested person" within the meaning of Rule 16b-3 under the Act, or
any successor provision.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Common Stock" or "Stock" means the Common Stock, $0.10par value, of the
Company.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the
Committee in good faith or in the manner established by the Committee from
time to time.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under the Plan which is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Nonconforming Awards" shall mean any Award permitted under the provisos
set forth in Sections 6(b) and 9(b).
"Nonstatutory Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under the Plan which is not intended to be
an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
"Participant" means a person selected by the Committee to receive an
Award under the Plan.
"Performance Cycle" or "Cycle" means the period of time selected by the
Committee during which performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been
earned.
"Performance Shares" means shares of Common Stock awarded to a
Participant under Section 8.
"Restricted Period" means the period of time selected by the Committee
during which an award of Restricted Stock may be forfeited to the Company.
"Restricted Stock" means shares of Common Stock awarded to a Participant
under Section 9 which are subject to forfeiture.
"Stock Appreciation Right" or "SAR" means a right awarded to a
Participant under Section 7.
D-1
<PAGE>
"Stock Unit" means a share of Common Stock or a unit is valued in whole
or in part by reference to, or otherwise based on, the value of a share of
Common Stock, awarded to a Participant under Section 10.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the operating of the Plan as it shall from time to
time consider advisable, to interpret the provisions of the Plan and any
Award, and to decide all disputes arising in connection with the Plan. The
Committee's decisions and interpretations shall be final and binding.
SECTION 4. ELIGIBILITY
All employees and consultants of the Company or any of its subsidiaries,
including any director who is an employee or consultant of the Company, shall
be eligible to be Participants in the Plan.
SECTION 5. STOCK AVAILABLE FOR AWARDS
(a) Awards may be made under the Plan for up to 4,245,000 shares of Common
Stock. If any Award in respect of shares of Common Stock expires or is
terminated before exercise or is forfeited for any reason or settled in a
manner that results in fewer shares of Common Stock outstanding than were
initially awarded, including without limitation the surrender of shares of
Common Stock in payment for the Award or any tax obligation thereon, the
shares of Common Stock subject to such Award or so surrendered, as the case
may be, to the extent of such expiration, termination, forfeiture or decrease,
shall again be available for award under the Plan. Shares of Common Stock
issued under the Plan may consist in whole or in part of authorized but
unissued shares or treasury shares.
(b) In the event that the Committee determines in its sole discretion that
any stock dividend, extraordinary cash dividend, creation of a class of equity
securities, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, warrants or rights offering to
purchase Common Stock at a price substantially below fair market value, or
other similar transaction affects the Common Stock such that an adjustment is
required in order to preserve the benefits or potential benefits intended to
be made available under the Plan, the Committee shall have the right to be
adjusted equitably any or all of (i) the number and kind of shares of stock or
securities in respect of which Awards may be made under the Plan, (ii) the
number and kind of shares subject to outstanding Awards, and (iii) the award,
exercise or conversion price with respect to any of the foregoing, and if
considered appropriate, the Committee may make provision for a cash payment
with respect to an outstanding Award, provided that the number of shares
subject to any Award shall always be a whole number.
(c) The Company may make Awards under the Plan in substitution for stock and
stock-based awards held by employees of another corporation who concurrently
become employees of the Company or a subsidiary of the Company as the result
of a merger or consolidation of the employing corporation with the Company or
a subsidiary of the Company or the acquisition by the Company or a subsidiary
of the Company of property or stock of the employing corporation. The
Committee may direct that the substitute awards be granted on such terms and
conditions as the Committee considers appropriate in the circumstances. The
shares which may be delivered under such substitute Awards shall be in
addition to the maximum number of shares provided for in section (a) above
only to the extent that the substitute Awards are both (i) granted to persons
whose relationship to the Company does not make (and is not expected to make)
them subject to Section 16(b) of the Act and (ii) are granted in substitution
for awards issued under a plan approved, to the extent then required under
Rule 16b-3 (or any successor rule) under the Act, by the stockholders of the
entity which issued such predecessor awards.
SECTION 6. OPTIONS
(a) Subject to the provisions of the Plan, the Committee may award Incentive
Stock Options and Nonstatutory Stock Options and determine the number of
shares to be covered by each Option, the option price
D-2
<PAGE>
therefor, the term of the Option, and the other conditions and limitations
applicable to the exercise of the Option. The terms and conditions of
Incentive Stock Options shall be subject to and comply with Section 422 of the
Code, or any successor provision, and any regulations thereunder. Anything in
the Plan to the contrary notwithstanding, no term of the Plan relating to
Incentive Stock Options shall be interpreted, amended or altered, nor shall
any discretion or authority granted to the Committee under the Plan be so
exercised, so as to disqualify the Plan or, without the consent of the
optionee, any Incentive Stock Option granted under the Plan, under Section 422
of the Code.
(b) The option price per share of Common Stock purchasable under an Option
shall not be less than 100% of the Fair Market Value of the Common Stock on
the date of award with respect to Incentive Stock Options and not less than
85% of the Fair Market Value of the Common Stock on the date of award with
respect to Nonstatutory Stock Options; provided, however, that with respect to
Nonstatutory Stock Options, the option price per share of Common Stock
purchasable under such Options may be less than 85% (but never less than 50%)
of the Fair Market Value of the Common Stock on the date of award of the
Nonstatutory Stock Option so long as any such Non-Conforming Awards, together
with all other Non-Conforming Awards outstanding at the time, do not cover
shares of Common Stock aggregating more than five percent of the shares of
Common Stock reserved for issuance under the Plan at the time. If the
Participant owns or is deemed to own (by reason of the attribution rules
applicable under Section 425(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any subsidiary or
parent corporation of the Company and an Incentive Stock Option is granted to
such Participant, the option price shall be not less than 110% of Fair Market
Value of the Common Stock on the date of award.
(c) No Incentive Stock Option shall be exercisable more than ten years after
the date the option is awarded and no Non-Qualified Stock Option shall be
exercisable more than ten years and one day after the date the option is
awarded. If a Participant owns or is deemed to own (by reason of the
attribution rules of Section 425(d) of the Code) more than 10% of the total
combined voting power of all classes of stock of the Company or any subsidiary
or parent corporation of the Company and an Incentive Stock Option is awarded
to such Participant, the term of such option shall be no more than five years
from the date of award.
(d) No shares shall be delivered pursuant to any exercise of an Option until
payment in full of the option price therefor is received by the Company. Such
payment may be made in whole or in part in cash or by certified or bank check
or, to the extent permitted by the Committee at or after the award of the
Option, by delivery of a note or shares of Common Stock owned by the optionee,
including Restricted Stock, valued at their Fair Market Value on the date of
delivery, or such other lawful consideration as the Committee may determine.
(e) No Option shall be transferable by the Participant otherwise than by
will or by the laws of descent and distribution, and all Options shall be
exercisable, during the Participant's lifetime, only by the Participant.
(f) The Committee may at any time accelerate the exercisability of all or
any portion of any Option.
(g) Once awarded, the option price per share of Common Stock purchasable
under an Option shall not be reduced without the approval of the stockholders
of the Company except that such option price may be reduced (i) pursuant to
Section 5(b) of the Plan and (ii) for Options covering shares of Common Stock
aggregating at the time no more than five percent of the shares of Common
Stock reserved for issuance under the Plan at the time.
SECTION 7. STOCK APPRECIATION RIGHTS
(a) A Stock Appreciation Right is an Award entitling the Participant to
receive an amount in cash or shares of Common Stock or a combination thereof
having a value equal to (or if the Committee shall so determine at time of
grant, less than) the excess of the Fair Market Value of a share of Common
Stock on the date of exercise over the Fair Market Value of a share of Common
Stock on the date of grant (or over the option exercise price, if the Stock
Appreciation Right was granted in tandem with a Stock Option) multiplied by
the number of shares with respect to which the Stock Appreciation Right shall
have been exercised.
D-3
<PAGE>
(b) Subject to the provisions of the Plan, the Committee may award SARs in
tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option, and determine the terms and conditions applicable
thereto, including the form of payment. SARs granted in tandem with an Option
shall terminate to the extent that the related Option is exercised, and the
related Option shall terminate to the extent that the tandem SARs are
exercised.
(c) An SAR related to an Option which can be exercised only during limited
periods following a change in control of the Company may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Common Stock in any transaction relating to the change in control or paid
during the thirty-day period immediately preceding the occurrence of the
change in control in any transaction reported in the stock market in which the
Common Stock is normally traded.
(d) Notwithstanding that an Option at the time of exercise shall not be
accompanied by a related Stock Appreciation Right, if the market price of the
shares subject to such Option exceeds the exercise price of such Option at the
time of its exercise, the Committee may, in its discretion, cancel such
Option, in which event the Company shall pay to the person exercising such
Option an amount equal to the difference between the Fair Market Value of the
Common Stock to have been purchased pursuant to such exercise of such Option
(determined on the date the Option is canceled) and the aggregate
consideration to have been paid by such person upon such exercise. Such
payment shall be by check, bank draft or in Common Stock having a Fair Market
Value (determined on the date the payment is to be made) equal to the amount
of such payments or any combination thereof, as determined by the Committee.
The Committee may exercise its discretion under the first sentence of this
paragraph (d) only in the event of a written request of the person exercising
the option, which request shall not be binding on the Committee.
SECTION 8. PERFORMANCE SHARES
(a) A Performance Share is an Award entitling the Participant to acquire
shares of Common Stock upon the attainment of specified performance goals.
Subject to the provisions of the Plan, the Committee may award Performance
Shares and determine the performance goals applicable to each such Award, the
number of such shares for each Performance Cycle, the duration of each
Performance Cycle and all other limitations and conditions applicable to the
awarded Performance Shares. There may be more than one Performance Cycle in
existence at any one time, and the duration of Performance Cycles may differ
from each other. The payment value of each Performance Share shall be equal to
the Fair Market Value of one share of Common Stock on the date the Performance
Share is earned or, in the discretion of the Committee, on the date the
Committee determines that the Performance Share has been earned.
(b) During any Performance Cycle, the Committee may adjust the performance
goals for such Performance Cycle as it deems equitable in recognition of
unusual or non-recurring events affecting the Company, changes in applicable
tax laws or accounting principles, or such other factors as the Committee may
determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established performance
goals. The payment values of earned Performance Shares shall be distributed to
the Participant as soon as practicable thereafter. The Committee shall
determine, at or after the time of award, whether payment values will be
settled in whole or in part in cash or other property, including Common Stock
or Awards.
SECTION 9. RESTRICTED STOCK
(a) A Restricted Stock Award is an Award entitling the Participant to
acquire shares of Common Stock for a purchase price (which may be zero) equal
to or less than their par value, subject to such conditions, including a
Company right during a specified period or periods to repurchase such shares
at their original purchase price (or to require forfeiture of such shares if
the purchase price was zero) upon the Participant's termination of employment.
D-4
<PAGE>
(b) Subject to the provisions of the Plan, the Committee may award shares of
Restricted Stock and determine the purchase price (if any) therefor, the
duration of the Restricted Period during which, and the conditions under
which, the shares may be forfeited to or repurchased by the Company and the
other terms and conditions of such Awards. Shares of Restricted Stock may be
issued for no cash consideration or such minimum consideration as may be
required by applicable law. Restricted Stock Awards shall not permit the right
of the Company to repurchase shares of Restricted Stock or the requirement
that such shares be forfeited to the Company to lapse in less than three
years; provided, however, that such lapsing shall be permitted so long as any
such Non-Conforming Awards, together with all other Non-Conforming Awards
outstanding at the time, do not cover shares of Common Stock aggregating more
than five percent of the shares of Common Stock reserved for issuance under
the Plan at the time.
(c) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as permitted by the Committee, during
the Restricted Period. Shares of Restricted Stock shall be evidenced in such
manner as the Committee may determine. Any certificates issued in respect of
shares of Restricted Stock shall be registered in the name of the Participant
and unless otherwise determined by the Committee, deposited by the
Participant, together with a stock power endorsed in blank, with the Company.
At the expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant.
(d) A Participant shall have all the rights of a shareholder with respect to
the Restricted Stock including voting and dividend rights, subject to
nontransferability restrictions and Company repurchase or forfeiture rights
described in this Section and subject to any other conditions contained in the
Award.
SECTION 10. STOCK UNITS
(a) Subject to the provisions of the Plan, the Committee may award Stock
Units subject to such terms, restrictions, conditions, performance criteria,
vesting requirements and payment rules as the Committee shall determine.
(b) Shares of Common Stock awarded in connection with a Stock Unit shall be
issued for no cash consideration or such minimum consideration as may be
required by applicable law.
SECTION 11. GENERAL PROVISIONS APPLICABLE TO AWARDS
(a) Notwithstanding any other provision of the Plan, to the extent required
to qualify for the exemption provided by Rule 16b-3 under the Act, and any
successor provision, (i) any Common Stock or other equity security offered
under the Plan to a Person subject to Section 16 of the Act may not be sold
for at least six months after acquisition and (ii) any Option, SAR or other
similar right related to an equity security, issued under the Plan to such a
person shall not be transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employee Retirement Income Security Act, or the
rules thereunder, shall not be exercisable for at least six months, and shall
be exercisable during the Participant's lifetime only by the Participant or
the Participant's guardian or legal representative.
(b) Each Award under the Plan shall be evidenced by a writing delivered to
the Participant specifying the terms and conditions thereof and containing
such other terms and conditions not inconsistent with the provisions of the
Plan as the Committee considers necessary or advisable to achieve the purposes
of the Plan or comply with applicable tax regulatory laws and accounting
principles.
(c) Each Award may be made alone, in addition to or in relation to any other
award. The terms of each Award need not be identical, and the Committee need
not treat Participants uniformly. Except as otherwise provided by the Plan or
a particular Award, any determination with respect to an Award may be made by
the Committee at the time of award or at any time thereafter.
D-5
<PAGE>
(d) The Committee shall determine whether Awards are settled in whole or in
part in cash, Common Stock, other securities of the Company, Awards or other
property. The Committee may permit a Participant to defer all or any portion
of a payment under the Plan, including the crediting of interest on deferred
amounts denominated in cash and dividend equivalents on amounts denominated in
Common Stock.
(e) In the discretion of the Committee, any Award under the Plan may provide
the Participant with (i) dividends or dividend equivalents payable currently
or deferred with or without interest, and (ii) cash payments in lieu of or in
addition to an Award.
(f) The Committee shall determine the effect on an Award of the disability,
death, retirement or other termination of employment of a Participant and the
extent to which, and the period during which, the Participant's legal
representative, guardian or designated beneficiary may receive payment of an
Award or exercise rights thereunder.
(g) In order to preserve a Participant's rights under an Award in the event
of a change in control of the Company, the Committee in its discretion may, at
the time an Award is made or at any time thereafter, take one or more of the
following actions with respect to any such change of control; (i) provide for
the acceleration of any time period relating to the exercise or realization of
the Award, (ii) provide for the Purchase of the Award upon the Participant's
request for an amount of cash or other property that could have been received
upon the exercise or realization of the Award had the Award been currently
exercisable or payable, (iii) adjust the terms of the Award in a manner
determined by the Committee, (iv) cause the Award to be assumed, or new rights
substituted therefor, by another entity, or (v) make such other provision as
the Committee may consider equitable and in the best interests of the Company.
(h) The Participant shall pay to the Company, or make provision satisfactory
to the Committee for payment of, any taxes required by law to be withheld in
respect of Awards under the Plan no later than the date of the event creating
the tax liability. In the Committee's discretion, such tax obligations may be
paid in whole or in part in shares of Common Stock, including shares retained
from the Award creating the tax obligation, valued at their Fair Market Value
on the date of delivery. The Company may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the Participant.
(i) For purposes of the Plan, the following events shall not be deemed a
termination of employment of a Participant:
(i) a transfer to the employment of the Company from a subsidiary or from
the Company to a subsidiary, or from one subsidiary to another;
(ii) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the Participant's right
to reemployment is guaranteed either by a statute or by contract or under
the policy pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing.
For purposes of the Plan, employees of a subsidiary of the Company shall be
deemed to have terminated their employment on the date on which such
subsidiary ceases to be a subsidiary of the Company.
(j) The Committee may amend, modify or terminate any outstanding Award,
including substituting therefor another Award of the same or a different type,
changing the date of exercise or realization and converting an Incentive Stock
Option to a Nonstatutory Stock Option, provided that the Participant's consent
to such action shall be required unless the Committee determines that the
action, taking into account any related action, would not materially and
adversely affect the Participant.
SECTION 12. MISCELLANEOUS
(a) No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to
continued employment. The Company expressly reserves the right
D-6
<PAGE>
at any time to dismiss a Participant free from any liability or claim under
the Plan, except as expressly provided in the applicable Award.
(b) Subject to the provisions of the applicable Award, no Participant shall
have any rights as a shareholder with respect to any shares of Common Stock to
be distributed under the Plan until he or she becomes the holder thereof. A
Participant to whom shares of Common Stock is awarded shall be considered the
holder of the Shares at the time of the Award except as otherwise provided in
the applicable Award.
(c) Subject to the approval of the shareholders of the Company, the Plan
shall be effective on May 8, 1990. Prior to such approval, Awards may be made
under the Plan expressly subject to such approval.
(d) The Board may amend, suspend or terminate the Plan or any portion
thereof at any time, provided that no amendment shall be made without
shareholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirement for
exemptive relief under Section 16(b) of the Securities Exchange Act of 1934,
or any successor provisions.
(e) Awards may not be made under the Plan after May 7, 2000, but then
outstanding Awards may extend beyond such date.
D-7
<PAGE>
PART II
INFORMATION NOT REQUESTED IN THE PROXY STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
NABI is a Delaware corporation. Reference is made to Section 145 of the
Delaware General Corporation Law, as amended which provides that a corporation
may indemnify any person who was or is a party to or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in manner be reasonably believed to be in or not opposed to be the best
interests of the corporation and, with respect to any criminal action or
proceeding had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to be the best interests of the corporation
and except that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable
to the corporation unless and only to the extent that the Delaware Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite and adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnify for such expenses which the Court of Chancery or such
other court shall deem proper. NABI's Certificate of Incorporation further
provides that NABI shall indemnify its directors and officers to the full
extent permitted by the law of the State of Delaware.
NABI's Certificate of Incorporation provides that NABI's Directors shall not
be liable to NABI or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent that exculpation from
liabilities is not permitted under the Delaware General Corporation Law as in
effect at the time such liability is determined.
NABI maintains an indemnification insurance policy covering all directors
and officers of NABI and its subsidiaries.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*2. Agreement and Plan of Merger (included as Appendix A to the Joint
Proxy Statement/Prospectus).
*3.1 Proposed Restated Certificate of Incorporation.
*3.2 By-laws.
4. Specimen Stock Certificate (incorporated by reference to NABI's
Registration Statement on Form S-2 dated August 19, 1994).
+5. Opinion of Nutter, McClennen & Fish.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.1 Third Amended and Restated Revolving Credit and Term Loan Agreement
between NationsBank of Florida, National Association 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).
*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 of Florida, National
Association ("NationsBank") and NABI dated as of December 1, 1994.
*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.
10.4 Asset Sale Agreement effective as of September 30, 1992 between NABI
and Abbott Laboratories relating to the purchase of H-BIG
(incorporated by reference to NABI's Annual Report on Form 10-K for
the year ended December 31, 1992).
10.5 Product Supply and Distribution 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).
10.6 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).
10.7 Agreement and Plan of Merger dated January 25, 1994 among NABI, PBI
Merger Corporation, Premier BioResources, Inc. and CGW Southeast
Partners I, L.P. (incorporated by reference to NABI's Current Report
on Form 8-K dated February 3, 1994).
10.8 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 dated August 19, 1994).
10.9 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 dated August 19, 1994).
10.10 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 dated August 19, 1994).
10.11 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 dated August 19, 1994).
10.12 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 dated August 19, 1994).
10.13 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 dated August 19, 1994).
10.14 Lease Agreements dated December 11, 1990, as modified on May 23, 1994
between NABI and Angelo Napolitino, 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 dated August 19, 1994).
10.15 Lease Agreement dated March 31, 1994 between NABI and Angelo
Napolitino, 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 dated August 19, 1994).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.16 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).
10.17 Employment Agreement dated January 27, 1994 between John C. Carlisle
and NABI (incorporated by reference to NABI's Registration Statement
on Form S-2 dated August 19, 1994).
*10.18 Employment Agreement effective August 1, 1995 between NABI and Alfred
J. Fernandez.
*10.19 Employment Agreement effective August 1, 1995 between NABI and
Stephen W. Weston.
*10.20 1990 Equity Incentive Plan (included as Appendix D to the Joint Proxy
Statement/Prospectus).
10.21 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).
10.22 Stock Plan for Non-Employee Directors (incorporated by reference to
NABI's Proxy Statement dated April 26, 1995).
*23.1 Consent of Price Waterhouse LLP as to NABI.
*23.2 Consent of Price Waterhouse LLP as to Univax.
+23.3 Consent of Robertson, Stephens & Company, L.P.
+23.4 Consent of Raymond James & Associates, Inc.
+23.5 Consent of Nutter, McClennen & Fish (included in Exhibit 5).
*24. Power of Attorney (contained on Page II-5 of the Registration
Statement).
</TABLE>
- --------
* Previously filed.
+ Filed herewith.
(b) Financial Statement Schedules:
<TABLE>
<CAPTION>
ITEM
----
<S> <C>
Report of Independent Certified Public Accountants on Schedule II (see
the Report of Price Waterhouse LLP for NABI at page F-2 of the
Prospectus included in this Registration Statement and the Consent of
Price Waterhouse LLP filed as Exhibit 23.1 hereto)
Schedule II--NABI Valuation and Qualifying Accounts and Reserves........ S-1
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions
or are not applicable, and therefore have been omitted.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(b) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (a) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933, as amended
(the "Securities Act") and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BOCA
RATON, STATE OF FLORIDA, ON THE 25TH DAY OF OCTOBER 1995.
North American Biologicals, Inc.
By: /s/ Alfred J. Fernandez
----------------------------------
ALFRED J. FERNANDEZ VICE
PRESIDENT, FINANCE AND CHIEF
FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ David J. Gury* Chairman of the October 25,
- ------------------------------------ Board, President, 1995
DAVID J. GURY Chief Executive
Officer
/s/ Alfred J. Fernandez Vice President,
- ------------------------------------ Finance, Chief October 25,
ALFRED J. FERNANDEZ Financial Officer 1995
/s/ Lorraine M. Breece* Chief Accounting October 25,
- ------------------------------------ Officer 1995
LORRAINE M. BREECE
/s/ Paul Bogikes* Director October 25,
- ------------------------------------ 1995
PAUL BOGIKES
/s/ John C. Carlisle* Director October 25,
- ------------------------------------ 1995
JOHN C. CARLISLE
/s/ David L. Castaldi* Director October 25,
- ------------------------------------ 1995
DAVID L. CASTALDI
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Richard A. Harvey, Jr.* Director October 25,
- ------------------------------------- 1995
RICHARD A. HARVEY, JR.
/s/ David A. Thompson* Director October 25,
- ------------------------------------- 1995
DAVID A. THOMPSON
*By: /s/ Alfred J. Fernandez
---------------------------
ALFRED J.FERNANDEZ
Attorney-in-fact
Powers of attorney have been filed
with this Registration Statement
</TABLE>
II-6
<PAGE>
SCHEDULE II
NORTH AMERICAN BIOLOGICALS, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
WRITE-OFFS
BALANCE AT PROVISION CHARGED CHARGED BALANCE AT END
CLASSIFICATION BEGINNING OF PERIOD TO EXPENSE AGAINST RESERVE OF PERIOD
-------------- ------------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C>
Year ended December 31,
1994:
Allowance for doubtful
accounts.............. $125 $ 422 -- $ 547
==== ====== ==== ======
Deferred tax asset
valuation allowance... $182 $1,337 -- $1,519
==== ====== ==== ======
Year ended December 31,
1993:
Allowance for doubtful
accounts.............. $151 $ 22 $ 48 $ 125
==== ====== ==== ======
Deferred tax asset
valuation allowance... -- $ 320 $138 $ 182
==== ====== ==== ======
Year ended December 31,
1992:
Allowance for doubtful
accounts.............. $128 $ 146 $123 $ 151
==== ====== ==== ======
</TABLE>
S-1
<PAGE>
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 29, 1995
NORTH AMERICAN BIOLOGICALS, INC.
The undersigned, having received the Notice of Special Meeting of
Stockholders and the Joint Proxy Statement/Prospectus, hereby appoint(s) Alfred
J. Fernandez and Lorraine M. Breece, and each of them, Proxies of the
undersigned (with full power of substitution) to attend the Special Meeting of
Stockholders of North American Biologicals, Inc. ("NABI") to be held November
29, 1995, and all postponements and adjournments thereof (the "Meeting"), and
there to vote all shares of Common Stock of NABI that the undersigned would be
entitled to vote, if personally present, in regard to all matters which may
come before the Meeting.
The undersigned hereby confer(s) upon the Proxies, and each of them,
discretionary authority to consider and act upon such business, matters or
proposals other than the business set forth below as may properly come before
the Meeting. THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
SPECIFIED HEREIN. IF NO SPECIFICATION IS MADE, THE PROXIES INTEND TO VOTE FOR
EACH PROPOSAL.
Please mark vote as in this example. [X]
1. Adoption and approval of the Agreement and Plan of Merger dated as of August
28, 1995 between NABI and Univax Biologics, Inc. ("Univax") pursuant to
which, as set forth in more detail in the accompanying Joint Proxy
Statement/Prospectus, Univax would be merged with and into NABI, each share
of Univax common stock would be converted into the right to receive .79
share of NABI common stock, NABI would assume certain Univax stock option
plans and NABI's Certificate of Incorporation would be amended to increase
the authorized number of shares of NABI Common Stock to 75,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN
2. Approval of an amendment to NABI's 1990 Equity Incentive Plan to increase
the number of shares of Common Stock available to be issued thereunder from
2,745,000 to 4,245,000, contingent upon consummation of the merger between
NABI and Univax.
[_] FOR [_] AGAINST [_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR BOTH PROPOSALS.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Mark here for address change and note
below. [_]
--------------------------------------
Signature Date
--------------------------------------
Signature Date
IN SIGNING, PLEASE WRITE NAME(S) EX-
ACTLY AS APPEARING IN THE IMPRINT ON
THIS CARD. FOR SHARES HELD JOINTLY,
EACH JOINT OWNER SHOULD SIGN. IF
SIGNING AS EXECUTOR, OR IN ANY OTHER
REPRESENTATIVE CAPACITY, OR AS AN OF-
FICER OF A CORPORATION, PLEASE INDI-
CATE YOUR FULL TITLE AS SUCH.
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
*2. Agreement and Plan of Merger (included as Appendix A to the
Joint Proxy Statement/Prospectus).
*3.1 Proposed Restated Certificate of Incorporation.
*3.2 By-laws.
4. Specimen Stock Certificate (incorporated by reference to
NABI's Registration Statement on Form S-2 dated August 19,
1994).
+5. Opinion of Nutter, McClennen & Fish.
10.1 Third Amended and Restated Revolving Credit and Term Loan
Agreement between NationsBank of Florida, National Association
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).
*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 of
Florida, National Association ("NationsBank") and NABI dated
as of December 1, 1994.
*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.
10.4 Asset Sale Agreement effective as of September 30, 1992
between NABI and Abbott Laboratories relating to the purchase
of H-BIG (incorporated by reference to NABI's Annual Report on
Form 10-K for the year ended December 31, 1992).
10.5 Product Supply and Distribution 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).
10.6 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).
10.7 Agreement and Plan of Merger dated January 25, 1994 among
NABI, PBI Merger Corporation, Premier BioResources, Inc. and
CGW Southeast Partners I, L.P. (incorporated by reference to
NABI's Current Report on Form 8-K dated February 3, 1994).
10.8 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 dated August 19,
1994).
10.9 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 dated August 19, 1994).
10.10 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 dated August 19, 1994).
10.11 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 dated August 19,
1994).
10.12 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 dated August 19, 1994).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------- ----------- ----
<C> <S> <C>
10.13 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 dated
August 19, 1994).
10.14 Lease Agreements dated December 11, 1990, as modified on May
23, 1994 between NABI and Angelo Napolitino, 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 dated August 19, 1994).
10.15 Lease Agreement dated March 31, 1994 between NABI and Angelo
Napolitino, 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 dated
August 19, 1994).
10.16 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).
10.17 Employment Agreement dated January 27, 1994 between John C.
Carlisle and NABI (incorporated by reference to NABI's
Registration Statement on Form S-2 dated August 19, 1994).
*10.18 Employment Agreement effective August 1, 1995 between NABI and
Alfred J. Fernandez.
*10.19 Employment Agreement effective August 1, 1995 between NABI and
Stephen W. Weston.
*10.20 1990 Equity Incentive Plan (included as Appendix D to the
Joint Proxy Statement/Prospectus).
10.21 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).
10.22 Stock Plan for Non-Employee Directors (incorporated by
reference to NABI's Proxy Statement dated April 26, 1995).
*23.1 Consent of Price Waterhouse LLP as to NABI.
*23.2 Consent of Price Waterhouse LLP as to Univax.
+23.3 Consent of Robertson, Stephens & Company, L.P.
+23.4 Consent of Raymond James & Associates, Inc.
+23.5 Consent of Nutter, McClennen & Fish (included in Exhibit 5).
*24. Power of Attorney (contained on Page II-5 of the Registration
Statement).
</TABLE>
- --------
* Previously filed.
+ Filed herewith.
<PAGE>
Exhibit 5
NUTTER, McCLENNEN & FISH
ATTORNEYS AT LAW
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2699
TELEPHONE: 617-439-2000 FACSIMILE: 617-973-9748
CAPE COD OFFICE DIRECT DIAL NUMBER
HYANNIS, MASSACHUSETTS
(617)439-2623
October 25, 1995
12771-84
North American Biologicals, Inc.
5800 Park of Commerce Boulevard, N.W
Boca Raton, Florida 33487
Gentlemen:
Reference is made to the Registration Statement on Form S-4 (File No.
33-63497) and the Joint Proxy Statement/Prospectus constituting a part
thereof (the "Registration Statement"), which North American Biologicals,
Inc. (the "Company") has filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the offer and issuance of approximately 14,261,512 shares of the
Company's Common Stock, $.10 par value (the "Common Stock"), in connection
with the merger (the "Merger") of Univax Biologics, Inc. ("Univax") with
and into the Company pursuant to the terms of that certain Agreement and
Plan of Merger dated as of August 28, 1995 between the Company and Univax
(the "Merger Agreement").
We have acted as counsel for the Company in connection with the
Registration Statement. We have examined original or certified copies of
the Certificate of Incorporation of the Company and all amendments thereto,
its By-laws, the corporate records of the Company to the date hereof,
certificates of public officials and such other documents, records and
materials as we have deemed necessary in connection with this opinion
letter. Based upon the foregoing, and in reliance upon information from
time to time furnished to us by the Company's officers, directors and
agents, we are of the opinion that:
Assuming the requisite approval and adoption of the Merger Agreement
by the stockholders of NABI and Univax and the filing of a Certificate of
Merger as contemplated by the Merger Agreement, the shares of Common Stock
to be issued by the Company in the Merger, when issued upon the terms
described in the Registration Statement and pursuant to the terms of the
Merger Agreement, will be duly and validly issued, fully paid and non-
assessable.
<PAGE>
North American Biologicals, Inc.
October 25, 1995
Page 2
We understand that this opinion letter is to be used in connection
with the Registration Statement, as finally amended, and hereby consent to
the filing of this opinion letter with and as a part of the Registration
Statement as so amended, and to the reference to our firm in the Joint
Proxy Statement/Prospectus under the heading "Legal Matters." It is
understood that this opinion letter is to be used in connection with the
offer and issuance of the aforesaid shares only while the Registration
Statement is effective as so amended and as it may be amended from time to
time as contemplated by Section 10(a)(3) of the Securities Act.
Very truly yours,
/s/ Nutter, McClennen & Fish
Nutter, McClennen & Fish
JED
<PAGE>
EXHIBIT 23.3
CONSENT OF ROBERTSON, STEPHENS & COMPANY, L.P.
We hereby consent to the use of our name in the Joint Proxy
Statement/Prospectus forming part of this Registration Statement on Form S-4
under the captions "SUMMARY--Fairness Opinions", "RISK FACTORS--Factors
Regarding the Combined Company; Potential Disadvantages of the Merger", "THE
MERGER--Background of the Merger", "THE MERGER--Recommendation of Univax Board
of Directors; Reasons for and Advantages of the Merger", "THE MERGER--Opinion
of Robertson Stephens" and of the filing of our opinion as Appendix C to the
Joint Proxy Statement/Prospectus.
In so consenting, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
/s/ Farah H. Champsi
Managing Director--Robertson, Stephens & Co. L.P.
San Francisco, California
October 23, 1995
<PAGE>
EXHIBIT 23.4
CONSENT OF RAYMOND JAMES & ASSOCIATES, INC.
We hereby consent to the use of our name in the Proxy Statement/Prospectus
forming part of this Registration Statement on Form S-4 under the captions
"SUMMARY--Fairness Opinions," "THE MERGER--Opinion of Raymond James," "THE
MERGER--Background of the Merger," "THE MERGER--Recommendation of NABI Board
of Directors; Reasons for and Advantages of the Merger," "RISK FACTORS--
Factors Regarding the Combined Company; Potential Disadvantages of the
Merger," and of the filing of our opinion as Appendix B to the Proxy
Statement/Prospectus.
In so consenting, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
/s/ Raymond James & Associates, Inc.
St. Petersburg, Florida
October 20, 1995
