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 DECEMBER 16, 1999
The Annual Meeting of Stockholders of NBI, Inc., a Delaware corporation
(the "Company" or "NBI"), will be held on Thursday, December 16, 1999, 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 the terms and conditions of the Company's
plan to sell a majority of the assets of a wholly-owned subsidiary,
Willowbrook Properties, Inc. ("Willowbrook Properties") and all of the capital
stock of a wholly-owned subsidiary, NBI Properties, Inc. ("NBI Properties").
3. 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 October 18, 1999 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 1999 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
November 26, 1999
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.
for use at the Annual Meeting of Stockholders to be held on Thursday, December
16, 1999, 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 November 23, 1999. 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 terms and conditions of the Company's plan to sell a majority of the
assets of Willowbrook Properties and all of the capital stock of NBI
Properties, 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 October 18, 1999,
will be entitled to vote at the meeting. On that date there were 8,103,320
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 October 18, 1999,
the approximate number of stockholders of record of its common stock was
1,230. 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 45 President, J.H.L. Holdings and February 1992
Equibond, Inc.
Martin J. Noonan 47 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 headquartered in San Antonio, Texas.
MARTIN J. NOONAN, Director, has been with the Company for thirteen years
and 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 President of L.E. Smith Glass Company, a wholly-owned subsidiary
of NBI, since October 1997. In addition, he was General Manager of the
systems integration operation from June 1992 to June 1994 and Director of
Marketing from September 1986 to June 1992. Mr. Noonan is also a licensed
stock broker for Equibond, Inc.
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 1999; however, these issues were discussed at
regular board meetings.
The Company's Board of Directors met four times during fiscal year 1999.
Both directors participated by personally or telephonically attending, during
fiscal year 1999, all Board of Directors meetings.
<PAGE>
EXECUTIVE OFFICERS
JAY H. LUSTIG is the Chairman of the Board and Chief Executive Officer of
the Company (a "Named Executive 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 with the Company for thirteen years and has
been Managing Director of NBI, Inc. since June 1993 with the responsibility
for managing the day-to-day activities within the Company (a "Named Executive
Officer"). He has also been President of L.E. Smith Glass Company, a
wholly-owned subsidiary of NBI, since October 1997. In addition, he was
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. Mr. Noonan is also a licensed
stock broker for Equibond, Inc.
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. Ms. Cogan has been NBI for twelve years; 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 and 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
Following is information regarding the compensation of the Company's CEO
and Managing Director (the "Named Executive Officers"). The Company has no
other executive officers whose total annual salary and bonus exceeded
$100,000.
The summary compensation table following contains information regarding
the compensation of the Named Executive Officers for services rendered in all
capacities during fiscal years 1999, 1998 and 1997.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
<S> <C> <C> <C> <C>
Other
Name and Fiscal Salary Bonus Annual Compen-
Principal Position Year ($) ($) sation ($)
Jay H. Lustig, 1999 $ 60,000 -- $6,475(1)
Chief Executive Officer 1998 $ 60,000 -- $6,475(1)
1997 $ 60,000 $ 22,000 --
Martin J. Noonan,
Managing 1999 $ 90,000 $ 15,000 --
Director 1998 $ 90,000 -- --
1997 $ 90,000 -- --
Long Term Compensation
<S> <C> <C> <C>
Restricted
Stock Securities All Other
Name and Award(s) Underlying Compensation
Principal Position ($) Options (#) ($)
Jay H. Lustig, -- -- --
Chief Executive Officer -- 400,000(2) --
-- -- --
Martin J. Noonan, -- -- --
Managing -- 100,500(3) --
Director -- -- --
<FN>
(1) Value of personal use of company vehicle.
(2) During fiscal 1998, the expiration date of these options was extended to October 1, 2003, with no
change in the exercise price or other terms of the options. These options were originally granted under
the terms of his employment agreement, and were scheduled to expire on October 1, 1998.
(3) During fiscal 1998, the expiration date of these options was extended to August 27, 2002, with no
change in the exercise price or other terms of the options. These options were originally granted under
the Company's employee stock option plan and were scheduled to expire on August 27, 1997.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the Named Executive Officers during the fiscal
year ended June 30, 1999.
The following table shows that the Named Executive Officers did not
exercise any stock options during the fiscal year ended June 30, 1999 and
states the number of shares covered by both exercisable and non-exercisable
stock options as of June 30, 1999. 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.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised In-the-
Shares Value Underlying Unexercised Money Options at FY-End ($)
Acquired on Realized Options at FY-End (#) Exercisable/Unexercisable
Name Exercise (#) ($) Exercisable/Unexercisable (1)
<S> <C> <C> <C> <C>
Jay H. Lustig -- -- 400,000(2) 0 $79,500 $0
Martin J. Noonan -- -- 100,500(3) 0 $59,169 $0
<FN>
(1) Based on the closing stock price as of June 30, 1999 of the
underlying shares of common stock of $.96875 per share, less the per share
exercise price of $.77 for J. Lustig and the per share exercise price of $.38
for M. Noonan.
(2) Includes 400,000 shares underlying options issued during fiscal 1994
in conjunction with this Named Executive Officer's employment agreement.
During fiscal 1998, the expiration date of these options was extended to
October 1, 2003.
(3) Consists of 100,500 shares issuable upon exercise of options. During
fiscal 1998, the expiration date of these options was extended to August 27,
2002.
</TABLE>
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 1999, 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 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.
<PAGE>
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,
1999.
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 September 30, 1999
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 September 30, 1999, upon the exercise of warrants or options.
<TABLE>
<CAPTION>
Amount and
Nature of Total as
Name and Address of Beneficial Percent
Beneficial Owner Ownership of Class
<S> <C> <C>
Jay H. Lustig 2,679,565 (1) 26.16%
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 11.46%
PO Box 1623
Pacific Palisades, CA 90272
Harry J. and Patricia S. Brown 961,000 11.86%
16079 Mesquite Circle
Fountain Valley, CA 92708
Transamerica Occidental Life
Insurance Co. 445,029 5.49%
1150 Olive Street
Los Angeles, CA 90015
All Executive Officers and Directors 2,920,890 (3) 27.90%
as a Group (4 persons)
<FN>
(1) Includes 400,000 shares issuable upon exercise of options and 1,740,000 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.
(2) Consists of 100,500 shares issuable upon exercise of options.
(3) Includes 626,125 shares issuable upon exercise of options and 1,740,000 shares issuable upon exercise
of warrants.
</TABLE>
<PAGE>
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, 1999 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. No royalties were incurred by the Company during the fiscal
years ended June 30, 1999 and 1998 and no royalties are expected to be earned
in the future due to the Company's discontinuance of this operation in fiscal
1999. 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 1999 and 1998, 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 1999
and 1998, totaled $10,000 and $1,000, respectively, on purchase and sale
transactions totaling $19,216,000 and $1,250,000, 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. The line of credit provides for interest to be paid at the
rate of ten percent per annum and is due and payable in full on December 31,
1999. In September and November 1999, NBI's CEO advanced Willowbrook
Properties $155,000 and $159,740, respectively, to fund development costs
incurred on Phase I of its land development project. Concurrently with the
closing of the Willowbrook Properties' sale transaction (see "Proposal 2: Sale
of Willowbrook Properties and NBI Properties"), such amounts shall be deemed
to be expenses of the buyer. In the event the closing does not occur on this
transaction, NBI will repay the CEO such amounts on a due date to be
determined at that time, with interest at the rate of ten percent per annum
accrued since the dates of the advances.
The Company's CEO has personally guaranteed a $500,000 letter of credit for
the benefit of the Commonwealth of Pennsylvania, Department of Transportation,
required in order for Willowbrook Properties to commence certain road
improvements mandated by the Pennsylvania Department of Transportation in
conjunction with Phase I of its land development project. In addition, in
conjunction with the Company's efforts to obtain construction financing for
Phase I of the development, Mr. Lustig has committed to personally guarantee
the repayment of such construction financing and to guarantee the completion
of Phase I of the development.
The Company believes that these transactions were in its best interests,
were on terms no less favorable to the Company than could be obtained from
unaffiliated third parties and were in connection with bona fide business
purposes of the Company. As a matter of policy, any future transactions
between the Company and any of its executive officers, directors or principal
stockholders will be subject to these same standards and will be approved by a
majority of the disinterested members of the Board of Directors.
<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: SALE OF WILLOWBROOK PROPERTIES AND NBI PROPERTIES
The Board has approved the terms and conditions of the Company's proposed
sale of a majority of the assets of Willowbrook Properties and all of the
capital stock of NBI Properties. The Company is planning to sell such assets
and stock in order to generate sufficient cash to pay the final installment of
$1.8 million on its IRS debt which is due on December 31, 1999. The Company's
ability to continue as a going concern is dependent upon obtaining funds
sufficient to pay off the IRS debt when due. The Company had originally
intended to raise the additional funds necessary to make the final installment
payment through a sale of Series A Cumulative Preferred Stock. The Company was
able to raise $4.8 million of net proceeds from the sale of such Preferred
Stock in December 1998, the proceeds of which were used to (i) pay a $3.5
million installment on the IRS debt due on December 31, 1998, (ii) fund a
majority of the land development costs paid for during fiscal 1999, and (iii)
invest in trading securities. However, in August of 1999, the Company
determined that it would not be able to raise sufficient funds from the sale
of additional shares of Preferred Stock, and determined that it would be
necessary to sell a portion of its assets to make the final installment
payment to the IRS.
If the Company does not complete the sale of the properties as described
below, the Company would likely default on the remaining $1.8 million
installment payment owed to the IRS, unless the Company could negotiate with
the IRS for an extension of time. There can be no assurance that the Company
would be successful in obtaining an extension. If the IRS did not agree to an
extension of time, it could declare a default and assess interest on the debt
since the last interest payment thereon (July 1, 1997), at the statutory rate
provided under the Internal Revenue Code, in amount estimated to total
approximately $1 million as of December 31, 1999, and seek to foreclose upon
the stock of NBI Properties and L.E. Smith, the Company's only other operating
subsidiary, in order to obtain payment of the final installment of $1.8
million and such default interest.
HISTORY OF WILLOWBROOK PROPERTIES AND NBI PROPERTIES
Land and construction-in-progress comprise substantially all of the
assets of Willowbrook Properties. The land was acquired in January 1997 for
$1.0 million and consists of 88 acres of undeveloped land in Belle Vernon,
Pennsylvania situated along Route 51 with frontage for approximately 2,700
feet. During fiscal 1999, Willowbrook Properties retained a real estate
developer and entered into a lease agreement with a national grocery store
chain to lease a significant portion of the total rentable square feet of
phase I of the development, which will be a mixed use retail center.
Willowbrook Properties is currently in negotiations with a number of other
prospective tenants for occupancy in phase I. Construction on phase I of the
project began in April 1999, with an anticipated construction period of
approximately fourteen months from commencement. The construction costs are
projected to be approximately $9.0 million. As of September 30, 1999, the
construction-in-progress totaled $1.4 million, excluding the land. In
September and November 1999, NBI's CEO advanced Willowbrook Properties
$155,000 and $159,740, respectively, to fund development costs incurred on
phase I, due to NBI's inability to pay for these costs out of its available
cash and cash equivalents. Concurrently with the closing of this Willowbrook
Properties' sale transaction, such amounts shall be deemed to be expenses of
the buyer. In the event the closing does not occur on this transaction, NBI
will repay the CEO such amounts on a due date to be determined at that time,
with interest at the rate of ten percent per annum accrued since the dates of
the advances (see "Related Party Transactions"). Willowbrook Properties
recently received a commitment for commercial financing to pay for a
significant portion of the construction costs of the project and Mr. Lustig
has committed to personally guarantee the repayment of such construction
financing and to guarantee the completion of Phase I of the development, in
order to facilitate NBI's attainment of such financing. In addition, the
Company's CEO has personally guaranteed a $500,000 letter of credit for the
benefit of the Commonwealth of Pennsylvania, Department of Transportation,
required in order for
<PAGE>
Willowbrook Properties to commence certain road improvements mandated by the
Pennsylvania Department of Transportation in conjunction with Phase I of the
development. Willowbrook Properties has completed funding of the initial
equity contribution required by the lender, partially through proceeds from
the advances received from Mr. Lustig. However, significant additional equity
contributions will be required during the construction period of Phase I.
In August 1995, NBI acquired 100% of the outstanding capital stock of the
Belle Vernon Motel Corporation, now known as NBI Properties. NBI Properties
owns and operates an 80 room full service Holiday Inn in Belle Vernon
Pennsylvania. The hotel consists of approximately 21,000 square feet and is
situated on approximately 5.8 acres of land leased under an acquired land
lease expiring in 2026 with an option to extend for an additional 25 year
term. The hotel has generated operating income of $129,000, $38,000 and
$5,000 for the last three years ended June 30, 1999, 1998 and 1997,
respectively, representing a total of approximately 13%, 8% and 1% of the
total operating income from all operations of the Company.
TERMS AND CONDITIONS OF THE SALE OF WILLOWBROOK PROPERTIES
The Company plans to sell the land and construction-in-progress of
Willowbrook Properties to Bellevue Partners LP, which is 100% owned and
controlled by NBI's CEO, for a net purchase price of $3,300,000. The purchase
price is net of the construction costs which are being funded from advances
from Mr. Lustig. The purchase price is to be paid by $600,000 in cash and
$2.7 million in a note payable to Willowbrook Properties.
The note payable by the purchaser to NBI will bear interest at the
rate of two-year Treasury Notes plus 200 basis points (7.875% at November 1,
1999), with the rate to be determined on the closing date of this transaction
for the remainder of calendar 1999 and all of calendar 2000, and to be
redetermined each succeeding December 31 for the following calendar year's
rate. The note will be payable in quarterly installments of interest only
with the entire outstanding principal balance plus any accrued but unpaid
interest to be paid in full on December 31, 2006. The note will be
collateralized by a second security lien in the property, to the extent
permitted by the construction or permanent lender, as the case may be, and
will be subordinate to any construction financing or permanent financing
obtained for development of the property. In the event the purchaser
experiences a change in control, which requires the consent of NBI, the note
will be due in full immediately, at the option of NBI. The note will be
subject to customary representations and covenants, including a prohibition
against the incurrence of any debt senior to the repayment obligation to NBI,
unless such funds are procured for the purpose of construction or development
on the property.
The Company determined that the purchase price for the property was
reasonable based upon prior market valuations of the unimproved land and the
cost of the construction-in-progress completed on Phase I. The terms of the
note may not be as favorable as the Company might be able to obtain from an
unaffiliated third party. However, the Company believes that the total
purchase price is more favorable than the Company could have obtained from an
unaffiliated third party at this time. The Company did not seek independent
offers for purchase of the property, because it did not believe that it would
be possible to obtain terms as favorable to the Company as those proposed by
the purchaser, and it also did not believe that it could reasonably complete a
sale to a third party prior to the due date of its IRS debt.
The Board believes the terms and conditions of this sale are in the best
interests of the Company because (i) the Company will be able to complete the
sale prior to the due date of the final installment on its IRS debt, (ii)
significant additional equity contributions would be required by the Company
during the construction period of Phase I, and the Company does not believe
that it could have raised such equity capital at the present time or in the
foreseeable future, (iii) the Company anticipates ultimately realizing a gain
on the transaction of approximately $900,000, net of selling expenses, and
(iv) the Company would be unable to utilize the future tax losses expected to
be generated by the completed development due to its $62.5 million of existing
net operating loss carryforwards. The Company has received a fairness opinion
from Mark I. Wolk and Associates regarding the terms and conditions of the
proposed transaction. (See "Fairness Opinion")
TERMS AND CONDITIONS OF THE SALE OF NBI PROPERTIES
The Company plans to sell all of the capital stock of NBI Properties to
Tybojen, Inc., which is 100% owned and controlled by NBI's CEO, for a purchase
price of $2,500,000. In addition, NBI agrees to allow a step-up in tax
<PAGE>
basis to the purchaser through a Section 338(h)(10) election on its federal
income tax return, effectively treating the sale as an asset sale for tax
purposes. The purchase price is to be paid by $1.4 million in cash and $1.1
million in a note payable to NBI, Inc. The note payable will bear interest at
the rate of two-year Treasury Notes plus 200 basis points (7.875% at November
1, 1999), with the rate to be determined on the closing date of this
transaction for the remainder of calendar 1999 and all of calendar 2000, and
to be redetermined each succeeding December 31 for the following calendar
year's rate. The note will be payable in quarterly installments of interest
only with the entire outstanding principal balance plus any accrued but unpaid
interest to be paid in full on December 31, 2006. The note will be
collateralized by a second security lien in the property and will be
subordinate to the existing mortgage note on the hotel. In the event the
purchaser experiences a change in control, which requires the consent of NBI,
the note will be due in full immediately, at the option of NBI. The note will
be subject to customary representations and covenants, including a prohibition
against the incurrence of any debt senior to the repayment obligation to NBI
without NBI's permission.
The Company determined that the purchase price for the stock of NBI
Properties was reasonable based upon prior market valuations of the hotel.
The terms of the note may not be as favorable as the Company might be able to
obtain from an unaffiliated third party. However, the Company believes that
the total purchase price is more favorable than the Company could have
obtained from an unaffiliated third party at this time. The Company did not
seek independent offers for purchase of the hotel, because it did not believe
that it would be possible to obtain terms as favorable to the Company as those
proposed by Tybojen, Inc., and it also did not believe that it could
reasonably complete a sale to a third party prior to the due date of its IRS
debt.
The Board believes the terms and conditions of this sale are in the best
interests of the Company because (i) the Company will be able to complete the
sale prior to the due date of the final installment on its IRS debt, and (ii)
the Company anticipates ultimately realizing a financial statement gain on the
transaction of approximately $900,000, net of selling expenses. The Company
has received a fairness opinion from Mark I. Wolk and Associates regarding the
terms and conditions of the proposed transaction. (See "Fairness Opinion".)
ACCOUNTING TREATMENT
For financial statement purposes, the proposed sales would be recorded by
the Company in accordance with Financial Accounting Standards Board Statement
of Financial Standards ("SFAS") No. 66, "Accounting for Sales of Real Estate".
Under SFAS No. 66, because the buyer is a related party, no gain will be
recognized on these sales until the purchase price is collected in full in
cash, or the Company's CEO transfers all or a portion of his interest in the
purchaser(s) to outside parties; at such time, NBI could recognize a portion
of the gain on the NBI Properties' sale transaction equal to the percentage of
ownership transferred. However, the Willowbrook Properties sale does not meet
the other requirements of SFAS No. 66 for recognition of gain until the
purchase price is paid in full in cash.
TAX CONSEQUENCES AND REGULATORY REQUIREMENTS
NBI expects to record a taxable gain of approximately $900,000 resulting
from the sale of the Willowbrook Properties' assets, and a taxable gain of
approximately $2.1 million from the sale of the capital stock of NBI
Properties. The Company has agreed to allow a step-up in tax basis to the
purchaser of the capital stock of NBI Properties through a Section 338(h)(10)
election on its federal income tax return, effectively treating the sale as an
asset sale for tax purposes. NBI does not expect to incur any significant
federal income taxes payable, due to the availability of capital loss and net
operating loss carryforwards. However, the Company does expect to incur
approximately $44,000 and $188,000 of Pennsylvania state income taxes on the
Willowbrook Properties' and NBI Properties' transactions, because it has
significantly lower Pennsylvania net operating loss carryforwards available.
There are no federal or state regulatory requirements that must be
complied with in connection with the proposed sales transactions, other than
the requirement that Tybojen, Inc. receive approval from the Pennsylvania
Liquor Control Board to transfer the hotel's liquor license.
PROFORMA INFORMATION
The following unaudited proforma consolidated balance sheet gives effect
to the dispositions of a majority of
<PAGE>
the assets of Willowbrook Properties and all of capital stock of NBI
Properties, as described in the terms of the sales above. The proforma
information is based on historical financial statements of NBI, Inc. giving
effect to these transactions through adjustments described in the following
explanatory notes to the unaudited proforma statement. The June 30, 1999
unaudited consolidated proforma balance sheet gives effect to these
transactions as if they had occurred on June 30, 1999.
The operations of Willowbrook Properties and NBI Properties were
classified as discontinued operations in the Company's financial statements
for the years ended June 30, 1999 and 1998 as shown in the Company's 1999
Annual Report on Form 10-KSB. The only proforma adjustment to the Company's
historical consolidated statements of income resulting from these sales
transactions is recognition of $299,000 of interest income on the notes
receivable assuming the current two-year Treasury Notes rate plus 200 basis
points of 7.875%.
<TABLE>
<CAPTION>
UNAUDITED PROFORMA CONSOLIDATED BALANCE SHEET
June 30, 1999
(amounts in thousands)
Historical Proforma Proforma
NBI, Inc. Adjustments NBI, Inc.
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $311 $600 A $500
(33)B
1,400 D
(1,778)H
Trading securities 36 36
Accounts receivable, net 1,243 1,243
Inventories 2,972 2,972
Other current assets 443 443
---------------------------------------------------------------
Total current assets 5,005 189 5,194
Notes receivable -- 2,700 A 3,800
1,100 D
Property and equipment, net 4,140 4,140
Deferred tax asset -- 696 G 696
Other assets 9 9
Net long-term assets of
discontinued operations 3,666 (2,082)A 9
(1,575)D
---------------------------------------------------------------
$12,820 $1,028 $13,848
===============================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and
current portion of notes pay $1,719 $1,719
Current portion of IRS debt
and other income taxes pay 1,788 44 C 242
188 F
(1,778)H
Accounts payable 1,372 30 B 1,447
45 E
Accrued liabilities 726 726
Net current liabilities of
discontinued operations 173 79 D 252
---------------------------------------------------------------
Total current liabilities 5,778 (1,392) 4,386
Long-term liabilities:
Notes payable 260 260
Deferred income taxes 92 (92)D --
Postemployment disability benefits
and other 264 264
Deferred gain on sale -- 1,218 A 2,048
(63)B
938 D
(45)E
---------------------------------------------------------------
Total liabilities 6,394 564 6,958
---------------------------------------------------------------
Stockholders' equity:
Preferred stock 5 5
Capital in excess of par
value - preferred 4,562 4,562
Common stock 101 101
Capital in excess of par
value - common 6,561 6,561
Retained earnings (deficit) (3,935) (44)C (3,471)
(188)F
696 G
Less treasury stock at cost (868) (868)
---------------------------------------------------------------
Total stockholders' equity 6,426 464 6,890
---------------------------------------------------------------
$12,820 $1,028 $13,848
===============================================================
</TABLE>
<PAGE>
EXPLANATORY NOTES TO PROFORMA BALANCE SHEET
(A) To record the gross proceeds from the sale of Willowbrook Properties'
land and construction-in-progress. Subsequent to June 30, 1999, net additions
of approximately $250,000 were completed on the construction and were
contemplated in the sales price of the property. Therefore, the actual
deferred gain expected from this sale will decrease by this amount. These
additions are net of the construction costs funded by advances from the
Company's CEO.
(B) To accrue the estimated selling expenses related to the Willowbrook
Properties' sale consisting of 50% of the transfer taxes, legal and other
professional fees.
(C) To accrue the estimated state and federal income taxes related to the
Willowbrook Properties' sale transaction.
(D) To record gross proceeds from the sale of all of the capital stock of
NBI Properties, Inc.
(E) To accrue the estimated selling expenses related to the sale of NBI
Properties' stock including legal and other professional fees.
(F) To accrue the estimated state and federal income taxes related to the
Willowbrook Properties' sale transaction.
(G) To record the deferred tax asset for the timing difference related to
the gains on both the Willowbrook Properties' and NBI Properties' sales. For
tax purposes, these gains are recognized currently, where as for financial
statement purposes these gains will be deferred.
(H) To record payment of the Company's IRS debt from the proceeds of the
Willowbrook Properties' and NBI Properties' sales transactions.
FAIRNESS OPINION
SUMMARY
Wolk Valuation Consultants, Inc. has issued a fairness opinion dated
November 4, 1999, regarding the Company's proposed sale of a majority of the
assets of Willowbrook Properties and all of the capital stock of NBI
Properties and has concluded that the transaction is fair to NBI, Inc. from a
financial point of view.
WOLK VALUATION CONSULTANTS, INC.
Wolk Valuation Consultants, Inc. is a Pittsburgh firm specializing in
financial and economic research and consulting, principally regarding the
valuation of closely held businesses and related interests.
The firm conducts valuation studies of public and private companies for a
variety of purposes, including: litigation, sale, equitable distribution,
ESOPs, buy/sell, estate and gift tax, and mergers and acquisitions. In
addition, the firm possesses considerable litigation support capabilities,
especially in rendering forensic expertise in loss measurement in commercial
disputes and lender liability claims, and fair consideration opinions in
leveraged buy-out, insider transaction and fraudulent conveyance matters.
MARK I. WOLK, A.S.A., A.E.P, is the founder and President of Wolk
Valuation Consultants, Inc., a business valuation and litigation support firm,
and of Mark I. Wolk and Associates, P.C., an accounting firm specializing in
taxation. He is a practicing Certified Public Accountant with over forty years
of experience. He has participated extensively in valuation studies of
closely held companies, including the rendering of expert testimony in court
and taking part in settlement negotiations.
Mr. Wolk is an Accredited Senior Appraiser (A.S.A.), Business Valuation
Division, of the American Society of Appraisers, a national professional
organization comprised of appraisal specialists. The designation of A.S.A. is
achieved only after meeting Society criteria, including: written examinations,
submission of representative appraisal reports, a minimum of five years of
full-time valuation experience and screening of applicants' practices and
ethics.
<PAGE>
He is also a former President of the Estate Planning Council of Pittsburgh,
Former Director of the Family Firm Institute, and is a member of the Allegheny
Tax Society and the Pittsburgh Tax Club. In addition, he has lectured
extensively on the subjects of valuation, utilization of computers in
forecasting and decision-making, accountancy and taxation, financial planning
and public speaking. Mr. Wolk is also a member of the Business Valuation
Committee of the Pennsylvania Institute of Certified Public Accountants.
NOREEN DORNENBURG, M.B.A., PH.D. is a Consultant at Wolk Valuation
Consultants, Inc. She has been a consultant in the fields of Business
Strategy and Business Ethics for over fifteen years in Pittsburgh and Denver,
and has taught on the faculties of eight major colleges and universities
across the United States. She has addressed dozens of national conferences on
a variety of topics in the fields of leadership, strategy, management and
business ethics and has published three professional articles in the area of
business ethics.
Dr. Dornenburg earned her Ph.D. at Yale University in 1972 and her M.B.A.
from the University of Colorado-Boulder. Her undergraduate degree is a B.A.
from Seton Hill College, Greensburg, PA. She is a candidate member of the
American Society of Appraisers and a member of the Academy of Management and
the Society for Business Ethics.
FAIRNESS OPINION
November 4, 1999
Board of Directors
NBI, Inc.
1880 Industrial Circle - Suite F
Longmont, CO 80501
Re: Proposed Purchase of the Assets of Willowbrook Development, Inc.
and 100% of the Capital Stock of NBI Properties, Inc.
Members of the Board:
You have asked us to advise you with respect to the fairness from a financial
point of view to NBI, Inc. (the "Company") of the consideration to be received
by the Company pursuant to the terms of the proposed transaction (the
"Transaction") with regard to the above referenced assets and entities as more
completely described below, between the Company and two entities in which the
Company's Chief Executive Officer, Mr. Jay Lustig, will hold an ownership
interest: Tybojen, Inc., a to be formed S-Corporation ( Tybojen ), and
Bellevue Partners, LP, a to be formed limited partnership. Our understanding
of the Transaction is as follows:
1. Tybojen will purchase 100% of the capital stock of NBI Properties, Inc.
from NBI, Inc. for a purchase price of $2,500,000. The purchase price will be
paid in two parts: $1,400,000 in cash upon purchase and a note for $1,100,000
due and payable on December 31, 2006. In addition, NBI, Inc. agrees to allow
a step-up in tax basis to Tybojen through a Section 338(h)(10) election.
2. Bellevue Partners, LP will purchase the assets of Willowbrook
Properties, Inc. (land and construction-in-progress) for a purchase price of
$3,300,000. The purchase price will be paid in two parts: $600,000 in cash
upon purchase and a note for $2,700,000, in connection with a loan due to NBI,
Inc. from Willowbrook Properties, Inc., due and payable on December 31, 2006.
Prior to and after the date of the Transaction, Mr. Lustig has and will
advance certain amounts for payment of ongoing construction costs at the
Willowbrook site. These amounts are to be deemed expenses of the buyer and
are not included in the purchase price.
3. The terms of the notes in each purchase are as follows:
a. INTEREST RATE: Two-Year U. S. Treasury rate plus 200 basis points,
with the rate to be determined on the closing date for the remainder of
calendar year 1999 and all of calendar year 2000, and to be re-
<PAGE>
determined each succeeding December 31 for the following
year's interest rate.
b. PAYMENTS: Interest only with a balloon payment due on
December 31, 2006.
c. COLLATERAL: Second security interest in the Willowbrook property,
subordinate to the Three Rivers Bank security interest securing the
construction loan and a second security interest in the property known as the
Belle Vernon Holiday Inn, subordinate to its current mortgage. (It is our
understanding that Mr. Jay Lustig will also personally guarantee the Three
Rivers Bank construction loan for the Willowbrook site.)
d. OTHER: The respective notes are due in full at the option of NBI, Inc.
upon a change in control of the purchaser of either property.
In connection with our analysis, you have furnished us with certain documents
and other information concerning the Company, the assets to be sold and the
proposed purchasers as we requested. We have performed such studies, analyses
and inquiries as considered appropriate. Among other items we have
considered, we have:
1) Read current and historical financial information with respect to the
results of operations, including: audited financial statements of NBI, Inc.
for fiscal years ended June 30, 1996, 1997, 1998 and 1999; audited and
unaudited financial statements for the Belle Vernon Motel Corporation prior to
its purchase by NBI Properties, Inc. and CPA-reviewed financial statements for
NBI Properties Inc. for fiscal years 1997, 1998 and 1999; consolidating
worksheets for NBI, Inc. and its subsidiaries for FYE 1999; and development
costs for Willowbrook Properties, Inc. through October, 1999;
2) Read certain publicly available business and financial information
relating to the Company for recent years and interim periods to date,
including the Company's Annual Reports for the years ended June 30, 1996,
1997, 1998 and 1999, the Company's prospectus for its Series A Cumulative
Preferred Stock Offering dated November 9, 1998, related SEC filings, and
drafts of proposed SEC filings for 1999;
3) Read certain internal financial and operating information, including
financial forecasts and projections, prepared by management of the Company and
by Michael Joseph Development Company;
4) Held telephone conferences with management and senior personnel to
discuss the business, operations, assets, historical financial situation and
future strategic goals of the Company, including its significant Federal tax
arrearages;
5) Performed an analysis of the impact of the Transaction on projected
future earnings of the Company;
6) Considered the appraisals and appraisal updates of the relevant
properties submitted by Lodging Evaluation Group and RTA Group, Inc. as well
as development projections for Willowbrook Plaza through September, 1999
submitted by Michael Joseph Development Corporation; and
7) Conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In our analysis and in formulating our opinion, we have assumed and relied
upon the accuracy and completeness of all the financial and other information
provided to us or publicly available, and we have not assumed any
responsibility for the independent verification of such information. We have
further relied upon the assurances of management of the Company that they are
unaware of any facts that would make the information provided to us incomplete
or misleading in any respect. We have assumed, pursuant to the terms of our
engagement, that the financial forecasts and projections provided to us by the
Company were prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's management. In addition,
we have not conducted a physical inspection of the properties or facilities of
the Company and have not made or obtained an independent valuation or
appraisal of the assets or liabilities of the Company. We express no view
whatever as to the federal, state or local tax consequences of the
Transaction.
Our services to the Company in connection with the Transaction have been
comprised solely of financial advisory services and not accounting, audit or
tax services. Without limiting the foregoing, our services with respect to
the
<PAGE>
Transaction do not constitute, nor should they be construed to constitute in
any way, a review or audit of or any other procedures with respect to any
financial information nor should such services be relied upon by any person to
disclose weaknesses in internal controls, financial statement errors or
irregularities, or illegal acts or omissions of any person affiliated with the
Transaction. Our opinion is necessarily based on economic and market
conditions and other circumstances as they exist and can be evaluated by us on
the date hereof. We shall have no obligation to update the Opinion unless
requested by you in writing to do so and expressly disclaim any responsibility
to do so in the absence of any such request.
Additionally, we have not been engaged to and have not solicited alternative
offers for the Company or its assets, or investigated any other alternative
transactions that may be available to the Company. Our opinion does not
address, nor shall it be construed to address, the underlying business
decision to effect the Transaction.
We have acted as financial advisor to the Company in connection with the
Transaction and will receive a fee for such services. Our only other
involvement with the Company was an independent valuation in 1998 of the L. E.
Smith Glass Company, one of the Company's subsidiaries, for use in the
Company's discussions with the Internal Revenue Service, and for which we were
paid our requested fee.
It is understood that this letter is solely for the benefit and use of the
Board of Directors of the Company in its consideration of the Transaction and
may not be relied upon by any other person, used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose without our prior written consent. In this context, however,
it is understood that the text of this letter will be printed in the Proxy
Statement for the Company's 1999 Annual Stockholders' Meeting. This letter
does not constitute a recommendation to any stockholder with respect to
whether to vote in favor of the Transaction or take any other action in
connection with the Transaction or otherwise, and should not be relied upon by
any stockholder as such.
Based upon and subject to the foregoing, including the various assumptions and
limitations set forth herein, it is our opinion that as of 5:00 pm on the date
hereof the consideration to be received in the Transaction is fair to NBI,
Inc. from a financial point of view.
Very truly yours,
WOLK VALUATION CONSULTANTS, INC.
BUSINESS VALUATION AND LITIGATION SERVICES
By: /s/ Mark I. Wolk
Mark I. Wolk, CPA, ASA, AEP
President
By: /s/ Noreen Dornenburg
Noreen Dornenburg, MBA, PhD
Senior Consultant
VOTE REQUIRED FOR APPROVAL
Because NBI's CEO is an interested party to this transaction, his shares
will not be counted for the vote. The affirmative vote of disinterested
holders of at least a majority of the outstanding shares of the disinterested
holders' 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 the sale of Willowbrook Properties and NBI Properties are not
approved, the sale will not be completed. However, shareholders should be
aware that the Company would then be required to obtain an extension of time
<PAGE>
from the IRS to make the final installment payment of $1.8 million owed. If
an extension could not be obtained, the IRS could declare a default and assess
interest on the debt since the last interest payment thereon (July 1, 1997),
at the statutory rate provided under the Internal Revenue Code, in amount
estimated to total approximately $1 million as of December 31, 1999, and seek
to foreclose upon the stock of NBI Properties and L.E. Smith, the Company's
only other operating subsidiary, in order to obtain payment of the final
installment of $1.8 million and such default interest.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
TERMS AND CONDITIONS OF THE COMPANY'S PLAN TO SELL A MAJORITY OF THE ASSETS OF
WILLOWBROOK PROPERTIES AND ALL OF THE CAPITAL STOCK OF NBI PROPERTIES.
<PAGE>
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 2000 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 July 26, 2000, 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 2000 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 August 31, 2000.
ANNUAL REPORT - FINANCIAL STATEMENTS
A copy of the Company's 1999 Annual Report on Form 10-KSB, including
financial statements for years ended June 30, 1999 and 1998, 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.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents which have been filed with the Commission
pursuant to the Exchange Act (Exchange Act File No. 1-8232) are hereby
incorporated by reference to this Proxy:
(1) the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1999, filed September 20, 1999, and as amended by Form 10-KSB/A
No. 1, filed October 28, 1999.
In addition, all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to December 16,
1999, the date of the Annual Meeting, shall be deemed to be incorporated by
reference in this Proxy.
By order of the Board of Directors
Marjorie A. Cogan
Secretary
Dated: November 26, 1999
<PAGE>
APPENDIX TO PROXY STATEMENT
FORM OF PROXY
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF NBI, INC.
For Annual Meeting on December 16, 1999
The undersigned hereby appoints Marjorie A. Cogan and Martin J. Noonan,
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 October 18, 1999, 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 Thursday,
December 16, 1999, 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 AND 2. 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 and 2.
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. Approval of SALE OF A MAJORITY OF THE ASSETS OF WILLOWBROOK
PROPERTIES AND ALL OF THE CAPITAL STOCK OF NBI PROPERTIES.
_________ For
_________ Against
_________ Withheld
3. 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__________
