SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act
of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
NBI, Inc.
---------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchanged Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by the registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement number:
(3) Filing party:
(4) Date filed:
<PAGE>
NBI, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 14, 1998
The Annual Meeting of Stockholders of NBI, Inc., a Delaware corporation
(the "Company"), will be held on Wednesday, October 14, 1998, at 4:30 p.m.,
Eastern Time, at the Belle Vernon Holiday Inn, I-70 and Highway 51, Belle
Vernon, Pennsylvania, for the following purposes:
1. To elect two directors to the Company's Board of Directors.
2. To consider and approve a proposal to amend the Certificate of
Incorporation to authorize the Board of Directors to issue up to five (5)
million shares of preferred stock, par value of $.01 per share, in one or more
series having such rights, preferences and privileges as the Board of
Directors shall determine in its discretion.
3. To consider and approve alternative proposals to amend the
Certificate of Incorporation to effect a two and one-half for one, three for
one, or four for one reverse stock split of the outstanding shares of common
stock, $.01 par value per share, of the Company.
4. To consider and approve a proposal to amend the Certificate of
Incorporation to eliminate Article Eleventh, which contains certain
restrictions on transfers of the Company's stock.
5. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
All stockholders are cordially invited to attend the meeting, although
only stockholders of record at the close of business on August 17, 1998, will
be entitled to notice of and to vote at the meeting. The minutes of the last
Annual Stockholders' Meeting and the stockholders' list of their share
eligibility to vote at the 1998 Annual Meeting will be open to inspection by
the stockholders at the Company's principal office, 1880 Industrial Circle,
Suite F, Longmont, Colorado 80501, for a period of ten (10) days prior to the
annual meeting.
Shares can only be voted at the meeting if the holder is present or
represented by proxy. If you do not expect to attend the meeting, you are
urged to date and sign the enclosed proxy and return it in the accompanying
envelope promptly so that your shares may be voted in accordance with your
wishes and the presence of a quorum may be assured. The prompt return of your
signed proxy, regardless of the number of shares you hold, will aid the
Company in reducing the expense of additional proxy solicitation. The giving
of such proxy does not affect your right to vote in person in the event you
attend the meeting.
By Order of the Board of Directors
Marjorie A. Cogan
Secretary
Longmont, Colorado
September 16, 1998
YOUR PROXY
PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE.
SHOULD YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN THOUGH YOU HAVE
GIVEN A PROXY. THE PROMPT RETURN OF YOUR PROXY WILL BE OF GREAT HELP IN
PREPARATION FOR THE MEETING.
<PAGE>
NBI, INC.
1880 INDUSTRIAL CIRCLE, SUITE F
LONGMONT, COLORADO 80501
PROXY STATEMENT
SOLICITATION, EXERCISE AND REVOCABILITY OF PROXY
The enclosed proxy is solicited by the Board of Directors of NBI, Inc.
(the "Company") for use at the Annual Meeting of Stockholders to be held on
Wednesday, October 14, 1998, or at any adjournment or postponement thereof.
The meeting will be held at 4:30 p.m., Eastern Time, at the Belle Vernon
Holiday Inn, I-70 and Highway 51, Belle Vernon, Pennsylvania. It is
anticipated that this proxy statement and the accompanying form of proxy will
first be mailed to the stockholders of the Company on or about September 16,
1998. The Company's principal executive offices are located at 1880
Industrial Circle, Suite F, Longmont, Colorado 80501, and its telephone number
at those offices is (303) 684-2700.
A proxy is revocable at any time, before it is voted, by written notice
to the Company, grant of a subsequent proxy, or voting at the meeting in
person. Unless contrary instructions are indicated on the proxy, all shares
represented by valid proxies received pursuant to this solicitation (and not
properly revoked before they are voted) will be voted for the election of the
two nominees to the Board of Directors named elsewhere herein, for approval of
the amendments to the Company's Certificate of Incorporation authorizing the
issuance of up to five (5) million shares of preferred stock, authorizing the
Board of Directors to declare a reverse split of either two and one-half for
one, three for one, or four for one of the Company's outstanding shares of its
common stock, $.01 par value per share, authorizing the elimination of Article
Eleventh, which contains certain restrictions on transfers of the Company's
stock, and to transact such other business as may come before the meeting. In
the event a stockholder specifies a different choice on his proxy, his shares
will be voted in accordance with the specifications so made. Abstentions and
broker non-votes are counted toward a quorum. Abstentions are counted in the
tabulations of the votes cast, but broker non-votes on any proposal are not
considered to be represented at the meeting, as to such proposal, and,
therefore, are not counted for purposes of determining whether a proposal has
been approved.
COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company.
VOTING
Only stockholders of record at the close of business on August 17, 1998,
will be entitled to vote at the meeting. On that date there were 8,088,320
shares of the Company's common stock issued and outstanding, entitled to one
vote per share. Stockholders are not entitled to cumulate their votes in the
election of directors, which means that the holders of more than half the
shares voting for the election of directors can elect all the directors if
they choose to do so. On all matters, unless otherwise noted, a favorable
vote consists of a simple majority of the votes represented at a meeting at
which a quorum is present. The Company believes that as of August 17, 1998,
the approximate number of stockholders of record of its common stock was
1,260. This includes shares held in nominee or "street" accounts.
The Board of Directors knows of only four stockholders owning more than
five percent of the outstanding voting securities of the Company: (i) Jay H.
Lustig, the Chairman of the Board and Chief Executive Officer of the Company,
(ii) Hakatak Enterprises, Inc., (iii) Harry J. and Patricia S. Brown, and (iv)
Transamerica Occidental Life Insurance Company. See "Beneficial Ownership of
Common Stock."
<PAGE>
ELECTION OF DIRECTORS
At the time of the annual meeting, the Board of Directors will consist of
two incumbent members who are seeking to be elected at the meeting to hold
office until the next meeting of stockholders and until their successors are
elected and qualified. Although the Bylaws specify that the Board of
Directors shall consist of three directors, there is one vacancy on the Board,
and it is not presently contemplated that such vacancy will be filled.
INFORMATION CONCERNING DIRECTORS
Jay H. Lustig and Martin J. Noonan, both incumbent directors, have been
nominated by the Board of Directors for election. Both nominees have informed
the Company that they are willing to serve, if elected, and management has no
reason to believe that either nominee will be unavailable. In the event a
nominee for director should become unavailable for election, the persons named
in the proxy will vote for the election of any other person who may be
recommended and nominated by the Board for the office of director.
Information regarding nominees and directors is set forth below.
NOMINEES FOR ELECTION AS DIRECTORS
Name Age Principal Occupation Director Since
---- --- -------------------- --------
Jay H. Lustig 43 President, J.H.L. Holdings
and Equibond, Inc. February 1992
Martin J. Noonan 46 Managing Director of NBI, Inc. April 1994
JAY H. LUSTIG has been Chairman of the Board since February 1992 and
Chief Executive Officer since October 1993, although he began acting in the
capacity of Chief Executive Officer in September 1992. Mr. Lustig has also
been President of J.H.L. Holdings, Inc., an investment management firm, since
1989, and President of Equibond, Inc., a securities broker-dealer and member
of the National Association of Securities Dealers, Inc., since 1995. In
addition, he is Chairman of the Board of National Bancshares Corporation of
Texas, a four-bank holding company currently headquartered in Laredo, Texas.
MARTIN J. NOONAN, Director, has been Managing Director of NBI, Inc. since
June 1993 with the responsibility for managing the day-to-day activities
within the Company. He has also been Interim President of L.E. Smith Glass
Company since October 1997. He has been with the Company for twelve years
including various other management positions such as General Manager of the
systems integration operation from June 1992 to June 1994 and Director of
Marketing from September 1986 to June 1992.
COMMITTEES, ATTENDANCE, NOMINATIONS
The Company has standing audit, compensation and nominating committees,
each of which consists of Mr. Lustig and Mr. Noonan. The nominating committee
is responsible for the nomination of persons whose names shall appear on the
ballot for election of directors. The audit committee recommends engagement
of the Company's independent accountants, approves services performed by such
accountants, and reviews and evaluates the Company's accounting system of
internal controls. The compensation committee approves salaries and other
compensation arrangements for the officers of the Company; however, Mr. Lustig
does not vote on matters relating to his compensation. These committees did
not meet during fiscal year 1998; however, these issues were discussed at
regular board meetings.
The Company's Board of Directors met three times during fiscal year 1998.
Both directors participated by personally or telephonically attending, during
fiscal year 1998, all Board of Directors meetings.
<PAGE>
EXECUTIVE OFFICERS
JAY H. LUSTIG is the Chairman of the Board and Chief Executive Officer of
the Company (the "Named Officer"). He has been on the Board since February
1992. Mr. Lustig has performed the functions of a chief executive officer
since September 25, 1992, but only assumed the title of Chief Executive
Officer on October 1, 1993, the effective date of his employment agreement
with the Company. Prior to October 1, 1993, Mr. Lustig received no
compensation for performing the functions of the chief executive officer.
MARTIN J. NOONAN has been Managing Director of NBI, Inc. since June 1993
with the responsibility for managing the day-to-day activities within the
Company. He has also been Interim President of L.E. Smith Glass Company since
October 1997. He has been with the Company for twelve years including various
other management positions such as General Manager of the systems integration
operation from June 1992 to June 1994, and Director of Marketing from
September 1986 to June 1992. He has been on the Board of Directors since
April 1994.
MARJORIE A. COGAN has been Chief Financial Officer of the Company since
October 1997, with responsibility for managing the accounting and finance
functions of the Company. She has also been Secretary of the Company since
May 1993 and was previously Corporate Controller of the Company from May 1993
until October 1997. Prior to joining NBI, Ms. Cogan was an auditor with a
Denver-based CPA firm for four years. Ms. Cogan graduated from Regis
University summa cum laude with a bachelor's degree in accounting and business
administration. Ms. Cogan obtained her CPA license in 1983.
MORRIS D. WEISS has been Senior Vice President and General Counsel since
April 1997 with responsibilities for overseeing and managing the legal affairs
of the Company. Prior to joining the Company, Mr. Weiss was a partner with
the law firm of Weil, Gotshal & Manges, LLP from January 1994 until April
1997, and had been an associate at such firm since October 1985. In addition,
Mr. Weiss has been General Counsel of Equibond, Inc. since April 1997, and
Senior Vice President and General Counsel of National Bancshares Corporation
of Texas since April 1997.
The Company has no other executive officers as defined under the
Securities Exchange Act of 1934.
EXECUTIVE COMPENSATION
Set forth below is information regarding the compensation of the Named
Officer. The Company has no executive officers whose total annual salary and
bonus exceeded $100,000.
The summary compensation table set forth below contains information
regarding the compensation of the Named Officer for services rendered in all
capacities during fiscal years 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Annual Compensation
Other
Name and Annual
Principal Position Fiscal Year Salary Bonus Compen-
($) ($) sation ($)
Jay H. Lustig, 1998 $60,000 -- $6,475(1)
Chief Executive Officer 1997 $60,000 $ 22,000 --
1996 $60,000 -- --
<S> <C> <C> <C>
Long Term Compensation
Restricted
Stock Securities All Other
Name and Fiscal Award(s) Underlying Compensation
Principal Position Year ($) Options (#) ($)
Jay H. Lustig, 1998 -- 400,000 (2) --
Chief Executive Officer 1997 -- -- --
1996 -- -- --
</TABLE>
(1) Value of personal use of company vehicle.
(2) This amount represents the option originally granted under the terms of his
employment agreement, which was scheduled to expire on October 1, 1998. The
term of this option was extended on January 13, 1998 to October 1, 2003, with
no change in the exercise price or other terms of the option.
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the Named Officer during the fiscal year ended
June 30, 1998.
The following table shows that the Named Officer did exercise stock
options for 25,000 shares of common stock during the fiscal year ended June
30, 1998 and states the number of shares covered by both exercisable and
non-exercisable stock options as of June 30, 1998. Also reported are the
values for "in-the-money" options which represent the positive spread between
the exercise price of any such existing stock options and the year-end price
of Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Securities
Shares Underlying Unexercised
Acquired on Value Options at FY-End (#)
Name Exercise (#) Realized ($) Exercisable/Unexercisable
Jay H. Lustig 25,000 $10,156 400,000 (2) 0
<S> <C>
Value of Unexercised In-the-
Money Options at FY-End
($) Exercisable/Unexercisable
Name (1)
Jay H. Lustig 79,500 $0
</TABLE>
(1) Based on the closing stock price as of June 30, 1998 of the
underlying shares of common stock of $.96875 per share, less the per share
exercise price of $.77.
(2) Includes 400,000 shares underlying options issued during fiscal 1994
in conjunction with the Named Officer's employment agreement. During fiscal
1998, the expiration date of these options was extended to October 1, 2003.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive a fee of $1,000
per regular meeting, $500 per telephonic meeting, $500 per committee meeting
(except when attended in conjunction with a Board meeting) and reimbursement
of expenses incurred in attending meetings. No directors' fees were incurred
during fiscal 1998, as all directors were also employees of the Company.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company entered into an employment agreement effective October 1,
1993, with Jay H. Lustig (the "CEO Agreement"). Pursuant to the terms of the
CEO Agreement, Mr. Lustig became an employee and Chief Executive Officer of
the Company as of October 1, 1993. Under the terms of this agreement, the
Company pays Mr. Lustig an annual salary of $60,000.
Mr. Lustig's position as CEO of the Company is a part-time position to
which he is required to dedicate no less than one-third of normal executive
business hours. In addition to Mr. Lustig's salary, the CEO Agreement
provides that the Company will pay Mr. Lustig an annual bonus of 10% of the
Company's pre-tax profits, if any, derived from all sources, but only to the
extent such 10% figure exceeds Mr. Lustig's base salary. Mr. Lustig remains
eligible for such bonus for twelve months after his termination from the
position of CEO. The Company has accrued, but not paid a $22,000 bonus for
fiscal year 1997, under the terms of this agreement. No other amounts have
been paid or accrued under the terms of this agreement, since its inception.
In addition to the salary and bonus described above, the CEO Agreement
required that Mr. Lustig be granted a non-qualified stock option to purchase
400,000 shares of the Company's common stock at an exercise price of $.77
<PAGE>
per share. Such price was approximately 400% of certain historic trading
levels of the Company's common stock. This option was effective as of October
1, 1993, was fully vested as of October 1, 1997 and is still outstanding. On
January 13, 1998, the Company extended the expiration date of these options to
October 1, 2003.
The CEO Agreement runs for one year terms which automatically renew on
July 1, unless terminated in writing by a majority of the Board of Directors
prior to such renewal date. As there was no action to terminate the CEO
Agreement, it automatically renewed for an additional one year term on July 1,
1998.
Effective April 7, 1997, the Company entered into a consulting agreement
with Morris D. Weiss. The agreement is for an initial term of three years and
automatically renews for successive one year periods unless one of the parties
elects not to extend the agreement. The agreement provides for Mr. Weiss to
be paid an annual consulting fee of $75,000 and requires the Company to grant
Mr. Weiss a stock option on terms similar to those available to other senior
executives. During fiscal year 1998, Mr. Weiss was granted an option to
acquire 100,500 shares of common stock.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock, as of July 31, 1998 by (i)
persons, including groups, known to the Company to own beneficially more than
five percent (5%) of the outstanding common stock of the Company, (ii) each
director and nominee for director, (iii) each Named Officer and (iv) all
executive officers and directors as a group. A person is deemed to be a
beneficial owner of common stock that can be acquired by such person within 60
days from July 31, 1998, upon the exercise of warrants or options.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Amount and
Nature of Total as
Name and Address of Beneficial Percent
Beneficial Owner Ownership of Class
- ------------------------------------- ----------- ---------
Jay H. Lustig 1,874,565 (1) 19.89%
P.O. Box 505
Belle Vernon, PA 15012
Martin J. Noonan 100,500 (2) 1.23%
1880 Industrial Circle, Suite F
Longmont, CO 80501
Hakatak Enterprises, Inc. 928,645 11.48%
PO Box 1623
Pacific Palisades, CA 90272
Harry J. and Patricia S. Brown 1,041,000 12.87%
16079 Mesquite Circle
Fountain Valley, CA 92708
Tranamerica Occidental Life
Insurance Co. 445,029 5.50%
1150 Olive Street
Los Angeles, CA 90015
All Executive Officers and Directors
as a Group (4 persons) 2,090,765 (3) 21.72%
<FN>
(1 Includes 400,000 shares issuable upon exercise of options and 935,000
shares issuable upon exercise of warrants. Also includes 324,565 shares
owned by an investment partnership in which he has an ownership interest and
as to which he has sole voting and investment power.
<PAGE>
(2) Consists of 100,500 shares issuable upon exercise of options.
(3) Includes 601,000 shares issuable upon exercise of options and 935,000
shares issuable upon exercise of warrants.
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act")
requires the Company's officers and directors, and persons who beneficially
own more than 10% of a registered class of the Company's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, directors and greater than 10% stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company believes all forms required by Section
16(a) during the fiscal year ended June 30, 1998 were timely filed.
RELATED PARTY TRANSACTIONS
In February 1995, the Company entered into an agreement to acquire 80% of
the outstanding stock of Krazy Colors, Inc., a small children's paint
manufacturing company, effective as of January 1, 1995. Prior to this
agreement the Company's Chief Executive Officer (CEO), Jay H. Lustig, owned
55% of the outstanding stock of the manufacturer. Under the purchase
agreement, the Company paid $288,000 in cash for the stock, including $158,000
paid to NBI's CEO. In addition, the sellers are eligible to receive
continuing annual royalty payments equal to a specified percentage of annual
gross margin. Royalties are calculated based upon gross margin in excess of
$150,000 in any calendar year and will be earned at the rate of twenty percent
when the gross margin is greater than $150,000 and less than or equal to
$300,000, twenty-five percent when the gross margin is greater than $300,000
and less than or equal to $450,000, and thirty percent when the gross margin
is greater than $450,000. NBI's CEO will receive 55% of any such royalty
payments. The Company has the right to buy out the royalty interest after
five years, at a price equal to the higher of five times the average annual
royalties paid for the preceding five years or 3.6 times the highest annual
royalty payment for any of the preceding five years. No royalties were
incurred by the Company during the fiscal years ended June 30, 1998 and 1997.
In conjunction with the purchase agreement, the sellers were issued warrants
to purchase a total of 1.7 million shares of NBI's common stock, including
warrants to purchase 935,000 shares issued to the Company's CEO, at a price of
$.89 per share. These warrants are exercisable through December 31, 2002.
During fiscal 1998 and 1997, the Company utilized Equibond, Inc., a
securities broker-dealer, which is 100% owned by its CEO, to execute certain
transactions on its behalf. However, NBI uses another unrelated company to
act as custodian and clearing firm for its investment assets. Gross revenues
earned by Equibond related to investment transactions by NBI in fiscal 1998
and 1997, totaled $1,000 and $90,000, respectively, on purchase and sale
transactions totaling $1,250,000 and $47,968,000, respectively, before fees.
During fiscal 1998, the Company borrowed $100,000 from its CEO for
working capital needs. The borrowings are subject to the terms of a revolving
line of credit which provides for interest to be paid at the rate of ten
percent per annum. The entire principal amount outstanding is due and payable
in full on December 31, 1998.
<PAGE>
PROPOSALS FOR VOTING
PROPOSAL 1: ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RE-ELECTION OF THE TWO INCUMBENT DIRECTORS AS DISCUSSED UNDER "ELECTION OF
DIRECTORS."
PROPOSAL 2: AUTHORIZATION OF PREFERRED STOCK
The Board has approved an amendment to the Company's Certificate of
Incorporation authorizing the issuance of up to five (5) million shares of
preferred stock, $.01 par value per share. The authorization of the issuance
of preferred stock will give the Board increased flexibility for raising
additional capital for the Company for its corporate purposes. The proposed
amendment would authorize the Board of Directors to issue preferred stock at
any time and from time to time in its sole discretion, without additional
stockholder approval. Preferred stock may be issued in one or more series,
having such rights, preferences and privileges as the Board shall determine.
Under the terms of the amendment, the Board will have the authority to issue
shares of preferred stock having rights, including liquidation preferences,
dividend rights, and other rights, which are senior to those of the holders of
the Company's common stock. In addition, shares of preferred stock may have
conversion privileges, redemption rights and other rights.
If the amendment is approved, the Board intends to authorize the Company
to offer up to 1 million shares of non-voting preferred stock to raise
additional funds for payment of an installment due on December 31, 1998, on
the Company's outstanding debt to the Internal Revenue Service ("IRS"), for
certain development costs in connection with the Company's planned real estate
development projects, and for repayment of certain other debts of the Company.
There can be no assurance that the Company will be successful in raising
proceeds from the proposed offering of preferred stock sufficient to pay
amounts due on the IRS debt or at all.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of holders of at least the majority of the
outstanding shares of Common Stock is required in order to approve this
Proposal 2. Therefore, failure to vote has the same effect as a negative
vote. Accordingly, if stockholders are in favor of this Proposal 2 and do not
vote their shares in favor of this Proposal 2, either in person or by proxy,
such stockholders will have effectively voted against the Proposal. If
approved, this Proposal 2 will be effective upon the filing of a Certificate
of Amendment to the Certificate of Incorporation with the Secretary of State
of Delaware, which is expected to follow shortly after the approval, if at
all, of this Proposal 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AUTHORIZATION OF PREFERRED
STOCK.
PROPOSAL 3: REVERSE STOCK SPLITS
The Board has approved each of the alternative proposals to effect a two
and one-half for one, three for one or four for one reverse stock split of the
outstanding Common Stock (individually, a Reverse Stock Split and
collectively, the Reverse Stock Splits ). At the Meeting, stockholders will
consider and vote on the Reverse Stock Splits. The intent of the Reverse
Stock Splits is to permit the Company's per share stock price to reach a level
sufficient to permit the Company to qualify for listing on a national
securities exchange at such time as the Company meets all of the other
quantitative and qualitative qualifications for listing on such an exchange.
Such a listing should increase the liquidity and marketability of the
Company's Common Stock. The Company does not currently qualify for listing on
any national exchange with respect to several of the requirements for listing,
but hopes that its financial performance may improve sufficiently over the
next year such that it will become qualified for listing. There can be no
assurance that the Company will qualify for listing, or that the Company will
become listed on a national exchange, either within the next year or at all.
If the Reverse Stock Splits are approved by the stockholders of the
Company at the Meeting, a Reverse Stock Split will be effected only upon a
determination by the Board of Directors that it will increase the ability of
the
<PAGE>
Company to become listed on a national securities exchange. In connection
with any determination by the Board of Directors to such effect, the Board
will also select, in its discretion, one of the Reverse Stock Splits based on
its determination of which of them will result in the greatest likelihood of
qualification for such listing. The remaining alternative Reverse Stock
Splits would be abandoned by the Board pursuant to Section 242(c) of the
Delaware General Corporation Law ("DGCL") without further action by the
stockholders of the Company.
No certificates or scrip representing fractional shares will be issued,
and each holder of a fractional share interest in the Company who surrenders
certificates representing a fractional share interest shall be entitled to
receive a cash payment in lieu thereof determined by multiplying the
fractional interest by the average closing price of one pre-split share for
the five trading days immediately preceding the effective date of the Reverse
Stock Split.
Stockholders may approve or reject the Reverse Stock Splits in whole but
not in part. If approved by the stockholders of the Company, a Reverse Stock
Split would become effective on any date (the Effective Date ) selected by
the Board of Directors on or prior to the Company's next annual meeting of
stockholders. If no Reverse Stock Split is effected by such date, the Board
of Directors will take action to abandon all of the Reverse Stock Splits
pursuant to Section 242(c) of the DGCL.
PURPOSES AND EFFECTS OF THE REVERSE STOCK SPLITS
Consummation of a Reverse Stock Split will not alter the number of
authorized shares of Common Stock, which will remain 20,000,000 shares.
Proportionate voting rights and other rights of stockholders will not be
altered by any Reverse Stock Split. Consummation of a Reverse Stock Split
will have no material federal tax consequences to stockholders.
As of the Record Date, the Company had outstanding 8,088,320 shares of
Common Stock. The Company's Common Stock is currently traded in the
over-the-counter market. On August 18, 1998, the closing bid and asked prices
of the Common Stock were $.78125 and $.9375, respectively.
The Board believes that a decrease in the number of shares in Common
Stock outstanding without any material alteration of the proportionate
economic interest in the Company represented by individual shareholdings may
increase the trading price of such shares to a price more appropriate for an
exchange-listed security, although no assurance can be given that the market
price of the Common Stock will rise in proportion to the reduction in the
number of outstanding shares resulting from any Reverse Stock Split.
Additionally, the Board believes that the current per share price of the
Common Stock may limit the effective marketability of the Common Stock because
of the reluctance of many brokerage firms and institutional investors to
recommend lower-priced stocks to their clients or to hold them in their own
portfolios. Certain policies and practices of the securities industry may
tend to discourage individual brokers within those firms from dealing in
lower-priced stocks. Some of those policies and practices involve
time-consuming procedures that make the handling of lower priced stocks
economically unattractive. The brokerage commission on a sale of lower-priced
stock may also represent a higher percentage of the sale price than the
brokerage commission on a higher priced issue. Any reduction in brokerage
commissions resulting from a Reverse Stock Split may be offset, however, in
whole or in part, by increased brokerage commissions required to be paid by
stockholders selling odd lots created by such Reverse Stock Split.
The par value of the Common Stock will remain at $.01 per share following
any Reverse Stock Split, and the number of shares of Common Stock outstanding
will be reduced. As a consequence, the aggregate par value of the outstanding
Common Stock will be reduced, while the aggregate capital in excess of par
value attributable to the outstanding Common Stock for statutory and
accounting purposes will be correspondingly increased. The resolutions
approving the Reverse Stock Splits provide that this increase in capital in
excess of par value will be treated as capital for statutory purposes.
However, under Delaware law, the Board of Directors of the Company will have
the authority, subject to various limitations, to transfer some or all of such
increased capital in excess of par value from capital to surplus, which
additional surplus could be distributed to stockholders as dividends or used
by the Company to repurchase outstanding stock. The Company currently has no
plans to use any surplus so created to pay any such dividend or to repurchase
stock.
<PAGE>
The Reverse Stock Splits would have the following effects upon the number
of shares of Common Stock outstanding (8,088,320 shares as of the Record Date)
and the number of authorized and unissued shares of Common Stock (assuming
that no additional shares of Common Stock are issued by the Company after the
Record Date):
<TABLE>
<CAPTION>
<S> <C> <C>
REVERSE
STOCK COMMON STOCK AUTHORIZED AND
SPLIT OUTSTANDING UNISSUED COMMON STOCK
- --------- ------------ ---------------------
1 for 2.5 3,235,328 16,764,672
1 for 3 2,696,106 17,303,894
1 for 4 2,022,080 17,977,920
</TABLE>
At the Effective Date, each share of the Common Stock issued and
outstanding immediately prior thereto (the Old Common Stock ), will be
reclassified as and changed into the appropriate number of shares of Common
Stock, par value $.01 per share (the New Common Stock ). Shortly after the
Effective Date, the Company will send transmittal forms to the holders of Old
Common Stock to be used in forwarding their certificates formerly representing
shares of Old Common Stock for surrender and exchange for certificates
representing whole shares of New Common Stock.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of holders of at least the majority of the
outstanding shares of Common Stock is required in order to approve this
Proposal 3. Therefore, failure to vote has the same effect as a negative
vote. Accordingly, if stockholders are in favor of this Proposal 3 and do not
vote their shares in favor of this Proposal 3, either in person or by proxy,
such stockholders will have effectively voted against the Proposal. If
approved, this Proposal 3 will be effective upon the filing of a Certificate
of Amendment to the Certificate of Incorporation with the Secretary of State
of Delaware, which is expected to occur sometime during fiscal 1999.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REVERSE STOCK SPLITS.
PROPOSAL 4: REMOVAL OF RESTRICTIONS ON TRANSFER OF STOCK
The Board has a approved a proposal to repeal Article Eleventh from the
Company's Certificate of Incorporation. Article Eleventh contains certain
restrictions upon transfers of the Company's stock, including Common Stock and
other stock having voting rights, which was adopted by the Company in 1992 to
protect the Company from transfers of stock which could cause a reduction in
the Company's ability to utilize federal net operating loss carryforwards
("NOLs") which were approximately $62 million at June 30, 1998. Section 382 of
the Internal Revenue Code of 1986, as amended, provides that, if an "ownership
change" occurs with respect to the Company, the ability to use NOLs to offset
future taxable income of the Company is limited annually to the product of the
value of the Company immediately prior to the ownership change times the
long-term tax exempt rate determined by the Treasure Department (5.15% in June
1998). Assuming that the Company did become subject to the annual limitation,
based upon the Company's market capitalization at August 14, 1998 and the
long-term tax exempt rate currently in effect, the future use of the remaining
NOLs would be limited to approximately $325,000 per year.
Notwithstanding the negative impact that an ownership change would have
on the Company's future ability to utilize NOLs, the Board of Directors
believes that it is more beneficial for the stockholders of the Company to
have the ability to freely transfer their shares of Common Stock without the
restrictions provided by Article Eleventh of the Certificate of Incorporation.
Therefore, the Board has recommended that Article Eleventh be repealed.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of holders of at least the majority of the
outstanding shares of Common Stock is required in order to approve this
Proposal 4. Therefore, failure to vote has the same effect as a negative
vote. Accordingly, if stockholders are in favor of this Proposal 4 and do not
vote their shares in favor of this Proposal 4,
<PAGE>
either in person or by proxy, such stockholders will have effectively voted
against the Proposal. If approved, this Proposal 4 will be effective upon the
filing of a Certificate of Amendment to the Certificate of Incorporation with
the Secretary of State of Delaware, which is expected to follow shortly after
the approval, if at all, of this Proposal 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REPEAL OF ARTICLE
ELEVENTH OF THE CERTIFICATE OF INCORPORATION CONTAINING RESTRICTIONS ON
TRANSFER OF THE COMPANY'S STOCK.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
presented at the annual meeting other than those described above. However, if
any other matters properly come before the meeting, it is intended that any
shares voted by proxy will be voted in the discretion of the Board of
Directors.
STOCKHOLDER PROPOSALS
In accordance with the rules of the Securities and Exchange Commission
("SEC"), any proposal of a stockholder intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company,
to the attention of the Secretary, 1880 Industrial Circle, Suite F, Longmont,
Colorado 80501, by May 17, 1999, in the form and subject to the other
requirements of the applicable rules of the SEC, in order for the proposal to
be considered for inclusion in the Company's notice of meeting, proxy
statement and proxy relating to the 1999 Annual Meeting. The Company's
management proxies may exercise their discretionary voting authority, without
any discussion of the proposal in the Company's proxy materials, for any
proposal which is received by the Company after July 31, 1999.
ANNUAL REPORT - FINANCIAL STATEMENTS
A copy of the Company's 1998 Annual Report on Form 10-KSB, including
financial statements for years ended June 30, 1998 and 1997, is being mailed
to all stockholders herewith. The Form 10-KSB is not to be regarded as proxy
solicitation material or as a communication by means of which any solicitation
is to be made.
By order of the Board of Directors
Marjorie A. Cogan
Secretary
Dated: September 16, 1998
<PAGE>
APPENDIX TO PROXY STATEMENT
FORM OF PROXY
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF NBI, INC.
For Annual Meeting on October 14, 1998
The undersigned hereby appoints Marjorie A. Cogan and Jay H. Lustig, or
either of them, attorneys and proxies for the undersigned, with full power of
substitution, to vote all shares of capital stock of NBI, Inc. (the "Company")
held of record by the undersigned on August 17, 1998, at the Annual Meeting of
Stockholders of NBI, Inc., to be held at the Belle Vernon Holiday Inn, I-70
and Highway 51, Belle Vernon, Pennsylvania, on Wednesday, October 14, 1998, at
4:30 p.m. Eastern Time, and at any adjournment or postponement thereof. The
undersigned hereby revokes any proxy or proxies heretofore given in respect to
the same shares of stock.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED ON THE
REVERSE SIDE BY THE UNDERSIGNED WITH RESPECT TO PROPOSALS 1, 2, 3, AND 4. IF
NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED FOR SUCH PROPOSALS, AND SUCH
SHARES WILL BE VOTED IN THE DISCRETION OF THE BOARD OF DIRECTORS UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
TO ENSURE A QUORUM, YOU ARE URGED TO DATE AND SIGN THIS PROXY ON THE LINE
PROVIDED AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
<PAGE>
X Please Mark votes as in this example
- ----
The Board of Directors recommends a VOTE FOR proposals 1, 2, 3, and 4.
1. Election of Directors
Nominees: Jay H. Lustig and Martin J. Noonan.
For Both Nominees
Withheld From Both
Nominees
For all nominees
except as noted above
2. Authorization of issuance of up to five million shares of preferred stock.
For
Against
Withheld
3. Authorization of reverse stock split of either 2.5:1, 3:1, or 4:1, at the
discretion of the Board of Directors.
For
Against
Withheld
4. Authorization of elimination of Article Eleventh of the Certificate of
Incorporation regarding certain restrictions on transfers of stock.
For
Against
Withheld
5. In their discretion, the above-named proxies are authorized to vote upon
such other business as may properly come before the meeting or any adjournment
or postponement thereof.
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT _____
Please sign as name appears hereon. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Signature Date
Signature Date
