SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number
1-8232
Name of Registrant
NBI, INC.
State of Incorporation IRS Employer I. D. Number
Delaware 84-0645110
Address
1880 Industrial Circle, Suite F
Longmont, Colorado 80501
(303) 684-2700
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES [ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 17, 2000
- -------------------------------------- --------------------------------
Common Stock, par value $.01 per share 8,103,320
<PAGE>
NBI, INC.
INDEX TO FORM 10-QSB
For Quarter Ended December 31, 1999
<TABLE>
<CAPTION>
PAGE
_______
PART I - FINANCIAL INFORMATION
<S> <C>
Consolidated Financial Statements (Unaudited) 3 - 6
Supplementary Notes to Consolidated Financial
Statements (Unaudited) 7 - 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations 15 - 18
PART II - OTHER INFORMATION 19
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except Share Data)
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
______________ ________
(Unaudited)
ASSETS
______
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 66 $ 311
Trading securities -- 36
Accounts receivable, less allowance for doubtful
accounts of $240 and $223, respectively 1,330 1,243
Inventories 2,847 2,972
Other current assets 253 443
Net current assets of discontinued operations 59 --
-------- --------
Total current assets 4,555 5,005
Property, plant and equipment, net 4,129 4,140
Note receivable from related party 2,700 --
Other assets 7 9
Net long-term assets of discontinued operations 1,553 3,666
-------- --------
$12,944 $12,820
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Short-term borrowings and current portion
of notes payable $ 1,925 $ 1,719
Current portion of IRS debt and other income taxes payable 1,389 1,788
Accounts payable 1,194 1,372
Accrued liabilities 467 726
Net current liabilities of discontinued operations -- 173
-------- --------
Total current liabilities 4,975 5,778
Long-term liabilities:
Notes payable 195 260
Deferred income taxes 92 92
Postemployment disability benefits 256 264
Deferred gain from sale of discontinued operation, net of taxes 880 --
-------- --------
Total liabilities 6,398 6,394
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock - $.01 par value; 5,000,000 shares authorized;
507,421 and 500,000 shares of Series A Cumulative Preferred
Stock issued and outstanding, respectively (liquidation
preference value of $5,074 and $5,000, respectively) 5 5
Capital in excess of par value - preferred stock 4,632 4,562
Common stock - $.01 par value; 20,000,000 shares
authorized; 10,130,520 and 10,115,520 shares issued, respectively 101 101
Capital in excess of par value - common stock 6,566 6,561
Accumulated deficit (3,890) (3,935)
-------- --------
7,414 7,294
Less treasury stock at cost (2,027,200 shares) (868) (868)
-------- --------
Total stockholders' equity 6,546 6,426
-------- --------
$12,944 $12,820
======== ========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues:
Sales $3,113 $4,331 $6,961 $8,229
------- ------- ------- -------
Costs and expenses:
Cost of sales 2,471 2,942 5,167 5,624
Marketing, general and administrative 734 741 1,479 1,427
------- ------- ------- -------
3,205 3,683 6,646 7,051
------- ------- ------- -------
Income (loss) from operations (92) 648 315 1,178
Other income (expense):
Net gain on investments 9 -- 57 --
Other income and expenses, net 7 2 10 14
Interest expense (49) (45) (97) (96)
------- ------- ------- -------
(33) (43) (30) (82)
------- ------- ------- -------
Income (loss) from continuing operations before
income taxes (125) 605 285 1,096
Income tax benefit (provision) 7 (169) (21) (228)
------- ------- ------- -------
Income (loss) before discontinued operations (118) 436 264 868
Income (loss) from discontinued operations,
net of income tax benefit (provision) of $(3),
$95, $(24) and $89, respectively 5 (185) 33 (184)
------- ------- ------- -------
Net income (loss) (113) 251 297 684
Dividend requirement on preferred stock (126) -- (252) --
------- ------- ------- -------
Income (loss) attributable to common stock $ (239) $ 251 $ 45 $ 684
======= ======= ======= =======
Income (loss) per common share - basic:
Income (loss) before discontinued operations $ (.03) $ .05 $ -- $ .11
Income (loss) from discontinued operations -- (.02) .01 (.03)
------- ------- ------- -------
Net income (loss) $ (.03) $ .03 $ .01 $ .08
======= ======= ======= =======
Income (loss) per common share - diluted:
Income (loss) before discontinued operations $ (.03) $ .05 $ -- $ .10
Income (loss) from discontinued operations -- (.02) .01 (.02)
------- ------- ------- -------
Net income (loss) $ (.03) $ .03 $ .01 $ .08
======= ======= ======= =======
Weighted average number of common
shares outstanding 8,103 8,088 8,102 8,088
======= ======= ======= =======
<FN>
See accompanying notes.
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 297 $ 684
Adjustments to reconcile net income to net cash
flow provided by operating activities:
Depreciation and amortization 483 386
Provision for bad debts and returns 23 42
Provision for (reversal of) writedown of inventory (1) 110
Provision for impairment of property and equipment and other
long-term assets -- 53
Gain on sales of property and equipment -- (8)
Net unrealized gain on trading securities (2) --
Other (8) 12
Changes in assets -- decrease (increase):
Trading securities 38 --
Accounts receivable (126) (486)
Inventory 134 69
Other current assets 201 (70)
Other assets (3) 70
Changes in liabilities -- (decrease) increase:
Accounts payable and accrued liabilities (534) 214
Income tax related accounts (39) 55
------ --------
Net cash flow provided by operating activities 463 1,131
------ --------
Cash flows from investing activities:
Proceeds from sale of land and construction-in-progress,
net of selling expenses 552 --
Proceeds from sales of property and equipment -- 9
Purchases of property and equipment (889) (666)
------ --------
Net cash flow used in investing activities (337) (657)
------ --------
Cash flows from financing activities:
Collections on note receivable 20 4
Proceeds from issuance of preferred stock, net of offering costs -- 4,848
Dividends paid on preferred stock (182) --
Proceeds from stock option exercises 5 --
Payments on notes payable and line of credit from CEO (177) (131)
Net borrowings (payments) on line of credit 307 (102)
Payments on IRS debt (400) (3,500)
------ --------
Net cash flow provided by (used in) financing activities (427) 1,119
------ --------
Net increase (decrease) in cash and cash equivalents (301) 1,593
Less change in cash and cash equivalents included in net current assets
or liabilities of discontinued operations 56 (22)
Cash and cash equivalents at beginning of period 311 209
------ --------
Cash and cash equivalents at end of period $ 66 $ 1,780
====== ========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
NBI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1999 1998
<S> <C> <C>
Supplemental disclosures of cash flow information:
Interest paid $ 159 $137
====== ====
Income taxes paid $ 80 $ 51
====== ====
Noncash purchases of property, plant and equipment included in
accounts payable at end of period $ 101 $237
====== ====
Noncash issuance of note receivable for sale of land and
construction-in-progress $2,700 $ --
====== ====
Deferred gain recorded from sale of discontinued operation,
net of taxes $ 880 $ --
====== ====
Preferred stock dividends paid in-kind $ 70 $ --
====== ====
<FN>
See accompanying notes.
</TABLE>
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Preparation
- ----------------------------------
The accompanying financial statements have been prepared in accordance with
the requirements of Form 10-QSB and include all adjustments (consisting of all
normal recurring adjustments) which in the opinion of management are necessary
in order to make the financial statements not misleading. The consolidated
financial statements include the accounts of the Company and its wholly-owned
and majority-owned subsidiaries. All significant intercompany accounts and
profits have been eliminated.
Note 2 - Going Concern
- --------------------------
As discussed in Note 8, the remaining balance of $1.8 million of the Company's
debt to the Internal Revenue Service ("IRS") was due on December 31, 1999. On
December 30, 1999, the Company paid the IRS $400,000 and as of December 31,
1999, $1,378,000 of the IRS debt was still outstanding. On January 5, 2000,
the IRS sent NBI notice of a default of its amended payment agreement with the
IRS dated April 8, 1998, due to the Company's failure to pay the remaining
$1,378,000 that was due on December 31, 1999. Per the terms of the agreement,
an event of default occurred on January 20, 2000, fifteen days after written
notice and demand from the IRS to NBI. Because an event of default has
occurred, the IRS has the right to declare the remaining principal amount due
and payable and interest thereon at the statutory rate provided under the
Internal Revenue Code since the last interest payment made by NBI, on July 1,
1997, under the original agreement, and to pursue any other available
remedies. On February 18, 2000, the Company paid the IRS $500,000 from a
deposit received from its CEO, Jay Lustig, related to NBI's pending sale of
all of the capital stock of a wholly-owned subsidiary, NBI Properties, Inc.
("NBI Properties") to an entity which is 100% owned and controlled by Mr.
Lustig. The Company is currently in discussions with the IRS in an effort to
obtain an extension on the remaining balance of $878,000, or to otherwise
satisfy its obligations. However, there can be no assurance that the Company
will be able to obtain an extension or satisfy its obligations. In order to
pay the remaining amount outstanding, management intends to generate
sufficient cash through the sale of the stock of NBI Properties; however,
there can be no assurance that the Company will be able to complete a sale of
this stock. This condition raises substantial doubt about the Company's
ability to continue as a going concern. The accompanying financial statements
do not contain any adjustments that might result from the outcome of this
uncertainty. Management believes that after the Company has sold the stock of
NBI Properties and pays off its IRS debt, it will generate sufficient future
cash flows from its remaining operations to allow the Company to be a going
concern. (See Notes 4, 8 and 13).
Note 3 - Cash and Cash Equivalents
- ----------------------------------------
Cash and cash equivalents include investments that are readily convertible to
known amounts of cash and have original maturities of three months or less.
The Company places its cash and temporary cash investments with financial
institutions. At times, such investments may be in excess of federally
insured limits.
Note 4 - Discontinued Operations
- ------------------------------------
On December 31, 1998, the Company established a plan to dispose of its Krazy
Colors, Inc. ("Krazy Colors") operation due to continuing losses incurred by
the operation, as well as the business' inability to sustain significant
long-term customers. On August 19, 1999, the Board of Directors voted to sell
the assets or stock of its wholly-owned subsidiaries, NBI Properties and
Willowbrook Properties, in order to pay the remaining balance of the IRS debt
due on December 31, 1999 (see Notes 2 and 8). Therefore, the Company has
discontinued its children's paint manufacturing, hotel and real estate
development operations, and it has separately reported the income or loss from
these segments as discontinued operations for the quarters and six months
ended December 31, 1999 and 1998 as follows:
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Children's Real
Paint Hotel Estate
Manufacturing Operation Development Total
------------ --------- ----------- ------
(Amounts in thousands)
<S> <C> <C> <C> <C>
For the Quarter Ended December 31, 1999:
Revenues from discontinued operations $ -- $ 605 $-- $ 605
====== ======= ==== =======
Income (loss) from discontinued operations
before income taxes $ -- $ 9 $(1) $ 8
Income tax provision -- (3) -- (3)
------ ------- ---- -------
Net income (loss) from operations -- 6 (1) 5
Loss on disposal -- -- -- --
------ ------- ---- -------
Net income (loss) from discontinued operations $ -- $ 6 $(1) $ 5
====== ======= ==== =======
For the Quarter Ended December 31, 1998:
- -------------------------------------------------
Revenues from discontinued operations $ 64 $ 573 $-- $ 637
====== ======= ==== =======
Loss from discontinued operations
before income taxes $ (60) $ (21) $(1) $ (82)
Income tax benefit 20 8 -- 28
------ ------- ---- -------
Net loss from operations (40) (13) (1) (54)
------ ------- ---- -------
Loss on disposal, including loss from operations
from January 1, 1999 through disposition of
$18 for the children's paint manufacturing (198) -- -- (198)
Income tax benefit 67 -- -- 67
------ ------- ---- -------
Net loss on disposal (131) -- -- (131)
------ ------- ---- -------
Net loss from discontinued operations $(171) $ (13) $(1) $ (185)
====== ======= ==== =======
For the Six Months Ended December 31, 1999:
- -------------------------------------------------
Revenues from discontinued operations $ 21 $1,291 $-- $1,312
====== ======= ==== =======
Income (loss) from discontinued operations
before income taxes $ -- $ 58 $(1) $ 57
Income tax provision -- (24) -- (24)
------ ------- ---- -------
Net income (loss) from operations -- 34 (1) 33
Loss on disposal -- -- -- --
------ ------- ---- -------
Net income (loss) from discontinued operations $ -- $ 34 $(1) $ 33
====== ======= ==== =======
</TABLE>
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Children's Real
Paint Hotel Estate
Manufacturing Operations Development Total
------------- ---------- ----------- -----
(Amounts in thousands)
<S> <C> <C> <C> <C>
For the Six Months Ended December 31, 1998:
- -------------------------------------------
Revenues from discontinued operations $ 95 $1,252 $-- $1,347
====== ======= ==== =======
Income (loss) from discontinued operations
before income taxes $(125) $ 52 $(2) $ (75)
Income tax benefit (provision) 43 (21) -- 22
------ ------- ---- -------
Net income (loss) from operations (82) 31 (2) (53)
Loss on disposal, including loss from operations
from January 1, 1999 through disposition of
$18 for the children's paint manufacturing (198) -- -- (198)
Income tax benefit 67 -- -- 67
------ ------- ---- -------
Net loss on disposal (131) -- -- (131)
------ ------- ---- -------
Net loss from discontinued operations $(213) $ 31 $(2) $ (184)
====== ======= ==== =======
</TABLE>
In determining the loss on disposal of its children's paint manufacturing
operation, which was recorded during the quarter ended December 31, 1998, the
Company estimated the net realizable value of the disposal of the discontinued
operation, including estimated costs and expenses directly associated with the
disposal and the estimated loss from operations through the expected disposal
date. The Company expects a significant gain overall from the discontinued
operations of both the hotel and land development, and therefore, no amount
has been recorded related to these disposals; the gain will be recognized when
realized.
The disposal of the children's paint manufacturing operation was substantially
complete as of September 30, 1999. On December 17, 1999, the Company sold a
majority of the assets of its real estate development, consisting of land and
construction-in-progress, to an entity which is 100% owned and controlled by
its CEO. The Company intends to sell all of the capital stock of NBI
Properties to an entity which is 100% owned and controlled by its CEO. (See
Note 13).
The net long-term assets of discontinued operations at December 31, 1999
consisted primarily of the hotel's building and furniture, fixtures and
equipment, net of a long-term mortgage note payable by the hotel. The net
current assets of discontinued operations at December 31, 1999 consisted
primarily of cash balances net of accounts payable and accrued liabilities.
Note 5 - Investments in Securities and Obligations from Short-Sale
- ---------------------------------------------------------------------------
Transactions
- ------------
During the three and six months ended December 31, 1999, all of the Company's
securities were classified as trading securities; no securities were
classified as held-to-maturity or available-for-sale. The Company recorded a
realized gain of $9,000 and no unrealized gain or loss for the quarter ended
December 31, 1999. Realized and unrealized investment gains of $55,000 and
$2,000, respectively, were recorded for the six months ended December 31,
1999. The Company held no investments and had no realized or unrealized gains
or losses for the quarter or six months ended December 31, 1998.
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5 - Investments in Securities and Obligations from Short-Sale
- ---------------------------------------------------------------------------
Transactions (cont'd)
- ---------------------
As part of its investment policies, the Company's investment portfolio may
include option instruments and may include a concentrated position in one or
more securities. As a result of this, the financial results may fluctuate
significantly and have larger fluctuations than with a more diversified
portfolio. In addition, the Company may invest in short-sale transactions of
trading securities. Short-sales can result in off-balance sheet risk, as
losses can be incurred in excess of the reported obligation if market prices
of the securities subsequently increase. At December 31, 1999, the Company
had no investment positions.
Note 6 - Inventories
- -----------------------
Inventories are comprised of the following amounts which are presented net of
reserves totaling $226,000:
<TABLE>
<CAPTION>
December 31,
1999
----
(Amounts in thousands)
<S> <C>
Raw materials $812
Work in process 388
Finished goods 1,647
-------
$2,847
=======
</TABLE>
Note 7 - Note Receivable from Related Party
- --------------------------------------------------
In conjunction with the sale of Willowbrook Properties' land and
construction-in-progress (see Notes 4 and 13), on December 17, 1999, the
Company received a note receivable in the amount of $2.7 million from an
entity which is 100% owned and controlled by Jay Lustig, NBI's CEO. The note
bears interest at the rate of two-year Treasury Notes plus 200 basis points
with a rate of 8.14% determined at closing 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 is 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.
Note 8 - Income Taxes
- -------------------------
IRS Debt:
- ----------
On April 28, 1998, the Company and the IRS entered into an amended payment
agreement, revising the payment terms related to NBI Inc.'s IRS debt of
$5,278,000. This agreement, effective April 9, 1998, revised the terms of the
agreement in principal with the IRS effective October 1, 1995 and the original
settlement agreement with the IRS dated June 12, 1991, with respect to NBI's
federal tax liabilities for the fiscal years ended June 30, 1980 through 1988.
Under the current agreement, $3,500,000 of the IRS debt was due and paid on
December 31, 1998, and the remaining balance of $1,778,000 was due on December
31, 1999. On December 30, 1999, the Company paid the IRS $400,000 and as of
December 31, 1999, $1,378,000 of the IRS debt was still outstanding. On January
5, 2000, the IRS sent NBI notice of a default of its amended payment agreement
with the IRS dated April 8, 1998, due to the Company's failure to pay the
remaining $1,378,000 that was due on December 31, 1999. Per the terms of the
agreement, an event of default occurred on January 20, 2000, fifteen days after
written notice and demand from the IRS to NBI. Because an event of default has
occurred, the IRS has the right to declare the remaining principal amount due
and payable and interest thereon at the statutory rate provided under the
Internal
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8 - Income Taxes (cont'd)
- -----------------------------------
IRS Debt: (cont'd)
- --------------------
Revenue Code since the last interest payment made by NBI, on July 1, 1997,
under the original agreement, and to pursue any other available remedies. On
February 18, 2000, the Company paid the IRS $500,000 from a deposit received
from its CEO, Jay Lustig, related to NBI's pending sale of all of the capital
stock of NBI Properties to an entity which is 100% owned and controlled by Mr.
Lustig. The Company is currently in discussions with the IRS in an effort to
obtain an extension on the remaining balance of $878,000, or to otherwise
satisfy its obligations. However, there can be no assurance that the Company
will be able to obtain an extension or satisfy its obligations. In order to pay
the remaining amount outstanding, management intends to generate sufficient
cash through the sale of the stock of NBI Properties; however, there can be no
assurance that the Company will be able to complete a sale of this stock. This
condition raises substantial doubt about the Company's ability to continue as a
going concern. Management believes that after the Company has sold the stock
of NBI Properties and pays off its IRS debt, it will generate sufficient future
cash flows from its remaining operations to allow the Company to be a going
concern. (See Notes 2, 4 and 13). The IRS debt continues to be collateralized
by a security interest in all of the capital stock of American Glass, Inc.,
d/b/a L.E. Smith Glass Company ("L.E. Smith") and NBI Properties.
Income tax provision:
- -----------------------
The Company recorded an income tax benefit from continuing operations of
$7,000 and an income tax provision of $21,000 for the three and six months
ended December 31, 1999, respectively. For the three and six months ended
December 31, 1998, the Company recorded income tax provisions from continuing
operations of $169,000 and $228,000, respectively. These benefits and
provisions include state and other income taxes and are based upon book
income.
In accordance with fresh start accounting, which was adopted as of April 30,
1992, and as a result of the Company's reorganization under Chapter 11 of the
U.S. Bankruptcy Code, utilization of any income tax benefit from
pre-reorganization net operating losses is not credited to the income tax
provision, but rather, reported as an addition to capital in excess of par
value. No pre-reorganization net operating losses were utilized for the three
or six months ended December 31, 1999 or 1998.
Willowbrook Properties' Sale:
- -------------------------------
During the three months ended December 31, 1999, the Company recorded a
taxable gain of approximately $920,000 from the sale of a majority of the
assets of Willowbrook Properties, Inc. ("Willowbrook Properties"), whereas,
the gain has been deferred for financial statement purposes (see Note 13).
NBI does not expect to incur any federal income taxes payable from this gain,
due to the availability of post-reorganization capital loss carryforwards.
However, it does expect to incur approximately $40,000 of Pennsylvania state
income taxes on this gain because Willowbrook Properties' does not have
sufficient Pennsylvania net operating loss carryforwards available to offset
the entire gain. The income tax expense has been netted against the deferred
gain on the sale.
Note 9 - Stockholders' Equity
- ---------------------------------
The Company has authorized 20,000,000 shares of $.01 par value common stock.
At December 31, 1999, 10,130,520 shares were issued including 2,027,200 held
in treasury. Therefore, the Company had 8,103,320 shares issued and
outstanding at December 31, 1999.
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9 - Stockholders' Equity
- ---------------------------------
The Company has authorized 5,000,000 shares of preferred stock with a par
value of $.01 per share, and has designated 2,000,000 preferred shares as
Series A Cumulative Preferred Stock. At December 31, 1999, 507,421 shares of
Series A Cumulative Preferred Stock were issued and outstanding.
On August 19, 1999, the Board of Directors declared the first semi-annual
dividend on its outstanding Series A Cumulative Preferred Stock to holders of
record as of August 19, 1999. On September 3, 1999, $252,000 in dividends
were paid, consisting of $182,000 in cash and 7,421 in additional shares of
preferred stock, valued at $70,000, per the elections of the holders.
Note 10 - Income Per Common Share
- ---------------------------------------
The Company reports earnings per common share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128 issued by the Financial
Accounting Standards Board. The following reconciles the numerators and
denominators of the basic and diluted earnings per common share computation
for income before discontinued operations:
<TABLE>
<CAPTION>
For the quarters ended
December 31,
1999 1998
---- ----
Basic Diluted Basic Diluted
----- ------- ----- -------
(Amounts in thousands
except per share data)
<S> <C> <C> <C> <C>
Income (loss) before discontinued operations $ (118) $ (118) $ 436 $ 436
Dividend requirement on preferred stock (126) (126) -- --
------- ------- ------ ------
Income (loss) before discontinued operations
attributable to common stock $ (244) $ (244) $ 436 $ 436
======= ======= ====== ======
Weighted average number of common
shares outstanding 8,103 8,103 8,088 8,088
======= ======
Assumed conversions of stock options -- 295
------- ------
8,103 8,383
======= ======
Income (loss) per common share
before discontinued operations $ (.03) $ (.03) $ .05 $ .05
======= ======= ====== ======
<FN>
Because the Company incurred a loss before discontinued operations for the
quarter ended December 31, 1999, none of its outstanding options or warrants
were included in the computation of diluted earnings per share, as their
effect would be anti-dilutive. For the quarter ended December 31, 1998, all
of the Company's outstanding options and warrants were included in the
computation of diluted earnings per share because their exercise price was
less than the average market price of the common stock during such period.
</TABLE>
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended
December 31,
1999 1998
---- ----
Basic Diluted Basic Diluted
----- ------- ----- -------
(Amounts in thousands
except per share data)
<S> <C> <C> <C> <C>
Income before discontinued operations $ 264 $ 264 $ 868 $ 868
Dividend requirement on preferred stock (252) (252) -- --
------- ------- ------ ------
Income before discontinued operations
attributable to common stock $ 12 $ 12 $ 868 $ 868
======= ======= ====== ======
Weighted average number of common
shares outstanding 8,102 8,102 8,088 8,088
======= ======
Assumed conversions of stock options 136 274
------- ------
8,238 8,362
======= ======
Income per common share
before discontinued operations $ -- $ -- $ .11 $ .10
======= ======= ====== ======
<FN>
For the six months ended December 31, 1999, only stock options outstanding
with an exercise price of $.38, $.59 and $.77 per share were included in the
computation of diluted earnings per share because their exercise price was
less than the average market price of the common stock during such period.
For the six months ended December 31, 1998, all of the Company's outstanding
options and warrants were included in the computation of diluted earnings per
share because their exercise price was less than the average market price of
the common stock during such period.
</TABLE>
The options and warrants outstanding at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Number
Exercise Outstanding at
Price December 31, 1999
----- -------------------
Stock options:
<S> <C> <C>
.38 201,000
.59 100,500
.77 400,000
.88 244,000
Warrants:
.89 1,700,000
1.20 1,000,000
---------
3,645,500
=========
</TABLE>
<PAGE>
NBI, INC.
SUPPLEMENTARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 11 - Comprehensive Income
- ----------------------------------
Effective July 1, 1998, the Company has adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." Comprehensive income includes all
changes in equity except those resulting from investments by owners and
distributions to owners. For the three and six months ended December 31, 1999
and 1998, the Company had no items of comprehensive income other than net
income; therefore, a separate statement of comprehensive income has not been
presented for these periods.
Note 12 - Seasonal Variations of Operations
- -------------------------------------------------
Excluding the effect of its significant customer, L.E. Smith typically has its
strongest revenue performance during the first and second fiscal quarters due
to seasonal variations. Generally, the fourth fiscal quarter's revenue is
moderately lower than in the first and second quarters, while the third fiscal
quarter's revenue is usually significantly lower than the other quarters.
However, historically these trends have been materially affected by
fluctuations in the timing of orders from its significant customer, which does
not have consistent trends.
Note 13 - Related Party Transactions
- -----------------------------------------
On December 17, 1999, the Company closed on the sale of a majority of the
assets of a wholly-owned subsidiary, Willowbrook Properties, to an entity
which is 100% owned and controlled by NBI's CEO. The terms and conditions of
the sale were previously approved at NBI's Annual Meeting of Stockholders held
on December 16, 1999. The Company has accounted for the sale in accordance
with SFAS No. 66, "Accounting for Sales of Real Estate." The terms of the
sale do not meet the requirements of SFAS No. 66 for recognition of gain until
the purchase price is paid in full in cash. Consequently, the Company
recorded a deferred gain on the sale of $880,000, as of December 31, 1999,
which is net of selling expenses of approximately $48,000 and net of
approximately $40,000 of related income taxes. The sale consisted of land and
construction-in-progress and was for a net purchase price of $3.3 million.
The purchase price was net of construction costs which were previously funded
by advances from Mr. Lustig. Concurrently with the closing of the Willowbrook
Properties sale transaction, such amounts were deemed to be expenses of the
buyer. The purchase price was paid by $600,000 in cash and a note payable in
the amount of $2.7 million. (See Notes 4, 7 and 8.)
In December, 1999, the Company paid Mr. Lustig approximately $148,000
consisting of repayment of a revolving line of credit balance of $100,000,
cumulative accrued interest thereon of $25,000 and an accrued bonus from
fiscal 1997 of $23,000.
Mr. Lustig has proposed to purchase all of the capital stock of NBI Properties
for $1,400,000 in cash and a note payable of $1.1 million. The terms and
conditions of the sale were approved at NBI's Annual Meeting of Stockholders
held on December 16, 1999. On February 18, 2000, Mr. Lustig paid the Company
a deposit of $500,000 related to this proposed purchase. Mr. Lustig is
currently working on obtaining the funds to enable him to close on this
transaction.
<PAGE>
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER, FISCAL YEAR 2000
The statements in this discussion contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, that are not
historical facts. The forward-looking statements are based upon the Company's
current expectations and are subject to known and unknown risks,
uncertainties, assumptions and other factors. Should one or more of such
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, the actual results could differ materially from those contemplated
by the forward-looking statements. Factors that may affect such
forward-looking statements include, among others, ability to obtain financing,
loss of significant customers, reliance on key personnel, competitive factors
and pricing pressures, availability of raw materials, labor disputes,
investment results, limitations on the utilization of net operating loss
carryforwards, adequacy of insurance coverage, inflation and general economic
conditions.
RESULTS OF OPERATIONS
Revenues from continuing operations totaling $3,113,000 for the second quarter
of fiscal 2000 reflected a decrease of $1.2 million, or 28.1%, from
$4,331,000 for the three months ended December 31, 1998. L.E. Smith
experienced a substantial decline, $1,044,000, in revenue from its largest
customer, as well as a decline of $215,000 in revenue from a customer that
declared Chapter 11 bankruptcy in March 1999. Although the Company expected a
substantial decline in revenues from its largest customer, the decline has
been far more severe than originally expected. Revenues from continuing
operations totaled $7.0 million for the six months ended December 31, 1999, a
decline of $1.2 million or 15.4%, compared to $8.2 million in revenues for the
same period in fiscal 1999, resulting from a decline of approximately
$1,335,000 in revenue from L.E. Smith's largest customer and a decline of
$317,000 in revenue from its customer that declared Chapter 11 bankruptcy in
March 1999. However, these declines were partially offset by sustained
revenue growth from its other customers.
Revenues from continuing operations are expected to decline significantly for
the three months ended March 31, 2000, compared to the same period in the
prior fiscal year, because L.E. Smith expects a substantial decline in revenue
from its largest customer which is expected to only be partially offset by
increased business from its other customers. Revenues from continuing
operations are expected to increase minimally for the third quarter of fiscal
2000 compared to the second quarter of fiscal 2000. Although the Company
expects a substantial decline in revenue from its largest customer during the
third quarter of fiscal 2000 compared to the same period in the prior year, it
expects a significant increase in revenues from this customer compared to the
second quarter of fiscal 2000. This improvement is expected to be
significantly offset by a decline in revenues anticipated due to seasonal
variations. The Company is still in the process of hiring a new sales
representative to concentrate on increasing the volume of the glass decorating
business in order to help offset the effect of the continuing decline in
revenues from L.E. Smith's largest customer.
Cost of sales from continuing operations as a percentage of related revenue
was 79.4% for the quarter ended December 31, 1999, compared to 67.9% for the
same period in fiscal 1999. For the six months ended December 31, 1999 and
1998, cost of sales from continuing operations as a percentage of related
revenue was 74.2% and 68.3%, respectively. The related significant decline in
gross margin was primarily due to a substantial decline in revenue volume
available to cover fixed costs, as well as higher depreciation expense,
resulting from a significant amount of capital improvements made in the prior
fiscal year, and general cost increases including significant increases in its
health and workmen's compensation insurance costs.
Cost of sales from continuing operations as a percentage of related revenue
for the third quarter of fiscal 2000 is expected to be moderately higher
compared to the third quarter of fiscal 1999, due to significantly higher
depreciation expense, general cost increases and a substantial decline in
expected sales volume causing unfavorable absorption of fixed costs. Cost of
sales from continuing operations as a percentage of related revenue for the
third quarter of fiscal 2000 is expected to be moderately lower compared to
the second quarter of fiscal 2000, primarily due to moderately lower labor
costs resulting from fewer holidays and the absence of year-end bonuses, as
well as an expected change in the sales mix.
<PAGE>
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER, FISCAL YEAR 2000 - CONTINUED
Marketing, general and administrative expenses from continuing operations
totaled $734,000 and $741,000 for the three months ended December 31, 1999 and
1998, respectively. Fiscal year-to-date, marketing, general and
administrative expenses from continuing operations increased $52,000, or 3.6%
to $1,479,000 for the six months ended December 31, 1999 compared to
$1,427,000 for the same period of fiscal 1999. These modest changes in
marketing, general and administrative expenses included increased sales
commissions and general cost increases as well as savings resulting from cost
control measures and the absence of a CEO bonus accrual. The increased sales
commissions were due to increased sales from outside sales representatives,
while the Company experienced a significant decline in revenues from its
largest customer which is a house account and is not subject to outside sales
commissions.
Marketing, general and administrative expenses are expected to increase
significantly for the three months ended March 31, 2000, compared to the same
period in the prior fiscal year resulting primarily from higher commissions,
due to the expected sales mix, general cost increases and the absence of
credits related to the reversal of a CEO bonus accrual and reduction of a
reserve for incurred but not reported claims of a previously self-insured
insurance plan, slightly offset by savings from cost control measures.
Marketing, general and administrative expenses are expected to decrease
moderately for the three months ended March 31, 2000, compared to the second
quarter of fiscal 2000 due to lower commissions from expected sales mix
variations and the absence of annual meeting costs and year-end bonuses,
partially offset by general cost increases.
For the three and six months ended December 31, 1999, the Company recorded
realized gains on investments of $9,000 and $55,000, respectively, and
unrealized gains on investments of $0 and $2,000, respectively compared to no
gain or loss on investments for the same periods in the prior fiscal year. As
part of its investment policy, the Company's investment portfolio may include
investments in option instruments and may include a concentrated position in
one or more securities. As a result of this, the financial results may
fluctuate significantly and have larger fluctuations than with a more
diversified portfolio. In addition, the Company may invest in short-sale
transactions of trading securities. Short-sales can result in off-balance
sheet risk, as losses can be incurred in excess of the reported obligation if
market prices of the securities subsequently increase. At December 31, 1999,
the Company had no investment positions.
The Company recorded an income tax benefit from continuing operations of
$7,000 and an income tax provision of $21,000 for the three and six months ended
December 31, 1999, respectively. For the three and six months ended December
31, 1998, the Company recorded income tax provisions from continuing
operations of $169,000 and $228,000, respectively. These benefits and
provisions include state and other income taxes and are based upon book
income. The state income tax provisions are related to the Company's
Pennsylvania operations and are based upon book income, because the continuing
operations do not have any net operating loss carryforwards available in
Pennsylvania. In accordance with fresh-start accounting, the income tax
provisions recorded include non-cash charges to the extent that the Company
expects to use its pre-reorganization net operating loss carryforwards. These
charges are reported as an addition to capital in excess of par value, rather
than as a credit through the income tax provision. There were no such
non-cash components included in the income tax provisions for the three or six
months ended December 31, 1999 or 1998.
DISCONTINUED OPERATIONS
On December 31, 1998, the Company established a plan to dispose of its Krazy
Colors operation due to continuing losses incurred by the operation, as well
as the business' inability to sustain significant long-term customers. On
August 19, 1999, the Board of Directors voted to sell the assets or stock of
its wholly-owned subsidiaries, NBI Properties and Willowbrook Properties in
order to pay the remaining balance of the IRS debt due on December 31, 1999
(see Notes 2, 4 and 13 to accompanying consolidated financial statements).
Therefore, the Company has discontinued its children's paint manufacturing,
hotel, and real estate development operations, and it has separately reported
the income or loss from these segments as discontinued operations for the
quarters ended December 31, 1999 and 1998.
<PAGE>
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER, FISCAL YEAR 2000 - CONTINUED
Revenues from discontinued operations totaled $605,000 and $1,312,000 for the
three and six months ended December 31, 1999, compared to $637,000 and
$1,347,000 for the same periods in the prior fiscal year.
The Company recorded net income from discontinued operations of $5,000 for the
three months ended December 31, 1999 compared to a net loss from discontinued
operations of $185,000 for the same period of the prior fiscal year.
Year-to-date, the Company recorded net income from discontinued operations of
$33,000 in fiscal 2000 compared to a net loss from discontinued operations of
$184,000 in fiscal 1999. The improvement resulted primarily from the absence
of a loss from the Krazy Colors operation because the estimated loss on
disposal of this operation was accrued for during the quarter ended December
31, 1998. In determining the loss on disposal of its Krazy Colors operation
which was recorded during the second quarter of fiscal 1999, the Company the
estimated the net realizable value of the disposal of the discontinued
operation, including estimated costs and expenses directly associated with the
disposal and the estimated loss from operations through the expected disposal
date. The Company expects a significant gain overall from the discontinued
operations of both the hotel and land development, and therefore, no amount
has been recorded related to these disposals; the gain will be recognized when
realized.
The disposal of the children's paint manufacturing operation was substantially
complete as of September 30, 1999. On December 17, 1999, the Company sold a
majority of the assets of its real estate development, consisting of land and
construction-in-progress. The Company intends to sell all of the capital
stock of NBI Properties to an entity which is 100% owned and controlled by its
CEO. (See Note 13).
The net long-term assets of discontinued operations at December 31, 1999
consisted primarily of the hotel's building and furniture, fixtures and
equipment, net of a long-term mortgage note payable by the hotel. The net
current assets of discontinued operations at December 31, 1999 consisted
primarily of cash balances net of accounts payable and accrued liabilities.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's total assets increased $124,000 to $12.9 million at December 31,
1999 from $12.8 million at June 30, 1999. The increase was primarily due to a
net gain on the sale of Willowbrook Properties' land and
construction-in-progress of $880,000, which was deferred for financial
statement purposes. However, this increase in assets was significantly offset
by a cash payment of $182,000 for a portion of the preferred dividends paid
during the first quarter of fiscal 2000 and the use of the net cash proceeds
from the Willowbrook Properties' sale to pay $400,000 on the IRS debt and
$148,000 to the Company's CEO to pay-off a revolving line of credit with
cumulative accrued interest, as well as an accrued bonus payable from fiscal
1997. The Company had negative working capital of $420,000 at December 31,
1999, compared to negative working capital of $773,000 at June 30, 1999. The
decrease in the working capital deficit resulted primarily from net cash
proceeds of $552,000 from the sale of Willowbrook Properties' land and
construction-in-progress, partially offset by cash and proceeds from
investment trades receivable, included in other current assets at June 30, 1999,
which were used to fund a portion of the land development costs incurred during
fiscal 2000, prior to its sale.
As discussed in Notes 2 and 8 to the Consolidated Financial Statements, the
remaining balance of $1.8 million of the Company's debt to the IRS was due on
December 31, 1999. On December 30, 1999, the Company paid the IRS $400,000 and
as of December 31, 1999, $1,378,000 of the IRS debt was still outstanding. On
January 5, 2000, the IRS sent NBI notice of a default of its amended payment
agreement with the IRS dated April 8, 1998, due to the Company's failure to pay
the remaining $1,378,000 that was due on December 31, 1999. Per the terms of
the agreement, an event of default occurred on January 20, 2000, fifteen days
after written notice and demand from the IRS to NBI. Because an event of
default has occurred, the IRS has the right to declare the remaining principal
amount due and payable and interest thereon at the statutory rate provided under
the Internal Revenue Code since the last interest payment made by NBI, on
July 1, 1997, under the original agreement, and to pursue any other available
remedies. On February 18, 2000, the Company paid the IRS $500,000 from a
deposit received from its CEO, Jay Lustig, related to NBI's pending sale of all
of the
<PAGE>
NBI, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER, FISCAL YEAR 2000 - CONTINUED
capital stock of NBI Properties to an entity which is 100% owned and controlled
by Mr. Lustig. The Company is currently in discussions with the IRS in an
effort to obtain an extension on the remaining balance of $878,000, or to
otherwise satisfy its obligations. However, there can be no assurance that the
Company will be able to obtain an extension or satisfy its obligations. In
order to pay the remaining amount outstanding, management intends to generate
sufficient cash through the sale of the stock of NBI Properties; however, there
can be no assurance that the Company will be able to complete a sale of this
stock. This condition raises substantial doubt about the Company's ability to
continue as a going concern. The accompanying financial statements do not
contain any adjustments that might result from the outcome of this
uncertainty. Management believes that after the Company has sold the NBI
Properties stock and pays off its IRS debt, it will generate sufficient future
cash flows from its remaining operations to allow the Company to be a going
concern. (See Notes 2, 4, 8 and 13).
Construction-in-progress from continuing operations totaled $366,000 at
December 31, 1999 and included $76,000 for design and engineering costs
related to a new crystal tank for the glass manufacturing facility. The
Company estimates that it will cost approximately $1,735,000 to complete the
outstanding construction-in-progress, all of which is expected to be completed
during fiscal 2000. A majority of the estimated costs to complete the
outstanding projects is related to the new crystal tank. The new tank will
have an estimated useful life of 20 to 25 years, with major refurbishments,
costing approximately $500,000, required every seven years. The Company is
currently pursuing various financing alternatives for this capital
improvement.
The Company expects its other working capital requirements in the next fiscal
year to be met by existing working capital at December 31, 1999, internally
generated funds including interest income from the note receivable from its
CEO received in conjunction with the sale of Willowbrook Properties' land and
construction in progress, and for L.E. Smith's requirements, short-term
borrowings under an existing line of credit.
YEAR 2000 COMPLIANCE
Substantially all of the machinery and equipment used by the Company's glass
manufacturing operation is manually controlled and operated. In addition, the
hotel operation is not significantly reliant on computer technology, with the
exception of its reservation system, which is maintained and upgraded under a
contract with Holiday Inns Franchising, Inc. and has already been upgraded
and tested to be year 2000 compliant. The primary effect of the year 2000
issue is on the Company's accounting systems. The Company has completed
hardware and software conversions to become year 2000 compliant.
To-date, the Company has not experienced any material problems resulting from
the year 2000 issue, nor has it experienced any problems from its suppliers or
customers related to the year 2000 issue. NBI believes that as a result of
the completed conversions to new hardware and software, the year 2000 issue
has been mitigated.
<PAGE>
NBI, INC.
PART II - OTHER INFORMATION
Item 4. Results of Votes of Security Holders
- ---------------------------------------------------
The Company's annual meeting was held of December 16, 1999. At this meeting,
Jay H. Lustig and Martin J. Noonan were elected to serve as directors. In
addition, one other proposal authorizing the terms and conditions of the
Company's plan to sell a majority of the assets of a wholly-owned subsidiary,
Willowbrook Properties, and all of the capital stock of a wholly-owned
subsidiary, NBI Properties, was voted on. The results of the voting were as
follows:
<TABLE>
<CAPTION>
Affirmative Votes
Votes Against Abstentions Broker
Non-votes
----------- -------- ----------- ---------
1. PROPOSAL I
Election of Directors
<S> <C> <C> <C> <C>
Jay H. Lustig 4,675,863 52,568 -- --
Martin J. Noonan 4,675,863 52,568 -- --
2. PROPOSAL II
Approval of sale of the majority of assets of
Willowbrook Properties and all of the capital
stock of NBI Properties 4,142,307 41,136 544,988 --
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
- -------------------------------------------------------
(a) Exhibits
10. Willowbrook Properties, Inc. Purchase and Sale Agreement
27. Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1999 or subsequently.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NBI, INC.
February 18, 2000 By: /s/ Marjorie A. Cogan
------------------- -----------------------------
(Date) Marjorie A. Cogan
As a duly authorized officer
Chief Financial Officer, Secretary
EXHIBIT 10:
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("AGREEMENT") is entered into as of the
30th day of November, 1999, by and between Willowbrook Properties, Inc., a
Delaware corporation having its principal office at 1880 Industrial Circle,
Longmont, Colorado 80501 ( "SELLER" ) and Bellevue Partners, L.P., a
Pennsylvania limited partnership having a postal address of P.O. Box 505,
Belle Vernon, Pennsylvania 15012 ( " BUYER" ).
RECITALS
I. Seller owns certain property consisting of 88.163 acres more or
less located in Rostraver Township, Westmoreland County, Pennsylvania, which
is more particularly described on Exhibit A hereto (the "PROPERTY" ).
II. Seller desires to sell to Buyer, and Buyer desires to buy from
Seller, the Property, all in accordance with the terms and conditions
contained herein.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the Seller and Buyer agree as follows:
1. DEFINITIONS. In addition to the words and terms defined in the
Recitals and elsewhere in this Agreement, the words and terms set forth
hereinbelow will, unless the context otherwise requires, have the following
meanings:
1.1 "CLOSING" means the consummation of the purchase and sale
provided for herein, payment of the Purchase Price to the Seller by Buyer and
the conveyance of the Property to Buyer.
1.2 "COMMITMENT" means the commitment for title insurance issued
by the Title Company, setting forth the status of title to the Property,
accompanied by copies of all instruments of record referred to as exception
therein.
1.3 "CONFIDENTIAL INFORMATION" shall have the meaning set forth
in Section 6.6 hereof.
1.4 "DEED" means the special warranty deed in the form attached
hereto as Exhibit B.
1.5 "DEVELOPMENT AGREEMENTS" means that certain Development
Agreement and that certain Leasing Agreement, each dated as of August 1, 1998
and each between Seller and Michael Joseph Development Corporation.
1.6 "ENVIRONMENTAL CONDITION" shall have the meaning set forth
in Section 6.6 hereof.
<PAGE>
1.7 "HAZARDOUS SUBSTANCE" shall have the meaning set forth in
Section 6.6 hereof.
1.8 "LEASE" means that certain Shopping Center Lease dated
March 16, 1999 between Seller and Supervalu Holdings, Inc., as amended.
1.9 "PERMITTED EXCEPTIONS" means the exceptions to title shown
on Exhibit C hereto.
1.10 "PERMITS" has the meaning set forth in Section 9.1.4
hereof.
1.11 "PURCHASE PRICE" means the amount set forth in Section 3.1
hereof.
1.12 "TITLE COMPANY" means -Commonwealth Land Title Insurance
Company.
1.13 "USE" shall have the meaning set forth in Section 9.1.3
hereof.
2. SALE OF PROPERTY. The Seller shall sell and convey and Buyer
shall purchase and pay for, upon the terms and conditions hereinafter set
forth, the Property.
3. PURCHASE PRICE.
3.1 AMOUNT. The Purchase Price for the Property shall be
$3,300,000.
3.2 PAYMENT. The Purchase Price shall be paid as follows:
3.2.1 Cash at closing - $600,000
3.2.2 Promissory Note - $2,700,000
3.3 FUNDS. All funds payable under this Agreement shall be paid
by wire transfer to such account as the Seller may designate in writing at
least on or prior to the Closing.
3.4 PROMISSORY NOTE. The promissory note to be delivered by Buyer
at closing will be in the form of and contain the terms set forth in
Exhibit D hereto.
4. CLOSING.
4.1 The Closing shall be held at a mutually agreed upon location
in Pittsburgh, Pennsylvania, no later than fifteen (15) days following
the satisfaction or waiver of the last of the conditions set forth in
Section 9 hereof, but in no event later than January 1, 2000. If the
Closing has not occurred prior to the close of business on the applicable
date set forth in the preceding sentence, any party who is not then
in breach hereof may terminate this Agreement upon written notice to
the other party.
<PAGE>
4.2 At Closing, Seller shall execute, acknowledge and deliver
the following documents to Buyer:
4.2.1 The Deed;
4.2.2 A FIRPTA certificate in compliance with Section 1445
of the Internal Revenue Code;
4.2.3 Such documents as may be reasonably required by the
Title Company for purposes of issuing the title insurance policy in
accordance with the terms of this Agreement;
4.2.4 An assignment of the Lease, the Permits and the
Development Agreements;
4.2.5 An estoppel certificate from the tenant under the
Lease; and
4.2.6 Such other documents as Buyer may reasonably request.
All such documents shall be in form and substance reasonably
acceptable to Buyer.
4.3 At Closing Buyer shall execute, acknowledge and deliver the
following documents to Seller:
4.3.1 The Promissory Note;
4.3.2 An assumption of the Lease, the Permits and the
Development Agreements;
4.3.3 Such other documents as Seller may reasonably
request.
All such documents shall be in form and substance
reasonably acceptable to Seller.
5. TAXES AND ASSESSMENTS. At the Closing all real estate taxes and
assessments for the Property shall be prorated between Buyer and Seller as of
the date of Closing on a calendar year basis based on the most recently
available information. On and after the date of Closing, all taxes and
assessments not yet paid and any additional taxes for the year in which
Closing occurs which are assessed as a result of any improvements to the
Property made subsequent to Closing shall be paid by Buyer and the Seller
shall have no responsibility for such taxes and assessments.
<PAGE>
6. RIGHT OF ENTRY; ENVIRONMENTAL AND/OR GEOTECHNICAL ASSESSMENT;
DEVELOPMENT COSTS.
6.1 LICENSE. Buyer shall have a license for reasonable
access to the Property for the purpose of making environmental assessments,
engineering studies, core borings, drillings and for any and all acts
necessary to conduct and complete Buyer's due diligence investigation of the
Property.
6.2 COST OF WORK. All work performed by Buyer or on its
behalf pursuant to this Section shall be performed at Buyer's expense.
6.3 INDEMNITY. Buyer shall protect, defend, indemnify, save
and hold harmless Seller against and from any and all claims, demands, fines,
suits, actions, proceedings, orders, decrees and judgments of any kind or
nature by or in favor of any or whomsoever, and against and from any and all
costs, damages and expenses, including without limitation attorneys' fees,
resulting from or occasioned in whole or in part by an act or omission of
Buyer, or any of employees agents, contractors or invitees in, upon, at or
from the Property pursuant to the license granted to Buyer in this Section 6.
In the event that this Agreement is terminated for any reason, the Buyer shall
place the Property as close to the condition it was in prior to the tests by
the Buyer as is reasonably possible, and such obligation of Buyer shall
survive the termination of this Agreement.
6.4 TERM. The Term of this license shall commence on the date
of this Agreement and shall terminate upon the occurrence of the earlier of
the following:
6.4.1 the date of the Closing; or
6.4.2 termination of this Agreement by either party
pursuant to any provisions therefor.
6.5 COPIES OF TESTS. Subject to any confidentiality
obligations, Buyer shall furnish the Seller with results of soil tests and
copies of all engineering studies and other reports within five business days
of their written request by Seller.
6.6 CONFIDENTIALITY. Buyer agrees that all information
relating to the Property, including without limitation, information, documents
and studies regarding the Environmental Condition or geotechnical condition
thereof ("CONFIDENTIAL INFORMATION"), will be held strictly confidential, and
shall not be disclosed to any third parties (other than to actual or proposed
consultants, contractors, lenders and tenants and their respective advisors to
the extent reasonably related to Buyer's acquisition, financing, development
or use of the Property) without the prior consent of the Seller unless Buyer
is under a legal obligation to disclose the Confidential Information. As used
herein the term " ENVIRONMENTAL CONDITION".
<PAGE>
shall be defined as the presence in surface water, ground water, drinking
water supply, land surface, subsurface strata, above-ground or underground
tanks or other containers, or ambient air of any pollutant, contaminant,
industrial solid waste or Hazardous Substance. The term "HAZARDOUS SUBSTANCE"
shall be defined in the manner set forth in Section 101(4) of the U.S.
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended. In the event that Buyer or any of its representatives becomes
legally compelled to disclose any of the Confidential Information, Buyer
and/or any representative shall provide the Seller with prompt notice so that
the Seller may seek a protective order or other appropriate remedy and/or
waive compliance with the provisions of this Section 6.6. In the event that
such a protective order or other remedy is not obtained or that the Seller
waive compliance with the provisions of this Section 6.6, Buyer or any
representative will furnish only that portion of the Confidential Information
that is legally required to be disclosed and will exercise its or their best
efforts to obtain confidential treatment for such Confidential Information. A
violation of this Section 6.6 will cause irreparable harm to the Seller;
remedies at law being inadequate, the Seller, in addition to any other legal
or equitable relief, shall be entitled to injunctive relief from any court of
competent jurisdiction to enjoin any actual or threatened violation. The
obligation of the Buyer under this Section 6.6 shall survive the termination
of this Agreement for any reason except the purchase of the Property by the
Buyer.
6.7 DEVELOPMENT COSTS. Prior to and after the date hereof,
Buyer has directly or indirectly advanced certain amounts to Seller for the
purpose of paying for Property development costs that will benefit Buyer after
the Closing. Concurrently with the Closing, and without further action on the
part of any party, such amounts shall be deemed to be expenses of Buyer
associated with the development of the Property. In the event that the
Closing does not occur, then Seller will repay such amounts to Buyer on such
terms as Buyer and Seller may agree, or, in the absence of such agreement, on
demand.
7. REPRESENTATIONS OF SELLER/CONDITIONS OF THE PROPERTY.
7.1 Seller hereby makes the following representations and
warranties, all of which shall continue to be true and correct on the date of
the Closing:
7.1.1 Seller is a corporation duly organized and in good
standing under the laws of the State of Delaware. The execution,
delivery and performance of this Agreement by Seller has been duly
authorized by all requisite corporate action.
7.1.2 The Property is presently in compliance with all
applicable laws and regulations.
7.1.3 To Seller's knowledge, the Lease and the Development
Agreements are in full force and effect and Seller has complied
with all of its obligations thereunder and, to Seller's knowledge,
the other parties thereto have complied with their obligations
thereunder.
<PAGE>
7.2 THE PROPERTY MAY BE INSPECTED BY THE BUYER PURSUANT TO
SECTION 6 ABOVE. THE PROPERTY IS BEING PURCHASED SOLELY IN RELIANCE UPON SUCH
INSPECTION AND, EXCEPT AS SET FORTH IN THIS SECTION 7, THERE HAVE NOT BEEN AND
ARE NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT
TO THE PROPERTY MADE BY THE SELLER. BUYER SHALL ACQUIRE THE PROPERTY IN "AS
IS, WHERE IS" CONDITION, INCLUDING WITHOUT LIMITATION THE GRADING, COMPACTION
AND ELEVATION OF THE PROPERTY. WITHOUT LIMITATION OF THE FOREGOING, THERE
HAVE BEEN NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO, AND THE BUYER
SHALL PURCHASE THE PROPERTY SUBJECT TO, ANY CURRENTLY EXISTING ENVIRONMENTAL
CONDITIONS NOT WITHIN SELLER'S ACTUAL KNOWLEDGE.
8. EVIDENCE OF TITLE. Seller has provided Buyer with a copy of
the Commitment. At the Closing, Seller will arrange for all exceptions other
than Permitted Exceptions to be removed. Notwithstanding anything contained
elsewhere in this Agreement to the contrary, Buyer will be solely responsible
for the cost of the Commitment and any and all title examination fees payable
to the Title company or its agents. Seller warrants that, except for the
Permitted Exceptions, it has not assigned, conveyed or transferred the
Property or any part thereof or interest therein.
9. PRE-CLOSING CONDITIONS; OPTION TO TERMINATE.
9.1 CONDITIONS TO BUYER'S OBLIGATIONS. Buyer will have the
option to terminate this Agreement in the event that any one or more of the
following conditions are not satisfied within the applicable time periods set
forth below:
9.1.1 REPRESENTATIONS AND COVENANTS. All of Seller's
representations and warranties set forth in Section 7.1 shall be
true and correct in all material respects and Seller shall have
performed all of its obligations set forth herein.
9.1.2 TITLE. Title at Closing shall be in the same
condition as approved by Buyer pursuant to Section 8 hereof, and,
contemporaneously with the Closing and upon payment of standard title
insurance premiums, Buyer shall have obtained a title insurance policy
consistent with the Commitment and the Title Company shall have given
Buyer the right to purchase at standard rates additional title
insurance (subject to any liens, encumbrances or other matters
thereafter arising) in connection with additional improvements and
construction financing relating to the Property.
9.1.3 GENERAL INSPECTION. Buyer, in its sole discretion,
shall have determined that the Property is otherwise suitable to Buyer
for its intended use for a shopping center (the " USE" ) and
that there are no environmental conditions relating to the Property
that make it less desirable to Buyer.
<PAGE>
9.1.4 PERMITS AND APPROVALS. All required permits and
other governmental approvals necessary for Buyer to develop the
Property as a shopping center in the manner presently contemplated by
the parties, including without limitation those set forth on Exhibit F
(the "PERMITS"), shall have been assigned to or received by Buyer, all
on such terms and conditions as Buyer, in its reasonable good
faith discretion deems satisfactory.
9.2 CONDITIONS TO SELLER'S OBLIGATIONS. Seller shall have
the option to terminate this Agreement in the event that Seller does not
receive the approval of the transactions contemplated hereby from the
shareholders of Seller's parent company, NBI, Inc., a Delaware corporation, on
or before the date of Closing.
9.3 OPTION TO TERMINATE. If either party determines that any
of the conditions set forth in this Section 9 will not be satisfied prior to
January 31, 2000, such party will have the option of terminating this
Agreement by delivery of written notice to the other party. Upon receipt of
such notice, this Agreement will terminate and neither party will have any
liability hereunder (except the provisions which expressly survive the
termination of this Agreement).
9.4 FIDUCIARY TERMINATION. In the event that the Board of
Directors of either the Seller or the parent company of the Seller determine
that their fiduciary obligations require them to terminate this Agreement,
Seller may terminate this Agreement at any time prior to Closing by written
notice to Buyer.
10. CLOSING CHARGES. The expense of the Closing shall be paid in
the following manner:
10.1 Seller shall pay:
10.1.1 the full cost of preparing, executing, and
acknowledging the Deed and other documents required to be delivered
by Seller hereunder;
10.1.2 the full cost of obtaining documents,
certifications, affidavits and utility and municipality letters
necessary to clear those exceptions listed in the Title Commitment;
and
10.1.3 one-half of all realty transfer taxes in connection
with the transfer of the Property.
<PAGE>
10.2 The Buyer shall pay:
10.2.1 the full cost of securing any title insurance
policy(ies) required by the Buyer;
10.2.2 the cost of recording the Deed;
10.2.3 the cost of any inspections or tests performed by
the Buyer in, on or about the Property;
10.2.4 one-half of all realty transfer taxes in connection
with the transfer of the Property;
10.2.5 the cost of any survey obtained by Buyer; and
10.2.6 all escrow fees, if any.
11. BROKER. Buyer and Seller represent to each other that no
broker has been retained by either of them in connection with the transactions
contemplated hereby and each party agrees to defend and indemnify the other
against any claim of any broker or similar party claiming under such party.
12. DEFAULT BY BUYER; REMEDIES OF THE SELLER. In the event Buyer
fails to comply in any material respect with any or all of the obligations,
covenants, warranties or agreements to be performed, honored or observed by
Buyer under and pursuant to the terms and provisions of this Agreement and
such default is not cured within ten (10) days after notice (other than
Buyer's failure to tender the Purchase Price on the date of Closing, as to
which no notice is required), then the Seller may terminate this Agreement, in
which event Buyer shall pay Seller the sum of $60,000 as liquidated damages
for Buyer's default.
13. DEFAULT BY THE SELLER; REMEDIES OF BUYER. In the event Seller
fails to comply with any or all of the obligations, covenants, warranties or
agreements to be performed, honored or observed under and pursuant to the
terms and provisions of this Agreement, and such default is not cured within
ten (10) days after notice, then Buyer may either (i) terminate this Agreement
all parties will be released from any further liability hereunder (except the
provisions hereof which expressly survive the termination of this Agreement),
or (ii) pursue the right of specific performance.
14. AMENDMENTS. This Agreement once properly signed by both parties
can be changed only by a document executed by an authorized representative of
the respective parties hereto.
<PAGE>
15. NOTICES. All notices, requests, demands or other communications
hereunder will be in writing and deemed given when delivered personally, when
telecopied or on the day said communication is deposited in the U.S. mail, by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Buyer: Bellevue Partners, L.P.
P.O. Box 505
Belle Vernon, PA 15012
If to the Seller: Willowbrook Properties, Inc.
c/o NBI, Inc.
1880 Industrial Circle
Longmont, CO 80501
With a copy to: Morris D. Weiss, Esq.
c/o NBI, Inc.
12400 Highway 281 North
San Antonio, TX 78216
or to such other address as the parties may from time to time designate by
notice in writing to the other parties.
16. MISCELLANEOUS.
16.1 SEVERABILITY. If any clause or provision of this Agreement
is held to be illegal, invalid or unenforceable, or the application
thereof to any person or circumstance shall to any extent be illegal,
invalid or unenforceable, under present or future laws effective during
the term hereof or of any provisions hereof which survive the Closing,
then and in any such event, it is the express intention of the parties
hereto that the remainder of this Agreement, or the application of such
clause or provision other than to those as to which it is held illegal,
invalid or unenforceable, shall not be affected thereby, and each clause
or provision of this Agreement and the application thereof shall be
legal, valid and enforceable to the fullest extent permitted by law.
16.2 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania.
16.3 SUCCESSORS AND ASSIGNS. This Agreement shall apply to, inure
to the benefit of and be binding upon and enforceable against the parties
hereto and their respective successors, assigns, heirs, executors,
administrators and legal representatives. Buyer may assign this Agreement
to any controlled, directly or indirectly, by Jay H. Lustig and, upon
delivery of written notice of such assignment to Seller and the
<PAGE>
assumption of Buyer's obligations hereunder by the assignee, Buyer shall
be released from any further liability hereunder.
16.4 TIME.
16.4.1 The term "days" means calendar days. If the date for
performance of any action or for the expiration of any time period
shall fall on a weekend or a holiday honored by the federal
government, such date of performance or expiration shall be extended
until the next Monday or non-holiday, as applicable.
16.4.2 If full performance of this Agreement is not
completed by the Closing date provided for in this Agreement, as it
may be extended hereunder, either party shall have the right after
that date to declare time to be of the essence of this Agreement by
giving written notice to the other party. Such notice shall contain a
declaration that time is of the essence and shall fix the time, date
and place of final settlement, which shall not be less than seven (7)
days, nor more than fourteen (14) days after such notice.
16.5 SECTION HEADINGS; GENDER AND NUMBER. The headings inserted
at the beginning of each Section are for convenience of reference only and shall
not limit or otherwise affect or be used in the construction of any of the
terms or provisions hereof. The plural shall include the singular and the
singular, the plural, wherever the context so admits. The use of any one
gender includes all others.
16.6 POSSESSION. Exclusive possession of the Property (except for
Permitted Exceptions) shall pass to Buyer at the Closing, at which time Buyer
will be deemed to have acknowledged that it has inspected the Property and has
agreed to accept it in its then condition.
16.7 PREPARATION OF AGREEMENT. In the event of a dispute between
the Buyer and Seller as to this Agreement, no party shall be entitled to the
benefit of any principle of contract construction premised upon the relative
bargaining power of the parties, the identity of the party partly or wholly
responsible for drafting the portion of the Agreement giving rise to the
dispute, contra proferentum, contracts of adhesion, or any similar contract
construction principle.
16.8 EXHIBITS. All exhibits attached hereto are incorporated
herein by reference and made a part hereof as if fully rewritten or reproduced
herein.
16.8.1 ENTIRE AGREEMENT. This Agreement contains all the
terms, promises, covenants, conditions and representations made or entered into
by and between the Seller and Buyer, and supersedes all prior discussions and
agreements, whether written or oral, between the Seller and Buyer with respect
to the conveyance
<PAGE>
of the Property and all other matters contained herein and constitutes the
sole and entire agreement between the Seller and Buyer with respect thereto.
16.9 WAIVER OF TENDER. Formal tender of the Deed and of the
Purchase Price are hereby waived.
16.10 COAL NOTICE. THIS DOCUMENT MAY NOT SELL, CONVEY, TRANSFER,
INCLUDE OR INSURE THE TITLE TO THE COAL AND RIGHT OF SUPPORT UNDERNEATH THE
SURFACE LAND DESCRIBED OR REFERRED TO HEREIN, AND THE OWNER OR OWNERS OF SUCH
COAL MAY HAVE THE COMPLETE LEGAL RIGHT TO REMOVE ALL OF SUCH COAL AND, IN THAT
CONNECTION, DAMAGE MAY RESULT TO THE SURFACE OF THE LAND AND ANY HOUSE,
BUILDING OR OTHER STRUCTURE ON OR IN SUCH LAND. THE INCLUSION OF THIS NOTICE
DOES NOT ENLARGE, RESTRICT OR MODIFY ANY LEGAL RIGHTS OR ESTATES OTHERWISE
CREATED, TRANSFERRED, EXCEPTED OR RESERVED BY THIS INSTRUMENT.
16.11 RECORDING. The Buyer acknowledges that the parent company of
the Seller, NBI, Inc., will file this agreement as an exhibit to a filing with
the Securities and Exchange Commission.
16.1 SEWAGE NOTICE. The Property is served by a community sewage
system.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under proper authority, the day and year first above written.
WILLOWBROOK PROPERTIES, INC.
By: /S/Jay H. Lustig
Jay H. Lustig, President
BELLEVUE PARTNERS, L.P.,
a Pennsylvania limited partnership
By: J.H.L. Holdings, Inc.,
a California corporation, General Partner
By: /S/Jay H. Lustig
Jay H. Lustig, President
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit Document
A Property Description
B Deed
C Permitted Exceptions
D Promissory Note
E Reserved
F Permits
<PAGE>
EXHIBIT A
PROPERTY DESCRIPTION
ALL that certain tract of land situate in Rostraver Township,
Westmoreland County, Pennsylvania, the same being more particularly bounded
and described as follows:
BEGINNING at a point in or near the center line of a certain improved
road (Route 51); said point being situate at the Northwesterly corner of a
certain other tract containing 20.13 acres heretofore conveyed by the
Pittsburgh Coal Company to Edgar Dunn and wife, by deed dated July 26, 1937;
thence from said point of beginning and along line of tract now or formerly of
Joseph Kuma, North 9 3' East, 1911.48 feet to a point; thence along line of
said tract, South 60 22' East, 231.0 feet to a point; thence along line of
tract now or formerly of J.P. Ward, South 53 07' East, 531.3 feet to a point
thence along line of tract now or formerly of James Stewart the following five
courses and distances, viz: South 38 56' East, 502.19 feet to a point; thence
South 49 35' East, 713.57 feet to a post; thence South 55 48' East, 722.49
feet to a post; thence South 38 27' East, 481.29 feet to a post; thence South
55 37' East, 22.75 feet to a point; thence along line of tract now or
formerly of William Scholl, South 12 12' West, 314.41 feet to a point in a
certain public road; thence in said public road partly along line of tract
containing 12.028 acres conveyed by said Pittsburgh Coal Company to Lulu
Martin by deed dated June 2, 1934, and partly through the original tract
(known as the James H. Moore tract of 175.307 acres), of which the herein
described tract is a part, North 56 48' West, 388.50 feet to a point in said
public road; thence by line through said original tract, South 14 04' West,
805.67 feet to a point in or near the center line of said improved road (Route
51); thence in said improved road through said original tract and partly along
line of tract heretofore conveyed to Edgar Dunn and wife, as aforesaid, North
63 07' West, 2370.20 feet to a point at the place of beginning.
CONTAINING 88.163 acres.
EXCEPTING and reserving from subject property all that certain parcel of
land containing 0.393 acre as conveyed by Maude G. Smith, widow and Dorothy G.
Smith, single to James Sabo and Margaret Sabo, his wife, dated November 27,
1979 and recorded in Deed Book Volume 2346, page 449.
BEING the same premises conveyed to Willowbrook Properties, Inc. by deed
of Darla J. Jones, unmarried and Della M. Ewart and Robert Ewart, her husband,
dated January 4, 1997, and recorded in Deed Book Volume 3467, page 101.
<PAGE>
EXHIBIT C
PERMITTED EXCEPTIONS
1. Excepting and reserving all coal and mining rights, oil and gas and
appurtenant rights and right to maintain and operate a line of telegraph,
telephone and power poles as set forth in deed from Pittsburgh Coal Company to
Jesse Smith, et ux., dated April 6, 1939 and recorded in Deed Book Volume
1030, page 458.
2. The following rights of way:
a) Grantor: Jesse Smith and Maude G. Smith
Grantee: Manufacturers Light and Heat Company
granted by instruments dated November 1, 1954, and recorded
in Deed Book Volume 1548, page 304, for 8 inch pipeline.
b) Grantor: Willowbrook Properties, Inc. d/b/a NBI Development
Corporation
Grantee: Municipal Authority of Westmoreland County granted by
instrument dated May 20, 1999, and recorded in Deed Book Volume 3675,
page 352, for 8 inch water line.
Memorandum of Lease by and between Supervalu Holdings, Inc. and Willowbrook
Properties, Inc. (a memorandum of which is) dated March 16, 1999 and recorded
in Deed Book Volume 3665, page 154.
Drainage easements and easements in slopes of cuts and fills along the State
or Federal road known as SR 0051.
The following matters as set forth in the plan of lots entitled as Willowbrook
Plan of Lots, recorded in Plan Book Volume 91, page(s) 1441:
a) Rights of the public and others entitled thereto in and to the use
of that portion of the premises within the bounds of SR 0051.
b) Peoples Gas line pump station and gas well through northwesterly
portion of premises.
c) Columbia Gas line through westerly portion of premises.
d) Fence encroachment in northeasterly portion of premises.
e) NOTE: No habitable structure to be built nor further subdivision
of the area remaining unless approved for sewage. For approval the Township
Sewage Enforcement Officer must be contacted.
<PAGE>
EXHIBIT F
LIST OF CONTRACTS AND PERMITS
Lease dated March 16, 1999 between Supervalu Holdings, Inc. and Willowbrook
Properties, Inc. d/b/a NBI Development Corporation, as amended by a First
Amendment to Lease dated September 24, 1999.
Drainage Agreement dated September 24, 1999 between Willowbrook Properties,
Inc. d/b/a NBI Development Corporation and Della M. Ewart and Darla J. Jones.
Highway Occupancy Permit issued by the Commonwealth of Pennsylvania Department
of Transportation on September 10, 1999.
Site Work Agreement dated April 30, 1999 (including Change Orders Nos. 1-8)
between NBI Development Corporation and Penn Transportation Services, Inc.
No-Lien Agreement dated April 30, 1999 between NBI Development Corporation and
Penn Transportation Services, Inc.
Permit for Discharge of Stormwater From Construction Activities No. PAS 10X080
issued to NBI Development Corporation by the Commonwealth of Pennsylvania
Department of Environmental Resources.
Site Paving Contract between Willowbrook Properties, Inc. and Peter J. Caruso
and Sons, Inc. dated November 17, 1999.
Architect's Agreement between Willowbrook Properties, Inc. and Turkhall
Associates, Inc. dated May 1, 1999.
Agreement for Engineering Services between McMillen Engineering Inc. and NBI
Properties, Inc. dated April 19, 1998.
Agreement for Engineering Services between McMillen Engineering Inc. and NBI
Development, Inc. dated September 29, 1998, as revised on October 8, 1998, as
revised on October 29, 1998.
Grading Permit issued by Rostraver Township.
Sewer Connection Permit issued by Rostraver Township.
Building Permit No. 990181 issued to Willowbrook Properties, Inc. by Rostraver
Township on September 1, 1999.
<PAGE>
EXHIBIT D
NON-NEGOTIABLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, PLEDGED, ASSIGNED
OR TRANSFERRED UNLESS REGISTERED THEREUNDER OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION SHALL BE AVAILABLE.
$2,700,000.00 December 17, 1999
FOR VALUE RECEIVED, Bellevue Partners, L.P., a Pennsylvania limited
partnership ("MAKER"), promises to pay to Willowbrook Properties, Inc., a
Delaware corporation ("PAYEE"), in lawful money of the United States of
America, the principal sum of Two Million Seven Hundred Thousand Dollars
($2,700,000.00), together with interest in arrears on the unpaid principal
balance at an annual rate equal to the Applicable Rate, as defined below, in
the manner provided in this Promissory Note (this "NOTE" ) below. From and
after a payment default hereof by Maker not waived in writing by Payee,
interest will accrue on the unpaid principal amount of this Note until the
date payment is made in full at a rate equal to the interest rate provided in
the immediately preceding sentence, plus 4% per annum. Interest shall be
calculated on the basis of a year of 365 or 366 days, as applicable, and
charged for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of a Purchase and Sale Agreement, dated November
30, 1999, between Maker and Payee (the "Purchase Agreement"). Capitalized
terms used in this Note without definition shall have the meanings given them
in the Purchase Agreement.
1. PAYMENTS.
1.1 PRINCIPAL AND INTEREST. The principal amount of this Note shall
be due and payable on December 31, 2006 or, following an Event of Default, as
determined pursuant to Section 2.1 hereof. Interest on the unpaid principal
balance of this Note shall be due and payable on the last day of each calendar
quarter, commencing March 31, 2000.
1.2 MANNER OF PAYMENT. All payments on this Note shall be made by
check at 1880 Industrial Circle, Suite F, Longmont, CO 80501, or at such
other place in the United States of America as Payee shall designate to Maker
in writing. If any payment of principal or interest on this Note is due on a
day that is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension of time shall be taken into
account in calculating the amount of interest payable under this Note.
"Business Day" means any day other than a Saturday, Sunday or legal holiday in
the Commonwealth of Pennsylvania.
<PAGE>
1.3 PREPAYMENT. Maker may, without premium or penalty, at any time
and from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid calculated to the date
of such prepayment.
1.4 RIGHT OF SET-OFF. Maker shall have the right to withhold and
set-off against any amount due hereunder the amount of any claim for
indemnification or payment to which Maker may be entitled under the Purchase
Agreement.
1.5 APPLICABLE RATE. The Applicable Rate for the period from the
date hereof to and including December 31, 2000 is 8.14% per annum. Effective
on January 1, 2001 and on each January 1 thereafter, the Applicable Rate will
equal 200 basis points plus the current yield at the close of business on the
immediately preceding December 31 (or, if such day is not a Business Day, the
last Business Day of such year) on United States Treasury Notes with a
maturity of two years as reported on the "U.S. Treasuries" page of
www.bloomberg.com or, if such rate is not reported there, such other reporting
service as Payee may reasonably select.
2. DEFAULTS.
2.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an event of default hereunder ("EVENT OF
DEFAULT"):
2.1.1 If Maker shall fail to pay when due any payment on this
Note, or if Maker shall in any respect fail to comply
with the provisions of Section 3 hereof, and such failure
continues for 15 days after Payee notifies Maker thereof
in writing; provided, however, that the exercise by
Maker in good faith of its right of set-off pursuant to
Section 1.4 above, whether or not ultimately determined
to be justified, shall not constitute an Event of
Default.
2.1.2 If, pursuant to or within the meaning of the United
States Bankruptcy Code or any other federal or state
law relating to insolvency or relief of debtors (a
"BANKRUPTCY LAW"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an
order for relief against it in an involuntary case;
(iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an
assignment for the benefit of its creditors; or (v) admit
in writing its inability to pay its debts as they become
due.
2.1.3 If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (a) is for relief
against Maker in an involuntary case, (b) appoints a
trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's
properties, or (c) orders the liquidation of Maker,
and in each case the order or decree is not
dismissed within 120 days.
<PAGE>
2.1.4 If Maker shall voluntarily suspend transaction of its
business, or shall consent to the taking of possession
by any official of all or any substantial part of its
property whether or not any such proceeding is
instituted, shall dissolve, wind-up or liquidate itself
or any substantial part of its property, or shall take
any action in furtherance of any of the foregoing.
2.1.5 If Jay H. Lustig shall at any time fail to have, directly
or indirectly, control of the Maker.
2.1.6 If an "Event of Default" occurs under that certain
promissory note in the principal amount of $1,100,000
from Tybojen, Inc., an affiliate of the Maker, to NBI
Properties, Inc., an affiliate of the Payee.
2.2 NOTICE BY MAKER. Maker shall notify Payee in writing within five
days after the occurrence of any Event of Default of which Maker acquires
knowledge.
2.3 REMEDIES. If an Event of Default hereunder has not been cured or
waived by Payee, Payee may, at its option, (i) by written notice to Maker,
declare the entire unpaid principal balance of this Note, together with all
accrued interest thereon, immediately due and payable regardless of any prior
forbearance, and (ii) exercise any and all rights and remedies available to it
under this Note and under applicable law, including, without limitation, the
right to collect from Maker all sums due under this Note. Maker shall pay all
reasonable costs and expenses incurred by or on behalf of Payee in connection
with Payee's exercise of any or all of its rights and remedies under this
Note, including, without limitation, reasonable attorneys' fees.
3. REPRESENTATIONS AND COVENANTS.
3.1 SINGLE PURPOSE ENTITY. Maker represents to Payee that Maker is and
has at all times since its formation been a Single Purpose Entity. "Single
Purpose Entity" shall mean an entity that exists solely for the purpose of
acquiring, developing, financing, managing and owning the Property, that
conducts business only in its own name, that does not engage in any business
or have any assets unrelated to such purpose, that does not have any
indebtedness other than that related to such purpose, that has its own
separate books, records, and accounts (with no commingling of assets), that
holds itself out as being an entity separate and apart from any other entity,
and that observes partnership formalities independent of any other entity.
3.2 LEGAL EXISTENCE; NAME, ETC. Maker shall preserve and keep in full
force and effect its existence as a Single Purpose Entity, franchises, rights
and privileges under the laws of the state of its formation, and all
qualifications, licenses and permits applicable to the ownership, use and
operation of the Property. Maker shall not wind up, liquidate, dissolve,
reorganize, merge, or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of all or substantially all of its
assets, or acquire all or substantially all of the assets of the business of
any Person. Maker shall conduct business only in its own name and shall not
change its name, identity, or organizational structure unless Maker shall have
obtained the prior written consent of Payee to such change.
<PAGE>
4. MISCELLANEOUS.
4.1 WAIVER. The rights and remedies of Payee under this Note shall
be cumulative and not alternative. No waiver by Payee of any right or remedy
under this Note shall be effective unless in a writing signed by Payee.
Neither the failure nor any delay in exercising any right, power or privilege
under this Note will operate as a waiver of such right, power or privilege and
no single or partial exercise of any such right, power or privilege by Payee
will preclude any other or further exercise of such right, power or privilege
or the exercise of any other right, power or privilege. To the maximum extent
permitted by applicable law, (i) no claim or right of Payee arising out of
this Note can be discharged by Payee, in whole or in part, by a waiver or
renunciation of the claim or right unless in a writing, signed by Payee; (ii)
no waiver that may be given by Payee will be applicable except in the specific
instance for which it is given; and (iii) no notice to or demand on Maker will
be deemed to be a waiver of any obligation of Maker or of the right of Payee
to take further action without notice or demand as provided in this Note.
Maker hereby waives presentment, demand, protest and notice of dishonor and
protest.
4.2 NOTICES. Any notice required or permitted to be given hereunder
shall be given in accordance with the Purchase Agreement.
4.3 SEVERABILITY. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note
held invalid or unenforceable only in part or degree will remain in full force
and effect to the extent not held invalid or unenforceable.
4.4 GOVERNING LAW. This Note will be governed by the laws of the
Commonwealth of Pennsylvania without regard to conflicts of laws principles.
4.5 PARTIES IN INTEREST. This Note shall bind Maker and its
successors and assigns. This Note shall not be assigned or transferred by
Payee without the express prior written consent of Maker, except by operation
of law.
4.6 MAXIMUM INTEREST. Notwithstanding anything to the contrary
contained in this Note, no interest shall accrue or be payable hereunder that
is in excess of the maximum amount permitted under the applicable law relating
to usury.
IN WITNESS WHEREOF, intending to be legally bound, Maker has executed and
delivered this Note as of date first above written.
BELLEVUE PARTNERS, L.P.
By: /S/Jay H. Lustig
Name: Jay H. Lustig
Title: President of JHL Holdings, Inc.,
General Partner
<PAGE>
EXHIBIT B
SPECIAL WARRANTY DEED
MADE on this 17th day of December, 1999 by WILLOWBROOK PROPERTIES,
INC., a Delaware corporation, d/b/a NBI Development Corporation
(hereinafter called "GRANTOR" )
and
BELLEVUE PARTNERS, L.P., a Pennsylvania limited partnership
(hereinafter called "GRANTEE" ).
WITNESSETH, that the Grantor, in consideration of the sum of THREE MILLION
THREE HUNDRED THOUSAND AND 00/100 DOLLARS ($3,300,000.00) paid to the Grantor
by the Grantee, the receipt of which is hereby acknowledged, does grant,
bargain, sell and convey to the Grantee, its successors and assigns:
ALL that certain tract of land situate in Rostraver Township, Westmoreland
County, Pennsylvania, being more particularly described as follows:
BEGINNING at a point in or near the center line of a certain improved road
(Route 51), said point being situate at the Northwesterly corner of a certain
other tract containing 20.13 acres heretofore conveyed by the Pittsburgh Coal
Company to Edgar Dunn, et ux., by deed dated July 26, 1937; thence from said
point of beginning and along line of tract now or formerly of Joseph Kuma,
North 9 3' East, 1761.69 feet to a point; thence North 81 27' 19 East,
226.87 feet to a point; thence along line of tact now or formely of J. P.
Ward, South 53 07' East, 531.30 feet to a point; thence along line of tract
now or formerly of James Stewart, the following five courses and distances,
viz: South 38 56' East, 502.19 feet to a point; thence South 49 35' East,
713.57 feet to a post; thence South 55 48' East, 722.49 feet to a post;
thence South 38 27'East, 481.29 feet to a post; thence South 55 37' East,
22.75 feet to a point; thence along line of tract now or formerly of William
Scholl, South 12 12'West, 314.41 feet to a point in a certain public road;
thence in said public road partly along line of tract containing 12.028 acres
conveyed by said Pittsburgh Coal Company to Lulu Martin by deed dated June 2,
1934, and partly through the original tact (known as the James H. Moore tract
of 175.307 acres), of which the herein described tract is a part, North 56
48' West, 388.50 feet to a point in said public road; thence by line through
said original tract, South 14 04' West, 805.67 feet to a point in or near the
center line of said improved road (Route 51); thence in said improved road
through said original tract and partly along line of tract heretofore conveyed
to Edgar Dunn, et ux., as aforesaid, North 63 07' West, 2370.20 feet to a
point at the place of BEGINNING.
<PAGE>
BEING the same property which Della M. Ewart and Robert Ewart, her husband,
and Darla J. Jones, unmarried, by Corrective Deed dated November 28, 1997, and
recorded on December 12, 1997, in the Westmoreland County Recorder of Deeds'
Office in Deed Book Volume 3545, page 55, granted and conveyed to Willowbrook
Properties, Inc., Grantor herein.
BEING the same property a portion of which was subdivided pursuant to that
certain subdivision plan entitled Willowbrook Plan of Lots recorded on
January 28, 1999, in the Westmoreland County Recorder of Deeds' Office in Plan
Book Volume 91, page 1441.
BEING designated as Tax Parcel Number 56-09-71 in the records of the Deed
Registry Office of Westmoreland County.
UNDER AND SUBJECT to all rights-of-way, easements, restrictions, reservations,
exceptions, and other matters as set forth in prior instruments of record or
which would be apparent upon an accurate survey and an inspection of the
property.
TOGETHER with all rights and appurtenances: TO HAVE and TO HOLD the same to
and for the use of the Grantee, its successors and assigns forever, and the
Grantor for itself, its successors and assigns, hereby covenants and agrees
that it will WARRANT SPECIALLY the property hereby conveyed.
NOTICE--THIS DOCUMENT MAY NOT/DOES NOT SELL, CONVEY, TRANSFER, INCLUDE OR
INSURE THE TITLE TO THE COAL AND RIGHT OF SUPPORT UNDERNEATH THE SURFACE LAND
DESCRIBED OR REFERRED TO HEREIN, AND THE OWNER OR OWNERS OF SUCH COAL MAY
HAVE/HAVE THE COMPLETE LEGAL RIGHT TO REMOVE ALL OF SUCH COAL AND, IN THAT
CONNECTION, DAMAGE MAY RESULT TO THE SURFACE OF THE LAND AND ANY HOUSE,
BUILDING OR OTHER STRUCTURE ON OR IN SUCH LAND. THE INCLUSION OF THIS NOTICE
DOES NOT ENLARGE, RESTRICT OR MODIFY ANY LEGAL RIGHTS OR ESTATES OTHERWISE
CREATED, TRANSFERRED, EXCEPTED OR RESERVED BY THIS INSTRUMENT. [This notice
is set forth in the manner provided in Section 1 of the Act of July 17, 1957,
P.L. 984, as amended, and is not intended as notice of unrecorded instruments,
if any.]
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Special Warranty Deed to
be executed on the day and year first written above.
WILLOWBROOK PROPERTIES, INC.,
a Delaware corporation, d/b/a NBI Development
Corporation
By: /S/Jay H. Lustig
Jay H. Lustig
President
COMMONWEALTH OF PENNSYLVANIA )
) ss:
COUNTY OF ALLEGHENY )
On this 17th day of December 1999, before me, the undersigned
officer, personally appeared Jay H. Lustig, who acknowledged himself to be the
President of Willowbrook Properties, Inc., a Delaware corporation, d/b/a NBI
Development Corporation, and that he as such officer, being authorized to do
so, executed the foregoing instrument for the purposes therein contained by
signing the name of the corporation by himself as the President of the
corporation.
In Witness Whereof, I hereunto set my hand and official seal.
/S/Dorothy A. Brown
Notary Public
My Commission Expires:
Notarial Seal
Dorothy A. Brown, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 23, 2000
Member, Pennsylvania Association of Notaries
<PAGE>
NOTICE THE UNDERSIGNED, AS EVIDENCED BY THE SIGNATURE(S) TO THIS NOTICE
AND THE ACCEPTANCE AND RECORDING OF THIS DEED, (IS, ARE) FULLY COGNIZANT OF
THE FACT THAT THE UNDERSIGNED MAY NOT BE OBTAINING THE RIGHT OF PROTECTION
AGAINST SUBSIDENCE, AS TO THE PROPERTY HEREIN CONVEYED, RESULTING FROM COAL
MINING OPERATIONS AND THAT THE PURCHASED PROPERTY, HEREIN CONVEYED, MAY BE THE
OWNERS OF THE ECONOMIC INTEREST IN THE COAL. THIS NOTICE IS INSERTED HEREIN
TO COMPLY WITH THE BITUMINOUS MINE SUBSIDENCE AND LAND CONSERVATION ACT OF
1966.
WITNESS: BELLEVUE PARTNERS, L.P.
/s/ Morris D. Weiss a Pennsylvania limited partnership
By: J.H.L. Holdings, Inc., a
California corporation, its
general partner
By: /s/Jay H. Lustig
Jay H. Lustig
President
CERTIFICATE OF RESIDENCE
I hereby certify that (1) FOR THE PURPOSE OF DELIVERY OF TAX STATEMENTS
ONLY the precise residence of Grantee is 100 Wilshire Boulevard, Suite 1700
Santa Monica, CA 90401 and (2) FOR ALL OTHER PURPOSES (including delivery of
assessment change notices) the precise residence of Grantee is 100 Wilshire
Boulevard, Suite 1700 Santa Monica, CA 90401.
Witness the due execution hereof this 17 day of December, 1999.
BELLEVUE PARTNERS, L.P.,
a Pennsylvania limited partnership
BY: J.H.L. HOLDINGS, INC., a California
corporation, its general partner
By: /S/ Jay H. Lustig
Jay H. Lustig
President
<TABLE> <S> <C>
<CAPTION>
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Jun-30-2000
<PERIOD-START> Jul-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 66
<SECURITIES> 0
<RECEIVABLES> 1,570
<ALLOWANCES> 240
<INVENTORY> 2,847
<CURRENT-ASSETS> 4,555
<PP&E> 6,911
<DEPRECIATION> 2,782
<TOTAL-ASSETS> 12,944
<CURRENT-LIABILITIES> 4,975
<BONDS> 451
<COMMON> 101
0
5
<OTHER-SE> 6,440
<TOTAL-LIABILITY-AND-EQUITY> 12,944
<SALES> 6,961
<TOTAL-REVENUES> 6,961
<CGS> 5,167
<TOTAL-COSTS> 5,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23
<INTEREST-EXPENSE> 97
<INCOME-PRETAX> 285
<INCOME-TAX> 21
<INCOME-CONTINUING> 264
<DISCONTINUED> 33
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 297
<EPS-BASIC> .01
<EPS-DILUTED> .01
<FN>
This schedule contains summary financial information extracted from the
consolidated financial statements of NBI, Inc. for the six months ended
December 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</TABLE>
<TABLE> <S> <C>
<CAPTION>
<S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Jun-30-1999
<PERIOD-START> Jul-01-1998
<PERIOD-END> Dec-31-1998
<CASH> 1,780
<SECURITIES> 0
<RECEIVABLES> 1,903
<ALLOWANCES> 93
<INVENTORY> 2,537
<CURRENT-ASSETS> 6,334
<PP&E> 10,162
<DEPRECIATION> 2,495
<TOTAL-ASSETS> 14,196
<CURRENT-LIABILITIES> 5,688
<BONDS> 1,453
<COMMON> 101
0
5
<OTHER-SE> 6,726
<TOTAL-LIABILITY-AND-EQUITY> 14,196
<SALES> 8,229
<TOTAL-REVENUES> 8,229
<CGS> 5,624
<TOTAL-COSTS> 5,624
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 42
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> 1,096
<INCOME-TAX> 228
<INCOME-CONTINUING> 868
<DISCONTINUED> (184)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 684
<EPS-BASIC> .08
<EPS-DILUTED> .08
<FN>
This schedule contains summary financial information extracted from the
consolidated financial statements of NBI, Inc. for the six months ended
December 31, 1998 and is qualified in its entirety by reference to such
financial statements.
</TABLE>
