<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NATIONAL INTERGROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5122 25-1425889
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION IDENTIFICATION NO.)
------------------------
1220 SENLAC DRIVE
CARROLLTON, TEXAS 75006
(214) 446-4800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PETER B. MCKEE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
NATIONAL INTERGROUP, INC.
1220 SENLAC DRIVE
CARROLLTON, TEXAS 75006
(214) 446-4800
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
------------------------
Copy to:
STEPHEN E. JACOBS, ESQ.
WEIL, GOTSHAL & MANGES
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective and all other conditions to the merger (the 'Merger') of FoxMeyer
Corporation ('FoxMeyer) with and into a wholly owned subsidiary of the
Registrant pursuant to the Merger Agreement described in the enclosed Joint
Proxy Statement/Prospectus have been satisfied or waived.
If any of the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED (1) PRICE PER UNIT OFFERING PRICE (2) REGISTRATION FEE (3)
<S> <C> <C> <C> <C>
Common Stock, par value $5.00
per share................... 6,510,000 $15.25 $84,027,500 $28,975.00
</TABLE>
(1) The number of shares of common stock, par value $5.00 per share, of the
Registrant ('NII Common Stock') to be registered has been determined on the
basis of the exchange ratio for such shares in the Merger (.90 shares of NII
Common Stock for each outstanding share of FoxMeyer Common Stock (as
hereinafter defined), par value .01 per share, not held by the Registrant),
the maximum number of shares of FoxMeyer Common Stock (5,510,000) to be
exchanged in the Merger and an indeterminate number of shares of NII Common
Stock that may be issuable by reason of an upward adjustment of the exchange
ratio in accordance with the terms of the Merger Agreement.
(2) Estimated pursuant to Rule 457(f)(1) under the Securities Act of 1933, as
amended (the 'Securities Act'), based on the market value of shares of
FoxMeyer Common Stock to be cancelled in the Merger ($15.25 per share, which
was the average of the high and low sale prices of shares of FoxMeyer Common
Stock on the NYSE on September 7, 1994).
(3) The registration fee for all securities registered hereby, $28,975 has been
calculated pursuant to Section 6(b) of the Securities Act and Rule 457(c)
thereunder as follows: 1/29th of one percent of $15.25 (the average of the
high and low sale price of a share of FoxMeyer Common Stock on the NYSE on
September 7, 1994) multiplied by 5,510,000 (the number of shares of FoxMeyer
Common Stock that may be exchanged upon the consummation of the Merger).
A fee of $16,488.67 was paid on July 15, 1994 pursuant to Rules 14a-6(i)(4)
and 0-11 under the Securities Exchange Act of 1934, as amended (the 'Exchange
Act'), in respect of the Merger upon the filing by the Registrant and FoxMeyer
of joint preliminary proxy materials relating thereto. Pursuant to Rule 457(b)
under the Securities Act and Rule 0-11 under the Exchange Act and Section
14(g)(1)(B) of the Exchange Act, the amount of such previously paid fee has been
credited against the registration fee payable in connection with this filing.
Accordingly, an additional fee of $12,490.00 is required to be paid with this
registration statement.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
NATIONAL INTERGROUP, INC.
CROSS-REFERENCE SHEET
Cross Reference Sheet Pursuant to Rule 404(a) under the Securities Act and
Item 501(b) of Regulation S-K, showing the location in the Joint Proxy
Statement/Prospectus of information required by Part I of Form S-4.
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS
-------------------------------------------------- --------------------------------------------------
A. Information about the Transaction
<S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................... Outside Front Cover Page of
Joint Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front Cover Page of Joint Proxy
Statement/Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information............................. Summary; NII Summary Historical Consolidated
Financial Information; Comparative Per Share Data;
Comparative Market Price Information; NII Selected
Historical Consolidated Financial Information
4. Terms of the Transaction.......................... Summary; The Merger; The Merger Agreement;
Description of Shares of NII Common Stock Offered
in the Merger; Comparison of Stockholders' Rights
5. Pro Forma Financial Information................... Pro Forma Condensed Consolidated Financial
Information; NII Pro Forma Condensed Consolidated
Statement of Operations; NII Pro Forma Condensed
Consolidated Balance Sheet; Notes to NII Pro Forma
Condensed Consolidated Financial Statements; NII Selected
Historical Consolidated Financial Information; FoxMeyer
Selected Historical Consolidated Financial Information
6. Material Contacts with the Company
Being Acquired.................................... Certain Transactions; The Merger--Background of the Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters................................ *
8. Interests of Named Experts and Counsel............ Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.... *
B. Information About the Registrant
10. Information with Respect to S-3 Registrants....... Available Information; Incorporation of Certain Documents
by Reference; Summary; Information Concerning NII;
NII Selected Historical Consolidated Financial
Information; Pro Forma Condensed Consolidated
Financial Information
11. Incorporation of Certain Information
by Reference...................................... Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or S-3
Registrants....................................... *
13. Incorporation of Certain Information by
Reference......................................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER LOCATION IN JOINT PROXY STATEMENT/PROSPECTUS
-------------------------------------------------- --------------------------------------------------
<S> <C>
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants................. *
<CAPTION>
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies......... Available Information; Incorporation of Certain Documents
by Reference; Summary; Information Concerning FoxMeyer;
FoxMeyer Selected Historical Consolidated Financial
Information; Pro Forma Condensed Consolidated
Financial Information
16. Information with Respect to S-2 or S-3
Companies......................................... *
17. Information with Respect to Companies
other than S-2 or S-3 Companies................... *
<CAPTION>
D. Voting and Management Information
<S> <C>
18. Information if Proxies, Consents or Authorizations
are to be Solicited............................... Incorporation of Certain Documents by Reference;
Information Concerning NII; Information Concerning
FoxMeyer; Summary; Meetings of Stockholders; The Merger;
Certain Transactions; Ownership of FoxMeyer Common
Stock of Certain Beneficial Owners and FoxMeyer
Management; Election of FoxMeyer Directors;
Ownership of NII Common Stock of Certain Beneficial
Owners and NII Management; Election of NII Directors;
Executive Officers of NII; Executive Officers of
FoxMeyer; Stockholder Nominations and Proposals for 1995
19. Information if Proxies, Consents or Authorizations
are not to be Solicited,
or in an Exchange Offer........................... *
</TABLE>
- ------------------
*Omitted because not required, inapplicable or answer in negative.
<PAGE>
NATIONAL INTERGROUP, INC.
1220 SENLAC DRIVE
CARROLLTON, TEXAS 75006
September 12, 1994
To our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
National Intergroup, Inc., a Delaware corporation ('NII'), to be held on
Wednesday, October 12, 1994 at the Four Seasons Hotel, 4150 North MacArthur
Boulevard, Irving, Texas 75038, at 9:00 a.m., local time (the 'NII Annual
Meeting').
At the NII Annual Meeting, stockholders of record of NII at the close of
business on September 8, 1994, will consider and vote upon (i) a proposal to
approve and adopt an Agreement and Plan of Merger, dated as of June 30, 1994
(the 'Merger Agreement'), by and among NII, FoxMeyer Acquisition Corp., a
Delaware corporation and wholly owned subsidiary of NII ('Acquisition'), and
FoxMeyer Corporation, a Delaware corporation ('FoxMeyer'), pursuant to which,
among other things, FoxMeyer will be merged with and into Acquisition (the
'Merger') and each outstanding share of common stock of FoxMeyer (other than
shares of FoxMeyer common stock held by NII or FoxMeyer) will be converted into
the right to receive 0.90 shares of common stock of NII, subject to upward
adjustment in accordance with the terms of the Merger Agreement; (ii) a proposal
to approve and adopt an amendment to NII's Restated Certificate of Incorporation
to increase the number of authorized shares of preferred stock of NII from
10,000,000 to 20,000,000; (iii) a proposal to approve and adopt an amendment to
NII's Restated Certificate of Incorporation to change NII's name to FoxMeyer
Health Corporation; (iv) a proposal to approve an amendment to NII's 1993 Stock
Option and Performance Award Plan (the '1993 Option Plan') to increase by
2,000,000 the number of shares of common stock authorized for issuance
thereunder; (v) a proposal to approve and adopt an amendment to the 1993 Option
Plan to allow grants thereunder to individuals not regularly employed by NII who
serve as directors of any subsidiary corporation of NII, at the discretion of
the committee administering such 1993 Option Plan; (vi) the election of two
directors to the NII Board of Directors each to hold office for a three-year
term; and (vii) such other business as may properly come before the NII Annual
Meeting or any adjournments or postponements thereof.
THE NII BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS
THAT NII STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT,
FOR APPROVAL AND ADOPTION OF THE AMENDMENT TO NII'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK OF
NII, FOR APPROVAL AND ADOPTION OF THE AMENDMENT TO NII'S RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE NII'S NAME TO FOXMEYER HEALTH CORPORATION, FOR APPROVAL
AND ADOPTION OF THE AMENDMENT TO THE 1993 OPTION PLAN TO INCREASE BY 2,000,000
THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE THEREUNDER, FOR
APPROVAL AND ADOPTION OF THE AMENDMENT TO THE 1993 OPTION PLAN TO ALLOW GRANTS
THEREUNDER TO INDIVIDUALS NOT REGULARLY EMPLOYED BY NII WHO SERVE AS DIRECTORS
OF ANY SUBSIDIARY CORPORATION OF NII, AND FOR ELECTION OF THE TWO NOMINEES FOR
DIRECTOR.
You should read carefully the accompanying Notice of Annual Meeting of
Stockholders and the Joint Proxy Statement/Prospectus for details of the Merger
and additional related information.
It is important that your shares be represented at the NII Annual Meeting.
Whether or not you plan to attend the NII Annual Meeting, we urge you to sign,
date and return the enclosed proxy card at your earliest convenience in the
enclosed postage-prepaid envelope. Your shares of stock will be voted in
accordance with the instructions you have given in your proxy. If you attend the
NII Annual Meeting, you may vote in person if you wish, even though you
previously have returned your proxy card. Your prompt cooperation will be
greatly appreciated.
Very truly yours,
/s/ ABBEY J. BUTLER /s/ Melvyn J.Estrin
- ------------------------------ ------------------------------
ABBEY J. BUTLER MELVYN J. ESTRIN
Co-Chairman of the Board Co-Chairman of the Board
and Co-Chief Executive Officer and Co-Chief Executive Officer
<PAGE>
NATIONAL INTERGROUP, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
The Annual Meeting of Stockholders of National Intergroup, Inc., a Delaware
corporation ('NII'), will be held on Wednesday, October 12, 1994, at the Four
Seasons Hotel, 4150 North MacArthur Boulevard, Irving, Texas 75038, at 9:00
a.m., local time (the 'NII Annual Meeting'), for the purpose of considering and
acting upon the following matters, which are described more fully in the
accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of June 30, 1994 (the 'Merger
Agreement'), among NII, FoxMeyer Acquisition Corp., a Delaware corporation
and wholly owned subsidiary of NII ('Acquisition'), and FoxMeyer
Corporation, a Delaware corporation and an 80.5% subsidiary of NII
('FoxMeyer'), pursuant to which, among other things, FoxMeyer will be
merged with and into Acquisition (the 'Merger') and each outstanding share
of common stock of FoxMeyer (other than shares of FoxMeyer common stock
held by NII or FoxMeyer) will be converted into the right to receive 0.90
shares of common stock of NII ('NII Common Stock'), subject to upward
adjustment in accordance with the terms of the Merger Agreement. THE MERGER
IS MORE COMPLETELY DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/
PROSPECTUS, AND A COPY OF THE MERGER AGREEMENT IS ATTACHED AS ANNEX A
THERETO.
2. To consider and vote upon a proposal to approve and adopt an
amendment to NII's Restated Certificate of Incorporation to increase the
number of authorized shares of preferred stock of NII from 10,000,000 to
20,000,000.
3. To consider and vote upon a proposal to approve and adopt an
amendment to NII's Restated Certificate of Incorporation to change NII's
name to FoxMeyer Health Corporation.
4. To consider and vote upon a proposal to approve and adopt an
amendment to NII's 1993 Stock Option and Performance Award Plan (the '1993
Option Plan') to increase by 2,000,000 the number of shares of NII common
stock authorized for issuance thereunder.
5. To consider and vote upon a proposal to approve and adopt an
amendment to the 1993 Option Plan to allow grants thereunder to individuals
not regularly employed by NII who serve as directors of any subsidiary
corporation of NII, at the discretion of the committee administering such
1993 Option Plan.
6. To elect two directors to NII's Board of Directors each to hold
office for a three-year term.
7. To transact such other business as may properly come before the NII
Annual Meeting or any adjournment or postponement thereof.
Copies of the Merger Agreement, the amendments to the 1993 Option Plan and
the amendments to NII's Restated Certificate of Incorporation to increase the
number of authorized preferred stock and to change NII's name are attached as
Annex A, C and D, respectively, to the accompanying Joint Proxy
Statement/Prospectus, and together with such Joint Proxy Statement/Prospectus,
form a part of this Notice.
The Board of Directors has fixed the close of business on September 8, 1994
as the record date for the purpose of determining the stockholders who are
entitled to receive notice of and to vote at the NII Annual Meeting and any
adjournment or postponement thereof.
A list of the stockholders entitled to vote at the NII Annual Meeting will
be made available for examination by any stockholder, for any purpose germane to
the NII Annual Meeting, during ordinary business hours at the offices of NII at
1220 Senlac Drive, Carrollton, Texas 75006, commencing on September 30, 1994 and
at the NII Annual Meeting.
The holders of shares of NII Common Stock are not entitled to dissenters'
rights in connection with the Merger.
<PAGE>
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHICH HAS BEEN PROVIDED FOR
YOUR CONVENIENCE AND WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
THE PROMPT RETURN OF PROXY CARDS WILL ENSURE A QUORUM. ANY STOCKHOLDER PRESENT
AT THE NII ANNUAL MEETING MAY VOTE PERSONALLY ON ALL MATTERS BROUGHT BEFORE THE
NII ANNUAL MEETING AND, IN THAT EVENT, HIS OR HER PROXY WILL NOT BE USED.
/s/ ELIZABETH T. CHING
---------------------------
Elizabeth T. Ching
Assistant Secretary
Carrollton, Texas
September 12, 1994
<PAGE>
FOXMEYER CORPORATION
1220 SENLAC DRIVE
CARROLLTON, TEXAS 75006
September 12, 1994
To our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
FoxMeyer Corporation, a Delaware corporation ('FoxMeyer'), to be held at the
Four Seasons Hotel, 4150 North MacArthur Boulevard, Irving, Texas 75038 on
Wednesday, October 12, 1994 at 10:00 a.m., local time (the 'FoxMeyer Annual
Meeting').
At the FoxMeyer Annual Meeting, stockholders of record of FoxMeyer at the
close of business on September 8, 1994 will consider and vote upon (i) a
proposal to approve and adopt an Agreement and Plan of Merger, dated as of June
30, 1994 (the 'Merger Agreement'), by and among FoxMeyer, National Intergroup,
Inc., a Delaware corporation and the owner of 80.5% of the common stock of
FoxMeyer ('NII'), and FoxMeyer Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of NII ('Acquisition'), pursuant to which, among other
things, FoxMeyer will be merged with and into Acquisition (the 'Merger') and
each outstanding share of common stock of FoxMeyer (other than shares of
FoxMeyer common stock held by NII or FoxMeyer) will be converted into the right
to receive 0.90 shares of common stock of NII, subject to upward adjustment in
accordance with the terms of the Merger Agreement; (ii) the election of six
directors to the FoxMeyer Board of Directors to hold office until the next
annual meeting of FoxMeyer stockholders and until their respective successors
are elected and qualified; and (iii) such other business as may properly come
before the FoxMeyer Annual Meeting or any adjournments or postponements thereof.
THE FOXMEYER BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT FOXMEYER STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT, AND FOR ELECTION OF THE NOMINEES FOR DIRECTOR.
You should read carefully the accompanying Notice of Annual Meeting of
Stockholders and the Joint Proxy Statement/Prospectus for details of the Merger
and additional related information.
It is important that your shares be represented at the FoxMeyer Annual
Meeting. Whether or not you plan to attend the FoxMeyer Annual Meeting, we urge
you to sign, date and return the enclosed proxy card at your earliest
convenience in the enclosed postage-prepaid envelope. Your shares of stock will
be voted in accordance with the instructions you have given in your proxy. If
you attend the FoxMeyer Annual Meeting, you may vote in person if you wish, even
though you previously have returned your proxy card. Your prompt cooperation
will be greatly appreciated.
Very truly yours,
/s/ ABBEY J. BUTLER /s/ MELVYN J. ESTRIN
- ------------------------------ ------------------------------
ABBEY J. BUTLER MELVYN J. ESTRIN
Co-Chairman of the Board Co-Chairman of the Board
and Co-Chief Executive Officer and Co-Chief Executive Officer
<PAGE>
FOXMEYER CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------
The Annual Meeting of Stockholders of FoxMeyer Corporation, a Delaware
corporation ('FoxMeyer'), will be held at the Four Seasons Hotel, 4150 North
MacArthur Boulevard, Irving, Texas 75038, on Wednesday, October 12, 1994, at
10:00 a.m., local time (the 'FoxMeyer Annual Meeting'), for the purpose of
considering and acting upon the following matters, which are described more
fully in the accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of June 30, 1994 (the 'Merger
Agreement'), by and among National Intergroup, Inc., a Delaware corporation
and the owner of 80.5% of FoxMeyer common stock ('NII'), FoxMeyer
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
NII ('Acquisition'), and FoxMeyer, pursuant to which, among other things,
FoxMeyer will be merged with and into Acquisition (the 'Merger'), and each
outstanding share of common stock of FoxMeyer (other than shares of
FoxMeyer common stock held by NII or FoxMeyer) will be converted into the
right to receive 0.90 shares of common stock of NII, subject to upward
adjustment in accordance with the terms of the Merger Agreement. THE MERGER
IS MORE COMPLETELY DESCRIBED IN THE ACCOMPANYING JOINT PROXY STATEMENT/
PROSPECTUS, AND A COPY OF THE MERGER AGREEMENT IS ATTACHED AS ANNEX A
THERETO.
2. To elect six directors to serve until the next annual meeting of
stockholders of FoxMeyer and until their respective successors are duly
elected and qualified.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The accompanying Joint Proxy Statement/Prospectus and the Annexes thereto,
including the Merger Agreement, form a part of this Notice.
The Board of Directors has fixed the close of business on September 8, 1994
as the record date for the purpose of determining the stockholders who are
entitled to receive notice of and to vote at the FoxMeyer Annual Meeting and any
adjournment or postponement thereof.
A list of the stockholders entitled to vote at the FoxMeyer Annual Meeting
will be made available for examination by any stockholder, for any purpose
germane to the FoxMeyer Annual Meeting, during ordinary business hours at the
offices of FoxMeyer at 1220 Senlac Drive, Carrollton, Texas 75006, commencing on
September 30, 1994 and at the Annual Meeting.
The affirmative vote of the holders of a majority of the outstanding shares
of FoxMeyer common stock is necessary to approve and adopt the Merger Agreement.
NII beneficially owns 22,690,000, or approximately 80.5%, of the shares of
FoxMeyer common stock outstanding as of August 22, 1994. Pursuant to the Merger
Agreement, NII has agreed to cause all of such shares of FoxMeyer common stock
to be voted in favor of approval of the Merger Agreement. Accordingly, approval
of the Merger Agreement is assured.
The holders of shares of common stock of FoxMeyer are not entitled to
dissenters' rights in connection with the Merger.
STOCKHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHICH HAS BEEN PROVIDED FOR
YOUR CONVENIENCE AND WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
THE PROMPT RETURN OF PROXY CARDS WILL ENSURE A QUORUM. ANY STOCKHOLDER PRESENT
AT THE FOXMEYER ANNUAL MEETING MAY VOTE PERSONALLY ON ALL MATTERS BROUGHT BEFORE
THE FOXMEYER ANNUAL MEETING AND, IN THAT EVENT, HIS OR HER PROXY WILL NOT BE
USED.
/s/ ELIZABETH T. CHING
--------------------
Elizabeth T. Ching
Assistant Secretary
Carrollton, Texas
September 12, 1994
<PAGE>
NATIONAL INTERGROUP, INC.
AND
FOXMEYER CORPORATION
------------------------
JOINT PROXY STATEMENT
------------------------
6,510,000 SHARES
NATIONAL INTERGROUP, INC. PROSPECTUS
COMMON STOCK
------------------------
This Joint Proxy Statement/Prospectus is being furnished to holders of
shares of common stock, par value $5.00 per share (the 'NII Common Stock'), of
National Intergroup, Inc., a Delaware corporation ('NII'), in connection with
the solicitation of proxies by the NII Board of Directors for use at the 1994
Annual Meeting of NII stockholders to be held on Wednesday, October 12, 1994, at
the Four Seasons Hotel, 4150 North MacArthur Boulevard, Irving, Texas 75038,
commencing at 9:00 a.m., local time, and at any adjournment or postponement
thereof (the 'NII Annual Meeting').
This Joint Proxy Statement/Prospectus is also being furnished to holders of
shares of common stock, par value $.01 per share (the 'FoxMeyer Common Stock'),
of FoxMeyer Corporation, a Delaware corporation ('FoxMeyer'), in connection with
the solicitation of proxies by the FoxMeyer Board of Directors for use at the
1994 Annual Meeting of FoxMeyer stockholders to be held on Wednesday, October
12, 1994, at the Four Seasons Hotel, 4150 North MacArthur Boulevard, Irving,
Texas 75038, commencing at 10:00 a.m., local time, and at any adjournment or
postponement thereof (the 'FoxMeyer Annual Meeting').
This Joint Proxy Statement/Prospectus constitutes the Prospectus of NII
filed as part of a Registration Statement on Form S-4 (together with any
amendments thereto, the 'Registration Statement') with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
'Securities Act'), relating to the shares of NII Common Stock issuable in
connection with the Merger (as defined herein). All information concerning NII
contained in this Joint Proxy Statement/Prospectus has been furnished by NII,
and all information concerning FoxMeyer contained in this Joint Proxy
Statement/Prospectus has been furnished by FoxMeyer.
This Joint Proxy Statement/Prospectus and the related form of proxy are
first being mailed to stockholders of NII and FoxMeyer on or about September 12,
1994.
------------------------
THE SHARES OF NII COMMON STOCK ISSUABLE IN THE MERGER HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Joint Proxy Statement/Prospectus is September 12, 1994.
<PAGE>
NII ANNUAL MEETING
At the NII Annual Meeting, stockholders of record of NII at the close of
business on September 8, 1994 (the 'NII Record Date'), will consider and vote
upon (i) a proposal to approve and adopt an Agreement and Plan of Merger, dated
as of June 30, 1994 (the 'Merger Agreement'), by and among NII, FoxMeyer
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of NII
('Acquisition'), and FoxMeyer, pursuant to which, among other things, FoxMeyer
will be merged with and into Acquisition, which will be the surviving
corporation (the 'Merger'), and each outstanding share of FoxMeyer Common Stock
(other than shares of FoxMeyer Common Stock held by NII or FoxMeyer) will be
converted into the right to receive 0.90 shares of NII Common Stock, subject to
upward adjustment in accordance with the terms of the Merger Agreement; (ii) a
proposal to approve and adopt an amendment to NII's Restated Certificate of
Incorporation (the 'NII Charter') to increase the number of authorized shares of
preferred stock of NII from 10,000,000 to 20,000,000; (iii) a proposal to
approve and adopt an amendment to the NII Charter to change NII's name to
FoxMeyer Health Corporation; (iv) a proposal to approve and adopt an amendment
to NII's 1993 Stock Option and Performance Award Plan (the '1993 Option Plan')
to increase by 2,000,000 the number of shares of NII Common Stock authorized for
issuance thereunder; (v) a proposal to approve and adopt an amendment to the
1993 Option Plan to allow grants thereunder to individuals not regularly
employed by NII who serve as directors of any subsidiary corporation of NII, at
the discretion of the committee administering such 1993 Option Plan; (vi) the
election of two directors to the NII Board of Directors each to hold office for
a three-year term; and (vii) such other business as may properly come before the
NII Annual Meeting or any adjournments or postponements thereof. See
'The Merger,' 'Election of NII Directors,' 'Amendment of the NII Charter to
Increase the Authorized Preferred Stock,' 'Amendment of the NII Charter to
Change the Name of NII,' 'Amendment of the 1993 Option Plan to Increase the
Number of Shares of NII Common Stock Authorized for Issuance' and 'Amendment of
the 1993 Option Plan to Allow Grants to Individuals who Serve as Directors of
Any Subsidiary Corporation of NII.'
FOXMEYER ANNUAL MEETING
At the FoxMeyer Annual Meeting, stockholders of record of FoxMeyer at the
close of business on September 8, 1994 (the 'FoxMeyer Record Date'), will
consider and vote upon (i) a proposal to approve and adopt the Merger Agreement;
(ii) the election of six directors to the FoxMeyer Board of Directors to hold
office until the next annual meeting of FoxMeyer stockholders and until their
respective successors are elected and qualified; and (iii) such other business
as may properly come before the FoxMeyer Annual Meeting or any adjournments or
postponements thereof. See 'The Merger' and 'Election of FoxMeyer Directors.'
CONSUMMATION OF THE MERGER
Upon consummation of the Merger (i) FoxMeyer will be merged with and into
Acqusition, which will change its name to FoxMeyer Corporation and will be the
surviving corporation (the 'Surviving Corporation'), (ii) each issued and
outstanding share of FoxMeyer Common Stock (other than shares of FoxMeyer Common
Stock held by NII or FoxMeyer) will be converted into the right to receive 0.90
shares of NII Common Stock, subject to upward adjustment (the 0.90 shares of NII
Common Stock, as the same may be adjusted, is referred to herein sometimes as
the 'Exchange Ratio'), (iii) each outstanding option to purchase shares of
FoxMeyer Common Stock will be deemed to constitute an option to purchase shares
of NII Common Stock, subject to the same terms and conditions as were previously
applicable to such option, including vesting, as in effect immediately prior to
the effective date of the Merger, except that (A) the number of shares of NII
Common Stock for which such stock option shall be exercisable shall be equal to
the product of the Exchange Ratio and the number of shares of FoxMeyer Common
Stock subject to such stock option immediately prior to the effective date of
the Merger (rounded down to the nearest whole number), and (B) the per share
exercise price for the shares of NII Common Stock issuable upon the exercise of
such assumed stock option shall be equal to the aggregate exercise price for the
shares of FoxMeyer Common Stock subject to the stock option, divided by the
number of shares of NII Common Stock deemed to be purchasable pursuant to such
stock option, and (iv) all shares of FoxMeyer Common Stock will no longer be
outstanding and will automatically be cancelled, and each holder of a
certificate representing shares of FoxMeyer Common Stock will cease to have any
rights with respect thereto, except the right to receive, upon surrender of such
certificate, the shares of NII Common Stock to be issued in consideration
therefor and the amount of any cash payable to such person in lieu of fractional
shares. Fractional shares of NII Common Stock will not be issued in connection
with the Merger. In lieu of any such
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fractional shares, American Stock Transfer & Trust Company, as the exchange
agent (the 'Exchange Agent') in connection with the Merger, shall, on behalf of
all holders of fractional shares, aggregate all such fractional interests and,
at NII's option, such fractional shares shall be purchased by NII or sold in the
open market by the Exchange Agent, in either case at the then prevailing price
on the New York Stock Exchange. See 'The Merger' and 'The Merger Agreement.'
AVAILABLE INFORMATION
NII and FoxMeyer are subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and in
accordance therewith file periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the 'Commission'). The
periodic reports, proxy statements and other information filed by NII and
FoxMeyer with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at certain regional offices of the Commission at 75
Park Place, Room 1228, New York, New York 10007 and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60601-2511. Copies of
such material also can be obtained, at prescribed rates, from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, periodic reports, proxy statements and other information
filed by NII and FoxMeyer may be inspected at the offices of the New York Stock
Exchange, Inc. (the 'NYSE'), 20 Broad Street, New York, New York 10005, on which
shares of NII Common Stock and shares of FoxMeyer Common Stock are listed. If
the Merger is consummated, NII will continue to file periodic reports, proxy
statements and other information with the Commission pursuant to the Exchange
Act and FoxMeyer will no longer be required to file periodic reports, proxy
statements or other information with the Commission pursuant to the Exchange
Act.
NII has filed with the Commission the Registration Statement under the
Securities Act, with respect to the shares of NII Common Stock to be issued
pursuant to or as contemplated by the Merger Agreement. This Joint Proxy
Statement/ Prospectus does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. The Registration Statement and any
amendments thereto, including exhibits filed as a part thereof, are available
for inspection and copying as set forth above.
------------------------
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST TO, IN THE CASE OF DOCUMENTS RELATING TO
NII, CORPORATE SECRETARY, NATIONAL INTERGROUP, INC., 1220 SENLAC DRIVE,
CARROLLTON, TEXAS 75006, (214) 446-4800, AND, IN THE CASE OF DOCUMENTS RELATING
TO FOXMEYER, CORPORATE SECRETARY, FOXMEYER CORPORATION, 1220 SENLAC DRIVE,
CARROLLTON, TEXAS 75006, (214) 446-4800. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BEFORE OCTOBER 4, 1994.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by NII or FoxMeyer with the
Commission pursuant to the Exchange Act are incorporated herein by this
reference:
1. NII's Annual Report on Form 10-K for the year ended March 31, 1994
('NII's Annual Report');
2. NII's Current Report on Form 8-K dated June 30, 1994 ('NII's
Current Report on Form 8-K');
3. NII's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1994 ('NII's Quarterly Report');
4. FoxMeyer's Annual Report on Form 10-K for the year ended March 31,
1994 ('FoxMeyer's Annual Report');
5. FoxMeyer's Current Report on Form 8-K dated June 30, 1994
('FoxMeyer's June 30 Current Report');
6. FoxMeyer's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1994 ('FoxMeyer's Quarterly Report'); and
7. FoxMeyer's Current Report on Form 8-K dated July 14, 1994 (together
with FoxMeyer's June 30 Current Report, 'FoxMeyer's Current Reports
on Form 8-K').
All documents filed by NII or FoxMeyer pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
date of the NII Annual Meeting and the FoxMeyer Annual Meeting shall be deemed
to be incorporated by reference herein and to be a part hereof from the date any
such document is filed.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document that also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
hereof. All information appearing in this Joint Proxy Statement/Prospectus is
qualified in its entirety by the information and financial statements (including
notes thereto) appearing in the documents incorporated herein by reference,
except to the extent set forth in the immediately preceding statement.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH
RESPECT TO SUCH MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY NII OR FOXMEYER. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF NII OR FOXMEYER SINCE THE DATE HEREOF OR THAT THE
INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THEREOF.
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TABLE OF CONTENTS
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NII Annual Meeting............................................... i
FoxMeyer Annual Meeting.......................................... i
Consummation of the Merger....................................... i
Available Information............................................ ii
Incorporation of Certain Documents by Reference.................. iii
Summary.......................................................... 1
The Companies.................................................. 1
Meetings of Stockholders....................................... 1
The Merger..................................................... 3
Market Prices.................................................. 9
NII Summary Historical Consolidated Financial Information........ 10
FoxMeyer Summary Historical Consolidated Financial Information... 11
Comparative Per Share Data....................................... 12
Comparative Market Price Information............................. 13
Information Concerning NII....................................... 14
Information Concerning FoxMeyer.................................. 15
Meetings of Stockholders......................................... 16
General........................................................ 16
Matters to Be Considered at the Meetings....................... 16
Voting at the Meetings; Record Date; Quorum.................... 17
Proxies........................................................ 18
The Merger....................................................... 20
Background of the Merger....................................... 20
FoxMeyer's Reasons for the Merger and Recommendation of the
Special Committee........................................... 24
Opinion of the Special Committee's Financial Advisor........... 26
NII's Reasons for the Merger................................... 29
Recommendation of the NII Board of Directors................... 30
Certain Consequences of the Merger............................. 30
Conduct of the Business of NII and FoxMeyer After the Merger... 30
Conduct of the Business of NII and FoxMeyer If the Merger Is
Not Consummated............................................. 30
Conflicts of Interest.......................................... 31
Certain Financial Projections.................................. 31
NII Summary Consolidated Statements of Operations
Projections................................................. 32
FoxMeyer Summary Consolidated Statements of Operations
Projections................................................. 33
Anticipated Accounting Treatment............................... 34
Certain Federal Income Tax Consequences........................ 34
Regulatory Approvals........................................... 34
Litigation Relating to the Merger.............................. 34
Federal Securities Law Consequences............................ 35
Appraisal Rights............................................... 35
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The Merger Agreement............................................. 35
Terms of the Merger............................................ 35
Effective Date................................................. 36
Conversion of Shares; Exchange of Stock Certificates; No
Fractional Amounts.......................................... 36
Treatment of Stock Options..................................... 37
Representations and Warranties................................. 37
Certain Covenants.............................................. 37
Indemnification................................................ 38
Approval of the Merger Agreement............................... 39
Conditions to the Merger....................................... 39
Termination.................................................... 39
Amendment and Modification..................................... 40
Fees and Expenses.............................................. 40
NII Selected Historical Consolidated Financial Information....... 41
FoxMeyer Selected Historical Consolidated Financial
Information...................................................... 42
Pro Forma Condensed Consolidated Financial Information........... 43
NII Pro Forma Condensed Consolidated Statement of Operations..... 44
NII Pro Forma Condensed Consolidated Balance Sheet............... 45
Notes to NII Pro Forma Condensed Consolidated Financial
Statements....................................................... 47
Description of Shares of NII Common Stock Offered in the
Merger........................................................... 48
General........................................................ 48
Voting......................................................... 48
Dividends...................................................... 48
Liquidation, Dissolution or Winding Up......................... 48
Transfer Agent................................................. 48
Comparison of Stockholders' Rights............................... 49
Directors...................................................... 49
Quorum......................................................... 49
Dividends...................................................... 49
Stockholder Vote Required for Certain Transactions............. 50
Election of NII Directors........................................ 51
Term Expiring in 1997.......................................... 51
Vote Required.................................................. 52
NII Directors Whose Terms of Office Continue................... 52
Terms Expiring in 1995......................................... 52
Terms Expiring in 1996......................................... 52
Committees of the NII Board of Directors....................... 53
Meetings of the NII Board of Directors......................... 53
Compensation of NII Directors.................................. 53
Amendment of the NII Charter to Increase the Authorized Preferred
Stock............................................................ 55
Recommendation and Vote Required............................... 56
Amendment of the NII Charter to Change the Name of NII........... 56
Recommendation and Vote Required............................... 56
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Amendment of the 1993 Option Plan to Increase the Number of
Shares of NII Common Stock Authorized for Issuance............... 56
Proposed Amendment............................................. 56
Description of the 1993 Option Plan............................ 57
Federal Income Tax Consequences................................ 59
Recommendation and Vote Required............................... 61
Amendment of the 1993 Option Plan to Allow Grants to Individuals
who Serve as Directors of Any Subsidiary Corporation of NII...... 61
Proposed Amendment............................................. 61
Recommendation and Vote Required............................... 62
Executive Officers of NII........................................ 62
Former NII Executive Officer................................... 62
Compensation of NII Executive Officers......................... 63
NII Summary Compensation Table................................. 63
Report of the NII Compensation Committee....................... 65
Option/SAR Grants in Fiscal 1994 to NII Executive Officers..... 67
Aggregate Option/SAR Exercises in Fiscal 1994 by NII Executive
Officers.................................................... 68
Long-Term Incentive Plans--Awards in Fiscal 1994 to NII
Executive Officers.......................................... 68
NII Performance Graph.......................................... 70
Compliance with Section 16(a) of the Securities Exchange Act of
1934........................................................ 71
Employment Agreements with NII Executive Officers.............. 71
Ownership of NII Common Stock of Certain Beneficial Owners and
NII Management................................................... 72
Election of FoxMeyer Directors................................... 75
Vote Required.................................................. 76
Committees of the FoxMeyer Board of Directors.................. 76
Meetings of the FoxMeyer Board of Directors.................... 76
Compensation of FoxMeyer Directors............................. 77
Executive Officers of FoxMeyer................................... 77
Former FoxMeyer Executive Officer.............................. 78
Compensation of FoxMeyer Executive Officers.................... 79
FoxMeyer Summary Compensation Table............................ 79
Report of the FoxMeyer Compensation Committee.................. 81
FoxMeyer's Compensation Committee Interlocks and Insider
Participation............................................... 82
Option/SAR Grants in Fiscal 1994 to FoxMeyer Executive
Officers.................................................... 82
Aggregate Option/SAR Exercises in Fiscal 1994 by FoxMeyer
Executive Officers.......................................... 82
Long-Term Incentive Plans--Awards in Fiscal 1994 to FoxMeyer
Executive Officers.......................................... 83
FoxMeyer Performance Graph..................................... 84
Compliance with Section 16(a) of the Securities Exchange Act of
1934........................................................ 85
Employment Agreements with FoxMeyer Executive Officers......... 85
Ownership of FoxMeyer Common Stock of Certain Beneficial Owners
and FoxMeyer Management.......................................... 87
Certain Transactions............................................. 89
Transactions Between NII and FoxMeyer.......................... 89
Other Transactions............................................. 90
General.......................................................... 91
NII............................................................ 91
FoxMeyer....................................................... 91
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Stockholder Nominations and Proposals for 1995................... 92
NII............................................................ 92
FoxMeyer....................................................... 92
Legal Matters.................................................... 92
Experts.......................................................... 92
Other Matters.................................................... 92
</TABLE>
Annex A Agreement and Plan of Merger, dated as of June 30, 1994, among NII,
Acquisition and FoxMeyer.
Annex B Opinion of Smith Barney Inc.
Annex C Amendment to NII's 1993 Stock Option and Performance Award Plan.
Annex D Amendment to NII's Restated Certificate of Incorporation.
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus. This summary is not intended to be
complete and is qualified in its entirety by reference to the more detailed
information contained elsewhere, or incorporated by reference, in this Joint
Proxy Statement/Prospectus and the Annexes hereto. Stockholders are urged to
read this Joint Proxy Statement/Prospectus, the Annexes hereto and the documents
incorporated herein by reference in their entirety. Unless otherwise defined
herein, capitalized terms used in this summary have the respective meanings
ascribed to them elsewhere in this Joint Proxy Statement/Prospectus.
THE COMPANIES
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National Intergroup,
Inc. ....................... NII is a holding company principally involved in
1220 Senlac Drive (i) health care services, including the
Carrollton, Texas 75006 distribution of a full line of pharmaceutical
(214) 446-4800 products and health and beauty aids, as well
as providing managed care services, through
FoxMeyer, its 80.5%-owned subsidiary, and (ii)
the franchising of general variety stores and
the franchising and operation of crafts
stores, together with the wholesale
distribution of products to those stores,
through Ben Franklin Retail Stores, Inc., its
67.2%-owned subsidiary.
FoxMeyer Acquisition
Corp. ...................... Acquisition, a wholly owned subsidiary of NII,
1220 Senlac Drive was formed for the purpose of effecting the
Carrollton, Texas 75006 Merger. To date, Acquisition has not engaged
(214) 446-4800 in any activities other than those incident to
its organization and the consummation of the
Merger.
FoxMeyer Corporation ....... FoxMeyer is the fourth largest wholesale drug
1220 Senlac Drive distributor in the United States. Through its 18
Carrollton, Texas 75006 distribution centers, FoxMeyer sells a broad
(214) 446-4800 line of pharmaceutical products and health and
beauty aids. FoxMeyer's geographic coverage
extends to the entire continental United
States. FoxMeyer also provides various managed
care services.
</TABLE>
MEETINGS OF STOCKHOLDERS
<TABLE>
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Time, Date and Place........ NII. The NII Annual Meeting will be held at 9:00
a.m., local time, on Wednesday, October 12,
1994, at the Four Seasons Hotel, 4150 North
MacArthur Boulevard, Irving, Texas 75038, and
at any adjournment or postponement thereof.
FoxMeyer. The FoxMeyer Annual Meeting will be
held at 10:00 a.m., local time, on Wednesday,
October 12, 1994, at the Four Seasons Hotel,
4150 North MacArthur Boulevard, Irving, Texas
75038, and at any adjournment or postponement
thereof.
Purposes of the Meetings.... NII. The purpose of the NII Annual Meeting is to
consider and vote upon (i) a proposal to approve
and adopt the Merger Agreement; (ii) a
proposal to approve and adopt an amendment to
the NII Charter to increase the number of
authorized shares of preferred stock of NII;
(iii) a proposal to approve and adopt an
amendment to the NII Charter to change NII's
name to FoxMeyer Health Corporation; (iv) a
proposal to approve and adopt an amendment to
the 1993 Option Plan to increase by 2,000,000
the number of shares of NII Common Stock
authorized for issuance thereunder; (v) a
proposal to approve and adopt an amendment to
the 1993 Option Plan to allow grants
thereunder to individuals not regularly
employed by NII who serve as directors of any
subsidiary corporation of NII, at the
discretion of the committee
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administrating such 1993 Option Plan; (vi) the
election of two directors to the NII Board of
Directors each to hold office for a three-year
term; and (vii) such other business as may
properly come before the NII Annual Meeting or
any adjournments or postponements thereof.
FoxMeyer. The purpose of the FoxMeyer Annual
Meeting is to consider and vote upon (i) a
proposal to approve and adopt the Merger
Agreement; (ii) the election of six directors
to the FoxMeyer Board of Directors to hold
office until the next annual meeting of
FoxMeyer stockholders and until their
respective successors are elected and
qualified; and (iii) such other business as
may properly come before the FoxMeyer Annual
Meeting or any adjournments or postponements
thereof.
Record Date, Shares Entitled
to Vote, Quorum........... NII. Holders of record of shares of NII Common
Stock at the close of business on September 8,
1994, are entitled to notice of and to vote at
the NII Annual Meeting. At such date there
were 12,759,303 shares of NII Common Stock
outstanding, each of which will be entitled to
one vote on each matter to be acted upon or
which may properly come before the NII Annual
Meeting. The presence, in person or by proxy,
of the holders of 40% of the outstanding
shares of NII Common Stock entitled to vote at
the NII Annual Meeting is necessary to
constitute a quorum for the transaction of
business at such meeting.
FoxMeyer. Holders of record of shares of
FoxMeyer Common Stock at the close of business
on September 8, 1994, are entitled to notice
of and to vote at the FoxMeyer Annual Meeting.
At such date there were 28,200,000 shares of
FoxMeyer Common Stock outstanding, each of
which will be entitled to one vote on each
matter to be acted upon or which may properly
come before the FoxMeyer Annual Meeting. The
presence, in person or by proxy, of the
holders of a majority of the outstanding
shares of FoxMeyer Common Stock entitled to
vote at the FoxMeyer Annual Meeting is
necessary to constitute a quorum for the
transaction of business at such meeting.
Votes Required.............. NII. The affirmative vote of the holders of a
majority of the shares of NII Common Stock voted
at the NII Annual Meeting is required for
approval of the amendments to the 1993 Option
Plan (the 'Option Plan Amendments'). See
'Amendment of the 1993 Option Plan to Increase
the Number of Shares of NII Common Stock
Authorized for Issuance' and 'Amendment of the
1993 Option Plan to Allow Grants to
Individuals who Serve as Directors of Any
Subsidiary Corporation.' The affirmative vote
of the holders of shares representing
two-thirds of the outstanding shares of NII
Common Stock entitled to vote thereon at the
NII Annual Meeting is required for approval of
the amendments to the NII Charter (the
'Charter Amendments'). See 'Amendment of the
NII Charter to Increase the Authorized
Preferred Stock' and 'Amendment of the NII
Charter to Change the Name of NII.' The
directors elected will be the candidates
receiving the greatest number of votes cast by
the holders of shares of NII Common Stock
present, in person or by proxy, at the NII
Annual Meeting. See 'Election of NII
Directors.' Although NII stockholder approval
of the Merger Agreement is not required under
Delaware law because NII is not a constituent
corporation to the Merger, under the
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rules of the NYSE, on which the shares of NII
Common Stock are listed, such approval is
required. The NYSE rules require the
affirmative vote of the holders of a majority
of the shares of NII Common Stock voted at the
NII Annual Meeting for approval and adoption
of the Merger Agreement. See 'Meetings of
Stockholders.'
Abbey J. Butler and Melvyn J. Estrin, the
Co-Chairmen of the Board and Co-Chief
Executive Officers of NII, beneficially own
(exclusive of their stock options) in the
aggregate, 3,777,000, or approximately 29.6%,
of the shares of NII Common Stock outstanding
at the NII Record Date. Messrs. Butler and
Estrin have agreed that they will cause all of
the shares of NII Common Stock that they
beneficially own to be voted in favor of
approval of the Merger Agreement, the Charter
Amendments, the Option Plan Amendments, and
the election of the two nominees for director.
In addition to Messrs. Butler and Estrin, all
other directors of NII beneficially own less
than 1% of the shares of NII Common Stock
outstanding at the NII Record Date. See 'The
Merger Agreement--Certain Covenants.'
FoxMeyer. The approval and adoption by FoxMeyer
stockholders of the Merger Agreement will
require the affirmative vote of a majority of
the outstanding shares of FoxMeyer Common
Stock. See 'Meetings of Stockholders.' The
directors elected will be the six candidates
receiving the greatest number of votes cast by
the holders of shares of FoxMeyer Common Stock
present, in person or by proxy, at the
FoxMeyer Annual Meeting. See 'Election of
FoxMeyer Directors.'
NII beneficially owns 22,690,000 shares of
FoxMeyer Common Stock (approximately 80.5% of
the outstanding shares of FoxMeyer Common
Stock) and, under the terms of the Merger
Agreement, will vote or cause to be voted all
those shares in favor of approval and adoption
of the Merger Agreement. Accordingly, approval
and adoption of the Merger Agreement is
assured. Nevertheless, the Board of Directors
of FoxMeyer is hereby soliciting your vote in
favor of approval and adoption of the Merger
Agreement.
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THE MERGER
<TABLE>
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Effect of Merger............ Upon consummation of the Merger, (i) FoxMeyer
will be merged with and into Acquisition, which
will change its name to FoxMeyer Corporation
and will be the Surviving Corporation, (ii)
each issued and outstanding share of FoxMeyer
Common Stock (other than shares of FoxMeyer
Common Stock held by NII or FoxMeyer) will be
converted into the right to receive 0.90
shares of NII Common Stock, subject to upward
adjustment as described below, (iii) each
outstanding option to purchase shares of
FoxMeyer Common Stock will be deemed to
constitute an option to purchase shares of NII
Common Stock, subject to the same terms and
conditions as were previously applicable to
such option, including vesting, as in effect
immediately prior to the effective date of the
Merger, except that (A) the number of shares
of NII Common Stock for which such stock
option shall be exercisable shall be equal to
the product of the Exchange Ratio and the
number of shares of FoxMeyer Common Stock
subject to such stock option immediately prior
to the effective date of the Merger (rounded
down to the nearest whole number), and (B) the
per share exercise price for the
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shares of NII Common Stock issuable upon the
exercise of such assumed stock option shall be
equal to the aggregate exercise price for the
shares of FoxMeyer Common Stock subject to the
stock option, divided by the number of shares of
NII Common Stock deemed to be purchasable
pursuant to such stock option, and (iv) all
shares of FoxMeyer Common Stock will no longer
be outstanding and will automatically be
cancelled, and each holder of a certificate
representing shares of FoxMeyer Common Stock
will cease to have any rights with respect
thereto, except the right to receive, upon the
surrender of such certificate, the shares of NII
Common Stock to be issued in consideration
therefor and to be paid, without interest, the
amount of any cash payable to such person in
lieu of fractional shares. Fractional shares of
NII Common Stock will not be issued in
connection with the Merger. In lieu of any such
fractional shares, the Exchange Agent shall, on
behalf of all holders of fractional shares,
aggregate all such fractional interests and, at
NII's option, such fractional shares shall be
purchased by NII or sold in the open market by
the Exchange Agent, in either case at the then
prevailing price on the NYSE. A copy of the
Merger Agreement is attached as Annex A to this
Joint Proxy Statement/Prospectus and is
incorporated by reference herein. See 'The
Merger Agreement.'
Merger Consideration........ Each issued and outstanding share of FoxMeyer
Common Stock (other than shares of FoxMeyer
Common Stock held by NII or FoxMeyer) will be
converted into the right to receive 0.90
shares of NII Common Stock. If the product of
(x) the Average Stock Price and (y) 0.90 is
less than $14.40, the Exchange Ratio shall be
increased so that the product of (x) the
Average Stock Price and (y) the Exchange Ratio
equals $14.40. The Merger Agreement may be
terminated by NII at any time prior to the
stockholders' meeting of FoxMeyer if the
Average Stock Price is less than $14.40. The
'Average Stock Price' means the average per
share closing price on the NYSE of shares of
NII Common Stock during the period of twenty
consecutive trading days commencing twenty-one
trading days prior to the date of the NII
Annual Meeting and ending on the second
trading day prior to the NII Annual Meeting.
See 'The Merger Agreement.'
Reasons for the Merger...... NII. The Board of Directors of NII believes that
the terms of the Merger are fair to, and in the
best interests of, NII and its stockholders.
Accordingly, the Board of Directors of NII has
approved the Merger Agreement. The Merger is
intended to simplify the corporate structure
under which NII and FoxMeyer operate and will
eliminate certain expenses associated with
FoxMeyer's status as a publicly held
corporation. NII estimates that all of such
costs would aggregate approximately $600,000
in 1994 if FoxMeyer were to continue as a
publicly held company. The Merger will also
eliminate potential conflicts of interest that
may arise as a result of NII's significant
ownership interest in FoxMeyer and the fact
that four of the eight directors of FoxMeyer
are also directors of NII. See 'The Merger--
FoxMeyer's Reasons for the Merger and
Recommendation of the Special Committee.'
FoxMeyer. The Board of Directors of FoxMeyer
believes, based on the recommendation of the
Special Committee, which consists of two
directors of FoxMeyer who are neither
directors, employees nor affiliates of NII
(the 'Special Committee'), that the terms of
the
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Merger are fair to and in the best interests
of FoxMeyer and its stockholders. Accordingly,
the Board of Directors of FoxMeyer has
approved the Merger Agreement and recommended
its approval and adoption by FoxMeyer's
stockholders. See 'The Merger-- FoxMeyer's
Reasons for the Merger and Recommendation of
the Special Committee.'
Recommendation of the
Special Committee and the
FoxMeyer Board of
Directors................. The Special Committee unanimously determined
that the Merger Agreement is fair to and in the
best interests of the stockholders of FoxMeyer
other than NII (the 'Unaffiliated FoxMeyer
Stockholders') and recommended that the
FoxMeyer Board of Directors approve the Merger
Agreement and the transactions contemplated
thereby. The directors of FoxMeyer unanimously
approved the Merger Agreement, declared it
advisable and recommended its approval and
adoption by the stockholders of FoxMeyer. The
other directors of FoxMeyer who also serve as
directors of NII voted in favor of the Merger
Agreement because the Special Committee voted
in favor of the Merger Agreement. The FoxMeyer
Board of Directors recommends that FoxMeyer
stockholders approve the Merger and vote for
the election of the six nominees for director.
The FoxMeyer Board of Directors'
recommendations are based upon a number of
factors discussed in this Joint Proxy
Statement/Prospectus. See 'The
Merger--FoxMeyer's Reasons for the Merger and
Recommendation of the Special Committee.'
Security Ownership of
FoxMeyer Management and
Certain Other Persons..... As of July 15, 1994, directors and executive
officers of FoxMeyer as a group were the
beneficial owners of less than 1% of the
outstanding shares of FoxMeyer Common Stock.
NII beneficially owns 22,690,000 shares of
FoxMeyer Common Stock (approximately 80.5% of
the outstanding shares of FoxMeyer Common
Stock) and, under the terms of the Merger
Agreement, will vote or cause to be voted
those shares in favor of approval and adoption
of the Merger Agreement by FoxMeyer.
Accordingly, approval and adoption of the
Merger Agreement is assured. Nevertheless, the
Board of Directors of FoxMeyer is hereby
soliciting your vote in favor of approval and
adoption of the Merger Agreement. See 'The
Merger--Conflicts of Interest.'
Opinion of the Special
Committee's Financial
Advisor................... Smith Barney Inc. delivered to the Special
Committee a written opinion, dated June 30,
1994, to the effect that, as of the date of
such opinion and based upon and subject to
certain matters stated therein, the Exchange
Ratio was fair, from a financial point of
view, to the holders of FoxMeyer Common Stock
(other than NII and its affiliates). Smith
Barney has confirmed such opinion by delivery
of a written opinion dated the date hereof.
The full text of the written opinion of Smith
Barney dated the date hereof, which sets forth
the assumptions made, matters considered and
limitations on the review undertaken, is
attached as Annex B to this Joint Proxy
Statement/Prospectus and should be read
carefully in its entirety. See 'The
Merger--Opinion of the Special Committee's
Financial Advisor.'
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Recommendation of the NII
Board of Directors........ The directors of NII have unanimously approved
the Merger Agreement, declared it advisable and
recommended its approval and adoption by the
stockholders of NII. The NII Board of
Directors recommends that NII stockholders
approve and adopt the Merger Agreement,
approve and adopt the NII Charter Amendments,
approve and adopt the Option Plan Amendments
and vote for the election of its two nominees
for director. The NII Board of Directors'
recommendations are based upon a number of
factors discussed in this Joint Proxy
Statement/Prospectus. See 'The Merger--NII's
Reasons for the Merger' and '--Recommendation
of the NII Board of Directors.'
Security Ownership of NII
Management and Certain
Other Persons............. Abbey J. Butler and Melvyn J. Estrin, the
Co-Chairmen of the Board and Co-Chief Executive
Officers of NII, beneficially own (exclusive
of their stock options) in the aggregate,
3,777,000 or approximately 29.6% of the shares
of NII Common Stock outstanding at the NII
Record Date. Messrs. Butler and Estrin have
agreed to cause all shares of NII Common Stock
that they beneficially own to be voted in
favor of approval of the Merger Agreement. In
addition to Messrs. Butler and Estrin, all
other directors of NII beneficially own less
than 1% of the shares of NII Common Stock
outstanding at the NII Record Date. See 'The
Merger--Conflicts of Interest.'
Certain Consequences of the
Merger.................... Upon consummation of the Merger, the
Unaffiliated FoxMeyer Stockholders will become
stockholders of NII. Shares of FoxMeyer Common
Stock will cease to be traded on the NYSE and
application will be made to deregister such
shares under the Exchange Act. After
consummation of the Merger, and (i) without
giving effect to outstanding stock options of
NII and FoxMeyer and (ii) assuming that the
Exchange Ratio is 0.90 shares of NII Common
Stock, then the current NII stockholders will
own approximately 72.0% of NII and the current
Unaffiliated FoxMeyer Stockholders will own
approximately 28.0% of NII.
As noted elsewhere herein, Mr. Butler and Mr.
Estrin beneficially own (exclusive of their
stock options) approximately 29.6% of the
currently outstanding shares of NII Common
Stock. Assuming no changes in the number or
ownership of the outstanding shares of NII
Common Stock, solely as a result of the
Merger, and (i) without giving effect to
outstanding stock options and (ii) assuming
that the Exchange Ratio is 0.90 shares of NII
Common Stock, then Messrs. Butler and Estrin
would own approximately 21.3% of the
outstanding shares of NII Common Stock. See
'The Merger--Certain Consequences of the
Merger.'
Conduct of the Business of
NII and FoxMeyer after the
Merger.................... Following consummation of the Merger, NII
intends to conduct its business and the business
of FoxMeyer substantially as they are
currently being conducted. Pursuant to the
Merger Agreement, (i) the members of the Board
of Directors of FoxMeyer immediately prior to
the consummation of the Merger shall be the
initial directors of the Surviving Corporation
following the consummation of the Merger and
(ii) the officers of FoxMeyer immediately
prior to the consummation of the Merger shall
be the initial officers of the Surviving
Corporation.
</TABLE>
6
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<TABLE>
<S> <C>
NII's management will not be affected by the
Merger. See 'The Merger--Conduct of the
Business of NII and FoxMeyer After the
Merger.'
Conduct of the Business of
NII and FoxMeyer if the
Merger Is Not
Consummated............... If the Merger is not consummated, it is expected
that the business and operations of NII and
FoxMeyer will each continue to be conducted
substantially as they are currently being
conducted and that FoxMeyer will continue to
be controlled by NII. In addition, in such
event, NII may purchase additional shares of
FoxMeyer Common Stock from time to time,
subject to availability at prices deemed
acceptable to NII, pursuant to a merger
transaction, tender offers, open market or
privately negotiated transactions or otherwise
on terms more or less favorable to the
Unaffiliated FoxMeyer Stockholders than the
terms of the Merger. However, NII has made no
determination as to any future transactions if
the Merger is not consummated. See 'The
Merger-- Conduct of Business of NII and
FoxMeyer If the Merger Is Not Consumated.'
Conflicts of Interest;
Interests of Certain
Persons in the Merger..... NII stockholders and FoxMeyer stockholders
should be aware that certain members of NII's
and FoxMeyer's management and Boards of
Directors have certain interests that may
present them with actual or potential
conflicts of interest. Each of Abbey J.
Butler, Melvyn J. Estrin, Sheldon W. Fantle
and Paul M. Finfer (the 'Interlocking
Directors') are members of the Board of
Directors of both NII and FoxMeyer, and
Messrs. Butler, Estrin, Fantle and Fain (also
a director of FoxMeyer) are also directors of
Ben Franklin. In addition, Messrs. Butler and
Estrin are Co-Chief Executive Officers of both
NII and FoxMeyer. At the time NII initially
proposed acquiring the shares of FoxMeyer
Common Stock not owned by NII, the
Interlocking Directors agreed not to vote as
directors in favor of the Merger and the
Merger Agreement unless recommended by the
Special Committee because such persons may be
deemed to have conflicts of interest by virtue
of being a director or executive officer of
both NII and FoxMeyer. The Special Committee
was asked to consider the Merger Agreement so
that the Merger Agreement would be reviewed by
directors of FoxMeyer who were neither
directors, employees nor affiliates of NII.
The Board of Directors of FoxMeyer and the
Special Committee were aware of the
relationships described above and considered
them, along with other matters, in approving
the Merger. See 'The Merger--Conflicts of
Interest.'
Certain Financial
Projections............... Neither NII nor FoxMeyer makes public
projections as to future revenues or earnings.
However, certain projections of NII's and
FoxMeyer's future operating performance
prepared by senior management were furnished
to the Special Committee in connection with
their review of the proposed Merger. Such
projections were prepared in the ordinary
course of business and were not specifically
prepared in contemplation of the proposed
Merger. For information concerning such
projections, see 'The Merger--Certain
Financial Projections.'
Effective Date of the
Merger.................... The Merger will become effective upon the date a
certificate of merger is filed with the
Secretary of State of the State of Delaware.
See 'The Merger Agreement--Effective Date.'
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Conditions to the Merger;
Termination of the Merger
Agreement................. The respective obligations of NII and FoxMeyer
to consummate the Merger are subject to the
satisfaction of certain conditions, including
obtaining requisite NII and FoxMeyer
stockholder approvals, the absence of any
injunction prohibiting consummation of the
Merger, the Registration Statement having been
declared effective, the delivery of an opinion
of NII's counsel to the Special Committee with
respect to certain tax matters, and obtaining
certain consents from third parties. The
obligations of FoxMeyer and NII to effect the
Merger are further subject to the absence
since March 31, 1994 of any material adverse
change in the business of NII or FoxMeyer and
the accuracy in all material respects of the
representations and warranties of NII and
FoxMeyer. See 'The Merger--Certain Federal
Income Tax Consequences,' '--Litigation
Relating to the Merger' and 'The Merger
Agreement--Conditions to the Merger.'
The Merger Agreement is subject to termination
by NII or FoxMeyer if, without fault of the
terminating party, the Merger is not
consummated on or before December 31, 1994,
and prior to such time upon the occurrence of
certain events. The Merger Agreement is also
subject to termination by NII prior to the
FoxMeyer Annual Meeting if the Average Stock
Price is less than $14.40. See 'The Merger
Agreement--Termination.'
Appraisal Rights............ Holders of shares of NII Common Stock are not
entitled to dissenters' appraisal rights under
the Delaware General Corporation Law in
connection with the Merger because NII is not
a constituent corporation to the Merger.
Holders of shares of FoxMeyer Common Stock are
not entitled to dissenters' appraisal rights
under the Delaware General Corporation Law in
connection with the Merger because the shares
of FoxMeyer Common Stock are listed for
trading on the NYSE and such holders are
entitled to receive only shares of NII Common
Stock which, at the Effective Date, will be
listed on the NYSE (and cash in lieu of
fractional interests) in the Merger. See 'The
Merger--Appraisal Rights.'
Certain Federal Income Tax
Consequences.............. It is a condition to the obligations of
FoxMeyer, NII and Acquisition to consummate the
Merger that NII shall have delivered to
FoxMeyer an opinion of its counsel to the
effect that, among other things, the Merger
will constitute a reorganization within the
meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the 'Code'), and
accordingly, holders of shares of FoxMeyer
Common Stock who receive shares of NII Common
Stock in exchange for their shares of FoxMeyer
Common Stock pursuant to the Merger Agreement
will recognize no gain or loss upon the
exchange, except with respect to the receipt
of cash received for fractional shares. For a
further discussion of certain federal income
tax consequences of the Merger, see 'The
Merger--Certain Federal Income Tax
Consequences.'
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Anticipated Accounting
Treatment................. The Merger will be accounted for as a 'purchase'
under generally accepted accounting principles.
Litigation Relating to
the Merger................ Nine actions were filed by minority stockholders
of FoxMeyer in connection with NII's initial
proposal to acquire the shares of FoxMeyer
Common Stock not owned by NII alleging, among
other things, violations of fiduciary duties
by NII, FoxMeyer and certain directors and
officers of FoxMeyer. In connection with the
execution of the Merger Agreement, NII and
FoxMeyer entered into a memorandum of
understanding with counsel to the plaintiffs
settling such actions. For information
regarding this litigation, see 'The
Merger--Litigation Relating to the Merger.'
Comparison of Stockholders'
Rights.................... Upon consummation of the Merger, the
Unaffiliated FoxMeyer Stockholders will become
stockholders of NII. See 'Comparison of
Stockholders' Rights' for a summary of the
material differences between the rights of
holders of shares of NII Common Stock and
shares of FoxMeyer Common Stock. NII and
FoxMeyer are both Delaware corporations;
accordingly, these differences arise solely
from the distinctions between the respective
charters and bylaws of NII and FoxMeyer.
NII Capital Stock........... NII currently has an authorized capitalization
of 50,000,000 shares of NII Common Stock and
10,000,000 shares of Preferred Stock. At the
NII Annual Meeting, the NII stockholders will
consider and vote upon the NII Charter
Amendments. For information with respect to
the rights of holders of shares of NII Common
Stock, see 'Description of Shares of NII
Common Stock Offered in the Merger.'
MARKET PRICES............... Shares of NII Common Stock are listed on the
NYSE. For information with respect to the high
and low sale prices of shares of NII Common
Stock and shares of FoxMeyer Common Stock, see
'Comparative Market Price Information.'
On February 28, 1994, the last full trading day
prior to the first public announcement of the
Initial Offer, the closing prices reported for
shares of NII Common Stock and shares of
FoxMeyer Common Stock on the NYSE Composite
Tape were $15.75 and $13.50 per share,
respectively.
On June 30, 1994, the last full trading day
prior to the joint public announcement of the
Merger Agreement, the closing prices reported
for shares of NII Common Stock and shares of
FoxMeyer Common Stock on the NYSE Composite
Tape were $17.50 and $14.00 per share,
respectively.
On September 9, 1994, the last full trading day
for which information was available prior to
the printing and mailing of the Joint Proxy
Statement, the closing prices reported for
shares of NII Common Stock and shares of
FoxMeyer Common Stock on the NYSE Composite
Tape were $17 3/8 and $15 3/8 per share,
respectively. STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THEIR SHARES.
</TABLE>
9
<PAGE>
NII SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
The following table sets forth, for the periods indicated, summary
historical consolidated financial information derived from financial information
included elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEARS ENDED MARCH 31,
------------------- ----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $1,256.9 $1,286.7 $5,409.4 $4,851.6 $3,411.3 $3,207.5 $2,736.1
Income (loss) from continuing operations
before extraordinary items and cumulative
effect of change in accounting principle... 5.2 5.3 29.5 .6 10.6 (59.0) 8.8
Discontinued operations...................... -- -- -- -- 25.6 (220.0) 33.9
Income (loss) before extraordinary items and
cumulative effect of change in accounting
principle.................................. 5.2 5.3 29.5 .6 36.2 (279.0) 42.7
Extraordinary items.......................... -- -- -- -- (5.8) -- 13.0
Cumulative effect of change in accounting
principle.................................. -- -- -- -- -- (15.6) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)............................ $ 5.2 $ 5.3 $ 29.5 $ .6 $ 30.4 $ (294.6) $ 55.7
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
COMMON STOCK DATA:
Earnings (loss) per share:
Continuing operations...................... $ .04 $ .20 $ 1.10 $ (.24) $ .24 $ (2.97) $ .15
Discontinued operations.................... -- -- -- -- 1.19 (10.11) 1.56
Extraordinary items........................ -- -- -- -- (.27) -- .60
Cumulative effect of change in accounting
principle................................ -- -- -- -- -- (.71) --
-------- -------- -------- -------- -------- -------- --------
Earnings (loss)............................ $ .04 $ .20 $ 1.10 $ (.24) $ 1.16 $ (13.79) $ 2.31
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Cash dividends per share..................... -- -- -- -- -- -- --
Average number of shares of common stock
outstanding (in thousands)................. 12,997 19,697 16,931 19,967 21,444 21,763 21,754
BALANCE SHEET DATA:
Working capital.............................. $ 351.7 $ 417.2 $ 375.0 $ 373.2 $ 307.8 $ 321.5 $ 239.5
Total assets................................. 1,561.7 1,652.3 1,525.5 1,562.1 1,137.4 1,065.2 1,576.5
Capital expenditures......................... 6.5 6.3 56.3 20.1 20.2 8.5 7.3
Long-term debt............................... 293.8 306.0 310.9 256.6 29.6 208.4 180.0
Redeemable preferred stock................... 168.4 50.6 164.8 50.6 55.0 55.0 55.0
Stockholders' equity......................... 225.1 364.2 224.8 360.1 377.6 416.1 694.5
KEY FINANCIAL RATIOS:
Current ratio................................ 1.51:1 1.56:1 1.59:1 1.52:1 1.71:1 1.97:1 1.59:1
Long-term debt as a percent of total
capitalization (2)......................... 42.7% 42.5% 44.4% 38.5% 6.4% 30.7% 19.4%
Return on average common stockholders'
equity(1).................................. 9.2% 6.0% 10.1% 0.2% 7.7% (53.1)% 8.2%
Return on net sales.......................... 0.4% 0.4% 0.5% 0.0% 0.9% (9.2)% 2.0%
</TABLE>
- ------------------
(1) Annualized for quarterly amounts.
(2) Securities and Exchange Commission regulations require that capitalization
ratios also be shown with redeemable preferred stock included in debt. On
this basis, long-term debt as a percent of total capitalization would be
67.2% and 49.5% for the quarterly period ended June 30, 1994 and 1993,
respectively, and 67.9%, 46.0%, 18.3%, 38.8% and 25.3%, respectively, for
each of the five years ended March 31, 1994.
10
<PAGE>
FOXMEYER SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
The following table sets forth, for the periods indicated, summary
historical consolidated financial information derived from financial information
included elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEARS ENDED MARCH 31,
-------------------- --------------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................... $1,181.8 $1,209.9 $5,071.4 $4,505.4 $3,077.7 $2,879.1 $2,404.5
-------- -------- -------- -------- -------- -------- --------
Net income................... $ 3.5 $ 2.7 $ 26.9 $ .2 $ 38.9 $ 26.5 $ 21.6
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
COMMON STOCK DATA:
Earnings per share:
Income from continuing
operations before
cumulative effect of
change in accounting
principle............... $ .12 $ .10 $ .95 $ .01 $ 1.43 $ 1.35 $ 1.03
Cumulative effect of
change in accounting
principle............... -- -- -- -- -- (.09) --
-------- -------- -------- -------- -------- -------- --------
Net income................ $ .12 $ .10 $ .95 $ .01 $ 1.43 $ 1.26 $ 1.03
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Dividends declared on common
stock after initial public
offering.................. $ .07 -- $ .21 $ .28 $ .07 -- --
Average number of shares of
common stock outstanding
(in thousands)............ 28,224 28,200 28,208 29,701 27,103 21,000 21,000
BALANCE SHEET DATA:
Working capital.............. $ 276.9 $ 317.7 $ 301.9 $ 295.1 $ 257.3 $ 229.9 $ 209.2
Total assets.............. 1,310.6 1,402.6 1,280.4 1,333.1 896.3 774.7 745.0
Capital expenditures...... 5.1 5.2 26.5 17.4 18.1 5.1 7.1
Long-term debt............ 237.8 280.8 257.5 251.9 29.0 43.0 8.4
Stockholders' equity...... 463.7 443.9 461.6 441.2 489.9 436.9 468.9
KEY FINANCIAL RATIOS:
Current ratio................ 1.5:1 1.5:1 1.5:1 1.5:1 1.7:1 1.8:1 1.8:1
Inventory turnover--FIFO
basis(1).................. 7.0x 7.0x 7.5x 7.8x 7.8x 7.9x 6.8x
Long-term debt as a percent
of total capitalization... 33.9% 38.7% 35.8% 36.3% 5.6% 9.0% 1.8%
Operating working capital as
a percent of net
sales(1).................. 5.1% 6.1% 5.9% 6.4% 8.1% 8.0% 9.0%
</TABLE>
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(1) Annualized for quarterly amounts.
11
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents NII's and FoxMeyer's historical per share data
and unaudited per share data to reflect consumation of the Merger on the basis
set forth in the NII Pro Forma Condensed Consolidated Financial Information
included elsewhere herein. The unaudited pro forma condensed consolidated
financial information does not purport to be indicative of the results that
would actually have been attained had the Merger been completed as assumed in
such pro forma data. The information contained in the table set forth below
should be read in conjunction with the NII Pro Forma Condensed Consolidated
Financial Information and with the historical consolidated financial statements
and related notes included in NII's Annual Report, NII's Quarterly Report,
FoxMeyer's Annual Report and FoxMeyer's Quarterly Report.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30,
MARCH 31, 1994 1994
-------------- ------------
<S> <C> <C>
Fully diluted earnings per share of
common stock:
Historical:
NII (per NII share)................ $ 1.10 $ .04
FoxMeyer (per FoxMeyer share)...... .95 .12
Pro Forma:
NII (per NII share)................ 1.12 .08
FoxMeyer share equivalent(a)....... 1.01 .07
Book value per share of common stock:
Historical:
NII (per NII share)................ $17.46 $17.53
FoxMeyer (per FoxMeyer share)...... 16.37 16.44
Pro Forma:
NII (per NII share)................ 17.47 17.52
FoxMeyer share equivalent(a)....... 15.72 15.77
</TABLE>
- ------------------
(a) The FoxMeyer share equivalent information was computed by multiplying the
NII pro forma information by the Exchange Ratio of 0.90.
12
<PAGE>
COMPARATIVE MARKET PRICE INFORMATION
Market prices for the shares of NII Common Stock and shares of FoxMeyer
Common Stock are reported on the NYSE. The table below sets forth for the fiscal
periods indicated the high and low sale prices per share of NII Common Stock and
per share of FoxMeyer Common Stock on the NYSE as reported in the NYSE Composite
Transactions. For current price information, NII stockholders and FoxMeyer
stockholders are urged to consult publicly available sources.
<TABLE>
<CAPTION>
PRICE PER SHARE
PRICE PER SHARE OF
OF FOXMEYER COMMON
NII COMMON STOCK STOCK
----------------- -----------------
HIGH LOW HIGH LOW
------- ------ ------- ------
<S> <C> <C> <C> <C>
Fiscal 1993
First Quarter............... $14 $12 5/8 $14 1/4 $12 1/4
Second Quarter.............. 14 1/4 11 1/8 14 1/4 10 3/8
Third Quarter............... 14 11 1/2 13 1/8 11 1/4
Fourth Quarter.............. 14 3/8 12 1/2 12 1/4 10 1/2
Fiscal 1994
First Quarter............... $14 2/8 $12 1/8 $11 1/2 $ 9 5/8
Second Quarter.............. 13 2/8 12 1/4 10 3/8 9
Third Quarter............... 15 7/8 12 3/4 12 3/4 9 5/8
Fourth Quarter.............. 17 5/8 13 1/4 14 3/8 11 1/8
Fiscal 1995
First Quarter............... $18 3/4 $15 1/8 $14 1/8 $12 1/4
Second Quarter (through
September 9, 1994)....... 17 3/8 17 15 1/2 15 1/4
</TABLE>
On February 28, 1994, the last full trading day prior to the first public
announcement of the Initial Offer, the closing prices reported for shares of NII
Common Stock and shares of FoxMeyer Common Stock on the NYSE Composite Tape were
$15.75 and $13.50 per share, respectively.
On June 30, 1994, the last full trading day prior to the joint public
announcement of the Merger Agreement, the closing prices reported for shares of
NII Common Stock and shares of FoxMeyer Common Stock on the NYSE Composite Tape
were $17.50 and $14.00 per share, respectively.
On September 9, 1994, the last full trading day for which information was
available prior to the printing and mailing of the Joint Proxy Statement, the
closing prices reported for shares of NII Common Stock and shares of FoxMeyer
Common Stock on the NYSE Composite Tape were $17 3/8 and $15 3/8 per share,
respectively.
NII AND FOXMEYER STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR THEIR SHARES.
13
<PAGE>
INFORMATION CONCERNING NII
GENERAL
NII is a holding company principally involved in (i) health care services,
including the distribution of a full line of pharmaceutical products and health
and beauty aids, as well as providing managed care services, through its
80.5%-owned subsidiary, FoxMeyer, and (ii) the franchising of general variety
stores and the franchising and operation of crafts stores, together with the
wholesale distribution of products to those stores, through its 67.2%-owned
subsidiary, Ben Franklin Retail Stores, Inc. ('Ben Franklin').
NII was incorporated in Delaware on September 27, 1982, for the purpose of
effecting a corporate restructuring of National Steel Corporation ('NSC') and
its subsidiaries in which NSC assets pertaining to the steel industry were
separated from its non-steel operations. Pursuant to the restructuring, on
September 13, 1983, NSC was merged with a subsidiary of NII and the stockholders
of NSC became stockholders of NII.
For the past several years, NII has engaged in a major corporate
realignment, the purpose of which has been to divest cyclical and low-return
businesses and to use the proceeds to acquire distribution and other businesses
which are not capital or labor intensive. NII made progress toward this goal
with the acquisitions of FoxMeyer and Ben Franklin in March 1986, and FoxMeyer
has acquired several regional wholesale pharmaceutical distribution firms in
subsequent years. In September 1991, FoxMeyer sold 10,350,000 new shares of
common stock in an initial public offering, thereby reducing NII's ownership in
FoxMeyer to 67%. Subsequently, NII and FoxMeyer have purchased shares of
FoxMeyer Common Stock in open market transactions and a tender offer resulting
in NII's ownership in FoxMeyer increasing to 80.5%. See 'Information Concerning
FoxMeyer.'
On November 4, 1993, NII reacquired 6,833,505 shares of NII Common Stock in
exchange for 3,416,753 shares of newly issued $4.20 Cumulative Exchangeable
Series A Preferred Stock, par value $5 per share, with a liquidation preference
of $40 (the 'Series A Preferred Stock'). Dividends on the shares of Series A
Preferred Stock are paid quarterly. On and prior to October 15, 1996, NII may,
at its option, pay the dividends in additional Series A Preferred Stock or in
cash. At present, NII intends to pay the dividends in additional shares of
Series A Preferred Stock. After October 15, 1996, the dividends must be paid in
cash. NII is required to redeem the Series A Preferred Stock on November 30,
2003.
NII's principal executive office is located at 1220 Senlac Drive,
Carrollton, Texas 75006 and its telephone number is (214) 446-4800.
NII's Annual Report, NII's Quarterly Report and NII's Current Report on
Form 8-K are incorporated by reference herein.
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INFORMATION CONCERNING FOXMEYER
FoxMeyer is a leading provider of health care products, benefits management
and information-based services nationwide. Through its 18 distribution centers,
FoxMeyer sells a broad line of pharmaceutical products and health and beauty
aids. FoxMeyer's geographic coverage extends to the entire continental United
States. FoxMeyer also provides various managed care services.
FoxMeyer's customers include independent drug stores, chain drug stores,
mass merchandisers and food stores with more than five store locations and
hospitals and alternate care facilities. FoxMeyer complements its distribution
activities by offering a broad range of merchandising and marketing programs and
computer-based services including merchandising assistance, training, product
selection and shelf allocation, advertising and promotional support, store
layout, inventory tracking and management reports. Through FoxMeyer's
proprietary Health Mart(Registered) franchise program, FoxMeyer offers its 797
franchisees (as of March 31, 1994) services and benefits normally associated
with a drug store chain. In addition, FoxMeyer has developed programs designed
to attract customers in growing specialty market niches, such as prescription
benefits management programs, home health care, long-term care and institutional
pharmacies. FoxMeyer has established itself in markets geared toward meeting the
needs of oncology, dialysis and ambulatory clinics. FoxMeyer is also developing
new on-line services and inaugurating a network of independent pharmacies. In
July 1994, FoxMeyer signed an agreement with the University Hospital Consortium
('UHC'), for a three-year term with an additional two-year UHC renewal option,
which management expects will generate sales of approximately $4 to $5 billion
over the five-year period.
FoxMeyer was incorporated in Delaware on December 19, 1977, for the purpose
of acquiring the Fox-Vliet Drug Company ('Fox-Vliet'), a wholesale drug
distributor, which commenced operations in 1903. In 1981, FoxMeyer acquired
another wholesale drug distributor, Meyer Brothers Drug Company ('Meyer
Brothers'). Fox-Vliet and Meyer Brothers were merged in 1983 to form FoxMeyer
Drug Company. FoxMeyer conducts its wholesale drug distribution business
principally through FoxMeyer Drug Company, its wholly owned subsidiary. By March
1986, FoxMeyer had acquired eight additional regional wholesale drug
distributors. In March 1986, FoxMeyer was acquired by NII. During the period
from April 1986 through March 1994, FoxMeyer acquired three additional drug
distributors.
In September 1991, FoxMeyer completed an initial public offering of
10,350,000 newly issued shares of FoxMeyer Common Stock and received net
proceeds therefrom of $141.4 million. FoxMeyer used such proceeds to (i) pay in
full promissory notes issued as a dividend on June 19, 1991 to NII in an
aggregate principal amount equal to $106.0 million, (ii) fund expenditures made
in connection with FoxMeyer's programs to upgrade management information systems
and to expand and automate distribution centers, and (iii) fund general
corporate activities. As a result of the offering, NII's ownership of FoxMeyer
was reduced to 67.0%.
In September 1992, NII purchased 40,000 shares of FoxMeyer Common Stock at
$11.00 per share at a total cost of $443,200 or an average cost of $11.08 per
share. In November 1992, FoxMeyer and NII completed a joint tender offer for
3,300,000 of FoxMeyer Common Stock at $13.50 per share. FoxMeyer and NII each
acquired 1,650,000 shares. See 'Certain Transactions.' In addition to the shares
of FoxMeyer Common Stock purchased pursuant to the joint tender offer, during
the fiscal year ended March 31, 1993, FoxMeyer purchased 1,500,000 shares of
FoxMeyer Common Stock at prices ranging from $10.75 to $13.375 per share at a
total cost of $17.9 million or an average cost of approximately $11.94 per
share. As a result of the foregoing transactions, NII's ownership in FoxMeyer
increased to 80.5%.
FoxMeyer's principal executive office is located at 1220 Senlac Drive,
Carrollton, Texas 75006 and its telephone number is (214) 446-4800.
FoxMeyer's Annual Report, FoxMeyer's Quarterly Report and FoxMeyer's
Current Reports on Form 8-K are incorporated by reference herein.
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MEETINGS OF STOCKHOLDERS
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of
shares of NII Common Stock in connection with the solicitation of proxies by the
NII Board of Directors for use at the NII Annual Meeting to be held on
Wednesday, October 12, 1994, at the Four Seasons Hotel, 4150 North MacArthur
Boulevard, Irving, Texas 75038, commencing at 9:00 a.m., local time, and at any
adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus is also being furnished to holders of
shares of FoxMeyer Common Stock in connection with the solicitation of proxies
by the FoxMeyer Board of Directors for use at the FoxMeyer Annual Meeting to be
held on Wednesday, October 12, 1994, at the Four Seasons Hotel, 4150 North
MacArthur Boulevard, Irving, Texas 75038, commencing at 10:00 a.m., local time,
and at any adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus also constitutes the Prospectus of
NII filed with the Commission as part of the Registration Statement under the
Securities Act relating to the shares of NII Common Stock issuable in connection
with the Merger. This Joint Proxy Statement/Prospectus and accompanying forms of
proxy are first being mailed to stockholders of NII and FoxMeyer on or about
September 12, 1994.
MATTERS TO BE CONSIDERED AT THE MEETINGS
NII. At the NII Annual Meeting, holders of shares of NII Common Stock will
consider and vote upon (i) a proposal to approve and adopt and adopt the Merger
Agreement; (ii) a proposal to approve an amendment to the NII Charter to
increase the number of authorized shares of preferred stock of NII from
10,000,000 to 20,000,000; (iii) a proposal to approve and adopt an amendment to
the NII Charter to change NII's name to FoxMeyer Health Corporation; (iv) a
proposal to approve and adopt an amendment to the 1993 Stock Option Plan to
increase by 2,000,000 the number of shares of NII Common Stock authorized for
issuance thereunder; (v) a proposal to approve and adopt an amendment to the
1993 Option Plan to allow grants thereunder to individuals not regularly
employed by NII who serve as directors of any subsidiary corporation of NII, at
the discretion of the committee administering such 1993 Option Plan; (vi) the
election of two directors to the NII Board each to hold office for a three-year
term; and (vii) such other business as may properly come before the NII Annual
Meeting or any adjournments or postponements thereof.
Holders of shares of NII Common Stock will not be entitled to dissenters'
rights as a result of the Merger. See 'The Merger.'
THE NII BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS
THAT NII STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT,
FOR APPROVAL AND ADOPTION OF THE AMENDMENT TO THE NII CHARTER TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK OF NII, FOR APPROVAL AND ADOPTION
OF THE AMENDMENT TO THE NII CHARTER TO CHANGE NII'S NAME TO FOXMEYER HEALTH
CORPORATION, FOR APPROVAL AND ADOPTION OF THE AMENDMENT TO THE 1993 OPTION PLAN
TO INCREASE THE NUMBER OF SHARES OF NII COMMON STOCK AUTHORIZED FOR ISSUANCE
THEREUNDER, FOR APPROVAL AND ADOPTION OF THE AMENDMENT TO THE 1993 OPTION PLAN
TO ALLOW GRANTS THEREUNDER TO INDIVIDUALS NOT REGULARLY EMPLOYED BY NII WHO
SERVE AS DIRECTORS OF ANY SUBSIDIARY CORPORATION OF NII, AND FOR THE ELECTION OF
THE NOMINEES AS DIRECTORS. SEE 'THE MERGER--BACKGROUND OF THE MERGER,'
'FOXMEYER'S REASONS FOR THE MERGER AND RECOMMENDATIONS OF THE SPECIAL COMMITTEE'
AND 'ELECTION OF NII DIRECTORS.'
FoxMeyer. At the FoxMeyer Annual Meeting, holders of shares of FoxMeyer
Common Stock will consider and vote upon (i) a proposal to approve and adopt the
Merger Agreement; (ii) the election of six directors to the FoxMeyer Board of
Directors to hold office until the next annual meeting of FoxMeyer stockholders
and until their respective successors are elected and qualified; and (iii) such
other business as may properly come before the FoxMeyer Annual Meeting or any
adjournments or postponements thereof.
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THE FOXMEYER BOARD OF DIRECTORS HAS APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT FOXMEYER STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS. SEE 'THE
MERGER.'
Holders of shares of FoxMeyer Common Stock will not be entitled to
dissenters' rights as a result of the Merger. See 'The Merger.'
VOTING AT THE MEETINGS; RECORD DATE; QUORUM
NII. The NII Board of Directors has fixed the close of business on
September 8, 1994 as the record date for the determination of the NII
stockholders entitled to notice of and to vote at the NII Annual Meeting.
Accordingly, only holders of record of shares of NII Common Stock on the NII
Record Date will be entitled to notice of and to vote at the NII Annual Meeting.
As of the NII Record Date, there were 12,836,803 shares of NII Common Stock
outstanding and entitled to vote and held by approximately 7,574 holders of
record. Each holder of record of shares of NII Common Stock on the NII Record
Date is entitled to cast one vote per share on the Merger Agreement, the Charter
Amendments, the Option Plan Amendments, the election of the directors and the
other matters, if any, properly submitted for the vote of the NII stockholders,
either in person or by properly executed proxy, at the NII Annual Meeting. The
presence, in person or by properly executed proxy, of the holders of 40% of the
outstanding shares of NII Common Stock entitled to vote at the NII Annual
Meeting is necessary to constitute a quorum at the NII Annual Meeting.
The affirmative vote of the holders of a majority of the shares of NII
Common Stock voted at the NII Annual Meeting is required for approval of the
Option Plan Amendments. See 'Amendment of the 1993 Option Plan to Increase the
Number of Shares of NII Common Stock Authorized for Issuance' and 'Amendment of
the 1993 Option Plan to Allow Grants to Individuals who Serve as Directors of
Any Subsidiary Corporation.' The affirmative vote of the holders of shares
representing two-thirds of the outstanding shares of NII Common Stock entitled
to vote thereon at the NII Annual Meeting, is required for approval of the
Charter Amendments to NII's Restated Certificate of Incorporation. See
'Amendment to the NII Charter to Increase the Authorized Preferred Stock' and
'Amendment of the NII Charter to Change the Name of NII.' Although NII
stockholder approval of the Merger Agreement is not required under Delaware law
because NII is not a constituent corporation to the Merger, under the rules of
the NYSE, on which the shares of NII Common Stock are listed, such approval is
required. The NYSE rules require the affirmative vote of the holders of a
majority of the shares of NII Common Stock voted at the NII Annual Meeting for
approval and adoption of the Merger Agreement. The directors elected will be the
candidate receiving the greatest number of votes cast by the holders of shares
of NII Common Stock present, in person or by proxy, at the NII Annual Meeting.
See 'Election of NII Directors.'
Abbey J. Butler and Melvyn J. Estrin, the Co-Chairmen of the Board and
Co-Chief Executive Officers of NII, beneficially own (exclusive of their stock
options), in the aggregate, 3,777,000 or approximately 29.6% of the shares of
NII Common Stock outstanding at the NII Record Date. Messrs. Butler and Estrin
have agreed to cause all shares of NII Common Stock that they beneficially own
to be voted in favor of approval of the Merger Agreement, the Charter
Amendments, the Option Plan Amendments and the election of the nominees for
directors. In addition to Messrs. Butler and Estrin, all other directors of NII
beneficially own less than 1% of the shares of NII Common Stock outstanding at
the NII Record Date.
FoxMeyer. The FoxMeyer Board of Directors has fixed the close of business
on September 8, 1994 as the FoxMeyer record date for the determination of the
FoxMeyer stockholders entitled to notice of and to vote at the FoxMeyer Annual
Meeting. Accordingly, only holders of record of shares of FoxMeyer Common Stock
on the FoxMeyer Record Date will be entitled to notice of and to vote at the
FoxMeyer Annual Meeting. As of the FoxMeyer Record Date, there were 28,200,000
shares of FoxMeyer Common Stock outstanding and entitled to vote and held by
approximately 297 holders of record. Each holder of record of shares of FoxMeyer
Common Stock on the FoxMeyer Record Date is entitled to cast one vote per share
on the Merger Agreement, the election of directors and the other matters, if
any, properly submitted for the vote of the FoxMeyer stockholders, either in
person or by properly executed proxy, at the FoxMeyer Annual Meeting. The
directors elected will be the six candidates receiving the greatest number of
votes cast by the holders of shares of FoxMeyer Common Stock present, in person
or by proxy, at the FoxMeyer Annual Meeting. See 'Election of FoxMeyer
Directors.' The
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presence, in person or by properly executed proxy, of the holders of a majority
of the outstanding shares of FoxMeyer Common Stock entitled to vote at the
FoxMeyer Annual Meeting is necessary to constitute a quorum at the FoxMeyer
Annual Meeting.
The approval and adoption by FoxMeyer stockholders of the Merger Agreement
will require the affirmative vote of the holders of a majority of the
outstanding shares of FoxMeyer Common Stock entitled to vote thereon at the
FoxMeyer Annual Meeting.
As of the FoxMeyer Record Date, NII beneficially owned 22,690,000, or
approximately 80.5%, of the outstanding shares of FoxMeyer Common Stock.
Pursuant to the Merger Agreement, NII will cause all of such shares of FoxMeyer
Common Stock to be voted in favor of approval of the Merger Agreement.
Accordingly, approval of the Merger Agreement by FoxMeyer stockholders is
assured. Nevertheless, the Board of Directors of FoxMeyer is hereby soliciting
your vote in favor of approval of the adoption of the Merger Agreement. See 'The
Merger--Conflicts of Interest.'
PROXIES
This Joint Proxy Statement/Prospectus is being furnished to NII and
FoxMeyer stockholders in connection with the solicitation of proxies by and on
behalf of the Boards of Directors of NII and FoxMeyer for use at their
respective annual meetings.
NII. Shares of NII Common Stock which are entitled to vote and are
represented by properly executed proxies received at or prior to the NII Annual
Meeting that have not been revoked will be voted at the NII Annual Meeting in
accordance with the instructions contained therein. Shares of NII Common Stock
represented by properly executed proxies for which no instruction is given will
be voted 'FOR' approval and adoption of the Merger Agreement, 'FOR' approval and
adoption of the amendment to the NII Charter to increase the number of
authorized shares of preferred stock of NII, 'FOR' approval and adoption of the
amendment to the NII Charter to change NII's name to FoxMeyer Health
Corporation, 'FOR' approval and adoption of the amendment to the 1993 Option
Plan to increase the number of shares of NII Common Stock authorized for
issuance thereunder, 'FOR' approval and adoption of the amendment to the 1993
Option Plan to allow grants thereunder to individuals not regularly employed by
NII who serve as directors of any subsidiary corporation of NII, at the
discretion of the committee administering such 1993 Option Plan, and 'FOR'
election of the nominees for director. The proxy card provides space for a
stockholder to withhold voting for the nominees to the NII Board of Directors or
to abstain from voting for any proposal if the stockholder chooses to do so. For
purposes of determining the number of votes cast with respect to any voting
matter, only those votes 'for' or 'against' are included. Abstentions and broker
non-votes are counted only for purposes of determining whether a quorum is
present at the NII Annual Meeting. NII stockholders are requested to complete,
sign, date and return promptly the enclosed proxy card in the postage-prepaid
envelope provided for this purpose to ensure that their shares are voted. A
stockholder may revoke a proxy with respect to any matter to be voted upon at
the NII Annual Meeting at any time prior to the vote thereon, by submitting a
later-dated proxy with respect to the same shares, delivering written notice of
revocation to the Secretary of NII at any time prior to such vote or attending
the NII Annual Meeting and voting in person. Mere attendance at the NII Annual
Meeting will not in and of itself revoke a proxy.
If the NII Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the NII Annual Meeting all proxies will be voted in
the same manner as such proxies would have been voted at the original convening
of the NII Annual Meeting (except for any proxies that have theretofore
effectively been revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a previous meeting.
If any other matters are properly presented at the meetings for
consideration, including, among other things, consideration of a motion to
adjourn either meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons named
in the enclosed form of proxy and acting thereunder will have discretion to vote
on such matters in accordance with their best judgment.
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FoxMeyer. Shares of FoxMeyer Common Stock represented by properly executed
proxies received at or prior to the FoxMeyer Annual Meeting that have not been
revoked will be voted at the FoxMeyer Annual Meeting in accordance with the
instructions contained therein. Shares of FoxMeyer Common Stock represented by
properly executed proxies for which no instruction is given will be voted 'FOR'
approval and adoption of the Merger Agreement and 'FOR' election of the six
nominees as directors. The proxy card provides space for a stockholder to
withhold voting for the nominees to the FoxMeyer Board of Directors or to
abstain from voting for any proposal if the stockholder chooses to do so. For
purposes of determining the number of votes cast with respect to any voting
matter, only those votes 'for' or 'against' are included. Abstentions and broker
non-votes are counted only for purposes of determining whether a quorum is
present at the FoxMeyer Annual Meeting. FoxMeyer stockholders are requested to
complete, sign, date and return promptly the enclosed proxy card in the
postage-prepaid envelope provided for this purpose to ensure that their shares
are voted. A stockholder may revoke a proxy at any time prior to the vote on the
Merger or the election of directors by submitting a later-dated proxy with
respect to the same shares, delivering written notice of revocation to the
Secretary of FoxMeyer at any time prior to such vote or attending the FoxMeyer
Annual Meeting and voting in person. Mere attendance at the FoxMeyer Annual
Meeting will not in and of itself revoke a proxy.
If the FoxMeyer Annual Meeting is postponed or adjourned for any reason, at
any subsequent reconvening of the FoxMeyer Annual Meeting all proxies will be
voted in the same manner as such proxies would have been voted at the original
convening of the FoxMeyer Annual Meeting (except for any proxies that have
theretofore effectively been revoked or withdrawn), notwithstanding that they
may have been effectively voted on the same or any other matter at a previous
meeting.
If any other matters are properly presented at the meetings for
consideration, including, among other things, consideration of a motion to
adjourn either meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons named
in the enclosed form of proxy and acting thereunder will have discretion to vote
on such matters in accordance with their best judgment.
Proxy Solicitation. NII and FoxMeyer will each bear the cost of soliciting
proxies from their respective stockholders, including the cost of preparing and
mailing this Joint Proxy Statement/Prospectus and will jointly bear the fees of
the Exchange Agent and Georgeson & Company Inc. as the Information Agent (the
'Information Agent') retained by NII and FoxMeyer in connection with the Merger.
NII and FoxMeyer will pay the Information Agent an aggregate fee of $20,000
covering its services in soliciting the forwarding and return of proxy material
and will reimburse the Information Agent for out-of-pocket expenses incurred in
connection therewith. In addition to solicitation by mail, directors, officers
and employees of NII and of FoxMeyer may solicit proxies by telephone, telegram
or otherwise. Such directors, officers and employees of NII and FoxMeyer will
not be additionally compensated for such solicitation, but may be reimburse
out-of-pocket expenses incurred in connection therewith. Brokerage firms,
fiduciaries and other custodians who forward soliciting material to the
beneficial owners of shares of NII Common Stock and shares of FoxMeyer Common
Stock held of record by them will be reimbursed for their reasonable expenses
incurred in forwarding such material.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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THE MERGER
BACKGROUND OF THE MERGER
On February 28, 1994, the Board of Directors of NII met to consider making
an offer to purchase the shares of FoxMeyer Common Stock not owned by NII (the
'Initial Offer'), pursuant to which holders of the FoxMeyer Common Stock would
have received, in exchange for each share of FoxMeyer Common Stock, $14.75
principal amount of a new issue of 8.25% Senior Notes due 2004 (the 'Senior
Notes') to be issued by a subsidiary of NII to be formed for the purpose of
holding a majority of the outstanding shares of FoxMeyer Common Stock. The NII
Board of Directors unanimously approved the making of the Initial Offer. See
'--NII's Reasons for the Merger.' Subsequently, on February 28, 1994, the Board
of Directors of FoxMeyer met to consider the Initial Offer. At that meeting, the
Board of Directors of FoxMeyer determined that any proposed business combination
between NII and FoxMeyer should be negotiated and reviewed by members of the
Board of Directors of FoxMeyer who were not also directors of NII. Accordingly,
the FoxMeyer Board of Directors unanimously approved the appointment of the
Special Committee of the FoxMeyer Board of Directors, consisting of Daniel J.
Callahan, III, Chairman, and Bruce E. Kahler (the 'Special Committee'), to
receive, study, negotiate and make recommendations to the FoxMeyer Board of
Directors concerning the Initial Offer, and authorized such committee to retain
legal counsel and an independent investment banking firm to assist the Special
Committee in their review and consideration of the Initial Offer. The directors
of FoxMeyer who also serve as directors of NII stated that they would vote in
favor of the Initial Offer only if it is recommended by the Special Committee.
On March 1, 1994, NII and FoxMeyer announced the terms of the Initial Offer
and the formation of the Special Committee. Shortly after the March 1
announcement, nine separate law suits (the 'Class Action Lawsuits') were filed
by certain stockholders of FoxMeyer (the 'Class Action Plaintiffs') against,
among others, NII, FoxMeyer and certain of their respective officers and
directors (the 'Individual Defendants') in respect of the Initial Offer. See
'--Litigation Relating to the Merger.'
After its formation, the Special Committee retained Latham & Watkins as its
legal advisor. The Special Committee thereafter discussed with Latham & Watkins
the procedures to be followed in evaluating the Initial Offer, including the
retention of a financial advisor. After conducting interviews of several
nationally recognized investment banking firms, in March 1994 the Special
Committee retained the investment banking firm of Smith Barney Inc. ('Smith
Barney') to serve as financial advisor to the Special Committee and, if
requested, to render an opinion as to the fairness from a financial point of
view of the consideration to be received by the holders of shares of FoxMeyer
Common Stock (other than NII and its affiliates) in a business combination
involving FoxMeyer and NII.
From late March through late June 1994, the Special Committee and its
advisors reviewed certain public and non-public information with respect to NII
and FoxMeyer and met on several occasions with members of management of both
companies to discuss the respective business and financial condition and
prospects of NII and FoxMeyer.
On April 25, 1994, the Special Committee met with its advisors and
considered at length the terms of the Initial Offer and certain issues
concerning negotiations with NII. At the meeting, the Special Committee's
advisors reviewed the preliminary due diligence conducted to date, including
their discussions and meetings with management of FoxMeyer and NII regarding the
business and financial condition and prospects of each of the companies. The
advisors also reviewed with the Special Committee additional due diligence that
they intended to conduct. At that meeting, the Special Committee and its
advisors reviewed the terms of the Initial Offer and Smith Barney made a
preliminary presentation which included, among other things, a review of the
valuation methodologies Smith Barney was implementing in connection with its
evaluation of the Initial Offer; a discussion of the FoxMeyer and NII financial
information, business plans and projections provided to the advisors and the
Special Committee by management of FoxMeyer and NII; and a discussion of the
terms of other recent transactions similar to the Initial Offer. At such
meeting, the Special Committee and its advisors also considered possible
improvements and alternatives to the Initial Offer, including, among other
things, increasing the amount of the consideration to be received by the
Unaffiliated FoxMeyer Stockholders and modifying the terms of the Senior Notes,
as well as alternative forms of consideration, including cash, NII Common Stock,
NII preferred
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stock or notes of NII or FoxMeyer. After discussion, the Special Committee
unanimously determined to seek to improve the Initial Offer by requesting that
NII increase the value of the merger consideration and requesting that the
merger consideration to be received by the Unaffiliated FoxMeyer Stockholders be
in the form of cash or, alternatively, NII Common Stock. The Special Committee
also noted that, if the form of consideration were to be modified, it may be
beneficial to the Unaffiliated FoxMeyer Stockholders to structure the
transaction to ensure that such stockholders would receive consideration with a
dollar value of no less than a specified price.
On May 2, 1994, the members of the Special Committee and representatives of
NII and their respective legal and financial advisors met to discuss the terms
of the Initial Offer. At that meeting, the Special Committee informed NII that
it desired certain modifications to the Initial Offer, including, among other
things, an increase in the value of the consideration to be received by the
Unaffiliated FoxMeyer Stockholders. The Special Committee also informed NII that
it would prefer that the consideration to be received by the Unaffiliated
FoxMeyer Stockholders in the transaction take the form of cash.
On May 9, 1994, representatives of NII informed the Special Committee that
NII did not believe that a transaction involving cash consideration would be
advisable; however, NII did indicate that it would be willing to consider a
transaction pursuant to which the Unaffiliated FoxMeyer Stockholders would
receive shares of NII Common Stock in exchange for their FoxMeyer Common Stock
(an 'All Stock Transaction') and requested that the Special Committee consider
the terms on which the Special Committee would be willing to pursue an All Stock
Transaction. Accordingly, the Special Committee and NII continued discussions
with respect to an All Stock Transaction and the value and/or amount of NII
Common Stock that the Unaffiliated FoxMeyer Stockholders would receive in such a
transaction. As a result of numerous meetings among the Special Committee and
its advisors, the Special Committee and NII thereafter engaged in negotiations
concerning an All Stock Transaction pursuant to which the Unaffiliated FoxMeyer
Stockholders would receive, in exchange for their shares of FoxMeyer Common
Stock, NII Common Stock with a fixed value on the date of the merger (based on
the average closing price of NII Common Stock over a specified number of trading
days prior to the merger) ranging from $14.75 to $16.50 per share of FoxMeyer
Common Stock (i.e., a 'floating exchange ratio').
On June 2, 1994, the Special Committee and its advisors were informed by
FoxMeyer's management that FoxMeyer was negotiating a multi-year, exclusive
distribution agreement with the UHC (the 'UHC Contract') that, if completed,
would likely result in a significant increase in FoxMeyer's projected gross
revenues over the life of the UHC Contract and that FoxMeyer was in the process
of finalizing the terms of the UHC Contract. Accordingly, the Special Committee
determined to delay completion of its deliberations to allow the Special
Committee and its advisors sufficient time to analyze the possible effect of the
UHC Contract on the business and financial condition and prospects of FoxMeyer
and NII and the value of the FoxMeyer Common Stock and the NII Common Stock.
From June 3 through June 14, 1994, the Special Committee and its advisors held
discussions with management of FoxMeyer concerning the effect of the UHC
Contract and analyzed certain financial information relating to the anticipated
effect of the UHC Contract.
On June 14, 1994, after completion of the Special Committee's preliminary
analysis concerning the potential effect of the UHC Contract, the Special
Committee and its advisors discussed the effect, if any, that the UHC Contract
should have on the Special Committee's consideration of an All Stock
Transaction. At that meeting, the Special Committee and its advisors discussed
and considered, among other things, the possible effects of the UHC Contract on
the future growth of FoxMeyer and NII and the respective trading prices and
values of the FoxMeyer Common Stock and the NII Common Stock. Due to the
possible effects of the UHC Contract, the Special Committee determined that it
should either (i) delay completion of negotiations with NII until finalization
and announcement of the UHC Contract or until it became clear that the UHC
Contract would not be finalized in the near future or (ii) consider
modifications to the proposed structure of the merger, including structuring the
transaction so that the Unaffiliated FoxMeyer Stockholders would receive, in
exchange for each share of FoxMeyer Common Stock, a number of shares of NII
Common Stock, based upon a fixed exchange ratio, so that the Unaffiliated
FoxMeyer Stockholders would participate, through their ownership of NII Common
Stock after consummation of the merger, in any increase in the value of FoxMeyer
due to the award of the UHC Contract. The Special Committee noted again its
desire to structure the transaction so that the Unaffiliated FoxMeyer
Stockholders would receive consideration with a value no less than a specified
dollar amount, given the possibility of a decline in the trading price of the
NII Common Stock due to the announcement of an All Stock Transaction or due to
an overall decline in trading prices in the public equity markets generally
prior to
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consummation of the merger. At the conclusion of the meeting, the Special
Committee authorized its advisors to contact the representatives of NII to
discuss such an alternative structure.
Following the June 14 Special Committee meeting, the Special Committee and
its advisors contacted representatives of NII and discussed the possibility of
delaying completion of negotiations until the announcement of, or termination of
discussions with respect to, the UHC Contract or, alternatively, restructuring
the All Stock Transaction to provide merger consideration to the Unaffiliated
FoxMeyer Stockholders in the form of NII Common Stock, based on a fixed exchange
ratio. Following those discussions, NII informed the Special Committee that it
did not desire to delay negotiations further because of the uncertainty of the
timing of completion of negotiations concerning the UHC Contract but indicated
that NII would consider restructuring the All Stock Transaction in the manner
discussed. Accordingly, the Special Committee and its advisors continued
discussions with NII and its advisors concerning the number of shares of NII
Common Stock to be received by the Unaffiliated FoxMeyer Stockholders for each
share of FoxMeyer Common Stock, as well as the provision of a 'collar' with
respect to the merger consideration providing for maximum and minimum dollar
value of the merger consideration to be received by the Unaffiliated Common
Stockholders. Between June 14 and June 25, NII and the Special Committee and
their respective advisors had numerous discussions concerning the appropriate
exchange ratio and 'collar,' if any. The Special Committee and its advisors
considered various alternatives with respect to the exchange ratio and the
collar as they related to the merger consideration to be received in the
transaction by the Unaffiliated FoxMeyer Stockholders. As these discussions
proceeded, the Special Committee and its advisors were provided with a draft
agreement and plan of merger setting forth the proposed terms of such a merger
and considered, and negotiated with NII's representatives, the terms of that
agreement. On June 23, 1994, the advisors also met with representatives of the
Class Action Plaintiffs to discuss the status of negotiations between the
Special Committee and NII and the possibility of settlement of the Class Action
Lawsuits in connection with any agreement that might be reached between NII and
the Special Committee. See '--Litigation Relating to the Merger.'
On June 27, 1994, representatives of NII requested that the Special
Committee consider an All Stock Transaction that would involve, among other
things, (i) merger consideration to be received by the Unaffiliated FoxMeyer
Stockholders of 0.90 shares of NII Common Stock for each share of FoxMeyer
Common Stock, (ii) adjustment to the exchange ratio to the extent necessary to
provide that the Unaffiliated FoxMeyer Stockholders would receive consideration
in the Merger of a value of not less than $14.75 per share of FoxMeyer Common
Stock and not more than $17.00 per share of FoxMeyer Common Stock (in each case,
based on the average per share closing price of the NII Common Stock during the
period of twenty consecutive trading days commencing twenty-one trading days
prior to the NII Annual Meeting and ending the second trading day prior to the
NII Annual Meeting), and (iii) the right of NII to terminate the merger
agreement if the Average Stock Price were less than $14.75. After consultation
with its advisors, the Special Committee agreed to schedule a meeting of the
Special Committee and its advisors for June 30, 1994 at which the Special
Committee would consider a transaction on the basis of such terms and those set
forth in the draft agreement and plan of merger as revised.
Following the discussions on June 27, 1994, the Special Committee and NII
continued negotiating the terms of the draft agreement and plan of merger and
continued discussions with representatives of the Class Action Plaintiffs
concerning the possibility of settlement of the Class Action Lawsuits
simultaneously with completion of the Merger Agreement.
Prior to the June 30 Special Committee meeting, representatives of the
Class Action Plaintiffs informed the Special Committee that the Class Action
Plaintiffs desired certain modifications to the terms of the All Stock
Transaction being considered by NII and the Special Committee. Representatives
of NII informed the Special Committee that the Class Action Plaintiffs would be
willing to settle the Class Action Lawsuits if the merger was structured as an
All Stock Transaction in accordance with the terms being considered by NII and
the Special Committee, provided that the terms of such a transaction were
modified so as not to include a 'collar' limiting the maximum dollar value of
the consideration to be received by the Unaffiliated FoxMeyer Stockholders or
ensuring that the Unaffiliated FoxMeyer Stockholders would receive consideration
of no less than a specific minimum dollar value. Representatives of NII also
requested that the Special Committee consider the modifications proposed by the
Class Action Plantiffs at the Special Committee meeting scheduled for June 30.
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On June 30, 1994, the Special Committee and its advisors met to discuss and
consider the terms of the merger transaction discussed by the Special Committee
and NII and their respective advisors on June 27, 1994, as well as the
modifications suggested by the Class Action Plaintiffs. At that meeting, Latham
& Watkins described the transaction discussed by NII and the Special Committee
on June 27, 1994 as well as the modifications to such terms suggested by the
Class Action Plaintiffs and discussed the terms of the revised draft agreement
and plan of merger. After consideration and discussion of the terms of the
transaction discussed on June 27, 1994 and the modifications to such terms
suggested by the Class Action Plaintiffs, the Special Committee, noting its
belief that the Unaffiliated FoxMeyer Stockholders would benefit from an All
Stock Transaction structured in a manner that would assure that such
stockholders would receive NII Common Stock of a value not less than specified
amount, determined it could not recommend the modifications proposed by the
Class Action Plaintiffs. After further consultation with its advisors, the
Special Committee determined that it would be willing to consider an All Stock
Transaction pursuant to which the Unaffiliated FoxMeyer Stockholders would
receive, in exchange for each share of FoxMeyer Common Stock, 0.90 shares of NII
Common Stock without limitation on the maximum value of the consideration to be
received by the Unaffiliated FoxMeyer Stockholders, but which would provide that
the Unaffiliated Common Stockholders would receive consideration of a value of
not less than $14.50 per share. The Special Committee suggested that the meeting
be adjourned to allow its advisors to propose a transaction on such terms to
NII. Immediately upon adjournment of that meeting, Latham & Watkins contacted
representatives of NII and held discussions concerning such a proposal. As a
result of those discussions, NII's representatives indicated that the Board of
Directors of NII would consider an All Stock Transaction pursuant to which (i)
FoxMeyer would merge with and into Acquisition, (ii) the Unaffiliated FoxMeyer
Stockholders would receive, as consideration in the merger, 0.90 shares (the
'Ratio') of NII Common Stock for each share of FoxMeyer Common Stock, (iii) the
Ratio would be adjusted to the extent necessary to ensure that the consideration
per share received by the Unaffiliated FoxMeyer Stockholders (based on the
Average Stock Price) would not be less than $14.40 per share (the Ratio, as it
may be adjusted, being referred to as the 'Exchange Ratio'), (iv) NII would have
the right to terminate the Merger Agreement if the Averge Stock Price was less
than $14.40, and (v) there would be no limit on the value of the consideration
to be received by the Unaffiliated FoxMeyer Stockholders in the transaction (the
'Revised Offer'). NII also indicated that any approval of the Revised Offer
would be subject to the execution of an agreement in principle with the Class
Action Plaintiffs providing for settlement of the Class Action Lawsuits.
Following such discussions, the Special Committee reconvened the June 30
Special Committee meeting and considered the Revised Offer. At such reconvened
meeting, Smith Barney made a presentation to the Special Committee with respect
to Smith Barney's financial analyses concerning FoxMeyer and NII and the
financial terms of the Revised Offer, see '--Opinion of the Special Committee's
Financial Advisor,' and the Special Committee then received the oral opinion
(subsequently confirmed in writing) of Smith Barney as to the fairness, from a
financial point of view, of the Exchange Ratio to the holders of the FoxMeyer
Common Stock (other than NII and its affiliates). After further discussion, the
Special Committee concluded, based in part on the factors described below under
'FoxMeyer's Reasons for the Merger and Recommendation of the Special Committee,'
that the transaction contemplated by the Revised Offer and the draft agreement
and plan of merger, as modified to reflect previous negotiations between NII and
the Special Committee and terms of the Revised Offer, were fair to, and in the
best interests of, the Unaffiliated FoxMeyer Stockholders. At a meeting of the
Board of Directors of FoxMeyer held immediately thereafter, the Board of
Directors of FoxMeyer, based on the recommendation of the Special Committee,
unanimously approved the Revised Offer and the Merger Agreement, subject to
completion of an agreement in principle with the Class Action Plaintiffs
providing for settlement of the Class Action Lawsuits.
At a meeting also held on June 30, 1994, the Board of Directors of NII
unanimously approved the Revised Offer and the Merger Agreement subject to
completion of an agreement in principle with the Class Action Plaintiffs
providing for settlement of the Class Action Lawsuits.
Following completion of the meetings held earlier that day, NII, FoxMeyer,
the Individual Defendants and the Class Action Plaintiffs, through their
respective legal advisors, entered into a memorandum of understanding setting
forth their agreement in principle with respect to the settlement of the Class
Action Lawsuits (the 'Memorandum of Understanding'). See '--Litigation Relating
to the Merger.' Following execution of the
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Memorandum of Understanding, the definitive Merger Agreement was executed and
delivered by the respective parties.
FOXMEYER'S REASONS FOR THE MERGER AND RECOMMENDATION OF THE SPECIAL COMMITTEE
At a meeting of the Special Committee held on June 30, 1994, the Special
Committee unanimously determined that the Merger Agreement was fair to, and in
the best interests of, the Unaffiliated FoxMeyer Stockholders and recommended
that the Board of Directors of FoxMeyer approve the Merger Agreement and the
transactions contemplated therein. At a meeting of the Board of Directors of
FoxMeyer on June 30, 1994, based on the recommendation of the Special Committee,
the Board of Directors of FoxMeyer unanimously (i) determined that the Merger
Agreement is in the best interests of the stockholders of FoxMeyer, (ii)
approved the Merger Agreement and the transactions contemplated thereby and
authorized the execution, delivery and performance thereof, and (iii) resolved
to recommend that the stockholders of FoxMeyer approve and adopt the Merger
Agreement and the transactions contemplated therein. ACCORDINGLY, THE BOARD OF
DIRECTORS OF FOXMEYER RECOMMENDS THAT THE STOCKHOLDERS OF FOXMEYER APPROVE AND
ADOPT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREIN.
The Board of Directors of FoxMeyer believes that the terms of the Merger
Agreement are fair to and in the best interest of FoxMeyer and its stockholders.
Accordingly, the Board of Directors of FoxMeyer has approved the Merger
Agreement and the transactions contemplated thereby and has recommended that the
stockholders of FoxMeyer approve and adopt the Merger Agreement and the
transactions contemplated therein. In reaching its conclusions, the Board of
Directors of FoxMeyer considered the recommendation of the Special Committee and
the factors that were considered by the Special Committee as set forth below.
The Special Committee, in reaching its conclusion that the Merger was fair
and in the best interests of the Unaffiliated FoxMeyer Stockholders and to
recommend approval of the Merger Agreement and the Merger to the Board of
Directors of FoxMeyer, considered a number of factors, including, without
limitation, the following:
1. The consideration to be received by the Unaffiliated FoxMeyer
Stockholders in the Merger, including the fact that the minimum consideration to
be received by the Unaffiliated FoxMeyer Stockholders represented a premium over
(i) the closing price of the FoxMeyer Common Stock on the day immediately
preceding the execution of the Merger Agreement ($13.625 per share), (ii) the
closing price of the FoxMeyer Common Stock on the date immediately preceding the
announcement of the Initial Offer ($13.50 per share), and (iii) the price at
which FoxMeyer and NII each acquired 1,650,000 shares of FoxMeyer Common Stock
pursuant to a joint tender offer by FoxMeyer and NII completed in November, 1992
($13.50 per share). See 'Certain Transactions.' In this regard, the Special
Committee also considered the fact that, if the Merger is consummated, subject
to the right of NII to terminate the Merger Agreement under certain
circumstances, the Unaffiliated FoxMeyer Stockholders would receive
consideration in the Merger of not less than $14.40 per share of FoxMeyer Common
Stock (based on the Average Stock Price) irrespective of the market conditions
or the respective values or trading prices of the FoxMeyer Common Stock or the
NII Common Stock at the Effective Time. The Special Committee also noted that
the Merger Agreement did not impose a limit on the dollar value of the Merger
Consideration to be received by the Unaffiliated FoxMeyer Stockholders.
2. The presentation of Smith Barney to the Special Committee on June 30,
1994, including Smith Barney's written opinion to the effect that, as of the
date of such opinion and based upon and subject to certain matters stated
therein, the Exchange Ratio was fair, from a financial point of view, to the
holders of FoxMeyer Common Stock (other than NII and its affiliates). See
'--Opinion of the Special Committee's Financial Advisor.'
3. The fact that, in the Merger, the Unaffiliated FoxMeyer Stockholders
will receive NII Common Stock and that, through their ownership of NII Common
Stock, the Unaffiliated FoxMeyer Stockholders would continue to participate in
any potential future growth of FoxMeyer, including any potential future growth
as a result of the UHC Contract. In this regard, the Special Committee noted
that each Unaffiliated FoxMeyer Stockholder would own a greater percentage of
the NII Common Stock immediately after the Merger than the percentage of
FoxMeyer Common Stock held by such Unaffiliated FoxMeyer Stockholder prior to
consummation of the Merger. The Special Committee also considered the possible
effect on the investment of the Unaffiliated FoxMeyer Stockholders of any future
losses and liabilities of NII and its subsidiaries other than FoxMeyer, as well
as any growth from the operation of NII and such subsidiaries. The Special
Committee, however, did not
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believe that such potential losses and liabilities outweighed the potential
benefit to the Unaffiliated FoxMeyer Stockholders of the increased participation
(through ownership of NII Common Stock) in the potential future growth of
FoxMeyer and any potential future growth of NII and its other subsidiaries.
4. Present and historical market trading prices, volatility and trading
information with respect to the FoxMeyer Common Stock and the NII Common Stock
and current market conditions.
5. The business, financial condition and prospects of FoxMeyer, NII and
their respective subsidiaries, including the possible effect thereon of the UHC
Contract.
6. The terms and conditions of the Merger Agreement, including the amount
and form of the consideration, the nature of the parties' representation,
warranties, covenants and agreements and the conditions to the obligations of
NII and Acquisition under the Merger Agreement. In that regard, the Special
Committee considered the fact that NII has the right to terminate the Merger
Agreement if the Average Stock Price is less than $14.40 per share. The Special
Committee believed that, given market and trading price uncertainties and
certain other factors, a minimum Merger Consideration of $14.40 per share would
provide significant benefit to the Unaffiliated FoxMeyer Stockholders and that,
given such benefit, the right of NII to terminate the Merger Agreement if the
Average Stock Price would fall below $14.40 was reasonable.
7. The ownership by NII of approximately 80.5% of the outstanding shares of
FoxMeyer Common Stock and the unlikelihood of a third party sale, restructuring
or liquidation of FoxMeyer in light of NII's past and present intention with
respect to its ownership of FoxMeyer Common Stock. In this regard, the Special
Committee noted that, since the announcement of the Initial Offer, no third
party had made an unsolicited offer to acquire the stock or assets of FoxMeyer.
The Special Committee also considered the possibility that, in the absence of a
binding merger agreement, NII could increase its ownership of FoxMeyer Common
Stock in a transaction not approved by FoxMeyer in which all Unaffiliated
FoxMeyer Stockholders would not participate.
8. The benefits to the Unaffiliated FoxMeyer Stockholders of the likely
increased liquidity and greater breadth of trading market provided by the
conversion of the FoxMeyer Common Stock of the Unaffiliated FoxMeyer
Stockholders into NII Common Stock.
9. The participation of the Special Committee and its advisors acting on
behalf of the Unaffiliated FoxMeyer Stockholders and the fact that the Merger
was negotiated on an arm's-length basis by NII and the Special Committee and
their respective advisors.
10. The tax-free nature of the Merger.
In view of the wide variety of factors considered in connection with its
evaluation of the terms of the Merger, the Special Committee did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to specific factors considered in reaching its determination.
The Special Committee believes that the Merger is procedurally fair
because: (i) the Special Committee was comprised of disinterested directors
appointed to represent the interests of, and to negotiate on an arm's-length
basis with NII on behalf of, the Unaffiliated FoxMeyer Stockholders; (ii) the
Special Committee retained and was advised by independent legal counsel; and
(iii) the Special Committee retained Smith Barney as financial advisor to assist
it in evaluating any proposal from NII regarding FoxMeyer from a financial point
of view. In addition, the Special Committee believes that the Merger is
procedurally fair because the Merger Consideration and the other terms and
conditions of the Merger Agreement resulted from arm's-length bargaining between
the Special Committee and representatives of NII.
The Special Committee and the Board of Directors of FoxMeyer recognized
that although no dissenters' appraisal rights would be available to the
Unaffiliated FoxMeyer Stockholders under Delaware law in connection with the
Merger because the Merger Consideration consists solely of securities listed on
a national securities exchange (and cash in lieu of fractional shares), the
Unaffiliated FoxMeyer Stockholders could continue to maintain an interest in
FoxMeyer's business through their ownership of NII Common Stock.
The members of the Special Committee (as well as the other directors of
FoxMeyer) are indemnified by FoxMeyer under FoxMeyer's Certificate of
Incorporation and By-Laws and the applicable provisions of Delaware law (and,
pursuant to the Merger Agreement, by NII) with respect to their actions in
connection with
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the Merger. See 'The Merger--Indemnification.' FoxMeyer has also agreed to pay
each member of the Special Committee $35,000 as compensation for his services as
a member of the Special Committee and has agreed to reimburse the members of the
Special Committee for the expenses incurred by them in connection with the
Merger. Such compensation is in addition to the compensation payable to all
directors of FoxMeyer, including the directors comprising the Special Committee.
See 'Election of FoxMeyer Directors--Compensation of FoxMeyer Directors' and
'Ownership of FoxMeyer Common Stock of Certain Beneficial Owners and FoxMeyer
Management.'
OPINION OF THE SPECIAL COMMITTEE'S FINANCIAL ADVISOR
Smith Barney was retained by the Special Committee to act as financial
advisor to the Special Committee in connection with the Merger. In connection
with such engagement, the Special Committee requested that Smith Barney evaluate
the fairness, from a financial point of view, to the holders of shares of
FoxMeyer Common Stock (other than NII and its affiliates) of the consideration
to be received by such holders in the Merger. On June 30, 1994, Smith Barney
delivered to the Special Committee a written opinion to the effect that, as of
the date of such opinion and based upon and subject to certain matters stated
therein, the Exchange Ratio was fair, from a financial point of view, to the
holders of the FoxMeyer Common Stock (other than NII and its affiliates). Smith
Barney has confirmed such opinion by delivery of a written opinion dated the
date hereof. The assumptions made, matters considered and limitations on the
review undertaken in the June 30, 1994 opinion are substantially the same as
those contained in the opinion dated the date hereof and attached hereto as
Annex B.
In arriving at its opinion, Smith Barney reviewed the Merger Agreement and
held discussions with certain senior officers, directors and other
representatives and advisors of FoxMeyer and the Special Committee and certain
senior officers and other representatives and advisors of NII concerning the
business, operations and prospects of FoxMeyer and NII. Smith Barney examined
certain publicly available business and financial information relating to
FoxMeyer and NII as well as certain financial forecasts and other data for
FoxMeyer and NII which were provided to Smith Barney by the respective
managements of FoxMeyer and NII. Smith Barney reviewed the financial terms of
the Merger as set forth in the Merger Agreement in relation to, among other
things: current and historical market prices and trading volumes of the FoxMeyer
Common Stock and NII Common Stock; the respective companies' historical and
projected earnings; and the capitalization and financial condition of FoxMeyer
and NII. Smith Barney considered, to the extent publicly available, the
financial terms of certain other similar transactions recently effected which
Smith Barney considered comparable to the Merger and analyzed certain financial
and other publicly available information relating to the businesses of other
companies whose operations Smith Barney considered comparable to the operations
of FoxMeyer and NII. Smith Barney also evaluated the pro forma financial impact
of the Merger on NII. In addition to the foregoing, Smith Barney conducted such
other analyses and examinations and considered such other financial, economic
and market criteria as Smith Barney deemed necessary to arrive at its opinion.
Smith Barney noted that its opinion was necessarily based upon financial, stock
market and other conditions and circumstances existing and disclosed to Smith
Barney as of the date of its opinion.
In rendering its opinion, Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information publicly available or furnished to or otherwise discussed
with Smith Barney. With respect to financial forecasts and other information
provided to or otherwise discussed with Smith Barney, Smith Barney assumed that
such forecasts and other information were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
respective managements of FoxMeyer and NII as to the expected future financial
performance of FoxMeyer and NII. Smith Barney also assumed that the Merger will
be treated as a tax-free reorganization for federal income tax purposes. Smith
Barney's opinion relates to the relative values of FoxMeyer and NII. Smith
Barney did not express any opinion as to what the value of the NII Common Stock
actually will be when issued to FoxMeyer stockholders pursuant to the Merger or
the price at which the NII Common Stock will trade subsequent to the Merger. In
addition, Smith Barney did not make or obtain an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of FoxMeyer or
NII nor did Smith Barney make any physical inspection of the properties or
assets of FoxMeyer or NII. Smith Barney was not requested to, and did not,
solicit third party indications of interest in acquiring all or a part of
FoxMeyer. In addition, although Smith Barney evaluated the financial terms of
the Merger, Smith Barney was not asked to and did not recommend the specific
consideration to be paid by NII in
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the Merger. No other limitations were imposed by the Special Committee on Smith
Barney with respect to the investigations made or procedures followed by Smith
Barney in rendering its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SMITH BARNEY DATED THE DATE HEREOF,
WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX B TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. FOXMEYER
STOCKHOLDERS ARE URGED TO READ THIS OPINION CAREFULLY IN ITS ENTIRETY. SMITH
BARNEY'S OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW AND HAS BEEN PROVIDED SOLELY FOR THE USE OF THE SPECIAL
COMMITTEE IN ITS EVALUATION OF THE MERGER, DOES NOT ADDRESS ANY OTHER ASPECT OF
THE MERGER OR RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO
ANY FOXMEYER STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE FOXMEYER
ANNUAL MEETING. THE SUMMARY OF THE OPINION OF SMITH BARNEY SET FORTH IN THIS
JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF SUCH OPINION.
In preparing its opinion to the Special Committee, Smith Barney performed a
variety of financial and comparative analyses, including those described below.
The summary of such analyses does not purport to be a complete description of
the analyses underlying Smith Barney's opinion. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analyses and the application
of those methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to summary description. In arriving at its opinion,
Smith Barney did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Smith Barney believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and factors, without considering all analyses and factors, could
create a misleading or incomplete view of the processes underlying such analyses
and its opinion. In its analyses, Smith Barney made numerous assumptions with
respect to FoxMeyer and NII, industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of FoxMeyer and NII. The estimates contained in such analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty.
Comparable Company Analysis. Using publicly available information, Smith Barney
analyzed, among other things, the market values and trading multiples of
selected medical distribution companies, including: Bergen Brunswig Corporation;
Bindley Western Industries, Inc.; Cardinal Health, Inc.; and McKesson
Corporation (collectively, the 'Comparable Companies'). Smith Barney compared
market values of, among other things, multiples of projected calendar 1994 and
1995 net income of the Comparable Companies. The multiples of projected net
income of the Comparable Companies were between 9.0x to 26.5x (with a mean of
15.6x and a median of 13.4x) and 7.9x to 23.3x (with a mean of 13.8x and a
median of 12.0x), respectively. The multiples of projected calendar 1994 and
1995 net income of FoxMeyer were 14.7x and 10.2x, respectively. The Exchange
Ratio, based on a closing sale price for NII Common Stock of $17.625, equated to
multiples of FoxMeyer projected calendar 1994 and 1995 net income of 15.3x and
10.6x, respectively.
Smith Barney also compared the adjusted market values (equity market value,
plus debt and preferred stock, less cash) to, among other things, historical net
revenues, gross profits and earnings before interest, taxes, depreciation and
amortization ('EBITDA'). The multiples of net revenues, gross profits and EBITDA
of the Comparable Companies were between the following ranges: (i) latest 12
months' net revenues: 0.1x to 0.4x (with a mean of 0.2x and a median of 0.2x);
(ii) latest 12 months' gross profits: 2.1x to 4.9x (with a mean of 3.7x and a
median of 3.9x); and (iii) latest 12 months' EBITDA: 6.6x to 13.4x (with a mean
of 10.2x and a median of 10.3x). The multiples of latest 12 months' net
revenues, gross profits and EBITDA of FoxMeyer were 0.1x, 2.2x and 7.3x,
respectively. The Exchange Ratio, based on a closing sale price for NII Common
Stock of $17.625, equated to multiples of FoxMeyer net revenues, gross profits
and EBITDA for the latest 12 months of 0.1x, 2.3x and 7.5x, respectively.
Smith Barney also compared the profit margins, debt to capitalization
ratios, historic revenue growth and projected earnings per share ('EPS') growth
of the Comparable Companies with those of FoxMeyer. All
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projected net income estimates for the Comparable Companies were based on the
consensus estimates of selected investment banking firms, and all projected net
income estimates for FoxMeyer were based on projections of FoxMeyer management.
All multiples were based on closing stock prices as of September 7, 1994.
Selected Merger and Acquisition Transaction Analysis. Using publicly
available information, Smith Barney analyzed the implied transaction multiples
in the following selected mergers and acquisition transactions in the medical
distribution industry: Owens & Minor, Inc./Stuart Medical, Inc.; Cardinal
Distribution, Inc./Whitmire Distribution, Inc.; Baxter International,
Inc./Stuart Medical, Inc. (subsequently terminated); Bergen Brunswig
Corp./Durr-Fillauer Medical Inc.; FoxMeyer Corporation/Harris Wholesale Company
(RABCO); and Bergen Brunswig Corporation/Owens & Minor, Inc. (Wholesale Drug)
(collectively, the 'Selected Acquisitions'). Smith Barney compared transaction
values as multiples of latest 12 months net revenues and earnings before
interest and taxes ('EBIT') and compared these multiples to the multiples of
FoxMeyer's performance implied by the Exchange Ratio as set forth above under
'Comparable Company Analysis.' The mean and median multiples of latest 12
months' revenues and EBIT of the Selected Acquisitions for which public
information was available were as follows: (i) latest 12 months' revenues mean
and median: 0.25x and 0.18x, respectively; and (ii) latest 12 months' EBIT mean
and median: 12.9x and 12.0x, respectively.
No company, transaction or business used in the comparable company and
selected merger and acquisition transactions analyses as a comparison is
identical to FoxMeyer, NII or the Merger. Accordingly, an analysis of the
results of the foregoing is not entirely mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the acquisition or
public trading value of the comparable companies or the business segment or
company to which they are being compared.
Discounted Cash Flow Analysis: Smith Barney performed a discounted cash
flow analysis of the projected free cash flow of FoxMeyer for the fiscal years
ended March 31, 1995 through March 31, 1988, assuming, among other things,
discount rates of 18.0%, 20.0% and 22.0%, and terminal multiples of EBITDA of
5.0x to 9.0x. Utilizing these assumptions, Smith Barney arrived at estimated
ranges of equity values per share of FoxMeyer Common Stock of between
approximately $9.63 to $23.52.
Premium Analysis: Smith Barney analyzed the premiums paid in approximately
38 selected transactions from 1989 through 1994 involving the acquisition of
publicly-held minority interests, based on stock prices one day prior to the
announcement of such transaction and on the effective date of such transaction.
The mean and median premiums for such transactions, as of one day prior to the
announcement date of such transaction, were 23.6% and 19.9%, respectively, with
all stock transactions mean and median premiums of 24.4% and 14.0%,
respectively. The mean and median premiums for such transactions, on the
effective date, were 24.0% and 19.9%, respectively, with all stock transactions
mean and median premiums of 25.8% and 19.4%, respectively.
Pro Forma Merger Analysis. Smith Barney analyzed certain pro forma effects
resulting from the Merger, including, among other things, the impact of the
Merger on the projected EPS of NII for the fiscal years ended March 31, 1995 and
1996. Based upon the consensus EPS estimates of selected investment banking
firms, the results of the pro forma merger analysis suggest that the Merger will
be accretive to NII's EPS in fiscal years 1995 and 1996. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
Other Factors and Comparative Analyses. In rendering its opinion, Smith
Barney considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) FoxMeyer and NII
historical and projected financial results; (ii) the history of trading prices
for FoxMeyer Common Stock and NII Common Stock and the relationship between
movements of such common stock; (iii) the implied value of the consideration to
be paid by NII in the Merger; (iv) the potential impact of the UHC contract on
the projected EPS of FoxMeyer and NII for the fiscal years ended March 31, 1995
and 1996; (v) the market valuations of NII's subsidiaries (including FoxMeyer);
(vi) the amount of the liabilities less the value of the assets of NII
(excluding FoxMeyer) relative to the value of the increased ownership in
FoxMeyer obtained by FoxMeyer Unaffiliated Stockholders (through their ownership
of NII Common Stock) by virtue of the Merger; (vii) the pro forma leverage of
the combined company relative to FoxMeyer and NII on a stand-alone basis; and
(viii) the pro forma ownership of the combined company.
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Pursuant to the terms of Smith Barney's engagement, FoxMeyer has agreed to
pay Smith Barney for its services in connection with the Merger an aggregate
financial advisory fee of $500,000. FoxMeyer also has agreed to reimburse Smith
Barney for travel and other out-of-pocket expenses incurred by Smith Barney in
performing its services, including the reasonable fees and expenses of its legal
counsel, and to indemnify Smith Barney and related persons against certain
liabilities, including liabilities under the federal securities laws, arising
out of Smith Barney's engagement.
Smith Barney has advised the Special Committee that, in the ordinary course
of business, it may actively trade the equity and debt securities of FoxMeyer
and NII for its own account or for the account of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Smith Barney is a nationally recognized investment banking firm and was
selected by the Special Committee based on Smith Barney's experience and
expertise. Smith Barney regularly engages in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes.
NII'S REASONS FOR THE MERGER
As indicated above, NII beneficially owns approximately 80.5% of the
outstanding shares of FoxMeyer Common Stock, and, as hereinafter described, has
a Management Agreement with FoxMeyer which is renewable on an annual basis by
either party. NII's purpose in consummating the Merger is to obtain beneficial
ownership of the shares of FoxMeyer Common Stock it does not already
beneficially own. Upon consummation of the Merger, NII will be entitled to all
benefits and will face all risks that result from ownership of all of the
outstanding shares of FoxMeyer Common Stock.
The Merger is intended to simplify the corporate structure under which NII
and FoxMeyer operate. Structural simplification will eliminate certain expenses
associated with FoxMeyer's status as a publicly held corporation, including
expenses of preparing and distributing annual reports, proxy statements and
other documents and information required by the Exchange Act, expenses related
to maintaining a registrar and transfer agent for the shares of FoxMeyer Common
Stock and certain legal, tax and accounting fees. NII estimates that all of such
costs would aggregate approximately $600,000 in 1994 if FoxMeyer were to
continue as a publicly held company. The Merger will also eliminate potential
conflicts of interest that may arise as a result of NII's significant ownership
interest in FoxMeyer and the fact that four of the eight current directors of
FoxMeyer are also directors of NII. The Merger will also provide NII and
FoxMeyer with a greater degree of flexibility in pursuing opportunities for the
greatest benefit to present NII stockholders and the Unaffiliated FoxMeyer
Stockholders who will become stockholders of NII in the Merger.
NII reviewed alternative structures, including a tender offer and other
transactions for the acquisition of the shares of FoxMeyer Common Stock that it
did not already own. NII determined not to proceed with a tender offer, since
there could be no assurance that the Unaffiliated FoxMeyer Stockholders would
tender all of their shares of FoxMeyer Common Stock to NII.
In the event the Merger is not consummated, NII may purchase additional
shares of FoxMeyer Common Stock from time to time, subject to availability at
prices deemed acceptable to NII, pursuant to a merger transaction, tender
offers, open market or privately negotiated transactions or otherwise on terms
and conditions more or less favorable to the Unaffiliated FoxMeyer Stockholders
than the terms of the Merger. However, NII has made no determination as to any
future transactions if the Merger is not consummated.
As a result of the Merger, the surviving corporation will be a privately
held company. For Unaffiliated FoxMeyer Stockholders, consummation of the Merger
will result in a termination of their rights as FoxMeyer stockholders. The
Unaffiliated FoxMeyer Stockholders will be able to participate in the future
activities of FoxMeyer through their ownership of shares of NII Common Stock,
but will not face the risk of a diminution of the value of FoxMeyer after the
Merger, except to the extent diminution in the value of FoxMeyer results in
diminution in the value of the shares of NII Common Stock received in the
Merger.
Unaffiliated FoxMeyer Stockholders will receive the Merger Shares in
exchange for their shares of FoxMeyer Common Stock having a premium, based upon
the valuation of shares of NII Common Stock in the Merger, over the $14.00
closing price of the shares of FoxMeyer Common Stock on June 30, 1994, the last
full
29
<PAGE>
trading day prior to the joint public announcement of the Merger Agreement and,
at the same time, through receipt of shares of NII Common Stock, and will have
the opportunity to participate in any potential future growth of a company which
has a more diversified line of businesses. The closing price of the shares of
FoxMeyer Common Stock on September 8, 1994, the last full trading day for which
information was available prior to the printing and mailing of this Joint Proxy
Statement/Prospectus, was $15 3/8. See 'Comparative Market Price Information.'
RECOMMENDATION OF THE NII BOARD OF DIRECTORS
At a meeting of the NII Board of Directors held on June 30, 1994, the
members of the NII Board of Directors unanimously (i) determined that the Merger
is advisable and in the best interests of NII and the NII stockholders, (ii)
approved the Merger Agreement and authorized the execution, delivery and
performance thereof, and (iii) resolved to recommend approval and adoption of
the Merger Agreement by the NII stockholders. ACCORDINGLY, THE NII BOARD OF
DIRECTORS RECOMMENDS THAT NII STOCKHOLDERS APPROVE AND ADOPT THE MERGER
AGREEMENT.
CERTAIN CONSEQUENCES OF THE MERGER
Upon consummation of the Merger, shares of FoxMeyer Common Stock will cease
to be traded on the NYSE and application will be made to deregister such shares
under the Exchange Act. FoxMeyer will cease to exist and the Surviving
Corporation will change its name to FoxMeyer Corporation. After the Merger, as a
result of deregistration under the Exchange Act, FoxMeyer will no longer be
obligated to file periodic reports with the Commission. In addition, the
termination of registration of the shares of FoxMeyer Common Stock under the
Exchange Act would cause to be inapplicable certain other provisions of the
Exchange Act, including requirements that FoxMeyer's officers, directors and 10%
stockholders file certain reports concerning ownership of FoxMeyer's securities
and provisions that any profit by such officers, directors and stockholders
through purchases and sales of FoxMeyer's equity securities within any six-month
period may be recaptured by FoxMeyer.
As a result of the Merger, the stockholders of FoxMeyer will become
stockholders of NII, and thereby will continue to have an interest in FoxMeyer
through NII. After consummation of the Merger and (i) without giving effect to
outstanding stock options of NII and FoxMeyer and (ii) assuming that the
Exchange Ratio is 0.90 shares of NII Common Stock, then the current NII
stockholders, in the aggregate, would own approximately 72.0% of NII and the
current Unaffiliated FoxMeyer Stockholders, in the aggregate, would own
approximately 28.0% of NII. NII will apply to have the additional shares of NII
Common Stock issued pursuant to the Merger listed on the NYSE.
As noted elsewhere herein, Messrs. Butler and Estrin beneficially own
(exclusive of their stock options) approximately 29.6% of the currently
outstanding shares of NII Common Stock. See 'Ownership of NII Common Stock of
Certain Beneficial Owners and NII Management.' Assuming no changes in the number
or ownership of the outstanding shares of NII Common Stock, solely as a result
of the Merger, and consummation of the Merger, and (i) without giving effect to
outstanding stock options of NII and FoxMeyer and (ii) assuming that the
Exchange Ratio is 0.90 shares of NII Common Stock, then Messrs. Butler and
Estrin would own approximately 21.3% of the outstanding shares of NII Common
Stock.
CONDUCT OF THE BUSINESS OF NII AND FOXMEYER AFTER THE MERGER
Following consummation of the Merger, NII intends to conduct its business
and the business of FoxMeyer substantially as they are currently being
conducted. Pursuant to the Merger Agreement, (i) the members of the Board of
Directors of FoxMeyer immediately prior to the consummation of the Merger shall
be the initial directors of the Surviving Corporation following the consummation
of the Merger and (ii) the executive officers of FoxMeyer immediately prior to
the consummation of the Merger shall be the initial officers of the Surviving
Corporation. NII's management will not be affected by the Merger.
CONDUCT OF THE BUSINESS OF NII AND FOXMEYER IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, it is expected that the business and
operations of NII and FoxMeyer will each continue to be conducted substantially
as they are currently being conducted and that FoxMeyer will continue to be
controlled by NII. In addition, in such event, NII may purchase additional
shares of FoxMeyer
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<PAGE>
Common Stock from time to time, subject to availability at prices deemed
acceptable to NII, pursuant to a merger transaction, tender offers, open market
or privately negotiated transactions or otherwise on terms more or less
favorable to the Unaffiliated FoxMeyer Stockholders than the terms of the
Merger. However, NII has made no determination as to any future transactions if
the Merger is not consummated.
CONFLICTS OF INTEREST
Certain members of the Board of Directors of FoxMeyer have interests that
may present them with actual or potential conflicts of interest.
Each of Abbey J. Butler, Melvyn J. Estrin, Sheldon W. Fantle and Paul M.
Finfer (the 'Interlocking Directors') are members of the Board of Directors of
both FoxMeyer and NII, and Messrs. Butler, Estrin, Fantle and Harvey A. Fain
(also a director of FoxMeyer) are also directors of Ben Franklin. In addition,
Messrs. Butler and Estrin are Co-Chief Executive Officers of both NII and
FoxMeyer. The Interlocking Directors agreed not to vote as directors of FoxMeyer
in favor of the Initial Offer, as amended, unless recommended by the FoxMeyer
Special Committee because such persons may be deemed to have conflicts of
interest by virtue of being a director or executive officer of both NII and
FoxMeyer.
CERTAIN FINANCIAL PROJECTIONS
Neither NII nor FoxMeyer makes public projections as to future revenues or
earnings. However, certain projections of NII's future operating performance
(the 'NII Projections') and of FoxMeyer's future operating performance (the
'FoxMeyer Projections' and, together with the NII Projections, the
'Projections') prepared by senior management were furnished to the FoxMeyer
Special Committee in connection with their review of the Initial Offer and,
therefore, are included in this Joint Proxy Statement/Prospectus. The
Projections were prepared in March 1994 in the ordinary course of business and
were NOT prepared in contemplation of the proposed Merger. In addition, the
Projections were prepared without consideration of any particular contract,
including the UHC Contract. Summaries of such Projections are set forth below.
The Projections have NOT been revised to reflect the actual terms of the Merger
Agreement. NII does not undertake to update the Projections. Indeed, the
Projections were prepared on the basis that the Merger does not occur.
THE FOLLOWING SUMMARY PROJECTIONS WERE NOT PREPARED IN ACCORDANCE WITH
PUBLISHED GUIDELINES OF THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS REGARDING PROJECTIONS AND FORECASTS OR GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES ('GAAP'). THE INDEPENDENT AUDITORS FOR NII AND FOXMEYER
HAVE NOT PERFORMED ANY PROCEDURES WITH RESPECT TO THESE PROJECTIONS.
PROJECTIONS NECESSARILY INVOLVE ESTIMATES AS TO THE FUTURE (WHICH MAY OR
MAY NOT PROVE TO BE ACCURATE), INCLUDING ASSUMPTIONS AS TO INDUSTRY
PERFORMANCES, GENERAL BUSINESS AND ECONOMIC CONDITIONS, TAXES AND OTHER MATTERS,
MANY OF WHICH ARE BEYOND THE CONTROL OF NII AND FOXMEYER, AS WELL AS FUTURE
COURSES OF ACTION. THE PROJECTIONS HAVE NOT BEEN UPDATED TO REFLECT DEVELOPMENTS
OCCURING AFTER THE PREPARATION OF THE PROJECTIONS. ACCORDINGLY, THESE
PROJECTIONS ARE NOT NECESSARILY INDICATIVE OF THE FUTURE PERFORMANCE OF NII AND
FOXMEYER, WHICH MAY BE SIGNIFICANTLY LESS FAVORABLE OR MORE FAVORABLE THAN THESE
PROJECTIONS; SUCH PROJECTIONS SHOULD NOT BE REGARDED AS REPRESENTATIONS BY NII
OR FOXMEYER THAT SUCH PROJECTED RESULTS WILL BE ACHIEVED. INDEED, SINCE THE
PREPARATION OF THE PROJECTIONS, RECENT FORECASTS SHOW THAT FOXMEYER'S NET SALES
TO ITS PRESENT CUSTOMER BASE FOR THE FISCAL YEAR ENDING MARCH 31, 1995 ('FISCAL
1995') COULD BE APPROXIMATELY $550 MILLION LESS THAN PREVIOUSLY PROJECTED.
FOXMEYER IS TAKING STEPS TO OFFSET THE EFFECTS, IF ANY, OF LOWER FORECASTED
SALES BY INTENSIFYING ITS EFFORTS TO ATTRACT NEW BUSINESS FROM EXISTING AND NEW
CUSTOMERS. EFFORTS BY FOXMEYER'S MANAGEMENT TO REDUCE OPERATING COSTS, THROUGH
IMPROVEMENTS IN OPERATING EFFICIENCY, ASSET PERFORMANCE AND CUSTOMER SERVICE,
ARE ALSO EXPECTED TO MITIGATE THE IMPACT OF ANY REDUCED SALES ON FISCAL 1995
EARNINGS. THE DEGREE TO WHICH FOXMEYER IS SUCCESSFUL IN THESE EFFORTS WILL
AFFECT THE REALIZATION OF THE FISCAL 1995 EARNINGS PROJECTIONS BY FOXMEYER AND
NII. FURTHER, NII AND FOXMEYER MAY ACQUIRE OTHER OPERATIONS AND/OR DISPOSE OF,
OR CHANGE THE MANNER IN WHICH THEY CONDUCT, THEIR EXISTING OPERATIONS. ANY OF
SUCH CHANGES COULD MAKE THESE PROJECTIONS MATERIALLY INACCURATE.
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<PAGE>
NII SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS PROJECTIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
Net sales.......................... $ 6,165,560 $ 6,854,258 $ 7,659,107
Operating costs.................... 0 0 0
Cost of goods sold............... 5,800,612 6,449,366 7,214,114
Selling, general and
administrative expenses....... 271,216 279,412 294,911
Depreciation and amortization.... 26,328 38,998 42,963
------------ ------------ ------------
67,404 86,482 107,119
Other expense...................... 2,056 2,987 2,808
------------ ------------ ------------
Operating income from continuing
operations....................... 65,348 83,495 104,311
Financing costs, net............... 21,584 14,655 10,399
Income before income tax benefit,
National Steel Corporation and
minority interest................ 43,764 68,840 93,912
Income tax provision............... 4,032 6,263 8,499
------------ ------------ ------------
Income before National Steel
Corporation and minority
interest......................... 39,732 62,577 85,413
National Steel Corporation......... 5,361 5,261 5,150
------------ ------------ ------------
Income before minority interest.... 45,093 67,838 90,563
Minority interest in results of
operations of consolidated
subsidiaries..................... 6,755 9,685 12,818
------------ ------------ ------------
Net Income......................... 38,338 58,153 77,745
Preferred stock dividends.......... 18,803 20,164 23,386
------------ ------------ ------------
Earnings applicable to common
stockholders..................... $ 19,535 $ 37,989 $ 54,359
------------ ------------ ------------
------------ ------------ ------------
Primary earnings per share of
common stock..................... $ 1.52 $ 2.95 $ 4.22
------------ ------------ ------------
------------ ------------ ------------
Average number of shares of common
stock outstanding................ 12,870 12,870 12,870
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
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<PAGE>
FOXMEYER SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS PROJECTIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
Net sales.......................... $ 5,814,560 $ 6,466,010 $ 7,230,637
Costs and expenses
Cost of goods sold............... 5,519,211 6,146,150 6,886,910
Selling, general and
administrative expenses....... 200,306 194,928 198,486
Depreciation and amortization.... 23,448 35,568 38,433
------------ ------------ ------------
5,742,965 6,376,646 7,123,829
------------ ------------ ------------
71,595 89,364 106,808
Other expense...................... 2,219 2,987 2,808
------------ ------------ ------------
Earnings before interest and
taxes............................ 69,376 86,377 104,000
Financing costs
Intercompany interest income..... 2,614 2,614 2,614
Net interest expense............. 16,542 9,388 4,959
------------ ------------ ------------
Income before income tax
provision........................ 55,448 79,603 101,655
Income tax provision............... 23,565 33,831 43,203
------------ ------------ ------------
Net income......................... $ 31,883 $ 45,772 $ 58,452
------------ ------------ ------------
------------ ------------ ------------
Primary earnings per share of
common stock..................... $ 1.13 $ 1.62 $ 2.07
------------ ------------ ------------
------------ ------------ ------------
Average number of shares of common
stock outstanding................ 28,200 28,200 28,200
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
THE INFORMATION PRESENTED ABOVE SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF NII AND FOXMEYER AND MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NII
AND FOXMEYER CONTAINED IN THE NII ANNUAL REPORT AND FOXMEYER ANNUAL REPORT AND
INCORPORATED BY REFERENCE ELSEWHERE IN THIS JOINT PROXY STATEMENT/PROSPECTUS.
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<PAGE>
ANTICIPATED ACCOUNTING TREATMENT
The Merger will be accounted for as a 'purchase' under generally accepted
accounting principles.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the consummation of the Merger that FoxMeyer shall
have received an opinion from Weil, Gotshal & Manges, counsel to NII, that the
Merger will constitute a reorganization within the meaning of Section 368 of the
Code, and accordingly, (i) no gain or loss will be recognized by holders of
shares of FoxMeyer Common Stock upon the exchange of shares of FoxMeyer Common
Stock solely for shares of NII Common Stock by reason of the Merger (except with
respect to cash, if any, received in lieu of fractional shares), (ii) the tax
basis of the shares of NII Common Stock received by holders of shares of
FoxMeyer Common Stock in the Merger will be the same as the tax basis of the
shares of FoxMeyer Common Stock surrendered in exchange therefor, and (iii) a
holder's holding period in such shares of NII Common Stock will include its
holding period in such shares of FoxMeyer Common Stock provided the shares of
FoxMeyer Common Stock were held as a capital asset on the date of the Merger.
Cash received by a holder of shares of FoxMeyer Common Stock in lieu of
fractional shares of NII Common Stock will result in the recognition of gain or
loss for federal income tax purposes, measured by the difference between the
amount of cash received and the basis of the shares of FoxMeyer Common Stock
surrendered in exchange therefor. Such gain or loss will be capital gain or
loss, provided that such shares of FoxMeyer Common Stock were held as capital
assets at the time of the Merger and will be long-term capital gain or loss if
such shares of FoxMeyer Common Stock have been held for more than one year.
Based upon the advice of their counsel, NII and FoxMeyer believe that no
gain or loss will be recognized by NII, FoxMeyer or Acquisition as a result of
the Merger.
ALTHOUGH THE FOREGOING DISCUSSION DESCRIBES ALL MATERIAL U.S. FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER, IT DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR LISTING OF ALL POTENTIAL TAX EFFECTS OF THE MERGER OR THE TAX
CONSEQUENCES TO A PARTICULAR HOLDER SUBJECT TO SPECIAL TREATMENT, SUCH AS
FOREIGN PERSONS, NOR ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCALITY OR FOREIGN JURISDICTION. HOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE MERGER TO THEM.
REGULATORY APPROVALS
There are no federal regulatory requirements the compliance with which is
required in order to consummate the Merger, other than those required pursuant
to federal and state securities laws.
LITIGATION RELATING TO THE MERGER
On March 1, 1994, NII and FoxMeyer announced the terms of the Initial Offer
and the formation of the Special Committee. Shortly after such announcement, the
Class Action Lawsuits were filed by the Class Action Plaintiffs against, among
others, NII, FoxMeyer and the Individual Defendants alleging, among other
things, that the defendants breached their fiduciary duties owed to holders of
shares of FoxMeyer Common Stock.
The Class Action Lawsuits sought to enjoin the transaction contemplated by
the Initial Offer or, if consummated, to rescind the transaction, and requested
an award for money damages, attorneys' fees and costs. The Class Action Lawsuits
include eight lawsuits filed in the Delaware Chancery Court in and for New
Castle County and one lawsuit filed in the Delaware Chancery Court in and for
Kent County. In connection with the Merger, an agreement in principle concerning
the Merger and settlement of the Class Action Lawsuits between the Class Action
Plaintiffs and the defendants was reached and the Memorandum of Understanding
was executed. The Memorandum of Understanding provides that, subject to
reasonable and confirmatory discovery,
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<PAGE>
the Class Action Plaintiffs will enter into a settlement of the Class Action
Lawsuits, which settlement will be subject, among other conditions, to
consummation of the Merger and the entry of a judgment dismissing the Class
Action Lawsuits. The proposed settlement will provide for a complete discharge,
settlement and release of, and an injunction barring, all claims, rights, causes
of action, suits, matters and issues, whether known or unknown, that have been,
could have been, or in the future might be asserted in the Class Action Lawsuits
or in any proceeding by or on behalf of the Class Action Plaintiffs. The
defendants deny that any of them have committed or have threatened to commit any
violations of law or breaches of duty to the Class Action Plaintiffs and, as the
Memorandum of Understanding states, are entering into such Memorandum of
Understanding, among other reasons, to eliminate the burden and expense of
further litigation. In connection with such settlement, the corporate defendants
would pay the Class Action Plaintiffs' counsel fees and expenses in an amount
not to exceed $410,000, as may be awarded by the court to such counsel. It is
expected that stockholders of FoxMeyer separately will be provided a notice
containing further information regarding the proposed settlement and related
proceedings, including a settlement hearing to be scheduled by the court.
FEDERAL SECURITIES LAW CONSEQUENCES
All shares of NII Common Stock issued in connection with the Merger will be
freely transferable, except that any shares of NII Common Stock received by
persons who are deemed to be 'affiliates' (as such term is defined under the
Securities Act) of FoxMeyer prior to the Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 if such persons are or become affiliates of NII)
or otherwise permitted under the Securities Act. Persons who may be deemed to be
affiliates of FoxMeyer or NII generally include individuals or entities that
control, are controlled by, or are under common control with, such party and may
include certain officers and directors of such party as well as principal
stockholders of such party.
APPRAISAL RIGHTS
Holders of shares of NII Common Stock are not entitled to appraisal rights
under the Delaware General Corporation Law (the "DGCL") DGCL in connection with
the Merger because NII is not a constituent corporation to the Merger.
Holders of shares of FoxMeyer Common Stock are not entitled to appraisal
rights under the DGCL in connection with the Merger because shares of NII Common
Stock are listed for trading on the NYSE and such holders will only be entitled
to receive shares of NII Common Stock, which will, at the Effective Date, be
approved for listing on the NYSE, subject to official notice of issuance (and
cash in lieu of fractional interests) in the Merger.
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Annex A to this Joint Proxy Statement/Prospectus
and is incorporated herein by reference. Such summary is qualified in its
entirety by reference to the Merger Agreement.
TERMS OF THE MERGER
The Merger Agreement provides that, following the approval of the adoption
of the Merger Agreement by the stockholders of FoxMeyer and the satisfaction or
waiver of the other conditions to the Merger, FoxMeyer will be merged with and
into Acquisition, which shall be the Surviving Corporation. As a result of the
Merger, FoxMeyer will cease to exist and Acquisition will change its name to
FoxMeyer Corporation. At the election of NII, any direct wholly owned subsidiary
of NII may be substituted for Acquisition as a constituent corporation in the
Merger, provided that such substituted constituent corporation is reasonably
acceptable to the FoxMeyer Special Committee.
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<PAGE>
EFFECTIVE DATE
The Merger Agreement provides that, subject to the requisite approval of
the stockholders of FoxMeyer, NII and Acquisition and to the satisfaction or
waiver of certain other conditions, the Merger will be consummated by and will
become effective on the date of the filing of a certificate of merger (the
'Effective Date'). The Merger Agreement may be terminated by either FoxMeyer or
NII if, among other reasons, the Merger has not been consummated on or before
December 31, 1994. See '--Conditions to the Merger.'
CONVERSION OF SHARES; EXCHANGE OF STOCK CERTIFICATES; NO FRACTIONAL AMOUNTS
At the Effective Date, pursuant to the Merger Agreement:
(a) Each share of FoxMeyer Common Stock outstanding immediately prior to
the Effective Date (other than shares of FoxMeyer Common Stock held by NII or
FoxMeyer) will be converted into the right to receive 0.90 shares of NII Common
Stock subject to upward adjustment. If the product of (x) the average per share
closing price on the NYSE of shares of NII Common Stock during the period of
twenty consecutive trading days commencing twenty-one trading days prior to the
NII Annual Meeting and ending on the second trading day prior to the NII Annual
Meeting and (y) 0.90 is less than $14.40, the Exchange Ratio shall be increased
so that the product of (x) the Average Stock Price and (y) the Exchange Ratio,
equals $14.40. The shares of NII Common Stock to be received upon the Merger
(the 'Merger Shares') shall be treasury shares of NII Common Stock. The Merger
Agreement may be terminated by NII at any time prior to the stockholders'
meeting of FoxMeyer if the Average Stock Price is less than $14.40.
(b) Each share of FoxMeyer Common Stock issued and outstanding immediately
prior to the Effective Date that is (i) owned by NII or FoxMeyer or (ii) held in
the treasury of FoxMeyer, shall be cancelled and retired and cease to exist,
without any conversion thereof, and no payment shall be made with respect
thereto; and
(c) Each share of common stock of Acquisition issued and outstanding
immediately prior to the Effective Date shall remain unchanged and shall be the
common stock of the Surviving Corporation.
Based on the number of shares of FoxMeyer Common Stock (other than shares
of FoxMeyer Common Stock held by NII or FoxMeyer) outstanding on the FoxMeyer
Record Date, assuming the exercise of all outstanding FoxMeyer stock options
(whether or not currently exercisable), and based on the Exchange Ratio of 0.90,
a maximum of 6,244,200 shares of NII Common Stock will be issued in connection
with the Merger.
No fractional shares of NII Common Stock will be issued in connection with
the Merger. The Exchange Agent shall, on behalf of all holders of fractional
shares, aggregate all such fractional interests and, at NII's option, such
fractional shares shall be purchased by NII or sold in the open market by the
Exchange Agent, in either case at the then prevailing price on the NYSE. Such
sale or sales, at NII's option, will either be to NII or will be effected by the
Exchange Agent for the account of such FoxMeyer stockholders in the open market
through one or more member firms of the NYSE designated by NII, in either case
at the then prevailing price on the NYSE. Net cash proceeds from such sale or
sales will be remitted without interest to such holders by the Exchange Agent in
accordance with their proportionate interest in the net proceeds of the
aggregate fractional shares of NII Common Stock. NII will pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including expenses and
compensation of the Exchange Agent, incurred in connection with such sale of the
fractional shares.
Promptly after the Effective Date, transmittal forms will be mailed to each
holder of record of shares of FoxMeyer Common Stock to be used in forwarding
such holder's certificates evidencing such shares for surrender and exchange for
the Merger Shares to which such holder has become entitled. After receipt of
such transmittal form, each holder of certificates formerly representing shares
of FoxMeyer Common Stock should surrender such certificates to the Exchange
Agent together with such letter of transmittal duly executed and completed in
accordance with the instructions thereto, and each such holder will be entitled
to receive in exchange therefor certificates of NII Common Stock evidencing the
whole number of shares of NII Common Stock (rounded down to the nearest whole
number) to which such holder is entitled and any cash which may be
36
<PAGE>
payable in lieu of a fractional share of NII Common Stock. Such transmittal
forms will be accompanied by instructions specifying other details of the
exchange.
FOXMEYER STOCKHOLDERS SHOULD NOT FORWARD THEIR CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED A TRANSMITTAL FORM AND INSTRUCTIONS.
AFTER THE EFFECTIVE DATE, EACH CERTIFICATE EVIDENCING SHARES OF FOXMEYER
COMMON STOCK (OTHER THAN SHARES OF FOXMEYER COMMON STOCK HELD OF RECORD IN THE
NAME OF NII), UNTIL SO SURRENDERED AND EXCHANGED, WILL BE DEEMED, FOR ALL
PURPOSES, TO EVIDENCE ONLY THE RIGHT TO RECEIVE THE NUMBER OF SHARES OF NII
COMMON STOCK WHICH THE HOLDER OF SUCH CERTIFICATE IS ENTITLED TO RECEIVE
PURSUANT TO THE TERMS OF THE MERGER AGREEMENT AND THE RIGHT TO RECEIVE ANY CASH
PAYMENT IN LIEU OF A FRACTIONAL SHARE OF NII COMMON STOCK.
TREATMENT OF STOCK OPTIONS
At the Effective Date, FoxMeyer's obligations with respect to each
outstanding option to purchase shares of FoxMeyer Common Stock granted pursuant
to FoxMeyer's Stock Option and Performance Award Plan (the 'Options') will be
assumed by NII. The Options assumed by NII will continue to have, and be subject
to, the same terms and conditions set forth in the stock option plans and
agreements, including vesting, pursuant to which such stock options were issued
as in effect immediately prior to the Effective Date, except that (a) the number
of shares for which such stock option shall be exercisable shall equal the
product of the Exchange Ratio and the number of shares of FoxMeyer Common Stock
subject to such stock option immediately prior to the Effective Date (rounded
down to the nearest whole number) and (b) the per share exercise price for the
shares of NII Common Stock issuable upon the exercise of such assumed stock
option shall be equal to the aggregate exercise price for the shares of FoxMeyer
Common Stock subject to the stock option, divided by the number of shares of NII
Common Stock deemed to be purchasable pursuant to the Option. After the
Effective Date, Options will not be exercisable for any shares of FoxMeyer
Common Stock.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties relating to, among other things, (a) each of NII's, Acquisition's and
FoxMeyer's organization and similar corporate matters; (b) each of NII's,
Acquisition's and FoxMeyer's capital structure; (c) consents of third parties
required to avoid violation of agreements; (d) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement with respect to
NII, Acquisition and FoxMeyer and related matters; (e) documents filed by NII
and FoxMeyer with the Commission and the accuracy of information contained
therein; (f) the accuracy of information supplied by each of NII and FoxMeyer in
connection with the Registration Statement and this Joint Proxy
Statement/Prospectus; (g) absence of material changes since March 31, 1994 with
respect to the business of NII and FoxMeyer; (h) receipt of an opinion from the
financial advisor to the Special Committee as to the fairness of the Exchange
Ratio from a financial point of view to the holders of the FoxMeyer Common Stock
(other than NII and its affiliates); (i) NII's intention to cause Acquisition,
after the Merger, to continue the historic business of FoxMeyer; and (j) the
absence of undisclosed material litigation.
CERTAIN COVENANTS
The Merger Agreement contains various customary covenants, including
covenants of each of NII and FoxMeyer that, during the period from the date of
the Merger Agreement until the Effective Date, except (A) as permitted by or
contemplated in the Merger Agreement, and (B) as otherwise consented to in
writing by the other parties, it (and each of its subsidiaries), among other
things: (a) will not declare or pay any dividends on or make other distributions
in respect of any of its common stock, except for FoxMeyer's regular quarterly
dividends, and will not effect certain other changes in its capitalization and
(b) will not issue capital stock, rights, warrants, options or convertible or
similar securities, subject to certain exceptions.
37
<PAGE>
NII has agreed (i) promptly to prepare and file a Registration Statement
with respect to the shares of NII Common Stock to be issued in the Merger and to
use all reasonable efforts to have the Registration Statement declared
effective, (ii) to take all steps necessary to hold a meeting of its
stockholders for the purpose of approving and adopting the Merger Agreement,
(iii) to vote, or cause to be voted, all shares of FoxMeyer Common Stock
beneficially owned by NII in favor of the Merger Agreement and to cause all
shares of NII Common Stock beneficially owned by Abbey J. Butler and Melvin J.
Estrin to be voted in favor of the Merger Agreement, (iv) to use its best
efforts to consummate the Merger and the transactions contemplated by the Merger
Agreement, (v) if required, to use its best efforts to effect authorization for
listing on the NYSE of the shares of NII Common Stock to be issued in the
Merger, and (vi) to use its best efforts to obtain consents of all third parties
and governmental authorities necessary to consummate the transactions
contemplated by the Merger Agreement.
FoxMeyer has agreed (i) to take all steps necessary to hold a meeting of
its shareholders for the purpose of approving and adopting the Merger Agreement,
(ii) to recommend to its stockholders the adoption and approval of the Merger
Agreement so long as no third party offer has been received which would give
rise to the right to terminate the Merger Agreement, and (iii) to use its best
efforts to obtain consents and to consummate the Merger and the transactions
contemplated in the Merger Agreement.
INDEMNIFICATION
From and after the Effective Date, Acquisition shall maintain, and NII
agrees to cause Acquisition to maintain, for a period of at least six years from
the Effective Date, (i) director and officer liability insurance providing at
least the same amounts and coverage with respect to FoxMeyer's officers and
directors as the current policies maintained by or on behalf of FoxMeyer, and
containing terms and conditions which are no less advantageous with respect to
matters existing or occurring on or prior to the Effective Date, and in the
event any claim is made against present directors or officers of FoxMeyer that
is covered, in whole or in part, or potentially so covered by insurance,
Acquisition and NII shall do nothing that would forfeit, jeopardize, restrict or
limit the insurance coverage available for that claim until the final
disposition of that claim; provided, however, that if the cost of maintaining
such insurance exceeds the current cost related to providing such insurance,
then Acquisition shall maintain, and NII agrees to cause Acquisition to
maintain, such director and officer liability insurance with the maximum amount
of coverage obtainable at twice such current cost, and (ii) all rights to
indemnification now existing in favor of the present directors or officers of
FoxMeyer and its respective subsidiaries as provided in their respective
certificates or articles of incorporation or by-laws or otherwise in effect on
the date hereof (other than pursuant to the Merger Agreement) shall survive the
Merger for a period of six years; provided, however, that all such rights to
indemnification with respect to any claim asserted, made or originated within
such six-year period shall survive until the final disposition of such claim,
and that during such period, the certificate of incorporation and by-laws of
Acquisition shall not be amended to reduce or limit the rights of indemnity of
the present directors or officers of FoxMeyer, or the ability of Acquisition to
indemnify them, nor to hinder, delay or make more difficult the exercise of such
rights of indemnity or the ability to indemnify.
From and after the Effective Date, NII shall indemnify, defend and hold
harmless each person who is now an officer or director of FoxMeyer against all
losses, claims, damages, costs, expenses or liabilities, or in connection with
any claim, action, suit, proceeding or investigation, arising out of the fact
that such person is an officer or director of FoxMeyer (or out of any action
taken by any such person on behalf of FoxMeyer), pertaining to any matter
existing or occurring on or prior to the Effective Date (including, without
limitation, the transactions contemplated in the Merger Agreement), whether
asserted or claimed prior to, or on or after, the Effective Date. In each case
such indemnification shall be to the full extent a corporation is permitted
under applicable law to indemnify its own directors and officers, as the case
may be (and NII will pay expenses in advance of the final disposition of any
such action or proceeding to each such director or officer of FoxMeyer seeking
indemnification hereunder to the full extent permitted by law).
38
<PAGE>
APPROVAL OF THE MERGER AGREEMENT
The Merger Agreement further provides that NII and FoxMeyer will take all
action necessary to convene meetings of their respective stockholders to
consider and vote upon the approval of the Merger Agreement and the Merger. The
FoxMeyer Special Committee has unanimously recommended to the FoxMeyer Board of
Directors that the Merger is fair to and in the best interests of the
Unaffiliated FoxMeyer Stockholders. Based upon the recommendation of the
FoxMeyer Special Committee, the Board of Directors of FoxMeyer has determined
that the Merger is advisable and in the best interests of the stockholders of
FoxMeyer and shall recommend such approval so long as no third party offer has
been received which would give rise to the right to terminate the Merger
Agreement. Consummation of the Merger will require the affirmative vote of at
least a majority of all outstanding shares of FoxMeyer Common Stock entitled to
vote at a meeting of stockholders of FoxMeyer and a majority of the shares voted
at the NII Annual Meeting. Pursuant to the Merger Agreement, NII will vote all
of the shares then owned by NII in favor of adoption of the Merger Agreement.
Accordingly, approval of the adoption of the Merger Agreement at the FoxMeyer
Annual Meeting is assured since NII is the beneficial owner of 80.5% of the
outstanding shares of FoxMeyer Common Stock.
CONDITIONS TO THE MERGER
The respective obligations of NII and Acquisition on the one hand, and
FoxMeyer on the other, to consummate the Merger are subject to the satisfaction
of certain conditions, including the conditions that: (i) the Merger Agreement
and the Merger shall have been approved by the holders of a majority of the
outstanding shares of FoxMeyer Common Stock and a majority of the shares of NII
Common Stock voting on the Merger Agreement and the Merger in accordance with
applicable laws; (ii) there shall be in effect no writ, order, decree or
preliminary or permanent injunction or other order of a court of competent
jurisdiction prohibiting or restricting the consummation of the Merger; (iii)
the Registration Statement shall have been declared effective, shall be
effective at the Effective Date and shall not be the subject of a stop order or
proceeding seeking a stop order; (iv) NII shall have delivered an opinion of its
counsel, Weil, Gotshal & Manges, acceptable to counsel to the Special Committee
to the effect that (A) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, (B) no gain or loss will be recognized by
holders of shares of FoxMeyer Common Stock upon the exchange of shares of
FoxMeyer Common Stock solely for shares of NII Common Stock by reason of the
Merger (except with respect to cash, if any, received in lieu of fractional
shares), (C) the tax basis of the shares of NII Common Stock received by holders
of shares of FoxMeyer Common Stock in the Merger will be the same as the tax
basis of the shares of FoxMeyer Common Stock surrendered in exchange therefor,
and (D) a holder's holding period in such shares of NII Common Stock will
include its holding period in such shares of FoxMeyer Common Stock, provided the
shares of FoxMeyer Common Stock were held as a capital asset at the Effective
Date; (v) certain consents shall have been obtained; (vi) all necessary blue sky
authorizations shall have been obtained; and (vii) the opinion of the financial
advisor to the Special Committee shall not have been modified, withdrawn or
revoked as of the time of mailing of the Joint Proxy Statement/Prospectus.
The obligations of FoxMeyer to effect the Merger are further subject to the
following conditions, among others: (a) since March 31, 1994, there shall not
have been any material adverse changes (other than a change solely with respect
to FoxMeyer) in the business of NII and (b) the accuracy in all material
respects of the representations and warranties of NII and Acquisition.
The obligations of NII and Acquisition to effect the Merger are further
subject to the following conditions, among others: (a) since March 31, 1994,
there shall not have been any material adverse changes in the business of
FoxMeyer and (b) the accuracy in all material respects of the representations
and warranties of FoxMeyer.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Date: (i) by mutual consent of the Boards of Directors of NII and FoxMeyer; (ii)
by either NII or FoxMeyer if, without fault of such terminating party, the
Merger shall not have been consummated on or before December 31, 1994, which
date may be extended by the mutual consent of the Boards of Directors of NII and
FoxMeyer; (iii) by NII or FoxMeyer, if any
39
<PAGE>
court of competent jurisdiction in the United States or other governmental body
in the United States shall have issued an order (other than a temporary
restraining order), decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger, and such order, decree, ruling or
other action shall have become final and nonappealable; (iv) by either FoxMeyer
or NII, if the stockholders of FoxMeyer or NII fail to duly adopt and approve
the Merger Agreement by the affirmative vote of at least a majority of the then
outstanding shares of FoxMeyer Common Stock and a majority of the shares of NII
Common Stock voting on the Merger Agreement and the Merger; (v) by NII prior to
the stockholders' meeting of FoxMeyer if the Average Stock Price is less than
$14.40; or (vi) by FoxMeyer, if prior to the consummation of the transactions
contemplated in the Merger Agreement, FoxMeyer receives a bona fide third-party
offer, which is not subject to any financing condition, to acquire the shares of
FoxMeyer Common Stock that involves the payment or issuance to all holders of
the shares of FoxMeyer Common Stock of consideration per share of the FoxMeyer
Common Stock with a value in excess of the consideration per share of FoxMeyer
Common Stock to be received by the Unaffiliated FoxMeyer Stockholders in the
Merger, which offer the FoxMeyer Special Committee has determined is more
favorable to the Unaffiliated FoxMeyer Stockholders.
AMENDMENT AND MODIFICATION
Subject to applicable law, the Merger Agreement may be amended, modified or
supplemented only by written agreement of NII, Acquisition and FoxMeyer at any
time prior to the Effective Date with respect to any of the terms contained
therein; provided, that after the Merger Agreement is adopted by FoxMeyer's
stockholders, no such amendment or modification may reduce the amount or change
the form of the consideration to be delivered to the stockholders of FoxMeyer.
FEES AND EXPENSES
The Merger Agreement provides that each party thereto shall pay all costs
and expenses incurred by it in connection with the Merger Agreement and the
consummation of the transactions contemplated thereby.
40
<PAGE>
NII SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
The selected historical consolidated financial information of NII set forth
below has been derived from and should be read in conjunction with the
historical consolidated financial statements and related notes thereto and other
financial information contained in NII's Annual Report and NII's Quarterly
Report, as applicable.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEARS ENDED MARCH 31,
------------------- ----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $1,256.9 $1,286.7 $5,409.4 $4,851.6 $3,411.3 $3,207.5 $2,736.1
Income (loss) from continuing operations
before extraordinary items and cumulative
effect of change in accounting
principal................................ 5.2 5.3 29.5 .6 10.6 (59.0) 8.8
Discontinued operations.................... -- -- -- -- 25.6 (220.0) 33.9
Income (loss) before extraordinary items
and cumulative effect of exchange in
accounting principal..................... 5.2 5.3 29.5 .6 36.2 (279.0) 42.7
Extraordinary items........................ -- -- -- -- (5.8) -- 13.0
Cumulative effect of change in accounting
principle................................ -- -- -- -- -- (15.6) --
-------- -------- -------- -------- -------- -------- --------
Net income (loss).......................... $ 5.2 $ 5.3 $ 29.5 $ .6 $ 30.4 $ (294.6) $ 55.7
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
COMMON STOCK DATA:
Earnings (loss) per share:
Continuing operations................. $ .04 $ .20 $ 1.10 $ (.24) $ .24 $ (2.97) $ .15
Discontinued operations............... -- -- -- -- 1.19 (10.11) 1.56
Extraordinary items................... -- -- -- -- (.27) -- .60
Cumulative effect of change in
accounting principle................ -- -- -- -- -- (.71) --
-------- -------- -------- -------- -------- -------- --------
Earnings (loss)....................... $ .04 $ .20 $ 1.10 $ (.24) $ 1.16 $ (13.79) $ 2.31
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Cash dividends per share................... -- -- -- -- -- -- --
Average number of shares of common stock
outstanding (in thousands)............... 12,997 19,697 16,931 19,967 21,444 21,763 21,754
BALANCE SHEET DATA:
Working capital............................ $ 351.7 $ 417.2 $ 375.0 $ 373.2 $ 307.8 $ 321.5 $ 239.5
Total assets............................... 1,561.7 1,652.3 1,525.5 1,562.1 1,137.4 1,065.2 1,576.5
Capital expenditures....................... 6.5 6.3 56.3 20.1 20.2 8.5 7.3
Long-term debt............................. 293.8 306.0 310.9 256.6 29.6 208.4 180.0
Redeemable preferred stock................. 168.4 50.6 164.8 50.6 55.0 55.0 55.0
Stockholders' equity....................... 225.1 364.2 224.8 360.1 377.6 416.1 694.5
KEY FINANCIAL RATIOS:
Current ratio.............................. 1.51:1 1.56:1 1.59:1 1.52:1 1.71:1 1.97:1 1.59:1
Long-term debt as a percent of total
capitalization (2)....................... 42.7% 42.5% 44.4% 38.5% 6.4% 30.7% 19.4%
Return on average common stockholders'
equity(1)................................ 9.2% 6.0% 10.1% 0.2% 7.7% (53.1)% 8.2%
Return on net sales........................ 0.4% 0.4% 0.5% 0.0% 0.9% (9.2)% 2.0%
</TABLE>
- ------------------
(1) Annualized for quarterly amounts.
(2) Securities and Exchange Commission regulations require that capitalization
ratios also be shown with redeemable preferred stock included in debt. On
this basis, long-term debt as a percent of total capitalization would be
67.2% and 49.5% for the quarterly period ended June 30, 1994 and 1993,
respectively, and 67.9%, 46.0%, 18.3%, 38.8% and 25.3%, respectively, for
each of the five years ended March 31, 1994.
41
<PAGE>
FOXMEYER SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
The selected historical consolidated financial information of FoxMeyer set
forth below has been derived from and should be read in conjunction with the
historical consolidated financial statements and related notes thereto and other
financial information contained in FoxMeyer's Annual Report and FoxMeyer's
Quarterly Report, as applicable.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, YEARS ENDED MARCH 31,
------------------- ----------------------------------------------------
1994 1993 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $1,181.8 $1,209.9 $5,071.4 $4,505.4 $3,077.7 $2,879.1 $2,404.5
-------- -------- -------- -------- -------- -------- --------
Net income................................... $ 3.5 $ 2.7 $ 26.9 $ .2 $ 38.9 $ 26.5 $ 21.6
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
COMMON STOCK DATA:
Earnings per share:
Income before cumulative effect of change
in accounting principle.................. $ .12 $ .10 $ .95 $ .01 $ 1.43 $ 1.35 $ 1.03
Cumulative effect of change in accounting
principle................................ -- -- -- -- -- (.09) --
-------- -------- -------- -------- -------- -------- --------
Net income................................. $ .12 $ .10 $ .95 $ .01 $ 1.43 $ 1.26 $ 1.03
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Dividends declared on common stock after
initial public offering.................... $ .07 -- $ .21 $ .28 $ .07 -- --
Average number of shares of common stock
outstanding (in thousands)................. 28,224 28,200 28,208 29,701 27,103 21,000 21,000
BALANCE SHEET DATA:
Working capital.............................. $ 276.9 $ 317.7 $ 301.9 $ 295.1 $ 257.3 $ 229.9 $ 209.2
Total assets................................. 1,310.6 1,402.6 1,280.4 1,333.1 896.3 774.7 745.0
Capital expenditures......................... 5.1 5.2 26.5 17.4 18.1 5.1 7.1
Long-term debt............................... 237.8 280.8 257.5 251.9 29.0 43.0 8.4
Stockholders' equity......................... 463.7 443.9 461.6 441.2 489.9 436.9 468.9
KEY FINANCIAL RATIOS:
Current ratio................................ 1.5:1 1.5:1 1.5:1 1.5:1 1.7:1 1.8:1 1.8:1
Inventory turnover--FIFO basis(1)............ 7.0x 7.0x 7.5x 7.8x 7.8x 7.9x 6.8x
Long-term debt as a percent of total
capitalization............................. 33.9% 38.7% 35.8% 36.3% 5.6% 9.0% 1.8%
Operating working capital as a percent of net
sales(1)................................... 5.1% 6.1% 5.9% 6.4% 8.1% 8.0% 9.0%
</TABLE>
- ------------------
(1) Annualized for quarterly amounts.
42
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated statements of
operations of NII are based on the historical consolidated statements of
operations of NII for the year ended March 31, 1994 and for the three month
period ended June 30, 1994 adjusted to give effect to the Merger as if the
Merger had been consummated on April 1, 1993. The following unaudited pro forma
condensed consolidated balance sheets are based on the historical consolidated
balance sheets of NII at March 31, 1994 and at June 30, 1994 adjusted to give
effect to the Merger assuming the Merger had been consummated as of the date
thereof. Additionally, the unaudited pro forma condensed consolidated financial
information has been prepared assuming an Exchange Ratio of 0.90 shares of NII
Common Stock for each share of FoxMeyer Common Stock and with an assumed price
per share of NII Common Stock of $17.50 (the closing price per share of NII
Common Stock on June 30, 1994, the last trading day before the announcement of
the agreement in principle with respect to the Merger). Based on the number of
shares of FoxMeyer Common Stock (other than shares of FoxMeyer Common Stock held
by NII or FoxMeyer) and assuming that none of the outstanding FoxMeyer stock
options are exercised prior to the Merger and based on the Exchange Ratio of
0.90, 5,510,000 shares of FoxMeyer Common Stock will be exchanged for 4,959,000
shares of NII Common Stock. The unaudited pro forma condensed consolidated
financial information should be read in conjunction with the audited financial
statements and related notes contained in NII's Annual Report for the year ended
March 31, 1994 and the unaudited financial statements and related notes
contained in NII's Quarterly Report. The unaudited pro forma condensed
consolidated financial information does not purport to be indicative of the
results that would actually have been attained had the Merger been completed at
the date indicated or that may be attained in the future.
43
<PAGE>
NII PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31, 1994 THREE MONTHS ENDED JUNE 30, 1994
------------------------------------------ ------------------------------------------
ACQUISITION ACQUISITION
OF FOXMEYER PRO FORMA OF FOXMEYER PRO FORMA
HISTORICAL MINORITY AMOUNT HISTORICAL MINORITY AMOUNT
---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................... $5,409,379 $5,409,379 $1,256,930 $1,256,930
Operating costs
Cost of goods sold
(exclusive of
depreciation and
amortization)............ 5,064,396 5,064,396 1,175,550 1,175,550
Selling, general and
administrative expenses.. 278,056 $ (600)(a) 277,456 66,573 $(150)(a) 66,423
Depreciation and
amortization............. 21,987 (212)(b) 21,775 6,343 (58)(b) 6,285
---------- ----------- ---------- ---------- ----------- ----------
44,940 812 45,752 8,464 208 8,672
Other income................. 6,390 6,390 2,558 2,558
---------- ----------- ---------- ---------- ----------- ----------
Operating income from
continuing operations...... 51,330 812 52,142 11,022 208 11,230
Financing costs
Interest income............ 4,511 4,511 1,901 1,901
Interest expense........... 27,436 27,436 7,003 7,003
---------- ----------- ---------- ---------- ----------- ----------
Financing costs, net......... 22,925 22,925 5,102 0 5,102
Income before income tax
benefit, National Steel
Corporation and minority
interest................... 28,405 812 29,217 5,920 208 6,128
Income tax benefit........... 1,193 (o) 1,193 148 (o) 148
---------- ----------- ---------- ---------- ----------- ----------
Income before National Steel
Corporation and minority
interest................... 29,598 812 30,410 6,068 208 6,276
National Steel Corporation
Loss on common stock
investment............... 2,350 2,350 0 0
Net preferred dividend
income................... 7,655 7,655 1,370 1,370
---------- ----------- ---------- ---------- ----------- ----------
5,305 5,305 1,370 0 1,370
---------- ----------- ---------- ---------- ----------- ----------
Income before minority
interest................... 34,903 812 35,715 7,438 208 7,646
Minority interest in results
of operations of
consolidated
subsidiaries............... 5,391 (5,262)(c) 129 2,210 (678)(c) 1,532
---------- ----------- ---------- ---------- ----------- ----------
Net income................... 29,512 6,074 35,586 5,228 886 6,114
Preferred stock dividends.... 10,830 10,830 4,701 4,701
---------- ----------- ---------- ---------- ----------- ----------
Earnings applicable to common
stockholders............... $ 18,682 $ 6,074 $ 24,756 $ 527 $ 886 $ 1,413
---------- ----------- ---------- ---------- ----------- ----------
---------- ----------- ---------- ---------- ----------- ----------
Earnings per share(d):
Primary.................... $ 1.10 $ 1.12 $ 0.04 $ 0.08
Fully diluted.............. $ 1.10 $ 1.12 $ 0.04 $ 0.08
Number of shares in
calculation(n):
Primary.................... 16,931 22,058 12,997 18,124
Fully diluted.............. 17,025 22,152 13,044 18,171
</TABLE>
See accompanying notes to NII pro forma condensed consolidated financial
statements.
44
<PAGE>
NII PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1994 JUNE 30, 1994
------------------------------------------ ------------------------------------------
ACQUISITION ACQUISITION
OF FOXMEYER PRO FORMA OF FOXMEYER PRO FORMA
HISTORICAL MINORITY AMOUNT HISTORICAL MINORITY AMOUNT
---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and short-term
investments............... $ 60,987 $ 60,987 $ 67,929 $ 67,929
Receivables, principally
trade, net of allowance
for possible loss......... 286,707 286,707 299,751 299,751
Inventories................. 624,574 $12,631(e) 637,205 631,479 $12,986(e) 644,465
Other current assets........ 37,299 37,299 37,102 37,102
---------- ----------- ---------- ---------- ----------- ----------
Total current assets.......... 1,009,567 12,631 1,022,198 1,036,261 12,986 1,049,247
Investment in National Steel
Corporation................. 29,261 29,261 30,615 30,615
Property, plant and
equipment................... 204,504 204,504 210,338 210,338
Less allowance for
depreciation and
amortization.............. 71,060 71,060 75,268 75,268
---------- ----------- ---------- ---------- ----------- ----------
133,444 133,444 135,070 0 135,070
Other assets
Intangibles, net of
accumulated amortization.. 240,927 (6,990)(f) 233,937 246,919 (7,626)(f) 239,293
Pre-bankruptcy receivable
from Phar-Mor, Inc., net
of allowance for possible
loss...................... 28,758 28,758 28,758 28,758
Deferred tax asset, net of
valuation allowance....... 47,342 47,342 47,342 47,342
Miscellaneous assets........ 36,171 36,171 36,730 36,730
---------- ----------- ---------- ---------- ----------- ----------
Total other assets............ 353,198 (6,990) 346,208 359,749 (7,626) 352,123
---------- ----------- ---------- ---------- ----------- ----------
Total assets.................. $1,525,470 $ 5,641 $1,531,111 $1,561,695 $ 5,360 $1,567,055
---------- ----------- ---------- ---------- ----------- ----------
---------- ----------- ---------- ---------- ----------- ----------
</TABLE>
See accompanying notes to NII pro forma condensed consolidated financial
statements.
45
<PAGE>
NII PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1994 JUNE 30, 1994
------------------------------------------ ------------------------------------------
ACQUISITION ACQUISITION
OF FOXMEYER PRO FORMA OF FOXMEYER PRO FORMA
HISTORICAL MINORITY AMOUNT HISTORICAL MINORITY AMOUNT
---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable............ $ 532,170 $ 532,170 $ 594,195 $ 594,195
Other accrued liabilities... 48,977 $ 5,634(g) 54,611 40,403 $ 5,634(g) 46,037
Salaries, wages and employee
benefits.................. 19,793 19,793 16,733 16,733
Income tax payable.......... 2,091 2,091 2,024 2,024
Deferred income tax
payable................... 29,360 4,961(h) 34,321 29,194 5,086(h) 34,280
Long-term debt due within
one year.................. 2,158 2,158 1,998 1,998
---------- ----------- ---------- ---------- ----------- ----------
Total current liabilities..... 634,549 10,595 645,144 684,547 10,720 695,267
Long-term debt................ 310,920 (1,544)(i) 309,376 293,757 (1,544)(i) 292,213
Reserves and other
liabilities................. 81,082 81,082 79,027 79,027
Minority interest in
consolidated subsidiaries... 109,331 (90,192)(j) 19,139 110,920 (90,598)(j) 20,322
Redeemable preferred stock.... 164,833 164,833 168,379 168,379
Commitments and
contingencies............... -- -- --
Stockholders' equity
Common stock $5.00 par
value; authorized 50,000
shares; 23,996 shares
issued.................... 119,979 119,979 120,464 120,464
Capital in excess of par
value..................... 207,281 207,281 208,239 208,239
Minimum pension liability... (73,797) (73,797) (73,797) (73,797)
Net unrealized holding loss
on marketable securities.. (225) (225) 448 448
Retained earnings........... 173,029 (3,025)(l) 170,004 173,556 (3,025)(l) 170,531
---------- ----------- ---------- ---------- ----------- ----------
426,267 (3,025) 423,242 428,910 (3,025) 425,885
Less: cost of common stock
held in treasury--11,125
shares historical and 6,166
shares pro forma at March
31, 1994 and 11,256 shares
historical and 6,297 shares
pro forma at June 30,
1994........................ 201,512 (89,807)(k) 111,705 203,845 (89,807)(k) 114,038
---------- ----------- ---------- ---------- ----------- ----------
Total stockholders' equity.... 224,755 86,782 311,537 225,065 86,782 311,847
---------- ----------- ---------- ---------- ----------- ----------
Total liabilities and
stockholders' equity........ $1,525,470 $ 5,641 $1,531,111 $1,561,695 $ 5,360 $1,567,055
---------- ----------- ---------- ---------- ----------- ----------
---------- ----------- ---------- ---------- ----------- ----------
Book value per outstanding
share(m):................... $ 17.46 $ 17.47 $ 17.53 $ 17.52
Number of outstanding shares
in calculation(n):.......... 12,870 17,829 12,837 17,796
</TABLE>
See accompanying notes to NII pro forma condensed consolidated financial
statements.
46
<PAGE>
NOTES TO NII PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) Represents the elimination of certain expenses associated with FoxMeyer's
status as a public company.
(b) Represents the amortization of the amount described as pro forma adjustment
(f) below.
(c) Represents the elimination of that portion of FoxMeyer's earnings
attributable to the acquired minority interest.
(d) The pro forma number of shares of common stock used in such calculations is
the aggregate of the number of shares used in the historical calculation
and, for pro forma purposes, 5,127 shares representing the number of shares
of NII Common Stock assumed issued to (i) the Unaffiliated FoxMeyer
Stockholders in the Merger and (ii) holders of the options, adjusted through
application of the treasury stock method.
(e) Represents the adjustment resulting from recording the portion of FoxMeyer's
inventory applicable to the acquired minority interest at fair value.
(f) Represents the difference between FoxMeyer's tangible assets and
liabilities, at fair value, and FoxMeyer's intangible assets, at book value
[refer to pro forma adjustments (e), (g), (h), (i) and (j)], over the
consideration received in the Merger [refer to the pro forma adjustments (l)
and (k)] and related costs. Such calculation considers that NII currently
beneficially owns 80.5% of the outstanding shares of FoxMeyer Common Stock.
(g) Represents the accrual for costs associated with the Merger.
(h) Represents the deferred income taxes attributable to the pro forma
adjustments, as applicable.
(i) Represents the adjustment resulting from recording the portion of FoxMeyer's
long-term debt applicable to the acquired minority interest at fair value.
(j) Represents the elimination of the acquired minority interest in FoxMeyer.
(k) Represents the issuance of 4,959 shares of NII Common Stock at $18.11 per
share of NII Common Stock, the average price per share of NII Common Stock
held in treasury.
(l) Represents the loss on the issuance of 4,959 shares of NII Common Stock
measured as the product of (i) 4,959 shares of NII Common Stock and the
difference between (ii) $18.11 (the average price per share of NII Common
Stock held in treasury) and $17.50 (the closing price per share of NII
Common Stock on June 30, 1994, the last trading day before the announcement
of the agreement in principle with respect to the Merger).
(m) The book value per share of NII Common Stock has been calculated by dividing
stockholders' equity by the number of shares of NII Common Stock
outstanding, on the date indicated, and, in addition, for pro forma
purposes, 4,959 shares of NII Common Stock assumed issued to the
Unaffiliated FoxMeyer Stockholders in the Merger. The calculation assumes
that no options are exercised.
(n) The number of shares used in the calculation of historical earnings per
share are weighted for the number of days the shares were outstanding over
the period and considers outstanding options. The weighted average shares
outstanding was significantly affected by the exchange of 6,834 shares of
NII Common Stock for 3,417 shares of NII Series A Preferred Stock in
November 1993. The number of shares used in the calculation of historical
book value per share are the shares outstanding on the date indicated
without considering outstanding options.
(o) The absence of a pro forma adjustment to income tax benefit reflects that
the (i) historical NII consolidated income tax benefit considers and
includes 100% of FoxMeyer's income tax provision for the periods indicated
and (ii) the pro forma adjustments to the statements of operations are
either non-deductible for income tax purposes or not material.
47
<PAGE>
DESCRIPTION OF SHARES OF NII COMMON STOCK OFFERED IN THE MERGER
GENERAL
The authorized capital stock of NII presently consists of 50,000,000 shares
of NII Common Stock and 10,000,000 shares of preferred stock, par value $5.00
per share (the 'Preferred Stock'). As of September 8, 1994, 12,759,303 shares of
NII Common Stock and 4,597,010 shares of Preferred Stock were outstanding. Under
Delaware law, NII's Board of Directors has authority to issue, without further
action by NII's stockholders, one or more series of Preferred Stock, and to
determine at the time of issuance of each such series the rights and preferences
thereof (including dividend rate, liquidation priority, and conversion and
voting rights, if any). The Board of Directors of NII has established three
series of Preferred Stock: the $5 Cumulative Convertible Preferred Stock (the
'Convertible Preferred Stock'), the $3.56 Cumulative Preferred Stock (all of
which have been redeemed and retired) and the Series A Preferred Stock.
VOTING
Holders of shares of NII Common Stock are entitled to one vote per share on
all matters submitted to a vote of stockholders. Shares of NII Common Stock do
not have cumulative voting rights, which means that the holders of a majority of
the shares of NII Common Stock voting for the election of the Board of Directors
can elect all members of the Board of Directors, subject to the rights of the
holders of the Convertible Preferred Stock and the Series A Preferred Stock to
elect directors under certain circumstances.
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of NII Common Stock is required to amend NII's Restated
Certificate of Incorporation.
DIVIDENDS
Holders of record of shares of NII Common Stock are entitled to receive
dividends when and if declared by the Board of Directors out of funds of NII
legally available therefor. However, (i) the terms of the loan agreement, dated
as of January 13, 1994, between NII and Banque Paribas, as amended (the
'Revolver'), restrict the payment of dividends on the shares of NII Common
Stock, (ii) the terms of the Series A Preferred Stock and the Convertible
Preferred Stock prohibit the payment of dividends on the shares of NII Common
Stock whenever dividends on either issue of Preferred Stock are in arrears, and
(iii) the payment of dividends on the shares of NII Common Stock is subject to
the timely redemption of shares of Convertible Preferred Stock and the Series A
Preferred Stock.
LIQUIDATION, DISSOLUTION OR WINDING UP
Upon any liquidation, dissolution or winding up of NII, holders of shares
of NII Common Stock are entitled to receive pro rata all of the net assets of
NII available for distribution to stockholders, subject to any prior rights of
holders of any outstanding shares of Preferred Stock.
TRANSFER AGENT
American Stock Transfer & Trust Company is the transfer agent and registrar
for shares of NII Common Stock.
48
<PAGE>
COMPARISON OF STOCKHOLDERS' RIGHTS
Upon consummation of the Merger, the stockholders of FoxMeyer will become
stockholders of NII. The following summary compares the material differences
between the rights of holders of shares of NII Common Stock and the rights of
holders of shares of FoxMeyer Common Stock. NII and FoxMeyer are both
incorporated under the laws of the State of Delaware; accordingly, the only
differences arise from the distinctions between the NII Charter and the By-Laws
of NII and the Restated Certificate of Incorporation and By-Laws of FoxMeyer.
The following summary does not purport to be a complete statement of the
rights of holders of shares of NII Common Stock and shares of FoxMeyer Common
Stock under, and is qualified in its entirety by reference to, the respective
certificates of incorporation and the by-laws of NII and FoxMeyer.
DIRECTORS
NII's By-Laws and the NII Charter provide that (i) the Board of Directors
of NII cannot be fixed at less than three (3) members and (ii) the directors
shall be divided into three classes with the total number of directors to be
allocated among the three classes as equally as possible. NII's By-Laws and the
NII Charter further provide that amendment of the foregoing provisions requires
the affirmative vote of the holders of 80% or more of the outstanding voting NII
Common Stock.
FoxMeyer's By-Laws provide that the Board of Directors of FoxMeyer shall
consist of eight (8) members, or such other number as may be fixed by action of
the stockholders of FoxMeyer or the FoxMeyer Board of Directors. The FoxMeyer
Board of Directors is not classified and the directors are elected at each
annual meeting of the stockholders.
FoxMeyer's By-Laws provide that all vacancies on the FoxMeyer Board of
Directors may be filled by the affirmative vote of a majority of the remaining
directors, or by a sole remaining director, or, at a special meeting of
stockholders, by the holders of shares entitled to vote for the election of
directors.
NII's By-Laws provide that all vacancies on the NII Board of Directors
shall be filled by the affirmative vote of a majority of the remaining
directors.
FoxMeyer's By-Laws provide that any and all directors may be removed, with
or without cause, by the holders of the majority of the shares of stock
outstanding and entitled to vote for the election of directors.
Neither NII's By-Laws nor the NII Charter contain a specific provision
regarding the removal of directors. Therefore, pursuant to applicable Delaware
law with respect to removal of directors of a classified board, the stockholders
of NII may remove a director only for cause.
QUORUM
FoxMeyer's By-Laws provide that a quorum for the purpose of a meeting of
stockholders shall consist of the holders of record of a majority of the issued
and outstanding shares of the capital stock of FoxMeyer entitled to vote at the
meeting.
NII's By-Laws provide that a quorum for the purpose of a meeting of
stockholders shall consist of forty percent (40%) of the issued and outstanding
shares of NII Common Stock.
DIVIDENDS
The NII Charter provides that so long as any shares of Preferred Stock are
outstanding, NII may not declare any dividend or make any distribution (other
than dividends and distributions payable in NII Common Stock) on, or purchase or
redeem any shares of NII Common Stock, or pay any money into or set apart or
make available any money for a sinking or retirement fund for the purchase or
redemption of shares of NII Common Stock, unless (i) all dividends on all shares
of Preferred Stock for all past and current dividend periods shall have been
paid or sufficient funds set apart therefor, and (ii) NII has complied with all
sinking fund obligations with respect to each series of Preferred Stock.
49
<PAGE>
Holders of the Series A Preferred Stock are entitled to receive, when, as
and if declared by the Board of Directors, cumulative dividends at the annual
rate of $4.20 per share, payable quarterly in arrears on each January 15, April
15, July 15 and October 15, commencing on January 15, 1994. Dividends payable
with respect to any or each such period ending on or prior to October 15, 1996
may be paid, at NII's option, by means of the issuance of such number of
additional shares of Series A Preferred Stock (including fractional shares, if
necessary) that have a liquidation preference equal to the aggregate dollar
value of the dividends to be paid on such date, rather than in cash. Thereafter,
dividends must be paid in cash. Whenever dividends payable on the Series A
Preferred Stock are in arrears, thereafter and until all dividends on shares of
Series A Preferred Stock have been paid in full, NII may not declare or pay any
dividend on any shares of NII of a class junior to the Series A Preferred Stock
or on the Convertible Preferred Stock. No dividends may be declared on the
Series A Preferred Stock with respect to any dividend period unless there has
been declared on the Convertible Preferred Stock (or any other Preferred Stock
of NII ranking pari passu with the Series A Preferred Stock) like dividends for
all periods coinciding with or ending before such period, ratably in proportion
to the respective annual dividend rates fixed therefor, and all sinking fund
payments have been made on the Convertible Preferred Stock.
Holders of the Convertible Preferred Stock are entitled to receive, when
and as declared by the Board of Directors, cumulative dividends at the annual
rate of $5.00 per share, payable quarterly in arrears on each January 15, April
15, July 15 and October 15. Whenever quarterly dividends payable on the
Convertible Preferred Stock are in arrears, thereafter and until all dividends,
including accrued dividends, on shares of Convertible Preferred Stock have been
paid in full, NII may not declare or pay any dividend on the Series A Preferred
Stock or on any shares of NII of a class junior to the Convertible Preferred
Stock. NII is required, on or prior to the business day preceding January 15, in
each of the years 1994 through and including 2002, to set aside for a mandatory
sinking fund, an amount of cash sufficient to redeem on each such January 15,
88,000 shares of Convertible Preferred Stock at a redemption price of $50 per
share, and on or before January 15, 2003, an amount in cash sufficient to redeem
on such date 220,000 shares of Convertible Preferred Stock.
Neither the Restated Certificate of Incorporation of FoxMeyer (the
'FoxMeyer Charter') nor FoxMeyer's By-Laws contain similar provisions.
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
The NII Charter provides that the affirmative vote of 80% of the
outstanding shares of NII Common Stock is required to approve the following
transactions: (i) any merger or consolidation of NII or any NII subsidiary with
any Interested Stockholder (as defined in the NII Charter) or any Affiliate (as
defined in Rule 12b-2 of the Exchange Act) of any Interested Stockholder; (ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition to
any Interested Stockholder or any Affiliate of an Interested Stockholder of any
assets of NII having an aggregate value of $1,000,000 or more; (iii) the
issuance or transfer by NII of any NII securities to any Interested Stockholder
or any Affiliate of an Interested Stockholder in exchange for cash, securities
or other property having an aggregate value of $1,000,000 or more; (iv) the
adoption of any plan for the liquidation or dissolution of NII proposed by any
Interested Stockholder; or (v) any reclassification of securities or
recapitalization of NII, or any merger or consolidation of NII with any of its
subsidiaries or any other transaction which has the effect of increasing the
proportionate share of the outstanding shares owned by any Interested
Stockholder or any Affiliate of an Interested Stockholder (each, a 'Business
Combination'); provided, however, that such stockholder approval shall not be
required if (a) the Business Combination has been approved by a majority of the
Continuing Directors (as defined in the NII Charter) or (b) the consideration to
be received by stockholders of NII pursuant to such Business Combination
satisfies certain specified criteria.
The FoxMeyer Charter does not contain such super-majority stockholder
voting provisions.
50
<PAGE>
ELECTION OF NII DIRECTORS
Under the terms of the By-Laws of NII, the Board of Directors of NII is to
be divided into three classes of directors, with the total number of directors
to be allocated among the three classes as equally as possible. The NII Board of
Directors presently consists of six members. Three members, Messrs. Abbey J.
Butler, Melvyn J. Estrin and William G. Tull, were elected at the 1993 annual
meeting of stockholders to serve until the annual meeting to be held in 1996.
The terms of another three members, Messrs. Sheldon W. Fantle, Paul M. Finfer
and Alfred H. Kingon, expire at the NII Annual Meeting. There are no members of
the Board presently remaining in the class that had been elected to serve until
the annual meeting of stockholders in 1995 (the '1995 Class').1
The NII Board of Directors has increased from six to seven the number of
directors who will serve on the NII Board of Directors after the NII Annual
Meeting. In order to divide the seven members of the Board of Directors of NII
into three classes of directors, with the total number of directors allocated
among the three classes as equally as possible, the NII Board of Directors has
established that the 1994 and the 1995 Classes shall each have two directors.
The NII Board has elected Messrs. Paul M. Finfer and Alfred H. Kingon (each
of whose term would have expired at the NII Annual Meeting) to fill the
vacancies in the 1995 Class. Messrs. Finfer and Kingon will serve on the NII
Board of Directors until the annual meeting of stockholders to be held in 1995.
The Board of Directors has nominated two individuals for election to the NII
Board of Directors to serve until the annual meeting of stockholders to be held
in 1997. Mr. Sheldon W. Fantle, the third director whose term expires at the NII
Annual Meeting, and Mr. Thomas L. Anderson, a director and the President and
Chief Operating Officer of FoxMeyer, have been nominated for election at the NII
Annual Meeting for a three year term each. The following sets forth information
concerning Messrs. Fantle and Anderson.
TERM EXPIRING IN 1997
SHELDON W. FANTLE, 71, has been a director of NII since 1991. Mr. Fantle
has been the Chairman and Chief Executive Officer of Fantle Enterprises, Inc., a
venture capital, consulting and public relations firm, since 1990. From 1987 to
1990, he served as the Chairman of the Board, President and Chief Executive
Officer of Dart Drug Stores, Inc. Prior thereto, from 1975 through 1987, he
served as Chairman of the Board, President and Chief Executive Officer of
Peoples Drug Stores, Inc. Mr. Fantle currently serves as a director of FoxMeyer,
Ben Franklin, Washington Gas Light Company, a public utility company, Medlantic
Healthcare Corporation, a hospital management company, and the National
Association of Chain Drug Stores. Mr. Fantle is a trustee and a member of the
Executive Committee of The American University and a trustee of the National
Symphony. He serves on the Board of Governors of United Way of America.
THOMAS L. ANDERSON, 46, is a director and the President and Chief Operating
Officer of FoxMeyer. Mr. Anderson has been the President of FoxMeyer since May
1993, the Chief Operating Officer since August 1991 and a director since July
1992. He served as the Executive Vice President of FoxMeyer from September 1990
to May 1993 and Senior Vice President and Chief Financial Officer of FoxMeyer
from January 1989 to September 1990. Mr. Anderson was Vice President of Fresh
Meats and Refinery Operations of Wilson Foods Corporation, a meat processor and
distribution company, from August 1987 to December 1988, after serving as Vice
President of Planning and Distribution of Wilson Foods Corporation from November
1985 to August 1987. Mr. Anderson has served on the Board of Directors of the
National Wholesale Druggists' Association since November 1992 and is a member of
its Audit Committee.
- ------------------
1 At the annual meeting of stockholders held in 1992, the following individuals
were elected to the 1995 Class: Mr. Robert J. Slater, who resigned from the
NII Board of Directors in September 1993; Mr. Robert L. King, who resigned
from the NII Board of Directors in May 1993; and Mr. Charles P. Abod, who died
in December 1992.
51
<PAGE>
VOTE REQUIRED
The affirmative vote of a plurality of the shares of NII Common Stock
represented in person or by proxy at the NII Annual Meeting is required for the
election of directors of NII. All properly executed proxies received in response
to this solicitation will be voted. Unless otherwise specified in the proxy, it
is the intention of the persons named in the proxies solicited by the Board of
Directors to vote FOR the election of Mr. Fantle and Mr. Anderson to the NII
Board of Directors each to serve for a three year term. If events not now known
or anticipated make either of them unable to serve, the proxies will be voted,
at the discretion of the holders thereof, for another nominee supported by the
NII Board of Directors.
NII DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
TERMS EXPIRING IN 1995
The following sets forth the name, age, period served as director, present
position if any, with NII and any other business experience of the directors in
the 1995 Class.
PAUL M. FINFER, 55, has been a director of NII since 1991. Mr. Finfer has
been the President and Chief Executive Officer of Franklin Acceptance
Corporation, a consumer finance company, since October 1989. From May 1986
through February 1988, he served as the Chairman of the Board and Chief
Executive Officer of FBX Corporation, a manufacturer and distributor of
electronic fire and burglar alarm signal processing products. Mr. Finfer also
serves as a director of FoxMeyer and Kitchen Bazaar, Inc., a specialty retailer.
ALFRED H. KINGON, 63, has been a director of NII since 1991. Mr. Kingon has
been a principal of Kingon International, Inc., an international investment and
consulting firm, since September 1989. From April 1987 through June 1988, he
served as the United States Ambassador to the European Communities. Mr. Kingon
served as the Assistant to the President of the United States and Secretary of
the Cabinet from February 1985 through April 1987. Mr. Kingon is a director of
Ben Franklin.
TERMS EXPIRING IN 1996
The following sets forth the name, age, period served as director, present
position, if any, with NII and any other business experience of the directors of
NII who will continue to serve until the annual meeting of stockholders to be
held in 1996.
ABBEY J. BUTLER, 57, has been a director of NII since 1990. Mr. Butler is
the Co-Chairman of the Board and Co-Chief Executive Officer of NII and FoxMeyer.
Mr. Butler has served as Co-Chairman of the Board of NII and FoxMeyer since
March 1991. Mr. Butler was appointed Co-Chief Executive Officer of NII in
October 1991 and became Co-Chief Executive Officer of FoxMeyer in May 1993.
Since November 1991, he has also served as Co-Chairman of the Board of Ben
Franklin. Mr. Butler has also been the President and a director of C.B. Equities
Corp., a private investment company, since 1982. Mr. Butler presently serves as
a director and a member of the Executive Committee of FWB Bancorporation, the
holding company of FWB Bank of Maryland, a director of CST Entertainment
Imaging, Inc., a company engaged in digital color enhancement of black and white
films, and a trustee of The American University, a director of the Starlight
Foundation, a charitable organization, and is a member of the advisory boards of
the Pediatric AIDS Foundation and the National Center for Survivors of Child
Abuse. Mr. Butler was appointed by President Bush to serve on the President's
Advisory Committee on the Arts and he now serves as a member of the Executive
Committee of the National Committee for the Performing Arts, John F. Kennedy
Center, Washington, D.C.
MELVYN J. ESTRIN, 52, has been a director of NII since 1990. Mr. Estrin is
the Co-Chairman of the Board and Co-Chief Executive Officer of NII and FoxMeyer.
Mr. Estrin has served as Co-Chairman of the Board of NII and FoxMeyer since
March 1991. Mr. Estrin was appointed Co-Chief Executive Officer of NII in
October 1991 and became Co-Chief Executive Officer of FoxMeyer in May 1993.
Since November 1991, he has also served as the Co-Chairman of the Board of Ben
Franklin. From December 1983 to the present, Mr. Estrin has also served as the
Chairman of the Board and Chief Executive Officer of Human Service Group, Inc.,
a private management and
52
<PAGE>
investment firm, and of University Research Corporation, a consulting firm. Mr.
Estrin presently serves as a director and a member of the Executive Committee of
FWB Bancorporation, the holding company of FWB Bank of Maryland, a director of
Washington Gas Light Company, a public utility company, and a trustee of the
University of Pennsylvania. Mr. Estrin serves as a Commissioner on the
President's National Capital Planning Commission.
WILLIAM G. TULL, 65, has been a director of NII since 1990. Mr. Tull served
as the President and Chief Operating Officer of American Security Bank, N.A., a
commercial bank, from April 1985 until January 1990. Upon his retirement in
January 1990, Mr. Tull became a self-employed financial consultant. Mr. Tull
serves as a director of Ramtron International Corporation, a company that
develops, manufactures and sells non-volatile semiconductor memory products.
COMMITTEES OF THE NII BOARD OF DIRECTORS
The NII Board of Directors has four committees. The principal
responsibilities and membership of each committee are described in the following
paragraphs.
AUDIT COMMITTEE. The Audit Committee reviews the work of NII's independent
auditors, management and internal audit staff to ensure that each is properly
discharging its responsibilities in the area of financial controls and
reporting. This committee is presently comprised of Mr. Kingon, who is the
Chairman, and Messrs. Fantle and Tull. This committee held three meetings during
the fiscal year ended March 31, 1994 ('Fiscal 1994').
EXECUTIVE AND NOMINATING COMMITTEE. The Executive and Nominating Committee
has the authority to exercise substantially all of the powers of the NII Board
of Directors in the management and business affairs of NII, except it does not
have the authority to declare dividends, authorize the issuance of shares of NII
Common Stock, modify the NII Charter or NII's By-Laws, adopt any agreement of
merger or consolidation or recommend to the stockholders the sale, lease or
exchange of all or substantially all of NII's assets or the dissolution of NII.
In addition, this committee recommends prospective nominees for election to the
NII Board of Directors. Regularly scheduled meetings of the NII Board of
Directors are held periodically each year and special meetings are held from
time to time. As a consequence, the occasions on which this committee is
required to take action are limited. The members of this committee are Messrs.
Butler and Estrin. The committee did not meet in Fiscal 1994.
FINANCE AND PENSION COMMITTEE. The Finance and Pension Committee reviews
and monitors the financial planning and structure of NII and the performance of
investments in NII's pension plans. This committee is presently comprised of Mr.
Tull, who is the Chairman, and Messrs. Butler, Estrin and Finfer. This committee
held one meeting in Fiscal 1994.
PERSONNEL AND COMPENSATION COMMITTEE. The Personnel and Compensation
Committee reviews the performance of the management of NII, determines the
compensation of management and makes recommendations with respect to the
establishment of management compensation plans. This committee is presently
comprised of Mr. Fantle, who is the Chairman, and Messrs. Finfer and Kingon.
This committee held three meetings in Fiscal 1994.
MEETINGS OF THE NII BOARD OF DIRECTORS
During Fiscal 1994, there were nine meetings of the NII Board of Directors.
Each director attended at least 75% of the meetings of the NII Board of
Directors and the committees of the NII Board of Directors of which he was a
member in Fiscal 1994.
COMPENSATION OF NII DIRECTORS
NII directors who are not officers or employees of NII or one of its
subsidiaries or members of the Executive and Nominating Committee receive an
annual fee of $15,000. They also receive $1,000 for each meeting of the NII
Board of Directors or of a committee of the NII Board of Directors (other than
the Executive and Nominating
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Committee) they attend. Chairmen of each of the committees receive an additional
$1,000 for each meeting of the committee they attend. Directors are reimbursed
for travel and lodging expenses in connection with NII Board and committee
meetings.
Under the terms of 1993 Stock Option Plan, NII directors who are not
officers or employees of NII or one of its subsidiaries ('outside directors')
are automatically granted options to purchase 15,000 shares of NII Common Stock
when first elected to serve on the NII Board of Directors and, in each year they
continue to serve as members of the NII Board of Directors, options to purchase
1,000 shares of NII Common Stock on the third trading date following the later
of (i) the date on which the annual meeting of NII's stockholders, or any
adjournment thereof, is held each year or (ii) the date on which NII's earnings
for the fiscal quarter immediately preceding the date of such annual meeting are
released to the public.
NII has a Director's Retirement Plan which provides for the payment of
retirement benefits to NII directors (other than directors who are, or at any
time subsequent to December 31, 1975 have been, officers of NII or an affiliated
corporation). Each qualifying NII director is entitled, at the later of
retirement or age 60, to receive a monthly benefit for a period equal to his
years of service or 15 years, whichever is less. Such monthly benefit is equal
to one-twelfth (1/12) of the highest annual fee in effect for NII directors
during such director's years of service on the NII Board of Directors.
NII has agreed to pay Mr. Robert J. Slater, a former director of NII who
resigned from the NII Board of Directors on September 30, 1993, quarterly
payments of $7,625 until July 31, 1995 in exchange for consulting services. NII
has also agreed to credit Mr. Slater for service through July 31, 1995 for
purposes of the NII Director's Retirement Plan.
See also 'Executive Officers of NII--Compensation of NII Executive
Officers.'
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AMENDMENT OF THE NII CHARTER
TO INCREASE THE AUTHORIZED PREFERRED STOCK
The NII Board of Directors has unanimously approved an amendment to the NII
Charter to increase by 10,000,000 shares the number of shares of Preferred Stock
that NII is authorized to issue. The terms of any such Preferred Stock,
including dividend rates, conversion prices, voting rights, redemption prices
and maturity dates, would be determined by the NII Board of Directors at the
time of issuance, without the necessity for further action or authorization by
NII's stockholders (unless required in a specific case by applicable law or the
rules of the NYSE).
The NII Charter currently authorizes NII to issue 10,000,000 shares of
Preferred Stock with such voting rights, and with such designations, other
rights, preferences and limitations as may be established by the NII Board of
Directors. If the proposed amendment is approved, the NII Charter would be
amended to authorize NII to issue a total of 20,000,000 shares of Preferred
Stock. The NII Board of Directors has previously established three series of
Preferred Stock, thus utilizing virtually all the previously authorized shares
of Preferred Stock either through issuance of shares or by setting aside such
shares for future issuance.
The NII Board of Directors believes that the authorization of an additional
10,000,000 shares of Preferred Stock is desirable because of the flexibility
afforded to NII through its ability to utilize preferred stock in connection
with acquisition or financing transactions. NII does not presently have any
specific plans to issue additional shares of Preferred Stock. Although the
number of shares of Preferred Stock authorized for issuance under the NII
Charter is limited, the issuance of depositary shares would enable NII to issue
shares of its Preferred Stock having economic and other attributes equivalent to
those of a substantially greater number of such shares it issued for trading in
the public markets. Depositary shares could be issued pursuant to a depositary
agreement with a third party under which each owner of a depositary share would
be entitled, proportionately, to all the rights, preferences and privileges
(including dividends, voting, conversion and liquidation rights) of a fractional
underlying share of Preferred Stock and subject to all of the limitations of
Preferred Stock. NII has no current intention of causing the issuance of
depositary shares in lieu of issuing shares of Preferred Stock.
All series of the Preferred Stock have preference over the shares of NII
Common Stock with respect to dividends and other distributions and liquidation
of NII and no shares of NII Common Stock may be repurchased or redeemed while
there is any arrearage in the payment of dividend or sinking fund installments
on any outstanding shares of Preferred Stock.
The only voting rights required by the NII Charter (or by Delaware law) are
(i) the consent of holders of at least a majority of all outstanding shares of
Preferred Stock, regardless of series, is required to increase or decrease the
par value of the Preferred Stock (par value $5 per share) and (ii) the consent
of at least a majority of the outstanding shares of any series is required to
alter or change the powers, preferences or special rights of such series of
Preferred Stock so as to adversely affect the holders thereof.
Notwithstanding the foregoing, because the voting and other rights of the
authorized but unissued Preferred Stock would be fixed by the NII Board of
Directors at the time of issuance, the issuance of such stock could create
impediments to persons seeking to effect a merger or otherwise to gain control
of NII. Certain existing provisions of the NII Charter and NII's By-Laws contain
provisions which could have the effect of delaying, deferring or preventing a
change in control of NII in the event of an extraordinary corporate transaction
involving NII. These provisions are summarized below.
The NII Charter and NII's By-Laws provide that each director will serve for
a three-year term and that approximately one-third of the directors are to be
elected annually. Therefore, it would take at least two annual meetings of NII's
stockholders to replace a majority of the members of the NII Board of Directors.
The affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares of NII Common Stock entitled to vote in an election of
directors (the 'NII Voting Stock'), is required to amend, repeal or adopt any
provision inconsistent with the provisions relating to NII's staggered Board of
Directors.
The NII Charter contains provisions (the 'Fair Price Provisions'), which
require the approval of holders of at least 80% of the NII Voting Stock as a
condition to certain specified business combinations with, or proposed
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by, a stockholder who is the beneficial owner of 10% or more of the outstanding
NII Voting Stock (an 'Interested Stockholder'), except where the transaction (i)
has been approved by a majority of directors who are not affiliated with the
Interested Stockholder or (ii) meets certain minimum price criteria and
procedural conditions. The affirmative vote of the holders of 80% or more of the
NII Voting Stock is required to amend, repeal or adopt any provisions which are
inconsistent with the Fair Price Provisions. See 'Comparison of Stockholders'
Rights--Stockholder Vote Required for Certain Transactions.'
All other provisions of the NII Charter may be amended by the affirmative
vote of holders of at least two-thirds of the NII Voting Stock at a
stockholders' meeting called for that purpose.
In addition, any sale, lease or exchange of all of the property or assets
of NII (other than one proposed by, or with, an Interested Stockholder) requires
the affirmative vote of holders of at least two-thirds of the NII Voting Stock.
The NII Board of Directors is not aware of any plans by others to seek
control of NII and believes that a takeover attempt would be unlikely under
present circumstances.
RECOMMENDATION AND VOTE REQUIRED
THE NII BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
Adoption of the proposed amendment to the NII Charter to increase the number of
authorized shares of Preferred Stock requires the affirmative vote of the
holders of two-thirds of the outstanding shares of NII Common Stock. Abstentions
and broker non-votes will not be counted as an affirmative vote for this
proposal. If this proposal is adopted, the NII Charter will be amended
accordingly.
AMENDMENT OF THE NII CHARTER
TO CHANGE THE NAME OF NII
The NII Board of Directors has unanimously approved an amendment to the NII
Charter to change the name of NII from 'National Intergroup, Inc.' to 'FoxMeyer
Health Corporation.' The NII Board of Directors has determined that NII's name
should be changed to more accurately reflect its current business.
RECOMMENDATION AND VOTE REQUIRED
THE NII BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL.
Adoption of the proposed amendment to the NII Charter to change the name of NII
from 'National Intergroup, Inc.' to 'FoxMeyer Health Corporation' requires the
affirmative vote of the holders of two-thirds of the outstanding shares of NII
Common Stock.
AMENDMENT OF THE 1993 OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF NII COMMON
STOCK AUTHORIZED FOR ISSUANCE
PROPOSED AMENDMENT
The NII Board of Directors recommends the adoption of an amendment to the
1993 Option Plan to increase the number of shares of NII Common Stock options
for which may be granted thereunder from 2,000,000 to 4,000,000. On June 22,
1994, the NII Board of Directors unanimously approved the amendment to increase
the number of shares of NII Common Stock options for which may be granted
thereunder from 2,000,000 to 4,000,000 subject to approval by NII's stockholders
at the NII Annual Meeting.
The 1993 Option Plan is intended to provide the NII Board of Directors with
flexibility in compensating key employees in a changing business environment and
was approved by NII's stockholders at their annual meeting last year and
replaced NII's 1987 Restated Stock Option and Performance Award Plan (the 'NII
1987 Plan'), which had expired on December 21, 1993.
On June 3, 1994, NII granted to each of Abbey J. Butler and Melvyn J.
Estrin, Co-Chairmen of the NII Board of Directors and Co-Chief Executive
Officers of NII, options to purchase 800,000 shares of NII Common
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Stock at an exercise price of $18.25 per share (the average price per share of
NII Common Stock on such date). Twenty-five percent (25%) of these options
become exercisable on each anniversary of the date of grant beginning on June 3,
1995, on a cumulative basis. Messrs. Butler and Estrin's options expire on June
2, 1999. On July 21, 1994, NII granted to Thomas L. Anderson, a nominee for
election as director of NII and a director and the President and Chief Operating
Officer of FoxMeyer, options to purchase 300,000 shares of NII Common Stock at
an exercise price of $17.875 per share (the average price per share of NII
Common Stock on July 20, 1994). One-third ( 1/3) of these options become
exercisable on each anniversary of the date of grant beginning on July 21, 1995,
on a cumulative basis. Mr. Anderson's options expire on July 20, 1999. As a
result of the grant by NII of options to Messrs. Butler, Estrin and Anderson and
other NII employees under the 1993 Option Plan, there are presently 98,000
shares of NII Common Stock remaining for option grants thereunder. In
anticipation of the proposed Merger (after which no further options will be
granted by FoxMeyer under its Stock Option and Performance Award Plan), and to
otherwise have a sufficient number of shares available for option grants, the
NII Board of Directors has decided to increase by 2,000,000 the aggregate number
of shares of NII Common Stock options for which may be granted under the 1993
Option Plan.
A copy of the amended 1993 Option Plan will be furnished by NII to any
stockholder upon written request to NII's Corporate Secretary.
DESCRIPTION OF THE 1993 OPTION PLAN
Term. The 1993 Option Plan became effective on July 21, 1993. The 1993
Option Plan will remain in effect for ten years thereafter.
Shares Subject to the 1993 Option Plan. The total number of shares of NII
Common Stock options for which may be granted presently under the 1993 Option
Plan is 2,000,000, subject to adjustments provided in the 1993 Option Plan in
order to prevent dilution or enlargement of rights under the 1993 Option Plan.
If an option or award of restricted shares is terminated unexercised, other than
in connection with the exercise of a stock appreciation right, or is forfeited,
the unpurchased or forfeited shares will be available for future awards.
Eligibility. All officers and key employees of NII and its subsidiaries and
all non-employee directors of NII are eligible to receive
options under the 1993 Option Plan. Officers and other employees also are
eligible to receive stock appreciation rights, performance shares, restricted
shares and performance units. The NII Personnel and Compensation Committee (the
'NII Compensation Committee') determines the employees to whom options will be
granted and the number of shares subject to such options. Grants to outside
directors are automatic. Commencing in 1994, such persons each began receiving
options to purchase 15,000 shares when first elected to serve on the NII Board
of Directors and options to purchase 1,000 shares in each year that the 1993
Option Plan is in effect as long as such persons continue to serve as members of
the NII Board of Directors. It is not possible to predict the number, names or
positions of employees who may be selected for participation or the extent of
their participation within the 1993 Option Plan's limitations, since no
determination has been made with respect to these matters. Approximately 40
employees of NII and FoxMeyer are currently eligible to participate in the 1993
Option Plan.
Option Price. The option price for any option granted to employees under
the 1993 Option Plan is established by the NII Compensation Committee at the
time of grant, but may not be less than 100% of the fair market value of the NII
Common Stock on the date of grant for options granted to outside directors, or
for grants of incentive options (110% of such fair market value in the case of a
grant of an incentive option to an employee who possesses more than 10% of the
total combined voting power of all classes of NII Common Stock). The option
price is payable at the time of exercise in cash or, at the discretion of the
NII Compensation Committee, by delivery of other shares of NII Common Stock
already owned by the optionee, which shares will be valued at their fair market
value on the day preceding the date of the exercise of the options.
Terms and Conditions of Options. Options granted under the 1993 Option Plan
to employees may be either options which meet the definitional requirements for
incentive options ('incentive options') under Section 422(b) of the Code or
options which do not satisfy such requirements ('non-qualified options').
Outside directors may only be granted non-qualified options. No option granted
under the 1993 Option Plan to an employee or an outside director is transferable
other than by will or by the laws of descent and distribution and each option is
exercisable during the lifetime of the optionee only by the optionee. Options
expire no later than
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10 years from the date of grant to an employee and no later than five years from
the date of grant to an outside director.
In the event of the death, permanent disability or retirement of an outside
director or an employee, all outstanding options become exercisable and may be
exercised by the estate of such optionee or such optionee, as the case may be,
for one year after the date of death, disability or retirement (except that in
the event of retirement, incentive options must be exercised within three
months). If the employment of the optionee is terminated for good cause or the
optionee voluntarily terminates employment without the consent of NII, his
option rights will terminate immediately, except as to shares already purchased.
If the employment of the optionee is terminated for any other reason, the
optionee has 30 days after the date of such termination (or three months in the
case of an incentive option) to exercise the option with respect only to the
number of shares which the optionee was entitled to purchase immediately prior
to such termination. In no event may any option be exercised after the
expiration date of such option.
Each option granted to employees requires the optionee to remain in the
employ of NII or one of its subsidiaries for at least six months from the date
of grant before any part of the option may be exercised. Except in the event of
the death, permanent disability or retirement of an optionee, each option
granted to employees is exercisable in such installments as may be determined by
the NII Compensation Committee at the time of grant. Fifty percent of the
options granted to outside directors become exercisable one year after the date
of grant, with the remainder becoming exercisable two years thereafter. The
right to purchase shares is cumulative so that when the right to purchase any
shares has accrued, such shares or any part thereof may be purchased at any time
thereafter until the expiration or termination of the option.
Stock Appreciation Rights. In connection with the grant of any option to an
employee under the 1993 Option Plan, the NII Compensation Committee, either at
the time of grant or by amendment, may include a stock appreciation right which
will entitle the optionee to surrender to NII, unexercised, the related option,
or any portion thereof, and to receive from NII, in exchange, that number of
shares having an aggregate value equal to the excess of the fair market value of
one share, on the date preceding the surrender of such option, over the option
price per share, times the number of shares called for by the option, or portion
thereof, which is surrendered, provided that no fractional shares may be issued
and further provided that the number of shares received may not exceed the
number of shares called for by the option. Each stock appreciation right relates
to and is subject to the terms and conditions of the specific option granted
under the 1993 Option Plan. The NII Compensation Committee has the choice of
settling the obligation of NII arising out of the exercise of stock appreciation
rights in cash or part in cash and part in shares.
Performance Shares, Restricted Shares and Performance Units. Awards of
performance shares, restricted shares or performance units may be granted either
separately or in combination with other awards authorized by the 1993 Option
Plan to employee participants.
The duration of the performance or restriction is determined by the NII
Compensation Committee at the time each grant is made. More than one grant may
be outstanding at any time and performance periods may be of different lengths.
At the time of each grant, the NII Compensation Committee establishes the
performance targets at which performance shares or units are earned or times at
which restrictions placed on restricted shares or units lapse. Performance
measures and targets may vary among grants but, once established for a grant,
may not be modified with respect to that grant, except in the event of a change
in the NII Common Stock or in the capital stock of NII's subsidiaries by reason
of a reorganization, recapitalization, stock dividend, stock split or other
corporate change and except that, with respect to performance shares and
performance units, the NII Compensation Committee may, in its sole discretion,
make such adjustments to performance targets, the number of performance shares
or the number or value of performance units which may be earned, or such other
changes as it deems necessary or advisable in the event of material changes in
the criteria used for establishing performance targets which would result in the
dilution or enlargement of an award outside the goals intended by the NII
Compensation Committee at the time of grant.
The NII Compensation Committee may provide that amounts equivalent to
dividends are payable with respect to performance or restricted shares or
performance units. Such amounts are credited to the participant's performance
account and are payable at the time that restrictions on the award are removed
and the award is distributed.
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Performance or restricted shares and performance units may not be sold or
transferred during any restriction period, provided that if a holder thereof
dies, becomes disabled, retires or terminates employment with the consent of the
NII Compensation Committee, the number of performance or restricted shares or
performance units earned will be determined by the NII Compensation Committee.
If a holder's employment is terminated for any other reason, all shares or units
subject to restrictions are forfeited.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Options
It is intended that incentive options granted under the 1993 Option Plan
will meet the definitional requirements of Section 422(b) of the Code for
'incentive stock options.' Under the Code, the grantee of an incentive option
generally is not subject to regular income tax upon the receipt or exercise of
the incentive option. However, an employee who exercises an incentive option by
delivering shares previously acquired pursuant to the exercise of an incentive
option is treated as making a 'disqualifying disposition' (described below) of
such shares if the employee delivers such shares before the expiration of the
holding period applicable to such shares. The 'applicable holding period' is the
longer of two years from the date of grant or one year from the date of transfer
pursuant to the exercise of such option. Upon the exercise of an incentive
option with previously acquired shares as to which no disqualifying disposition
occurs, it appears that the optionee will not recognize gain or loss with
respect to such previously acquired shares.
For purposes of computing any alternative minimum tax liability, an
employee who exercises an incentive option generally will be required to
increase his or her 'alternative minimum taxable income' by an amount equal to
the excess of the fair market value of a share at the time the option is
exercised over the exercise price and must compute his or her tax basis in the
acquired share as if such share had been acquired through the exercise of a
non-qualified option (as described below).
If, subsequent to the exercise of an incentive option (whether paid for in
cash or in shares), the optionee holds the shares received upon exercise for a
period that exceeds the applicable holding period (as defined above), the
difference (if any) between the amount realized from the sale of such shares and
their tax basis to the holder will be taxed as long-term capital gain or loss
(provided that such shares were held by the optionee as a capital asset at the
time).
In general, if, after exercising an incentive option, an employee disposes
of the shares so acquired before the end of the applicable holding period (i.e.,
makes a 'disqualifying disposition'), the employee will be deemed in receipt of
ordinary income in the year of the disqualifying disposition, in an amount equal
to the excess of the fair market value of the shares at the date the incentive
option was exercised over the exercise price. If the disqualifying disposition
is a sale or exchange that will permit a loss to be recognized under the Code
(were a loss in fact to be sustained), and the sales proceeds are less than the
fair market value of the shares on the date of exercise, the employee's ordinary
income therefrom will be limited to the gain (if any) from the sale. If the
amount realized upon disposition exceeds the fair market value of the shares on
the date of exercise, the excess will be treated as short-term or long-term
capital gain, depending on whether the holding period for such shares exceeded
one year and provided that the employee held such shares as a capital asset at
such time. Under proposed regulations, special rules may apply in the case of a
disqualifying disposition of shares that were acquired upon the exercise of an
incentive option by delivering previously acquired shares.
A deduction will not be allowed to NII for federal income tax purposes with
respect to the grant or exercise of an incentive option or the disposition,
after the applicable holding period, of shares acquired upon exercise of the
option. In the event of a disqualifying disposition, a federal income tax
deduction will be allowed to NII in an amount equal to the ordinary income to be
recognized by the optionee, provided that such amount constitutes an ordinary
and necessary business expense to the employer corporation, is reasonable, and
the provisions of Section 162(m) of the Code relating to certain limits on the
deductibility of compensation in excess of $1 million paid to certain executives
are inapplicable.
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Non-Qualified Options and Stock Appreciation Rights
A non-qualified option is one that does not qualify as an incentive stock
option under Section 422(b) of the Code. An employee who receives a
non-qualified option or a stock appreciation right (a 'Right') will not
recognize any taxable income upon the grant of such non-qualified option or
Right. In general, upon exercise of a non-qualified option an individual will be
treated as having received ordinary income in an amount equal to the excess of
(i) the fair market value of the shares at the time of exercise over (ii) the
exercise price. Upon the receipt of cash or the transfer of shares pursuant to
the exercise of a Right, an employee will recognize ordinary income in an amount
equal to the sum of the amount of cash and the fair market value of the shares
received. The ordinary income recognized with respect to the transfer of shares
or receipt of cash by an employee upon exercise of a non-qualified option or a
Right under the 1993 Option Plan is subject to both wage withholding and
employment taxes.
Under certain circumstances, the timing of income recognition by an
optionee who is an officer or director of NII or a beneficial owner of more than
ten percent (10%) of any class of equity securities of NII possibly might be
deferred for a period following the exercise of a non-qualified option or of a
Right for shares (i.e., the 'Deferral Period'), unless such optionee files a
written election with the Internal Revenue Service within 30 days after the date
of transfer pursuant to Section 83(b) of the Code, to include in income, as of
the transfer date, the excess (on such date) of the fair market value of such
shares over their exercise price.
An individual's tax basis in the shares received on exercise of a
non-qualified option for cash or a Right will be equal to the amount of any cash
paid on exercise, plus the amount of ordinary income recognized by such
individual as a result of the receipt of such shares. The holding period for
such shares will begin just after the transfer of the shares or, in the case of
an officer, director or beneficial owner of more than 10% of any class of equity
securities of NII who does not elect to be taxed as of the exercise date, just
after the expiration of the Deferral Period, if any. A deduction for federal
income tax purposes will be allowed to NII in an amount equal to the ordinary
income taxable to the individual, provided that such amount constitutes an
ordinary and necessary business expense, is reasonable, the provisions of
Section 162(m) of the Code relating to certain limits on the deductibility of
compensation in excess of $1 million paid to certain executives are
inexplicable, and, in the case of an exercise by an employee of a non-qualified
option or of a Right for shares, that the employer corporation satisfied its
withholding obligation with respect to such income.
If an individual exercises a non-qualified option by delivering other
shares, the employee will not recognize gain or loss with respect to the
exchange of such shares, even if the shares' then fair market value is different
from the individual's tax basis. The individual, however, will be taxed as
described above with respect to the exercise of the non-qualified option as if
he or she had paid the exercise price in cash, and the employer corporation
likewise generally will be entitled to an equivalent tax deduction. As long as
the individual receives a separate identifiable stock certificate therefor, his
or her tax basis in that number of shares received on such exercise that is
equal to the number of shares surrendered on such exercise will be equal to his
or her tax basis in the shares surrendered and his or her holding period for
such number of shares received will include his or her holding period for the
shares surrendered. The individual's tax basis and holding period for the
additional shares received on exercise of a non-qualified option paid for, in
whole or in part, with shares will be the same as if the individual had
exercised the non-qualified option solely for cash.
Performance Shares, Restricted Shares and Performance Units
In general, if a participant receiving an award of performance shares,
restricted shares or performance units under the 1993 Option Plan makes an
election with respect to such shares or units under Section 83(b) of the Code
not later than 30 days after the date such shares or units are transferred to
such participant pursuant to such award, such participant will recognize
ordinary income at the time of transfer in an amount equal to the fair market
value of the shares or units covered by the award (determined without regard to
any restriction other than a restriction which by its terms will never lapse) at
the time of such transfer. In the absence of such election, the participant
generally will recognize ordinary income at the time at which the restrictions
which impose a substantial risk of forfeiture of such shares or units (the
'Restrictions') lapse, in an amount equal to the fair market value of such
shares or units at such time. The ordinary income recognized by an employee with
respect
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to shares or units awarded pursuant to the 1993 Option Plan will be subject to
both wage withholding and employment taxes.
Under certain circumstances, a participant may not recognize ordinary
income with respect to amounts allocated to his or her performance account until
the participant receives payment of such amounts or until such amounts are
otherwise made available to such participant.
If a Section 83(b) election is available and is made, dividends received or
performance shares, restricted shares or performance units which are subject to
Restrictions will be treated as dividend income. If a participant does not make
an election under Section 83(b), dividends received on the shares or units prior
to the time the Restrictions on such shares or units lapse will be treated as
additional compensation, and not dividend income, for federal income tax
purposes, and are subject to wage withholding and employment taxes.
A participant's tax basis in shares or units received pursuant to the 1993
Option Plan will be equal to the amount of ordinary income recognized by such
participant with respect to the receipt of such shares or units or the lapse of
Restrictions thereon. The participant's holding period for such shares or units
for purposes of determining gain or loss on a subsequent sale will begin
immediately after the transfer of such shares or units to the participant, if a
Section 83(b) election is made with respect to such shares or units, or
immediately after the Restrictions on such shares or units lapse, if no Section
83(b) election is made.
In general, a deduction will be allowed to NII, for federal income tax
purposes, in an amount equal to the ordinary income recognized by a participant
with respect to shares or units awarded pursuant to the 1993 Option Plan,
provided that such amount constitutes an ordinary and necessary business expense
of NII, is reasonable, the provisions of Section 162(m) of the Code relating to
certain limits on the deductibility of compensation in excess of $1 million paid
to certain executives are inapplicable, and provided further that, in the case
of the issuance of property other than cash, NII satisfied its withholding
obligation with respect to such income.
If, subsequent to the lapse of Restrictions on his or her shares or units,
the participant sells such shares or units, the difference, if any, between the
amount realized from such sale and the tax basis of such shares or units to the
holder will be taxed as long-term or short-term capital gain or loss, depending
on whether the participant's holding period for such shares or units exceeds the
requisite holding period at the time of sale and provided that the participant
holds such shares or units as a capital asset at such time.
If a Section 83(b) election is available and is made and, before the
Restrictions on the shares or units lapse, the shares or units which are subject
to such election are forfeited, (i) no deduction will be allowed to such
participant for the amount included in the income of such participant by reason
of such Section 83(b) election, and (ii) NII will be required to include in its
income the amount of any deduction previously allowable to it in connection with
the transfer of such shares or units.
The 1993 Option Plan is not qualified under the provisions of Section
401(a) of the Code, and is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
RECOMMENDATION AND VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO APPROVE THE ADOPTION OF THE AMENDMENT TO THE 1993 OPTION PLAN TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF NII COMMON STOCK THEREUNDER. The affirmative vote
of a majority of the shares of NII Common Stock represented in person or by
proxy and entitled to vote at the NII Annual Meeting is required for the
approval of the adoption of the Option Amendment.
AMENDMENT OF THE 1993 OPTION PLAN TO ALLOW GRANTS TO INDIVIDUALS
WHO SERVE AS DIRECTORS OF ANY SUBSIDIARY CORPORATION OF NII
PROPOSED AMENDMENT
The NII Board of Directors recommends the adoption of an amendment to the
1993 Option Plan to allow grants thereunder to individuals not regularly
employed by NII who serve as directors of any subsidiary corporation of NII, at
the discretion of the committee administering such 1993 Option Plan. On August
24, 1994,
61
<PAGE>
the NII Board of Directors unanimously approved the amendment to the 1993 Option
Plan to allow grants thereunder to individuals not regularly employed by NII who
serve as directors of any subsidiary corporation of NII, at the discretion of
the committee administering such 1993 Option Plan.
The purpose of this amendment to the 1993 Option Plan is to afford
directors of any subsidiary corporation of NII an opportunity to acquire a
proprietary interest in NII and thus to create in such persons an increased
interest in and greater concern for the welfare of NII and any subsidiary
corporation of NII. For a description of the 1993 Option Plan, see 'Amendment of
the 1993 Option Plan to Increase the Number of Shares of NII Common Stock
Authorized for Issuance.'
A copy of the amended 1993 Option Plan will be furnished by NII to any
stockholder upon written request to NII's corporate subsidiary.
RECOMMENDATION AND VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO APPROVE THE ADOPTION OF THE AMENDMENT TO THE 1993 OPTION PLAN TO ALLOW GRANTS
TO INDIVIDUALS WHO SERVE AS DIRECTORS OF ANY SUBSIDIARY CORPORATION OF NII. The
affirmative vote of a majority of the shares of NII Common Stock represented in
person or by proxy and entitled to vote at the NII Annual Meeting is required
for the approval of the adoption of this proposal.
EXECUTIVE OFFICERS OF NII
A brief biography of each executive officer of NII (other than the
Co-Chairmen of the Board and Co-Chief Executive Officers, whose biographies are
set forth under 'Election of NII Directors--NII Directors Whose Terms of Office
Continue--Terms Expiring in 1996' above) who served during Fiscal 1994 is
provided below. NII's executive officers are elected by the NII Board of
Directors at its annual meeting and hold office until the next annual meeting of
the NII Board of Directors or until their successors have been duly elected and
qualified.
PETER B. MCKEE, 56, has been Vice President and Chief Financial Officer of
NII since February 1994. He has also served as Senior Vice President and Chief
Financial Officer of FoxMeyer since January 1994. From October 1991 to December
1993, he was Executive Vice President and Chief Financial Officer of InterSolve
Group, a managerial consulting firm. From March 1988 to September 1991, he was
Senior Vice President and Chief Financial Officer of Metro Airlines, a regional
airline that operated in the Southwest and Eastern United States and in the
Caribbean and which filed a petition under chapter 11 of title 11 of the United
States Code in April 1991 and was subsequently reorganized thereunder.
EDWARD L. MASSMAN, 35, has been Vice President and Controller of NII since
July 1994 and Controller of NII since July 1993. He has also served as Vice
President and Controller of FoxMeyer since September 1, 1994 and, prior thereto,
served as Director of Accounting of FoxMeyer from September 1990. Mr. Massman
was employed by Deloitte & Touche LLP from January 1983 to September 1990,
serving most recently as Senior Audit Manager.
FORMER NII EXECUTIVE OFFICER
LAWRENCE J. PILON, 45, was Vice President, Human Resources of NII from June
1986 to January 1994. He was Secretary of NII from August 1991 to January 1994.
He also served as Senior Vice President-- Administration of FoxMeyer from
September 1990 to January 1994.
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<PAGE>
COMPENSATION OF NII EXECUTIVE OFFICERS
The following table sets forth the compensation for the three fiscal years
ended March 31, 1994 received by NII's Co-Chief Executive Officers and the three
remaining most highly compensated executive officers of NII in Fiscal 1994.
NII SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(A)
-----------------------
AWARDS
----------
ANNUAL COMPENSATION SECURITIES PAYOUTS
------------------------------------------ UNDERLYING ----------
FISCAL OTHER ANNUAL OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(B) SARS(#) PAYOUTS($) COMPENSATION($)(C)
- ---------------------------- ------ --------- -------- ------------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Abbey J. Butler (D) ........ 1994 709,000 318,330 53,974 28,000 0 5,372
Co-Chairman of the Board 1993 702,000 175,000 (H) 540,000 0 1,750
and Co-Chief Executive 1992 556,250 139,000 (H) 110,000 0 1,750
Officer
Melvyn J. Estrin (D) ....... 1994 709,000 318,330 50,997 28,000 0 5,958
Co-Chairman of the Board 1993 702,000 175,000 (H) 540,000 0 1,167
and Co-Chief Executive 1992 556,250 139,000 (H) 110,000 0 1,750
Officer
Lawrence J. Pilon (E) ...... 1994 174,042 0 (H) 0 0 3,748
Vice President, Human 1993 197,937 28,000 (H) 17,000 62,500 4,456
Resources (through January 1992 185,811 42,200 66,456 60,000 0 4,325
1994)
Edward L. Massman (F) ...... 1994 94,338 24,379 (H) 0 0 3,115
Controller 1993 82,362 9,500 0 0 0 2,471
1992 75,775 12,200 0 0 0 1,263
Peter B. McKee (G) ......... 1994 44,302 35,750 0 60,000 0 0
Vice President and Chief 1993 0 0 0 0 0 0
Financial Officer 1992 0 0 0 0 0 0
(effective February 1994)
</TABLE>
- ------------------
(A) NII made no awards of restricted stock during the three fiscal years ended
March 31, 1994 to any of the five executive officers of NII named in the
NII Summary Compensation Table.
(B) For Fiscal 1994, the amount set forth under 'Other Annual Compensation'
includes amounts paid by NII or by FoxMeyer to each executive officer under
FoxMeyer's Supplemental Savings Plan, which is a nonqualified plan for
employees whose contributions to the FoxMeyer Employees' Savings and Profit
Sharing Program (the 'FoxMeyer 401(k) Plan') are limited by the Code's
limitations on elective contributions thereto.
(C) Represents amounts contributed by NII or by FoxMeyer to each executive
officer's account under the FoxMeyer 401(k) Plan.
(D) In Fiscal 1994, Mr. Butler and Mr. Estrin each received $350,000 from NII
for serving as Co-Chief Executive Officer of NII, $275,000 from FoxMeyer
for serving as Co-Chairman of the Board and Co-Chief Executive Officer of
FoxMeyer and $84,000 from Ben Franklin for serving as Co-Chairman of the
Board of Ben Franklin. For Fiscal 1994, Mr. Butler and Mr. Estrin each
received a $175,000 bonus from NII and a $137,500 bonus from FoxMeyer and a
$5,830 bonus under FoxMeyer's performance plan (a plan which paid bonuses
to all FoxMeyer employees upon the attainment by FoxMeyer of an earnings
target). In Fiscal 1993, Mr. Butler and Mr. Estrin each received $350,000
from NII for serving as Co-Chief Executive Officers of NII, $275,000 from
FoxMeyer for serving as Co-Chairmen of the Board of FoxMeyer and $77,000
from Ben Franklin for serving as Co-Chairman of the Board of Ben Franklin.
For Fiscal 1993, Mr. Butler and Mr. Estrin each received a $65,000 bonus
from NII, an $85,000 bonus from FoxMeyer and a
(footnotes continued on following page)
63
<PAGE>
(footnotes continued from preceding page)
$25,000 bonus from Ben Franklin. In Fiscal 1992, Mr. Butler and Mr. Estrin
each received $350,000 from NII for serving as Co-Chief Executive Officers
of NII and $206,250 (which represents payments from July 1992 through March
1993) from FoxMeyer for serving as Co-Chairmen of the Board of FoxMeyer. The
$139,000 bonus paid to each of Mr. Butler and Mr. Estrin for Fiscal 1992 was
paid by FoxMeyer.
In Fiscal 1994, Ben Franklin extended the expiration date (from April 27,
1997 to April 27, 2001) of options for 10,000 shares of common stock of Ben
Franklin ('Ben Franklin Common Stock') held by each of Mr. Butler and Mr.
Estrin and granted each of them additional options for 18,000 shares of Ben
Franklin Common Stock. In Fiscal 1993, Mr. Butler and Mr. Estrin were each
granted options for 440,000 shares of NII Common Stock, options for 50,000
shares of FoxMeyer Common Stock and options for 50,000 shares of Ben
Franklin Common Stock. In Fiscal 1992, Mr. Butler and Mr. Estrin were each
granted options for 110,000 shares of FoxMeyer Common Stock.
(E) Until January 1994, Mr. Pilon served as the Vice President, Human Resources
of NII but did not receive compensation from NII in such capacity. Mr.
Pilon was also the Senior Vice President--Administration of FoxMeyer, which
paid all of his compensation for services rendered in Fiscal 1994, 1993 and
1992.
In Fiscal 1993, Mr. Pilon received a $62,500 payment from FoxMeyer for
25,000 performance units granted by NII in April 1990 ('1990 Performance
Units') under the Performance Units Supplement to the NII 1987 Plan. The
value of the 1990 Performance Units was tied to the operating results of
FoxMeyer Drug Company, a wholly owned subsidiary of FoxMeyer, and was based
on operating goals set by the NII Compensation Committee related to return
on invested capital of FoxMeyer Drug Company over the three-year period
ended March 31, 1993. For Fiscal 1992, $55,586 of the amount shown under
'Other Annual Compensation' represents payments made to Mr. Pilon in
connection with his relocation from Pittsburgh to Dallas.
(F) Mr. Massman presently serves as the Vice President and Controller of NII.
Prior to July 1994, Mr. Massman was also the Director of Accounting of
FoxMeyer, which paid all of his compensation for services rendered in
Fiscal 1994, 1993 and 1992 except for a $5,000 special bonus paid by NII in
Fiscal 1994.
(G) Since February 1994, Mr. McKee has served as the Vice President and Chief
Financial Officer of NII but does not receive compensation from NII in such
capacity. Mr. McKee is the Senior Vice President and Chief Financial
Officer of FoxMeyer, which paid all of his compensation for services
rendered in Fiscal 1994. In Fiscal 1994, Mr. McKee was granted options for
60,000 shares of FoxMeyer Common Stock.
(H) Other annual compensation to this executive officer, including payment of
club dues, personal use of corporate property (including the use of NII's
airplane) and other personal benefits, did not exceed the lesser of $50,000
or 10% of such executive officers's total salary and bonus for such fiscal
year.
64
<PAGE>
REPORT OF THE NII COMPENSATION COMMITTEE
The NII Compensation Committee is comprised of three directors: Mr. Sheldon
W. Fantle, who is the Chairman, and Messrs. Paul M. Finfer and Alfred H. Kingon,
all of whom are outside directors of NII.
EXECUTIVE COMPENSATION. Compensation for NII's executive officers is
comprised of base salary, annual incentive payments and long-term incentive
awards in the form of stock option grants. The goal of NII's executive
compensation policy is to reward its executive officers for overseeing and
managing NII's operating subsidiaries, for their contributions towards long-term
strategic planning and for improving long-term stockholder value. Decisions with
respect to the compensation of the Co-Chief Executive Officers of NII are made
by the NII Compensation Committee. NII generally does not pay any compensation
to NII's other executive officers, whose salaries and bonuses are paid solely by
FoxMeyer and are determined by the Personnel and Compensation Committee of the
Board of Directors of FoxMeyer, which consists of Messrs. Fantle and Finfer and
Messrs. Abbey J. Butler, Melvyn J. Estrin and Daniel J. Callahan, III (the
'FoxMeyer Compensation Committee').
FoxMeyer provides an executive compensation program that aims to reinforce
FoxMeyer's overall business mission, strategies, values and objectives. The
goals of FoxMeyer's executive compensation program are to motivate and reward
its executive officers and other key employees, to improve long-term stockholder
value and to attract and retain high-quality executive talent. FoxMeyer's
executive compensation program consists of base salary, annual and long-term
incentive payments, stock options and employee benefits. FoxMeyer reviews its
compensation programs periodically and compares its pay practices with other
companies in the wholesale distribution business and with companies staffed with
similarly skilled executives. FoxMeyer's objective is to position total
compensation at approximately the median of market pay for executives in similar
positions. Annual incentive payments are based on the attainment of specific
goals established each year. Long-term incentives, in the form of cash payments
and stock option grants, are designed to reward sustained corporate performance
over a three-to five-year period.
During the first fiscal quarter of each year, the FoxMeyer Compensation
Committee meets to review salary increases for the current year and incentive
payments to be made in connection with the previous year's performance. The
FoxMeyer Compensation Committee also reviews the current fiscal year's business
plan and establishes performance objectives for each FoxMeyer executive officer.
Goals relating to FoxMeyer's financial performance, based on such factors as
return on capital, pre-tax income or net income, are set as a primary component
of executive incentive compensation. Individual performance objectives are also
determined for officers and are weighted to reflect their respective functions,
significance and contribution to FoxMeyer business goals. In making its
decisions, the FoxMeyer Compensation Committee receives recommendations from
FoxMeyer's Co-Chief Executive Officers and President on senior executives and
then meets privately (without the presence of management, including FoxMeyer's
Co-Chief Executive Officers, in relation to their compensation) to determine
compensation for FoxMeyer's Co-Chief Executive Officers. The FoxMeyer
Compensation Committee's decisions are based on input from FoxMeyer's Human
Resources Department, and periodically from outside advisors, to maintain the
desired level of competitiveness and congruence with long-term company
performance.
During the year, the NII Compensation Committee and the FoxMeyer
Compensation Committee receive periodic updates on FoxMeyer's operating results
and the progress made by FoxMeyer's executive officers towards performance
targets relevant to FoxMeyer's incentive programs. Discussions of management
contribution and performance are held periodically.
NII'S CO-CHIEF EXECUTIVE OFFICERS. During Fiscal 1994, NII paid each of
Messrs. Butler and Estrin, NII's Co-Chief Executive Officers, a base salary of
$350,000. This base salary was approved by the NII Board of Directors in October
1991, based upon the recommendation of the NII Compensation Committee (which had
consulted with an outside advisor). See '--Employment Agreements with FoxMeyer
Executive Officers.' No salary increase was granted to the Co-Chief Executive
Officers for Fiscal 1994. For Fiscal 1994, the NII Board of Directors, based
upon the recommendation of the NII Compensation Committee, awarded each of NII's
Co-Chief Executive Officers a bonus of $175,000 for their management of NII and
their involvement in a number of financing transactions by FoxMeyer and Ben
Franklin during Fiscal 1994 that provided enhanced liquidity to
65
<PAGE>
these companies at lower cost; their work on NII's exchange offer in November
1993 (in which NII exchanged approximately 6.8 million shares of NII Common
Stock for the Series A Preferred Stock); and their work in obtaining a $15
million revolving loan facility for NII.
In determining the amount of the Co-Chief Executive Officers' bonuses for
Fiscal 1994, the NII Compensation Committee took into consideration the
aggregate compensation payable to them by NII, FoxMeyer and Ben Franklin
relative to their performance on behalf of NII's stockholders and to the fact
that no increase in base salary had been authorized for either of them since
Fiscal 1992.
In Fiscal 1994, each NII Co-Chief Executive Officer received $275,000 from
FoxMeyer for his services as Co-Chairman of the Board and Co-Chief Executive
Officer of FoxMeyer. The Board of Directors of FoxMeyer consisted of eight
members in Fiscal 1994, including Messrs. Butler, Estrin, Fantle and Finfer (who
were also directors of NII). Although Messrs. Butler and Estrin are members of
the FoxMeyer Board of Directors and the FoxMeyer Compensation Committee, they do
not participate in the determination of their annual compensation, bonuses and
the grant of FoxMeyer options to them. The $275,000 annual payment to each of
Messrs. Butler and Estrin was approved by the FoxMeyer Board of Directors
(without the participation of Messrs. Butler and Estrin) in June 1991 based upon
the substantial, but not full-time, services they were expected to render to
FoxMeyer as Co-Chairmen of the FoxMeyer Board of Directors, including financial
and strategic planning and supervisory and managerial services. When they
assumed the additional offices of Co-Chief Executive Officers of FoxMeyer in May
1993, there was no increase in the payments to Messrs. Butler and Estrin from
FoxMeyer. For Fiscal 1994, the FoxMeyer Board of Directors, based upon the
recommendation of the FoxMeyer Compensation Committee, awarded each Co-Chief
Executive Officer a bonus of $137,500 for his contribution to the rebuilding and
restructuring of FoxMeyer's operating businesses and financial structure, the
completion of a number of FoxMeyer's financing transactions in Fiscal 1994 that
have provided FoxMeyer with greater liquidity at lower cost, the improved
profitability experienced by FoxMeyer in Fiscal 1994 and the preparation of
FoxMeyer's three-year strategic plan.
The Board of Directors of Ben Franklin consisted of eight members in Fiscal
1993, including Messrs. Butler, Estrin, Fantle and Kingon (who were also
directors of NII). Although Messrs. Butler and Estrin are members of the Ben
Franklin Board, they do not participate in the determination of their annual
fees, bonuses and the grant of Ben Franklin options to them. In May 1992, the
Ben Franklin Board of Directors approved (without the participation of Messrs.
Butler and Estrin) the payment of $84,000 per annum to each of them for serving
as Co-Chairmen of the Board of Directors of Ben Franklin, in which capacity each
of them would render substantially the same services as those rendered to
FoxMeyer.
SHELDON W. FANTLE (CHAIRMAN)
PAUL M. FINFER
ALFRED H. KINGON
The foregoing report is not incorporated by reference in any prior or
future filings of NII under the Securities Act, or under the Exchange Act,
directly or by reference to the incorporation of proxy statements of NII, unless
NII specifically incorporates the report by reference, and the report shall not
otherwise be deemed filed under such Acts.
66
<PAGE>
OPTION/SAR GRANTS IN FISCAL 1994 TO NII EXECUTIVE OFFICERS
NII did not grant options in Fiscal 1994 to any of the executive officers
of NII named in the NII Summary Compensation Table. The following table provides
information regarding the options granted by FoxMeyer and Ben Franklin to
certain executive officers of NII.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------
PERCENT
OF
TOTAL
OPTIONS/ POTENTIAL REALIZABLE
NUMBER OF SARS VALUE AT ASSUMED ANNUAL
SECURITIES GRANTED RATES OF STOCK PRICE
UNDERLYING TO APPRECIATION FOR OPTION
OPTIONS/ EMPLOYEES EXERCISE OR TERM(A)
SARS IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------------- ------------- --------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
GRANTS BY FOXMEYER:
Peter B. McKee................ 60,000(B) 37.5% 12.25 1/16/1999 203,067 448,725
GRANTS BY BEN FRANKLIN:
Abbey J. Butler............... 10,000(C) 5.0% 5.00 4/27/2001 13,814 30,526
18,000 16.5% 4.50 1/16/2003 22,379 49,451
Melvyn J. Estrin.............. 10,000(C) 5.0% 5.00 4/27/2001 13,814 30,526
18,000 16.5% 4.50 1/16/2003 22,279 49,451
</TABLE>
- ------------------
(A) The potential realizable values set forth under these columns result from
calculations assuming 5% and 10% growth rates as set by the Commission and
are not intended to forecast future price appreciation of either FoxMeyer
Common Stock or Ben Franklin Common Stock. The amounts reflect potential
future value based upon growth at these prescribed rates. NII did not use
an alternative formula for a grant date valuation, an approach which would
state gains at present, and therefore lower, value. NII is not aware of any
formula which will determine with reasonable accuracy a present value based
on future unknown or volatile factors. Actual gains, if any, on stock
option exercises are dependent on the future performances of FoxMeyer
Common Stock and Ben Franklin Common Stock. There can be no assurance that
the amounts reflected in this table will be achieved.
(B) One-third (1/3) of these options will become exercisable on January 17,
1995, another 1/3 will become exercisable on January 17, 1996, and the
remaining 1/3 will become exercisable on January 17, 1997.
(C) These options were originally granted on April 28, 1992 and became fully
exercisable on April 28, 1994. On December 20, 1993, Ben Franklin extended
the expiration date of all non-incentive stock options granted on April 28,
1992 from April 27, 1997 to April 27, 2001, including those held by Messrs.
Butler and Estrin.
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1994 BY NII EXECUTIVE OFFICERS
The following table provides information as to options exercised by each of
the named executives in 1994 and the value of options held by such executives at
year end measured in terms of the last reported sale price for the shares of NII
Common Stock on March 31, 1994 ($16, as reported on the New York Stock Exchange
Composite Tape).
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
VALUE UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS
REALIZED (A) FY-END (#) AT MARCH 31, 1994 ($)(B)
($)
SHARE ACQUIRED ------------ ---------------------------- ----------------------------
NAME ON EXERCISE (#)
- ---------------------------- ---------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Abby J. Butler.............. -- -- 440,000 0 $ 440,000 --
Melvyn J. Estrin............ -- -- 440,000 0 $ 440,000 --
Lawrence J. Pilon........... 5,000 $2,188 0 0 -- --
Peter B. McKee.............. -- -- -- -- -- --
Edward L. Massman........... -- -- -- -- -- --
</TABLE>
- ------------------
(a) Market value on the date of exercise of shares covered by options exercised,
less option exercise price.
(b) Market value of shares covered by in-the-money options on March 31, 1993,
less option exercise price. Options are in-the-money if the market value of
the shares covered thereby is greater than the option exercise price.
LONG-TERM INCENTIVE PLANS--AWARDS IN FISCAL 1994 TO NII EXECUTIVE OFFICERS (A)
<TABLE>
<CAPTION>
NUMBER PERFORMANCE
OF OR OTHER
SHARES, PERIOD ESTIMATED FUTURE PAYOUTS UNDER
UNITS OR UNTIL NON-STOCK PRICE-BASED PLANS
OTHER MATURATION ------------------------------------------------
NAME RIGHTS OR PAYOUT THRESHOLD($)(B) TARGET($)(C) MAXIMUM($)(D)
- ------------------------------------------- -------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Abbey J. Butler ........................... 8.0% 3/31/97 $ 0 $483,781 $ 1,342,861
Co-Chairman of the Board and
Co-Chief Executive Officer
Melvyn J. Estrin .......................... 8.0% 3/31/97 $ 0 $483,781 $ 1,342,861
Co-Chairman of the Board and
Co-Chief Executive Officer
Lawrence J. Pilon (E) ..................... 5.0% 3/31/97 -- -- --
Vice President, Human Resources
(through January 1994)
Peter B. McKee ............................ 6.0% 3/31/97 $ 0 $362,836 $ 1,007,146
Vice President and
Chief Financial Officer
(effective February 1994)
</TABLE>
- ------------------
(A) In April 1993, FoxMeyer adopted a Long-Term Incentive Plan (the 'FoxMeyer
LTIP') to motivate and reward sustained improvements in FoxMeyer's
financial performance over a long-term period. Under the FoxMeyer LTIP, the
FoxMeyer Compensation Committee is authorized to create, from time to time,
pools to be funded by FoxMeyer ('performance pools') for the payment of
incentive payments to participants in the FoxMeyer LTIP upon the attainment
by FoxMeyer of certain earnings and financial parameters. The
(footnotes continued on following page)
68
<PAGE>
(footnotes continued from preceding page)
FoxMeyer Compensation Committee created the first performance pool in April
1993 (the '1993 Performance Pool') and it will be funded by FoxMeyer based
on the attainment of sustained annual growth in its earnings before taxes
('EBT') over a four-year period from Fiscal 1994 through Fiscal 1997. If
another performance pool is created under the FoxMeyer LTIP, amounts to be
allocated to the 1993 Performance Pool subsequent thereto may be adjusted
based upon terms and conditions to be established at such time by the
FoxMeyer Compensation Committee.
Under the 1993 Performance Pool, FoxMeyer's EBT target for Fiscal 1994 was
$46.1 million, which also served as the EBT starting point. Because
FoxMeyer has achieved its Fiscal 1994 EBT target, 2.5% of FoxMeyer's actual
EBT for Fiscal 1994 (which was $46.8 million) was allocated to the 1993
Performance Pool. Thereafter, if FoxMeyer's EBT increases from year to year
by at least 7.5%, a certain percentage of FoxMeyer's EBT (the 'Multiplier')
of the just-completed fiscal year will be allocated to the 1993 Performance
Pool. The Multiplier is 3% if growth in FoxMeyer's EBT equals 7.5% but is
less than 15%; 4% if growth in EBT equals 15% but is less than 20%; 5% if
growth in EBT equals 20% but is less than 25%; and 7% if growth in EBT is
equal to or greater than 25%. If FoxMeyer's EBT declines from year to year,
dollars will be deducted from the amount allocated to the 1993 Performance
Pool based on the same scale except that, in calculating the amount to be
deducted, the Multiplier will be applied to the higher of FoxMeyer's EBT
target that year or the actual EBT.
Messrs. Butler and Estrin were each awarded an 8% share of the 1993
Performance Pool in their capacities as Co-Chairmen of the Board and
Co-Chief Executive Officers of FoxMeyer. Mr. McKee was awarded 6% of the
1993 Performance Pool in his capacity as Senior Vice President and Chief
Financial Officer of FoxMeyer. Mr. Massman is not a participant in the
FoxMeyer LTIP. The first payouts from the 1993 Performance Pool may be made
after the end of Fiscal 1995 (of up to 50% of the aggregate amount
accumulated therein) and the final payouts will be made after the end of
Fiscal 1997.
(B) If FoxMeyer's EBT after Fiscal 1994 declines each year, deductions will be
made from the 1993 Performance Pool and, depending upon the magnitude of
the decline in EBT each year, the $1,170,250 allocated to the 1993
Performance Pool for Fiscal 1994 may be reduced to $0 by the end of Fiscal
1997. If this occurs, the individuals who have been granted shares in the
1993 Performance Pool would receive no payments.
(C) These amounts are provided for illustrative purposes only and are
calculated based on each individual's share in the 1993 Performance Pool
and assume that, after Fiscal 1994, FoxMeyer's EBT will grow by a factor
of 7.5% each year. Based on an assumed EBT growth rate of 7.5% each year,
$1,509,622 would be allocated by FoxMeyer to the 1993 Performance Pool for
Fiscal 1995; $1,622,844 for Fiscal 1996; and $1,744,557 for Fiscal 1997,
resulting in a hypothetical aggregate amount allocated to the 1993
Performance Pool by the end of Fiscal 1997 of $6,047,273. There can be no
assurances that the EBT growth reflected in the amounts set forth in this
table will be achieved by FoxMeyer.
(D) These amounts are provided for illustrative purposes only and are
calculated based on each individual's share in the 1993 Performance Pool
and assumes that, after Fiscal 1994, FoxMeyer's EBT will grow by a factor
of 25% each year. Based on an assumed EBT growth rate of 25% each year,
$4,095,875 would be allocated by FoxMeyer to the 1993 Performance Pool for
Fiscal 1995; $5,119,843 for Fiscal 1996; and $6,339,804 for Fiscal 1997,
resulting in a hypothetical aggregate amount allocated to the 1993
Performance Pool by the end of Fiscal 1997 of $16,785,772. There can be no
assurances that the EBT growth reflected in the amounts set forth in this
table will be achieved by FoxMeyer.
(E) Mr. Pilon had been awarded a 5% share of the 1993 Performance Pool in his
capacity as Senior Vice President--Administration of FoxMeyer, which he
forfeited upon his resignation from FoxMeyer in January 1994.
69
<PAGE>
NII PERFORMANCE GRAPH
The following performance graph compares the performance of the NII Common
Stock, the Standard & Poor's 500 Index and an index of peer companies selected
by NII (the 'NII Peer Group Index') for NII's last five fiscal years. The graph
assumes that the value of the investment in the NII Common Stock and in each
index was $100 on April 1, 1989, and that all dividends were reinvested.
NII has two operating subsidiaries: FoxMeyer, in which NII owns
approximately 80.5% of the outstanding shares and which contributed
approximately 94% of NII's net sales in Fiscal 1994, and Ben Franklin, in which
NII owns approximately 67% of the outstanding shares and which contributed
approximately 6% of NII's net sales in Fiscal 1994. The NII Peer Group Index
shown on the performance graph (which is weighted on the basis of market
capitalization) consists of (i) NII, FoxMeyer and Ben Franklin; (ii) the
following companies which are engaged primarily in the wholesale drug
distribution business: Bergen Brunswig Corporation, Bindley Western Industries,
Inc., Cardinal Health, Inc., D&K Wholesale Drug, Inc., Krelitz Industries, Inc.,
McKesson Corporation, Moore Medical Corporation and Owens & Minor, Inc.; and
(iii) the following companies which are engaged primarily in the sale of variety
and crafts merchandise: Ambers Stores, Inc. and Michaels Stores, Inc.
[INSERT GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
----------------------------------------------
4/1/89 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NII................. 100.00 94.93 89.13 77.54 75.63 93.08
S&P 500 Index....... 100.00 119.27 136.46 151.53 174.60 177.17
NII Peer Group
Index............. 100.00 106.14 145.05 146.44 147.18 181.76
</TABLE>
The foregoing performance graph is not incorporated in any prior or future
filings of NII under the Securities Act or the Exchange Act, directly or by
reference to the incorporation of proxy statements of NII, unless NII
specifically incorporates the graph by reference, and the graph shall not
otherwise be deemed filed under such Acts.
70
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ('Section 16(a)') requires NII's
directors, executive officers and persons who beneficially own more than 10% of
a registered class of NII's equity securities ('10% Owners') to file reports of
beneficial ownership of NII's securities and changes in such beneficial
ownership with the Commission. Directors, executive officers and 10% Owners are
also required by rules promulgated by the Commission to furnish NII with copies
of all forms they file pursuant to Section 16(a).
Based solely upon a review of the copies of the forms filed pursuant to
Section 16(a) furnished to NII, or written representations that no year-end Form
5 filings were required for transactions occurring during Fiscal 1994, NII
believes that its directors, executive officers and 10% Owners complied with
Section 16(a) filing requirements applicable to them during Fiscal 1994.
EMPLOYMENT AGREEMENTS WITH NII EXECUTIVE OFFICERS
Effective October 24, 1991, NII entered into employment agreements with
each of Messrs. Butler and Estrin pursuant to which they each agreed to serve as
Co-Chief Executive Officer of NII through October 31, 1994 at a minimum annual
base salary of $350,000, subject to periodic increases by the NII Board of
Directors. The Co-Chief Executive Officers are also entitled to participate in
the benefits generally available to senior executives of NII and to receive such
other amounts as the FoxMeyer Board of Directors or any other entity controlled
by NII may authorize. For additional compensation received by Messrs. Butler and
Estrin, see the NII Summary Compensation Table on page 61 and Note D thereto.
In addition to base salary, Messrs. Butler and Estrin have each been
granted, as an incentive bonus under their employment agreements, options to
purchase 440,000 shares of NII Common Stock at an exercise price of $15.00 per
share (the average price per share of NII Common Stock on the effective date of
the employment agreements), which options were approved by NII's stockholders at
the annual meeting in 1992 (the 'Bonus Award Options').
All of the Bonus Award Options are presently exercisable and will expire on
October 31, 1994, unless the executive's employment is terminated for just
cause, in which event the right to exercise any unexercised Bonus Award Options
will terminate. The options contain anti-dilution provisions to maintain the
percentage ownership represented by the shares issuable upon exercise thereof
and are not transferrable (other than by will or the laws of descent and
distribution). However, each Co-Chief Executive Officer has certain rights to
have NII register his or his transferee's shares of NII Common Stock issuable
upon exercise of Bonus Award Options and to pay the expenses incurred in
connection therewith.
If either executive is removed without his consent as Co-Chairman of the
Board or Co-Chief Executive Officer of NII, or if either executive dies or
becomes permanently or totally disabled during the term of the employment
agreements, each executive (or his estate, as the case may be) is entitled to
exercise his Bonus Award Options.
On June 3, 1994, each of Messrs. Butler and Estrin were granted options to
purchase 800,000 shares of NII Common Stock. These options are not reflected in
their beneficial ownership of NII Common Stock shown in the table under
'Ownership of Shares of NII Common Stock of Certain Beneficial Owners and
Management' because these options are not presently exercisable or exercisable
within 60 days of the NII Annual Meeting.
Peter B. McKee, the Vice President and Chief Financial Officer of NII, has
an employment agreement with FoxMeyer in his capacity as Senior Vice President
and Chief Financial Officer of FoxMeyer which expires on January 14, 1997. Under
the terms of the agreement, Mr. McKee's minimum annual base salary may not be
less than his annual base salary as of January 15, 1994 (which was $200,000 per
annum). If Mr. McKee's employment with FoxMeyer is terminated for any reason
other than for cause, Mr. McKee will be entitled to receive monthly severance
payments equivalent to his monthly base salary in effect at the time of
termination for a period equal to the longer of the remaining term of his
employment agreement or one year.
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<PAGE>
OWNERSHIP OF NII COMMON STOCK OF
CERTAIN BENEFICIAL OWNERS AND NII MANAGEMENT
The following table sets forth certain information as of August 22, 1994
with respect to the beneficial ownership of shares of NII Common Stock by (i)
persons known to NII to be the beneficial owners of more than 5% of the
outstanding shares of NII Common Stock, (ii) all directors and nominees for
election as directors of NII, (iii) each of the executive officers named in the
NII Summary Compensation Table and (iv) all directors and executive officers of
NII as a group.
The number of shares of NII Common Stock beneficially owned by each
individual set forth below is determined under rules of the Commission and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares as to which
an individual has sole or shared voting power or investment power and any shares
which an individual presently, or within 60 days of the NII Annual Meeting, has
the right to acquire through the exercise of any stock option or other right.
Unless otherwise indicated, each individual has sole voting and investment power
(or shares such powers with his spouse) with respect to the shares of NII Common
Stock set forth in the following table.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENTAGE OF
NAME AND ADDRESS(1) BENEFICIALLY OUTSTANDING
OF BENEFICIAL OWNER OWNED SHARES
- --------------------------------- ---------------- ----------------
<S> <C> <C>
The Centaur Group................ 3,777,000(2) 29.6%
c/o Centaur Partners IV
17 Battery Place, Suite 709
New York, New York 10004
DIRECTORS AND NOMINEES FOR
DIRECTORS
(including those who are also
Executive Officers):
Abbey J. Butler................ 4,217,000(3) 31.9%
Melvyn J. Estrin............... 4,217,000(4) 31.9%
Sheldon W. Fantle.............. 16,500(5) (11)
Paul M. Finfer................. 16,500(6) (11)
Alfred H. Kingon............... 16,500(7) (11)
William G. Tull................ 19,500(8) (11)
EXECUTIVE OFFICERS:
Lawrence J. Pilon 85,000(9) (11)
(through January 1994).........
Peter B. McKee................. 1,000(10) (11)
Edward L. Massman.............. -0- --
All Directors and Executive 4,727,000(12))13) 34.5%(12)(13)
Officers
as a Group (9 persons).........
</TABLE>
- ------------------
(1) The business address of each of the persons listed above is c/o National
Intergroup, Inc., 1220 Senlac Drive, Carrollton, Texas 75006.
(2) The Centaur Group is comprised of Messrs. Butler and Estrin, Centaur
Partners IV, a New York general partnership ('Centaur IV'), Estrin Equities
Limited Partnership, a Maryland limited partnership ('Estrin Equities') and
Butler Equities II, L.P., a Delaware limited partnership ('Butler
Equities'). The general partners of Centaur IV are Estrin Equities and
Butler Equities.
(footnotes continued on following page)
72
<PAGE>
(footnotes continued from preceding page)
Mr. Estrin owns 82.5% of the outstanding capital stock of Human Service
Group, Inc., a Delaware corporation ('Human Service'). Human Service owns all
of the capital stock of HSG Acquisition Co., a Delaware corporation ('HSG').
HSG and MJE, Inc., a Virginia corporation controlled by Mr. Estrin, are the
general partners of Estrin Equities.
Mr. Butler owns all of the outstanding capital stock of AB Acquisition Corp.,
a Delaware corporation ('AB Acquisition'). AB Acquisition is the sole general
partner of Butler Equities.
The Centaur Group in the aggregate holds 3,777,000 shares of NII Common
Stock. These shares are held directly by the persons and entities described
above as follows: Mr. Butler, none; Mr. Estrin, 392,375; Centaur IV, 1,000
shares; Estrin Equities, 1,495,625 shares; and Butler Equities, 1,888,000
shares. Pursuant to the terms of the Centaur IV partnership agreement,
neither Estrin Equities nor Butler Equities may acquire or dispose of shares
of NII Common Stock without the consent of Centaur IV. In addition, pursuant
to the Centaur IV partnership agreement, Estrin Equities and Butler Equities
must vote all shares of NII Common Stock owned by each such entity as
directed by Centaur IV. Accordingly, Centaur IV, which directly holds 1,000
shares, may be deemed to share the power to direct the voting and disposition
of the 1,495,625 and the 1,888,000 shares held by each of Estrin Equities and
Butler Equities, respectively.
Estrin Equities has designated Mr. Estrin and Butler Equities has designated
Mr. Butler to act as a 'Coordinating Person' pursuant to the Centaur IV
partnership agreement. Messrs. Estrin and Butler, acting together, manage the
affairs of Centaur IV and have the authority to make all decisions concerning
Centaur IV's interest in the NII Common Stock.
Estrin Equities disclaims beneficial ownership of the shares of NII Common
Stock owned by Butler Equities and Butler Equities disclaims beneficial
ownership of the shares of NII Common Stock owned by Estrin Equities and Mr.
Estrin individually.
(3) In addition to his beneficial ownership of NII Common Stock through The
Centaur Group, Mr. Butler also holds an option to purchase 440,000 shares of
NII Common Stock which is presently exercisable. This option expires on
October 31, 1994. On June 3, 1994, Mr. Butler was granted options to
purchase 800,000 shares of NII Common Stock. These options are not reflected
in his beneficial ownership of NII Common Stock shown in the table above
because these options are not presently exercisable or exercisable within 60
days of the NII Annual Meeting. Mr. Butler also holds 86,948 shares of
FoxMeyer Common Stock of directly, 2,140.7 shares of FoxMeyer Common Stock
through his participation in the FoxMeyer 401(k) Plan and options to
purchase 135,000 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the NII Annual Meeting which
shares and options represent less than 1% of the outstanding FoxMeyer Common
Stock. Mr. Butler also holds options to purchase 50,000 shares of common
stock of Ben Franklin Common Stock which are presently exercisable or
exercisable within 60 days of the NII Annual Meeting, which options
represent less than 1% of the outstanding Ben Franklin Common Stock.
(4) In addition to his beneficial ownership of NII Common Stock through The
Centaur Group, Mr. Estrin also holds an option to purchase 440,000 shares of
NII Common Stock which is presently exercisable. This option expires on
October 31, 1994. On June 3, 1994, Mr. Estrin was granted options to
purchase 800,000 shares of NII Common Stock. These options are not reflected
in his beneficial ownership of NII Common Stock shown in the table above
because these options are not presently exercisable or exercisable within 60
days of the NII Annual Meeting. Mr. Estrin holds 421.4 shares of FoxMeyer
Common Stock through his participation in the FoxMeyer 401(k) Plan, he is a
co-trustee for two trusts which hold an aggregate of 20,000 shares of
FoxMeyer Common Stock (the beneficial ownership of which he disclaims) and
he holds options to purchase 135,000 shares of FoxMeyer Common Stock which
are presently exercisable or exercisable within 60 days of the NII Annual
Meeting which shares and options represent less than 1% of the outstanding
FoxMeyer Common Stock. Mr. Estrin is also a co-trustee for two trusts which
hold an aggregate of 10,000 shares of
(footnotes continued on following page)
73
<PAGE>
(footnotes continued from preceding page)
Ben Franklin Common Stock (the beneficial ownership of which he disclaims)
and he holds options to purchase 50,000 shares of Ben Franklin Common Stock
which are presently exercisable or exercisable within 60 days of the NII
Annual Meeting which shares and options represent less than 1% of the
outstanding Ben Franklin Common Stock.
(5) Mr. Fantle holds options to purchase 16,500 shares of NII Common Stock which
are presently exercisable or exercisable within 60 days of the NII Annual
Meeting. He also holds 1,000 shares of FoxMeyer Common Stock and options to
purchase 16,500 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the NII Annual Meeting which
shares and options represent less than 1% of the outstanding FoxMeyer Common
Stock.
(6) Mr. Finfer holds options to purchase 16,500 shares of NII Common Stock which
are presently exercisable or exercisable within 60 days of the NII Annual
Meeting. He also holds 400 shares of FoxMeyer Common Stock and options to
purchase 16,500 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the NII Annual Meeting, which
shares and options represent less than 1% of the outstanding FoxMeyer Common
Stock.
(7) Mr. Kingon holds options to purchase 16,500 shares of NII Common Stock which
are presently exercisable or exercisable within 60 days of the NII Annual
Meeting.
(8) Mr. Tull holds 3,000 shares of NII Common Stock and options to purchase
16,500 shares of NII Common Stock which are presently exercisable or
exercisable within 60 days of the NII Annual Meeting. Mr. Tull also holds
3,000 shares of FoxMeyer Common Stock, which shares represent less than 1%
of the outstanding FoxMeyer Common Stock.
(9) Mr. Pilon held options to purchase 85,000 shares of NII Common Stock which
were all exercisable. After his resignation from NII, Mr. Pilon had the
right to exercise his options for a period of 30 days after his last date of
employment. All of Mr. Pilon's options have terminated.
(10) Mr. McKee shares beneficial ownership of 1,000 shares of FoxMeyer Common
Stock with a minor child.
(11) Indicates less than 1%.
(12) Includes 946,000 shares of NII Common Stock subject to options which are
presently exercisable, or exercisable within 60 days of the NII Annual
Meeting held by all directors and executive officers of NII (but excludes
options formerly belonging to Mr. Pilon which terminated upon his
resignation from NII) as a group under the NII 1987 Plan and the options
held by Mr. Butler and Mr. Estrin.
(13) Includes the 3,777,000 shares of NII Common Stock held by members of The
Centaur Group, as described above.
74
<PAGE>
ELECTION OF FOXMEYER DIRECTORS
At the FoxMeyer Annual Meeting, six directors are to be elected to serve
until the next annual meeting of stockholders or until their successors have
been duly elected and qualified.
All properly executed proxies received in response to this solicitation
will be voted. Unless otherwise specified in the proxy, it is the intention of
the persons named in the proxies solicited by the FoxMeyer Board of Directors to
vote FOR the nominees listed below, all of whom are presently serving on the
FoxMeyer Board of Directors. If events not now known or anticipated make any of
the nominees unable to serve, the proxies will be voted, at the discretion of
the holders thereof, for other nominees supported by the management of FoxMeyer
in lieu of those unable to serve.
The following sets forth the name, age, period served as director, present
position, if any, with FoxMeyer and any other business experience of the
individuals nominated by the FoxMeyer Board of Directors for election at the
FoxMeyer Annual Meeting.
ABBEY J. BUTLER, 57, is the Co-Chairman of the Board and Co-Chief Executive
Officer of FoxMeyer. Mr. Butler has served as Co-Chairman of the Board of
Directors of FoxMeyer since March 1991, as Co-Chief Executive Officer since May
1993 and as a director since August 1990. Mr. Butler has also served as Co-
Chairman of the Board of NII since March 1991 and as Co-Chief Executive Officer
of NII since October 1991. Since November 1991, he has also served as
Co-Chairman of the Board of Ben Franklin. Mr. Butler has also been the President
and a director of C.B. Equities Corp., a private investment company, since 1982.
Mr. Butler presently serves as a director and a member of the Executive
Committee of FWB Bancorporation, the holding company of FWB Bank of Maryland, a
director of CST Entertainment Imaging, Inc., a company engaged in digital color
enhancement of black and white films, a trustee of The American University, a
director of the Starlight Foundation, a charitable organization, and is a member
of the advisory boards of the Pediatric AIDS Foundation and the National Center
for Survivors of Child Abuse. Mr. Butler was appointed by President Bush to
serve on the President's Advisory Committee on the Arts and he now serves as a
member of the Executive Committee of the National Committee for the Performing
Arts, John F. Kennedy Center, Washington, D.C.
MELVYN J. ESTRIN, 52, is the Co-Chairman of the Board and Co-Chief
Executive Officer of FoxMeyer. Mr. Estrin has served as Co-Chairman of the Board
of Directors of FoxMeyer since March 1991, as Co-Chief Executive Officer since
May 1993 and as a director since August 1990. Mr. Estrin has also served as Co-
Chairman of the Board of NII since March 1991 and as Co-Chief Executive Officer
of NII since October 1991. Since November 1991, he has also served as the
Co-Chairman of the Board of Ben Franklin. From December 1983 to the present, Mr.
Estrin has also served as the Chairman of the Board and Chief Executive Officer
of Human Service Group, Inc., a private management and investment firm, and of
University Research Corporation, a consulting firm. Mr. Estrin presently serves
as a director and a member of the Executive Committee of FWB Bancorporation, the
holding company of FWB Bank of Maryland, a director of Washington Gas Light
Company, a public utility company, and as a trustee of the University of
Pennsylvania. Mr. Estrin serves as a Commissioner on the President's National
Capital Planning Commission.
THOMAS L. ANDERSON, 46, is a director and President and Chief Operating
Officer of FoxMeyer. Mr. Anderson has been the President of FoxMeyer since May
1993, the Chief Operating Officer since August 1991 and a director since July
1992. He served as the Executive Vice President of FoxMeyer from September 1990
to May 1993 and Senior Vice President and Chief Financial Officer of FoxMeyer
from January 1989 to September 1990. Mr. Anderson was Vice President of Fresh
Meats and Refinery Operations of Wilson Foods Corporation, a meat processor and
distribution company, from August 1987 to December 1988, after serving as Vice
President of Planning and Distribution of Wilson Foods Corporation from November
1985 to August 1987. Mr. Anderson has served on the Board of Directors of the
National Wholesale Druggists' Association since November 1992 and is a member of
its Audit Committee.
DANIEL J. CALLAHAN, III, 62, has been a director of FoxMeyer since June
1991. He has served as Chairman and Chief Executive Officer of USLICO
Corporation, a life insurance company, since October 1992. He has been Vice
Chairman of the Board of American Security Bank since February 1991 and a
director of USLICO Corporation since 1985. Mr. Callahan was Chairman of the
Board and Chief Executive Officer of American Security Bank from January 1985 to
February 1991 and President and a director of MNC Financial, a bank
75
<PAGE>
holding company, from March 1987 to February 1991. Mr. Callahan serves as a
director of Washington Gas Light Company, a public utility company, and as a
director of the Atlantic Council, a non-profit public center that addresses the
advancement of the United States' global interests among Atlantic and Pacific
communities.
HARVEY A. FAIN, 56, has been a director of FoxMeyer since June 1991. He has
been the President and Chief Executive Officer and a director since 1982 of
Harvey A. Fain & Co., Inc., a computer consulting company. Mr. Fain is also a
director of Ben Franklin.
BRUCE E. KAHLER, 52, has been a director of FoxMeyer since June 1991. Since
May 1993, he has served as the President and Chief Executive Officer of
Seabrokers, Inc., a ship brokerage and consulting firm. From December 1987 to
April 1993, he was a partner and a director of Atlantic Chartering, a ship
brokerage firm engaged in oil tanker chartering and sales. From March 1986 to
December 1987, Mr. Kahler was President and Chief Executive Officer of Marine
Transport Lines, Inc., a shipping company.
VOTE REQUIRED
The affirmative vote of a plurality of the shares of FoxMeyer Common Stock
represented in person or by proxy at the Annual Meeting is required for the
election of directors of FoxMeyer. NII has indicated that it intends to vote the
SHARES OF FOXMEYER COMMON STOCK FOR THE ELECTION OF ALL SIX NOMINEES, THEREBY
ASSURING THAT EACH NOMINEE WILL BE ELECTED AS A MEMBER OF THE FOXMEYER BOARD OF
DIRECTORS.
COMMITTEES OF THE FOXMEYER BOARD OF DIRECTORS
The FoxMeyer Board of Directors has a standing Executive Committee, Audit
Committee and Personnel and Compensation Committee. It does not have a
nominating committee. The principal responsibilities and membership of each
committee are described in the following paragraphs.
EXECUTIVE COMMITTEE. The Executive Committee has the authority to exercise
substantially all of the powers of the FoxMeyer Board of Directors in the
management and business affairs of FoxMeyer, except it does not have the
authority to declare dividends, authorize the issuance of shares of FoxMeyer
Common Stock, modify the FoxMeyer Charter or FoxMeyer's By-Laws, adopt any
agreement of merger or consolidation or recommend to the stockholders the sale,
lease or exchange of all or substantially all of FoxMeyer's assets or the
dissolution of FoxMeyer. Regularly scheduled meetings of the FoxMeyer Board of
Directors are held periodically each year and special meetings are held from
time to time. As a consequence, the occasions on which this committee is
required to take action are limited. The members of this committee are Messrs.
Butler, Estrin and Anderson. The committee held no meetings during Fiscal 1994.
AUDIT COMMITTEE. The Audit Committee reviews the work of FoxMeyer's
independent auditors, management and internal audit staff to ensure that each is
properly discharging its responsibilities in the area of financial controls and
reporting. This committee is presently comprised of Mr. Callahan, who is the
Chairman, and Messrs. Fain and Kahler. This committee held three meetings during
Fiscal 1994.
PERSONNEL AND COMPENSATION COMMITTEE. The FoxMeyer Compensation Committee
reviews the performance of the management of FoxMeyer, determines the
compensation of management and makes recommendations to the FoxMeyer Board of
Directors with respect to the establishment of management compensation plans.
This committee is presently comprised of Mr. Fantle, who is the Chairman, and
Messrs. Butler, Callahan, Estrin and Finfer. This committee held five meetings
in Fiscal 1994.
MEETINGS OF THE FOXMEYER BOARD OF DIRECTORS
During Fiscal 1994, there were seven meetings of the FoxMeyer Board of
Directors. Each director attended at least 75% of the meetings of the FoxMeyer
Board of Directors and the committees of the FoxMeyer Board of Directors of
which he was a member in Fiscal 1994.
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<PAGE>
COMPENSATION OF FOXMEYER DIRECTORS
FoxMeyer Directors who are not officers or employees of FoxMeyer or one of
its subsidiaries or members of the Executive Committee receive an annual fee of
$15,000. They also receive $1,000 for each meeting of the FoxMeyer Board of
Directors or of a committee of the FoxMeyer Board of Directors (other than the
Executive Committee) they attend. Chairmen of each of the committees receive an
additional $1,000 for each meeting of the committee they attend. Directors are
reimbursed for travel and lodging expenses in connection with FoxMeyer Board and
committee meetings.
Under the terms of FoxMeyer's Stock Option and Performance Award Plan (the
'Option Plan'), directors who are not officers or employees of FoxMeyer or one
of its subsidiaries ('outside directors') are automatically granted options to
purchase 15,000 shares of FoxMeyer Common Stock when first elected to serve on
the FoxMeyer Board of Directors and, in each year they continue to serve as
members of the FoxMeyer Board of Directors, options to purchase 1,000 shares of
FoxMeyer Common Stock on the third trading date following the later of (i) the
date on which the annual meeting of FoxMeyer's stockholders, or any adjournment
thereof, is held each year or (ii) the date on which FoxMeyer's earnings for the
fiscal quarter immediately preceding the date of such annual meeting are
released to the public. Subsequent to the Merger, each director (including the
directors comprising the Special Committee) of the surviving corporation in the
Merger may receive grants under the 1993 Option Plan, assuming the Option Plan
Amendments are approved by stockholders at the NII Annual Meeting. See
'Amendment of 1993 Option Plan to Allow Grants to Individuals who Serve as
Directors of any Subsidiary Corporation of NII.'
EXECUTIVE OFFICERS OF FOXMEYER
A brief biography of each executive officer of FoxMeyer (other than the
Co-Chairmen of the Board and Co-Chief Executive Officers and the President and
Chief Operating Officer, whose biographies are set forth under 'Election of
FoxMeyer Directors' above) who served during Fiscal 1994 is provided below.
ROBERT R. BROWN, 50, has been Senior Vice President--Information Services
and Chief Information Officer of FoxMeyer since September 1992. He was Chief
Information Officer of A.C. Nielsen from January 1991 to August 1992, President
of Information Services and Technology for A.C. Nielsen from August 1988 to
January 1991 and Executive Vice President--Finance and Administration for A.C.
Nielsen Marketing Research from June 1987 to August 1988.
WILLIAM L. ESTES, 47, has been Senior Vice President--Sales and Operations
of FoxMeyer since August 1994. He joined FoxMeyer in December 1993 as Senior
Vice President--Sales. From October 1991 to December 1993, he was Vice President
and Chief Operating Officer of the U.S. operations of The Body Shop, Inc., a
manufacturer and distributor of specialty skin and hair-color products with
worldwide sales of $600 million. From 1983 to October 1991, he was employed by
Frito-Lay, Inc., a subsidiary of Pepsico, Inc., where he served from March 1990
as Vice President, Operations Support, and was responsible for the warehousing
and distribution of all Frito-Lay products.
BRENDA L. FUGAGLI, 37, has been Senior Vice President--Retail Marketing and
Product Management of FoxMeyer since August 1994. From April 1992 to August
1994, she was Vice President--Inventory Management and Purchasing of FoxMeyer.
Prior thereto, she was Vice President and Controller of FoxMeyer from March 1989
to April 1992.
WILLIAM J. JONES, 52, has been Regional Senior Vice President of FoxMeyer
since August 1994. He was Senior Vice President--National Accounts since October
1993. He was Regional Senior Vice President--Sales of FoxMeyer from April 1992
to October 1993 and Senior Regional Vice President of FoxMeyer from April 1984
to April 1992.
RICHARD LEVIN, 50, has been Regional Senior Vice President of FoxMeyer from
August 1994 to August 1994. From June 1993 to August 1994, he was Regional Vice
President--Sales of FoxMeyer. Prior thereto, he was Vice President and General
Manager of Sales for McKesson Drug Company from January 1992 to June 1993 and
Regional Vice President of McKesson Drug Company from August 1989 to January
1992.
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<PAGE>
PETER B. MCKEE, 56, has been Senior Vice President and Chief Financial
Officer of FoxMeyer since January 1994. He has also served as Vice President and
Chief Financial Officer of NII since February 1994. From October 1991 to
December 1993, he was Executive Vice President and Chief Financial Officer of
InterSolve Group, a managerial consulting firm. From March 1988 to September
1991, he was Senior Vice President and Chief Financial Officer of Metro
Airlines, a regional airline that operated in the Southwest and Eastern United
States and in the Caribbean, which filed a petition under chapter 11 of the
United States Bankruptcy Code in April 1991 and was subsequently reorganized
thereunder.
JOHN R. NIXON, 40, has been Regional Senior Vice President of FoxMeyer
since August 1994. He was Senior Vice President--Retail and Chain Sales of
FoxMeyer from November 1993 to August 1994. He was Vice President--National
Accounts of FoxMeyer from July 1992 to November 1993. From January 1990 to July
1992, he was Group Vice President of Harris Wholesale Company, a regional
wholesale drug distribution company acquired by FoxMeyer in May 1992, and had
responsibility for sales, purchasing, inventory management and strategic
planning. From May 1987 to January 1990, he was Division Vice President of
Harris Wholesale Company.
GLENN G. PAPIT, 47, has been Senior Vice President--Hospital and Alternate
Care Sales of FoxMeyer since July 1994. From August 1992 to July 1994, he was
Vice President of National Accounts for Owens & Minor, Inc., a medical and
surgical distribution company with annual revenues of $2.2 billion. Prior
thereto, he was a pastoral minister for 13 years. From October 1977 to November
1979, he was Sales Manager and Director of Government Relations for Owens &
Minor, Inc.
FORMER FOXMEYER EXECUTIVE OFFICER
MICHAEL C. WEBSTER, 45, was Senior Vice President--Sales and Marketing from
October 1993 to July 1994. He was Senior Vice President--Retail and Chain Sales
of FoxMeyer from April 1992 to October 1993, Senior Vice President--Sales of
FoxMeyer from March 1984 to April 1992, and Vice President--Marketing of
FoxMeyer from July 1980 to March 1984.
78
<PAGE>
COMPENSATION OF FOXMEYER EXECUTIVE OFFICERS
The following table sets forth the compensation for the three fiscal years
ended March 31, 1994 received by FoxMeyer's Co-Chief Executive Officers and the
three remaining most highly compensated executive officers of FoxMeyer in Fiscal
1994.
FOXMEYER SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(A)
---------------------------
ANNUAL COMPENSATION AWARDS
---------------------------------- ----------
OTHER SECURITIES PAYOUTS
ANNUAL UNDERLYING ------------- ALL OTHER
NAME AND PRINCIPAL FISCAL COMPENSA- OPTIONS/ LTIP COMPENSA-
POSITION YEAR SALARY($) BONUS($) TION($) SARS (#) PAYOUTS($)(B) TION($)(C)
- ------------------------------- ------ --------- -------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Abbey J. Butler (D)
Co-Chairman of the 1994 275,000 143,330 0 0 0 0
Board and Co-Chief Executive 1993 275,000 85,000 (G) 50,000 0 0
Officer...................... 1992 206,250 139,000 (G) 110,000 0 0
Melvyn J. Estrin (D)
Co-Chairman of the 1994 275,000 143,330 0 0 0 0
Board and Co-Chief Executive 1993 275,000 85,000 (G) 50,000 0 0
Officer...................... 1992 206,250 139,000 (G) 110,000 0 0
Thomas L. Anderson (E) 1994 305,664 155,088 (G) 0 0 4,947
President and Chief Operating 1993 250,250 275,000 0 24,000 75,000 4,477
Officer...................... 1992 235,250 107,300 0 110,000 181,670 4,388
Robert R. Brown (F)
Senior Vice President 1994 230,750 218,240 0 0 0 2,813
and Chief Information 1993 123,669 30,000 87,179 75,000 0 0
Officer...................... 1992 -- -- -- -- -- --
Michael C. Webster 1994 189,079 59,098 (G) 0 0 4,684
Senior Vice President-- Sales 1993 177,000 21,910 (G) 12,000 37,500 4,598
and Marketing................ 1992 143,565 50,200 (G) 60,000 93,290 3,947
(through July 1994)
</TABLE>
- ------------------
(A) FoxMeyer made no awards of restricted stock during the three fiscal years
ended March 31, 1994 to any of the five executive officers of FoxMeyer
named in the FoxMeyer Summary Compensation Table.
(B) Under the Performance Units Supplement, effective April 1, 1989, to the NII
1987 Plan, NII granted, in April 1989, 37,000 performance units ('1989
Performance Units') to Mr. Anderson and 19,000 1989 Performance Units to
Mr. Webster. In April 1990, NII granted 30,000 performance units to Mr.
Anderson and 15,000 1990 Performance Units to Mr. Webster.
The value of the 1989 Performance Units and the 1990 Performance Units was
tied to the operating results of FoxMeyer Drug Company, a wholly owned
subsidiary of FoxMeyer ('FoxMeyer Drug'), and was based on operating goals
set by the NII Compensation Committee relating to return on invested
capital of FoxMeyer Drug over the three-year periods ended March 31, 1992
and March 31, 1993, respectively. The NII Compensation Committee
determined, in Fiscal 1992, to pay $4.91 for each 1989 Performance Unit
and, in Fiscal 1993, $2.50 for each 1990 Performance Unit.
(C) Represents amounts paid by FoxMeyer to each executive officer's account
under the FoxMeyer 401(k) Plan.
(footnotes continued on following page)
79
<PAGE>
(footnotes continued from preceding page)
<TABLE>
<C> <S>
(D) Mr. Butler's and Mr. Estrin's compensation in Fiscal 1994 was for serving
as Co-Chairmen of the Board and Co-Chief Executive Officers of FoxMeyer
and, in Fiscal 1993 and 1992 was for serving as Co-Chairmen of the
Board of FoxMeyer. In Fiscal 1994, $5,830 of the bonus paid to each of Mr.
Butler and Mr. Estrin was paid under FoxMeyer's performance plus plan (a
plan which paid bonuses to all employees upon the attainment by FoxMeyer of
an earnings target). In addition, Messrs. Butler and Estrin each received
from NII, in each of Fiscal 1994, 1993 and 1992, a salary of $350,000 and,
in Fiscal 1994, a bonus of $175,000 and, in Fiscal 1993, a bonus of
$65,000. NII makes contributions on behalf of Messrs. Butler and Estrin to
the FoxMeyer 401(k) Plan. For Mr. Butler, NII contributed $5,372 in Fiscal
1994 and $1,750 in each of Fiscal 1993 and 1992. For Mr. Estrin, NII
contributed $5,958 in Fiscal 1994, $1,167 in Fiscal 1993 and $1,750 in
Fiscal 1992.
(E) For Fiscal 1993, Mr. Anderson's bonus included a retention bonus of
$225,000 that was paid in July 1992.
(F) Mr. Brown has been Senior Vice President--Information Services and Chief
Information Officer of FoxMeyer since September 1992. For Fiscal 1994, Mr.
Brown's bonus included $150,000 paid to him for accomplishing significant
improvements in FoxMeyer's strategic plan for upgrading its information
systems. For Fiscal 1993, the amount shown under 'Other Annual
Compensation' represents amounts paid to Mr. Brown in connection with his
relocation to Dallas.
(G) Other annual compensation to this executive officer, including payment of
club dues, personal use of corporate property (including the use of NII's
airplane) and other personal benefits, did not exceed the lesser of $50,000
or 10% of such executive officer's total annual salary and bonus for such
fiscal year.
</TABLE>
80
<PAGE>
REPORT OF THE FOXMEYER COMPENSATION COMMITTEE
The FoxMeyer Compensation Committee is comprised of five directors: Mr.
Sheldon W. Fantle, who is the Chairman, and Messrs. Daniel J. Callahan III, and
Paul M. Finfer, each of whom is an outside director, and Messrs. Abbey J. Butler
and Melvyn J. Estrin, the Co-Chairmen of the Board and Co-Chief Executive
Officers of FoxMeyer. Although Messrs. Butler and Estrin are members of the
FoxMeyer Compensation Committee, they do not participate in the determination of
their annual salaries and bonuses.
EXECUTIVE COMPENSATION. FoxMeyer provides an executive compensation program
that aims to reinforce FoxMeyer's overall business mission, strategies, values
and objectives. The goals of the executive compensation program are to motivate
and reward executive officers and other key employees, to improve long-term
stockholder value and to attract and retain high-quality executive talent. The
executive compensation program consists of base salary, annual and long-term
incentive payments, stock options and employee benefits. FoxMeyer reviews its
compensation programs periodically and compares its pay practices with other
companies in the wholesale distribution business and with companies staffed with
similarly skilled executives. FoxMeyer's objective is to position total
compensation at approximately the median of market pay for executives in similar
positions. Annual incentive payments are based on the attainment of specific
goals established each year. Long-term incentives, in the form of cash payments
and stock option grants, are designed to reward sustained corporate performance
over a three-to five-year period.
During the first fiscal quarter of each year, the FoxMeyer Compensation
Committee meets to review salary increases for the current year and incentive
payments to be made in connection with the previous year's performance. The
FoxMeyer Compensation Committee also reviews the current fiscal year's business
plan and establishes performance objectives for each executive officer. Goals
relating to FoxMeyer's financial performance, based on such factors as earnings
per share, return on capital, pre-tax income or net income, are set as a primary
component of executive incentive compensation. Individual performance objectives
are also determined for officers and are weighted to reflect their respective
functions, significance and contributions to FoxMeyer's business goals. In
making its decisions, the FoxMeyer Compensation Committee receives
recommendations from FoxMeyer's Co-Chief Executive Officers and President on
senior executives and then meets privately (without the presence of management,
including FoxMeyer's Co-Chief Executive Officers in relation to their
compensation) to determine compensation for FoxMeyer's Co-Chief Executive
Officers. The FoxMeyer Compensation Committee's decisions are based on input
from FoxMeyer's Human Resources Department, and periodically from outside
advisors, to maintain the desired level of competitiveness and congruence with
long-term FoxMeyer performance.
During the year, the FoxMeyer Compensation Committee receives periodic
updates on FoxMeyer's operating results and the progress made by executive
officers towards performance targets relevant to the incentive programs.
Discussions of management's contributions and performance are held periodically.
FOXMEYER'S CO-CHIEF EXECUTIVE OFFICERS. In Fiscal 1994, Messrs. Butler and
Estrin each received $275,000 from FoxMeyer for their services as Co-Chairmen of
the Board and Co-Chief Executive Officers of FoxMeyer. The $275,000 annual
payment to each Co-Chief Executive Officer was approved by the FoxMeyer Board of
Directors in June 1991, based upon the substantial, but not full-time services
they were expected to render to FoxMeyer as Co-Chairmen of the Board, including
financial and strategic planning and supervisory and managerial services. When
they assumed the additional offices of Co-Chief Executive Officers of FoxMeyer
in May 1993, there was no increase in the payments to Messrs. Butler and Estrin.
For Fiscal 1994, FoxMeyer, based upon the recommendation of the FoxMeyer
Compensation Committee, awarded each Co-Chief Executive Officer a bonus of
$137,500 for their contributions in the rebuilding and restructuring of
FoxMeyer's operating businesses and financial structure, the completion of a
number of financing transactions in Fiscal 1994 that provided FoxMeyer with
greater liquidity at lower cost, the improved profitability experienced by
FoxMeyer in Fiscal 1994 and the preparation of FoxMeyer's three-year strategic
plan.
SHELDON W. FANTLE (CHAIRMAN)
ABBEY J. BUTLER
DANIEL J. CALLAHAN III
MELVYN J. ESTRIN
PAUL M. FINFER
81
<PAGE>
The foregoing report is not incorporated by reference in any prior or
future filings of FoxMeyer under the Securities Act or under the Exchange Act,
directly or by reference to the incorporation of proxy statements of FoxMeyer,
unless FoxMeyer specifically incorporates the report by reference, and the
report shall not otherwise be deemed filed under such Acts.
FOXMEYER'S COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Butler and Mr. Estrin, members of the FoxMeyer Compensation Committee,
served as Co-Chairmen of the Board and Co-Chief Executive Officers of FoxMeyer
during Fiscal 1994.
OPTION/SAR GRANTS IN FISCAL 1994 TO FOXMEYER EXECUTIVE OFFICERS
FoxMeyer did not grant options in Fiscal 1994 to any of the executive
officers of FoxMeyer named in the FoxMeyer Summary Compensation Table.
The following table provides information as to options exercised, if any,
by each of the named executives in 1994 and the value of options held by such
executives at year end measured in terms of the last reported sale price for the
shares of FoxMeyer Common Stock on March 31, 1994 ($13 1/8 as reported on the
New York Stock Exchange Composite Tape).
AGGREGATE OPTION/SAR EXERCISES IN FISCAL 1994 BY FOXMEYER EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
VALUE UNEXERCISED OPTIONS/SAR
SHARES ACQUIRED REALIZED OPTIONS/SARS AT AT FISCAL YEAR END(A)
NAME ON EXERCISE (#) ($) FY-END (#) ($)
- ---------------------------------------- --------------- -------- --------------------------- ---------------------------
UNEXERCISABLE UNEXERCISABLE
EXERCISABLE ------------- EXERCISABLE -------------
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Abby J. Butler.......................... -- -- 135,000 25,000 -- --
Melvyn J. Estrin........................ -- -- 135,000 25,000 -- --
Thomas L. Anderson...................... -- -- 122,000 12,000 -- --
Robert R. Brown......................... -- -- 25,000 50,000 $25,000 $50,000
Michael C. Webster...................... -- -- 66,000 6,000 -- --
</TABLE>
- ------------------
<TABLE>
<S> <C>
(a) Market value of shares covered by in-the-money options on March 31, 1993, less option exercise price. Options
are in-the-money if the market value of the shares covered thereby is greater than the option exercise price.
</TABLE>
82
<PAGE>
LONG-TERM INCENTIVE PLANS--AWARDS IN FISCAL 1994 TO FOXMEYER EXECUTIVE OFFICERS
(A)
<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER
SHARES, PERIOD ESTIMATED FUTURE PAYOUTS UNDER
UNITS OR UNTIL NON-STOCK PRICE-BASED PLANS
OTHER MATURATION ------------------------------------------------
NAME RIGHTS(#) OR PAYOUT THRESHOLD($)(B) TARGET($)(C) MAXIMUM($)(D)
- ---------------------------------------- --------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Abbey J. Butler 8.0% 3/31/97 $ 0 $483,781 $ 1,342,861
Co-Chairman of the Board and
Co-Chief Executive Officer
Melvyn J. Estrin 8.0% 3/31/97 $ 0 $483,781 $ 1,342,861
Co-Chairman of the Board and
Co-Chief Executive Officer
Thomas L. Anderson 9.0% 3/31/97 $ 0 $544,254 $ 1,510,719
President and Chief Operating
Officer
Robert R. Brown 6.0% 3/31/97 $ 0 $362,836 $ 1,007,146
Senior Vice President
and Chief Information Officer
Michael C. Webster 6.0% 3/31/97 $ 0 $362,836 $ 1,007,146
Senior Vice President--
Sales and Marketing
(through July 1994)
</TABLE>
(A) In April 1993, FoxMeyer adopted the FoxMeyer LTIP to motivate and reward
sustained improvements in FoxMeyer's financial performance over a long-term
period. Under the FoxMeyer LTIP, the FoxMeyer Compensation Committee is
authorized to create, from time to time, performance pools to be funded by
FoxMeyer for the payment of incentive payments to participants in the
FoxMeyer LTIP upon the attainment by FoxMeyer of certain earnings and
financial parameters. The FoxMeyer Compensation Committee created the 1993
Performance Pool in April 1993 and it will be funded by FoxMeyer based on
attainment of sustained annual growth in its earnings before taxes over a
four-year period from Fiscal 1994 through Fiscal 1997. If another
performance pool is created under the FoxMeyer LTIP, amounts to be allocated
to the 1993 Performance Pool subsequent thereto may be adjusted based upon
terms and conditions to be established at such time by the FoxMeyer
Compensation Committee.
Under the 1993 Performance Pool, FoxMeyer's EBT target for Fiscal 1994 was
$46.1 million, which also served as the EBT starting point. Because FoxMeyer
has achieved its Fiscal 1994 EBT target, 2.5% of FoxMeyer's actual EBT for
Fiscal 1994 (which was $46.8 million) has been allocated to the 1993
Performance Pool. Thereafter, if FoxMeyer's EBT increases from year to year
by at least 7.5%, a certain percentage of FoxMeyer's EBT of the just
completed fiscal year will be allocated to the 1993 Performance Pool. The
Multiplier is 3% if growth in FoxMeyer's EBT equals 7.5% but is less than
15%; 4% if growth in EBT equals 15% but is less than 20%; 5% if
growth in EBT equals 20% but is less than 25%; and 7% if growth in EBT is
equal to or greater than 25%. If FoxMeyer's EBT declines from year to year,
dollars will be deducted from the amount allocated to the 1993 Performance
Pool based on the same scale except that, in calculating the amount to be
deducted, the Multiplier will be applied to the higher of FoxMeyer's EBT
target that year or the actual EBT.
(footnotes continued on following page)
83
<PAGE>
(footnotes continued from preceding page)
(B) If FoxMeyer's EBT after Fiscal 1994 declines each year, deductions will be
made from the 1993 Performance Pool and, depending upon the magnitude of the
decline in EBT each year, the $1,170,250 allocated to the 1993 Performance
Pool for Fiscal 1994 may be reduced to $0 by the end of Fiscal 1997. If this
occurs, the individuals who have been granted shares in the 1993 Performance
Pool would receive no payments.
(C) These amounts are provided for illustrative purposes only and are calculated
based on each individual's share in the 1993 Performance Pool and assume
that, after Fiscal 1994, FoxMeyer's EBT will grow by a factor of 7.5% each
year. Based on an assumed EBT growth rate of 7.5% each year, $1,509,622
would be allocated by FoxMeyer to the 1993 Performance Pool for Fiscal 1995;
$1,622,844 for Fiscal 1996; and $1,744,557 for Fiscal 1997, resulting in a
hypothetical aggregate amount allocated to the 1993 Performance Pool by the
end of Fiscal 1997 of $6,047,273. There can be no assurances that the EBT
growth reflected in the amounts set forth in this table will be achieved by
FoxMeyer.
(D) These amounts are provided for illustrative purposes only and are calculated
based on each individual's share in the 1993 Performance Pool and assume
that, after Fiscal 1994, FoxMeyer's EBT will grow by a factor of 25% each
year. Based on an assumed EBT growth rate of 25% each year, $4,095,875 would
be allocated by FoxMeyer to the 1993 Performance Pool for Fiscal 1995;
$5,119,843 for Fiscal 1996; and $6,399,804 for Fiscal 1997, resulting in a
hypothetical aggregate amount allocated to the 1993 Performance Pool by the
end of Fiscal 1997 of $16,785,772. There can be no assurances that the EBT
growth reflected in the amounts set forth in this table will be achieved by
FoxMeyer.
84
<PAGE>
FOXMEYER PERFORMANCE GRAPH
The following performance graph compares the performance of the shares of
the FoxMeyer Common Stock, the Standard & Poor's 500 Index and an index of peer
companies selected by FoxMeyer (the 'FoxMeyer Peer Group Index') since September
1991 (which is when the FoxMeyer Common Stock first traded publicly). The graph
assumes that the value of the investment in the shares of the FoxMeyer Common
Stock and in each index was $100 on September 1, 1991 and that all dividends
were reinvested.
The FoxMeyer Peer Group Index shown on the performance graph (which is
weighted on the basis of market capitalization) consists of FoxMeyer and the
following companies which are engaged primarily in the wholesale drug
distribution business: Bergen Brunswig Corporation, Bindley Western Industries,
Inc., Cardinal Health, Inc., D&K Wholesale Drug, Inc., Krelitz Industries, Inc.,
McKesson Corporation, Moore Medical Corporation and Owens & Minor, Inc.
[GRAPH]
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
MARCH 31
--------------------------
9/1/91 1992 1993 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
FoxMeyer............ 100.00 97.90 79.31 94.82
S&P 500 Index....... 100.00 106.34 122.53 124.34
FoxMeyer Peer Group
Index............. 100.00 95.33 88.70 112.12
</TABLE>
The foregoing performance graph is not incorporated in any prior or future
filings of FoxMeyer under the Securities Act or the Exchange Act, directly or by
reference to the incorporation of proxy statements of FoxMeyer, unless FoxMeyer
specifically incorporates the graph by reference, and the graph shall not
otherwise be deemed filed under such Acts.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires FoxMeyer's directors, executive
officers and 10% Owners of a registered class of FoxMeyer's equity securities to
file reports of beneficial ownership of FoxMeyer's securities and changes in
such beneficial ownership with the Commission. Directors, executive officers and
10% Owners
85
<PAGE>
are also required by rules promulgated by the Commission to furnish
FoxMeyer with copies of all forms they file pursuant to Section 16(a).
Based solely upon a review of the copies of the forms filed pursuant to
Section 16(a) furnished to FoxMeyer, or written representations that no year-end
Form 5 filings were required for transactions occurring during Fiscal 1994,
FoxMeyer believes that its directors, executive officers and 10% Owners complied
with Section 16(a) filing requirements applicable to them during Fiscal 1994.
EMPLOYMENT AGREEMENTS WITH FOXMEYER EXECUTIVE OFFICERS
Thomas L. Anderson, the President and Chief Operating Officer of FoxMeyer,
has an employment agreement with FoxMeyer which expires on August 9, 1997. The
agreement provides Mr. Anderson with a minimum annual salary of $400,000. If Mr.
Anderson's employment with FoxMeyer is terminated for any reason other than for
cause, he will be entitled to receive severance payments equal to his base
salary in effect at the time of termination for a period equal to the longer of
the remaining term of his employment agreement or two years. The agreement also
provides that if Mr. Anderson is terminated subsequent to a change of control of
FoxMeyer or NII, such termination would be deemed to be a termination without
cause. A reduction of Mr. Anderson's duties or responsibilities would also be
considered a termination without cause. The agreement contains noncompetition
and nondisclosure provisions.
Robert R. Brown, the Senior Vice President--Information Services and Chief
Information Officer of FoxMeyer, has an employment agreement with FoxMeyer which
expires on September 1, 1995. Under the terms of the agreement, Mr. Brown's
minimum annual base salary may not be less than his annual base salary as of
September 1, 1992 (which was $200,000 per annum). If Mr. Brown's employment with
FoxMeyer is terminated for any reason other than for cause, Mr. Brown will be
entitled to receive monthly severance payments equivalent to his monthly base
salary in effect at the time of termination for a period equal to the longer of
the remaining term of his employment agreement or one year. The agreement
contains noncompetition and nondisclosure provisions.
Peter B. McKee, the Senior Vice President and Chief Financial Officer of
FoxMeyer, has an employment agreement with FoxMeyer, the terms of which are
substantially identical to Mr. Brown's employment agreement. Mr. McKee's
agreement expires on January 14, 1997 and guarantees him a minimum annual base
salary of $200,000 (his base salary as of January 15, 1994).
86
<PAGE>
OWNERSHIP OF FOXMEYER COMMON STOCK OF CERTAIN BENEFICIAL
OWNERS AND FOXMEYER MANAGEMENT
The following table sets forth certain information as of August 22, 1994
with respect to the beneficial ownership of FoxMeyer Common Stock by (i) persons
known to FoxMeyer to be the beneficial owners of more than 5% of the outstanding
shares of FoxMeyer Common Stock, (ii) all directors and nominees for election as
directors of FoxMeyer, (iii) each of the executive officers named in the
FoxMeyer Summary Compensation Table (which appears on page 79), and (iv) all
directors and executive officers of FoxMeyer as a group.
The number of shares of FoxMeyer Common Stock beneficially owned by each
individual set forth below is determined under the rules of the Commission and
the information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as to
which an individual has sole or shared voting power or investment power and any
shares which an individual presently, or within 60 days of the FoxMeyer Annual
Meeting, has the right to acquire through the exercise of any stock option or
other right. Unless otherwise indicated, each individual has sole voting and
investment power (or shares such powers with his spouse) with respect to the
shares of FoxMeyer Common Stock set forth in the following table.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS(1) OF COMMON STOCK PERCENTAGE OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES
- ----------------------------------- ------------------ ------------------
<S> <C> <C>
National Intergroup, Inc. ........ 22,690,000 80.5%
1220 Senlac Drive
Carrollton, Texas 75006
DIRECTORS AND NOMINEES FOR
DIRECTORS
(INCLUDING THOSE WHO ARE ALSO
EXECUTIVE OFFICERS):
Abbey J. Butler............... 224,088(2)(3) (19)
Melvyn J. Estrin.............. 155,421(2)(4) (19)
Thomas L. Anderson............ 125,000(5) (19)
Daniel J. Callahan III........ 17,500(6) (19)
Harvey A. Fain................ 16,500(7) (19)
Sheldon W. Fantle............. 17,500(8) (19)
Paul M. Finfer................ 16,900(9) (19)
Bruce E. Kahler............... 17,500(10) (19)
EXECUTIVE OFFICERS:
Robert R. Brown............... 50,000(11) (19)
William L. Estes.............. 0 --
Brenda L. Fugagli............. 53,000(12) (19)
William J. Jones.............. 66,000(13) (19)
Richard Levin................. 11,600(14) (19)
Peter B. McKee................ 1,000(15) (19)
John R. Nixon................. 10,280(16) (19)
Glenn G. Papit................ 0 --
Michael C. Webster (through 66,549(17) (19)
July 1994)..................
All Directors and Executive
Officers as a Group
(17) persons).................... 848,838(18) 2.9%(18)
</TABLE>
- ------------------
(1) The business address of each of the persons listed above is c/o FoxMeyer
Corporation, 1220 Senlac Drive, Carrollton, Texas 75006.
(2) Messrs. Butler and Estrin and entities controlled by them beneficially own
approximately 29.4% of the outstanding shares of NII Common Stock. Messrs.
Butler and Estrin serve as Co-Chairmen of the Board and Co-Chief Executive
Officers of NII.
(3) Mr. Butler holds 86,948 shares of FoxMeyer Common Stock directly, 2,140.7
shares of FoxMeyer Common Stock through his participation in the FoxMeyer
401(k) Plan and options to purchase 135,000 shares of FoxMeyer Common Stock
which are presently exercisable or exercisable within 60 days of the
FoxMeyer
87
<PAGE>
Annual Meeting. Mr. Butler also holds options to purchase 440,000 shares of
NII Common Stock which are presently exercisable, which options represent
3.3% of the outstanding NII Common Stock.
(4) Mr. Estrin holds 421.4 shares of FoxMeyer Common Stock through his
participation in the FoxMeyer 401(k) Plan and is a co-trustee for two
trusts that own an aggregate of 20,000 shares of FoxMeyer Common Stock (the
beneficial ownership of which he disclaims). He also holds options to
purchase 135,000 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the FoxMeyer Annual Meeting.
Mr. Estrin also holds options to purchase 440,000 shares of NII Common
Stock which are presently exercisable, which options represent 3.3% of the
outstanding NII Common Stock.
(5) Mr. Anderson holds 3,000 shares of FoxMeyer Common Stock and options to
purchase 122,000 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the FoxMeyer Annual Meeting.
(6) Mr. Callahan holds 1,000 shares of FoxMeyer Common Stock and options to
purchase 16,500 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the FoxMeyer Annual Meeting.
(7) Mr. Fain holds options to purchase 16,500 shares of FoxMeyer Common Stock
which are presently exercisable or exercisable within 60 days of the
FoxMeyer Annual Meeting.
(8) Mr. Fantle holds 1,000 shares of FoxMeyer Common Stock and options to
purchase 16,500 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the FoxMeyer Annual Meeting.
Mr. Fantle also serves as a director of NII and holds options to purchase
16,500 shares of NII Common Stock which are presently exercisable or
exercisable within 60 days of the FoxMeyer Annual Meeting, which options
represent less than 1% of the outstanding NII Common Stock.
(9) Mr. Finfer holds 400 shares of FoxMeyer Common Stock and options to
purchase 16,500 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the FoxMeyer Annual Meeting.
Mr. Finfer also serves as a director of NII and holds options to purchase
16,500 shares of NII Common Stock which are presently exercisable or
exercisable within 60 days of the FoxMeyer Annual Meeting, which options
represent less than 1% of the outstanding NII Common Stock.
(10) Mr. Kahler holds 1,000 shares of FoxMeyer Common Stock and options to
purchase 16,500 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the FoxMeyer Annual Meeting.
(11) Mr. Brown holds options to purchase 50,000 shares of FoxMeyer Common Stock
which are presently exercisable or exercisable within 60 days of the
FoxMeyer Annual Meeting.
(12) Ms. Fugagli holds options to purchase 53,000 shares of FoxMeyer Common
Stock which are presently exercisable or exercisable within 60 days of the
FoxMeyer Annual Meeting.
(13) Mr. Jones holds options to purchase 66,000 shares of FoxMeyer Common Stock
which are presently exercisable or exercisable within 60 days of the
FoxMeyer Annual Meeting.
(14) Mr. Levin holds 1,600 shares of FoxMeyer Common Stock and options to
purchase 10,000 shares of FoxMeyer Common Stock which are presently
exercisable or exercisable within 60 days of the FoxMeyer Annual Meeting.
(15) Mr. McKee shares beneficial ownership of 1,000 shares of FoxMeyer Common
Stock with a minor child.
(16) Mr. Nixon holds 280.3 shares of FoxMeyer Common Stock through his
participation in the FoxMeyer 401(k) Plan and options to purchase 10,000
shares of FoxMeyer Common Stock which are presently exercisable or
exercisable within 60 days of the FoxMeyer Annual Meeting.
(17) Mr. Webster holds 549.7 shares of FoxMeyer Common Stock through his
participation in the FoxMeyer 401(k) Plan and options to purchase 66,000
shares of FoxMeyer Common Stock which are presently exercisable or
exercisable within 60 days of the FoxMeyer Annual Meeting. After his
resignation from FoxMeyer, Mr. Webster had the right to exercise his
options for a period of 30 days after his last date of employment. All of
Mr. Webster's options have terminated.
(18) Includes 729,500 shares of FoxMeyer Common Stock subject to options which
are presently exercisable, or exercisable within 60 days of the FoxMeyer
Annual Meeting, held by all directors and executive officers of FoxMeyer as
a group under the FoxMeyer Stock Option and Performance Award Plan.
(19) Indicates less than 1%.
The State of Wisconsin Investment Board announced on September 9, 1994
that it owns 2,186,000 shares of FoxMeyer Common Stock which represents
approximately 7.8% of the outstanding shares as of September 8, 1994, and
further indicated that it will oppose the Merger.
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CERTAIN TRANSACTIONS
TRANSACTIONS BETWEEN NII AND FOXMEYER
THE LOAN. In November 1992, FoxMeyer and NII completed a joint tender offer
(the 'Tender Offer') for 3,300,000 shares (the 'Shares') of FoxMeyer Common
Stock at $13.50 per share, net in cash to the seller. Three million three
hundred thousand shares were purchased pursuant to the Tender Offer, with
FoxMeyer and NII each purchasing 1,650,000 shares of FoxMeyer Common Stock. As a
result of the Tender Offer, NII presently owns approximately 80.5% of the
outstanding shares of FoxMeyer Common Stock.
The funds to purchase the Shares were provided from borrowings under
FoxMeyer's bank credit facility, which was amended on October 20, 1992 to permit
the use of such borrowings to pay for the Shares in the Tender Offer. Among
other things, this amendment allowed FoxMeyer, pursuant to a Loan Agreement
dated as of November 25, 1992, to lend NII up to $30,000,000 (the 'Loan') to be
used by NII to purchase its portion of the Shares of FoxMeyer Common Stock
pursuant to the Tender Offer, to pay its portion of related fees and expenses
and to provide additional funds for general corporate purposes and working
capital requirements.
Under the terms of the Loan, NII borrowed $22,300,000 to finance NII's
portion of the Tender Offer and to pay related fees and expenses. Additionally,
NII may borrow up to an additional $7,700,000 for general corporate purposes,
working capital requirements and additional Tender Offer expenses. The entire
principal amount of the Loan is due on December 16, 1996. Effective as of July
1, 1993, interest on the Loan was 9.09% per annum (which is equal to 2.0% over
the interest rate that FoxMeyer Its Senior Notes due April 15, 2005 (the 'Senior
Notes')). If the Senior Notes are no longer outstanding, interest on the Loan
will be adjusted each calendar quarter to equal the sum of 2.0% plus the annual
interest rate in effect on the first day of each such calendar quarter under the
loan having the longest-term maturity date under FoxMeyer's then existing credit
facilities. The Loan is secured by a pledge by NII of 4,500,000 shares of
FoxMeyer Common Stock.
TAX SHARING AGREEMENT. Pursuant to the Tender Offer, NII increased its
ownership of FoxMeyer Common Stock to more than 80% of the outstanding shares.
As a result, FoxMeyer and NII are able to consolidate for federal income tax
purposes. As members of NII's consolidated tax group (the 'NII Consolidated
Group'), FoxMeyer and each of its subsidiaries file a consolidated federal
income tax return with NII. As members of the NII Consolidated Group, FoxMeyer
and each of its subsidiaries are severally liable for all federal income tax
liabilities of every member of the NII Consolidated Group for years during which
FoxMeyer and its subsidiaries are members of such group. FoxMeyer and NII have
entered into a Tax Sharing Agreement, dated as of November 25, 1992 (the 'Tax
Sharing Agreement'), which relates to the payment of taxes and certain related
matters effective for periods following the closing of the Tender Offer. During
the term of the Tax Sharing Agreement, FoxMeyer will be obligated to pay to NII
an amount equal to those federal income taxes FoxMeyer would have incurred if,
subject to the exceptions described below, FoxMeyer (on behalf of itself and its
subsidiaries) had filed a separate federal income tax return. If a Potential
Default or Event of Default (as defined in FoxMeyer's bank credit facility or
replacement thereof) occurs or is reasonably likely to occur thereunder or if,
in general, net income of FoxMeyer and its subsidiaries was not positive for the
preceding year, the amount of the payments made by FoxMeyer under the Tax
Sharing Agreement may not exceed the amount of the federal income taxes actually
payable by NII until such time as such Potential Default or Event of Default is
cured, or net income is positive, at which time any amounts otherwise payable
under the Tax Sharing Agreement will be paid. Further, under the Tax Sharing
Agreement, NII will compensate FoxMeyer to the extent a tax attribute of
FoxMeyer is used to reduce the amount of federal income taxes that otherwise
would have been paid by NII. Any tax attributes for which FoxMeyer is so
compensated will not be available to FoxMeyer to reduce amounts owing to NII
under the Tax Sharing Agreement. The Tax Sharing Agreement provides for
analogous principles to be applied to any consolidated, combined or unitary
state or local taxes. In Fiscal 1994, FoxMeyer paid NII $7,664,362 pursuant to
the Tax Sharing Agreement.
MANAGEMENT AGREEMENT. FoxMeyer and NII are parties to a management
agreement pursuant to which certain management and administrative personnel of
FoxMeyer perform certain functions for NII, including general management,
financial, legal, computer, public and investor relation and administrative
services. Effective January 1, 1992, NII has paid a quarterly fee of $175,000 to
FoxMeyer for providing such services. The
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management fee is intended to approximate the personnel and overhead costs to
FoxMeyer of providing such services and is subject to increase or decrease in
the event of a change of circumstances that materially affects the quantity of
services provided by FoxMeyer to NII or the cost to FoxMeyer of providing such
services.
OTHER TRANSACTIONS
During Fiscal 1994, Ben Franklin, 67% of the outstanding common stock of
which is owned by NII, subleased two facilities from FoxMeyer. Under a sublease
arrangement for Ben Franklin's distribution center in Seymour, Indiana, the
entire property was subleased by FoxMeyer to Ben Franklin. In addition, FoxMeyer
subleases a portion of its Carol Stream, Illinois property to Ben Franklin. In
Fiscal 1994, the amount charged to Ben Franklin as rent and, in the case of the
Carol Stream sublease, shared operating expenses under these sublease
arrangements, was $2,300,000.
During Fiscal 1994, FoxMeyer provided certain data processing services to
Ben Franklin under an agreement negotiated in Fiscal 1992. The amount charged to
Ben Franklin for such services was $150,000. The fees charged for such services
were formulated to approximate FoxMeyer's actual cost of such services, as
determined by FoxMeyer's internal audit department. Ben Franklin leases
approximately 5,500 square feet of FoxMeyer's data processing center located in
Wichita, Kansas, pursuant to a lease expiring on March 31, 1996 for a current
annual rent of approximately $124,000, which is payable monthly.
On January 4, 1993, Ben Franklin Insurance Agency, Inc., a subsidiary of
Ben Franklin ('BFIA'), entered into an agreement with FoxMeyer under which BFIA
uses FoxMeyer's tradenames and logos in connection with its marketing of
insurance products to customers, franchisees and prospects of FoxMeyer. BFIA
pays FoxMeyer a royalty of 1% of earned insurance premiums received from such
sales. The agreement expires on December 31, 1994 and by its terms is renewed
thereafter for successive one-year terms, subject to termination upon 90 days'
notice.
National Intergroup Realty Corporation ('NIRC') and National Intergroup
Realty Development, Inc. ('NIRD') are wholly owned subsidiaries of NII engaged
in the activity of buying, holding, operating and disposing of real estate
assets put up for bid by the Resolution Trust Corporation and other financial
institutions.
The business activities of NIRC and NIRD are typically conducted through
joint ventures (the 'Joint Ventures') in which NIRC or NIRD holds a 50% general
partner's interest. In general, the terms of the partnership agreements
governing the Joint Ventures provide for either NIRC or NIRD to receive a
preferred return on its investment (ranging from 12% to 18%) until its
investment is returned in full and 50% of all subsequent distributions. The
managing general partner of each of the Joint Ventures is an affiliate of The
Bernstein Companies, a real estate development firm based in Washington, D.C.
Mr. Estrin, who is a director and the Co-Chief Executive Officer of NII, is
a director of NIRC and NIRD. Wilma E. Bernstein, who is Mr. Estrin's sister, and
Stuart A. Bernstein, who is Mr. Estrin's brother-in-law, are owners of The
Bernstein Companies.
From September 1992 through to July 1994, NIRC and NIRD invested an
aggregate $9,130,359 in the Joint Ventures. Since inception, the annual return
on such investments was approximately 41%. As of July 31, 1994, $2,970,964
remains invested in the Joint Ventures.
In Fiscal 1994, NIRC purchased for $2,000,000 a $5,400,000 note secured by
real property from Chemical Bank. The borrower on the note is RCHLP Limited
Partnership, the sole general partner of which is Z Investors, Inc. (formerly,
Bernstein Investments, Inc.), a corporation which is owned solely by Stuart
Bernstein. Mr. Bernstein is also a guarantor of the note. In consideration for a
50% equity participation in the real property securing the note, the principal
balance of the note was reduced to $2,700,000. Wilma Bernstein purchased an
$800,000 participation in the note from NIRC, thereby reducing NIRC's investment
in the note to $1,200,000. Subsequent thereto NIRC and Mrs. Bernstein each sold
their respective interests in the note to one of the Joint Ventures for
$2,000,000 plus accrued interest.
In August of 1994, FWB Bancorporation, a Maryland corporation ('FWB'), sold
to Oceanside Enterprises, Inc., a Delaware corporation and a wholly-owned
subsidiary of NII ('Oceanside'), all of FWB's rights in a Sale and Assignment
Agreement (the 'FWB Purchase Agreement') which granted FWB the right to purchase
a
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promissory note (the 'FWB Note') with an approximate outstanding balance of
principal and interest of $2,600,000, secured by a first lien mortgage covering
certain real property and improvements with a recent appraised value of
approximately $6,800,000. Pursuant to the FWB Purchase Agreement, Oceanside
purchased the FWB Note for $2,100,000. As consideration for the assignment of
FWB's rights in the FWB Purchase Agreement, Oceanside agreed to pay FWB a
deferred purchase price the amount of which is contingent upon the proceeds
received in the final settlement of such promissory note. Abbey J. Butler and
Melvyn J. Estrin, Co-Chairmen of the Board and Co-Chief Executive Officers of
NII, are members of the board of directors of Oceanside. Messrs. Butler and
Estrin also serve as directors and are members of the Executive Committee of
FWB. Messrs. Butler and Estrin are also significant beneficial owners of FWB
capital stock.
GENERAL
NII
As of the date of this Joint Proxy Statement/Prospectus, management does
not intend to present at the NII Annual Meeting, and has no knowledge that
others will present, any matters other than the matters set forth in the Notice
of NII Annual Meeting of Stockholders. If any other matters should properly come
before the NII Annual Meeting, the persons named in the accompanying proxy will
vote on such matters in accordance with their own judgment.
Deloitte & Touche LLP served as independent auditors for NII for the fiscal
year ended March 31, 1994 and will continue in that capacity for the fiscal year
ending March 31, 1995. Representatives of Deloitte & Touche LLP will be present
at the NII Annual Meeting. It is not expected that such representatives will
make a statement at the NII Annual Meeting, but they will have an opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions from stockholders.
Proxies in the form enclosed are solicited by or on behalf of the NII Board
of Directors. NII will bear the cost of preparing, assembling and mailing
material in connection with this solicitation of proxies and may reimburse
persons holding stock in their names or those of their nominees for their
expenses in sending solicitation material to their principals.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
OF NII ARE URGED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING STAMPED AND ADDRESSED ENVELOPE.
FOXMEYER
As of the date of this Joint Proxy Statement/Prospectus, management of
FoxMeyer does not intend to present at the FoxMeyer Annual Meeting, and has no
knowledge that others will present, any matters other than the matters set forth
in the Notice of FoxMeyer Annual Meeting of Stockholders. If any other matters
should properly come before the FoxMeyer Annual Meeting, the persons named in
the accompanying proxy will vote on such matters in accordance with their own
judgment.
Deloitte & Touche served as independent auditors for FoxMeyer for the
fiscal year ended March 31, 1994 and will continue in that capacity for the
fiscal year ending March 31, 1995. Representatives of Deloitte & Touche will be
present at the FoxMeyer Annual Meeting. It is not expected that such
representatives will make a statement at the FoxMeyer Annual Meeting, but they
will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions from stockholders.
Proxies in the form enclosed are solicited by or on behalf of the FoxMeyer
Board of Directors. FoxMeyer will bear the cost of preparing, assembling and
mailing material in connection with this solicitation of proxies and may
SEimburse persons holding stock in their names or those of their nominees for
their expenses in sending solicitation material to their principals.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
OF FOXMEYER ARE URGED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING STAMPED AND ADDRESSED ENVELOPE.
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STOCKHOLDER NOMINATIONS AND PROPOSALS FOR 1995
NII
Stockholders intending to submit names of nominees for election to the NII
Board of Directors at any annual meeting must comply with Section 12A of NII's
By-Laws which requires, among other things, notice to the Secretary of NII 45
days in advance of such meeting.
Any proposals intended to be presented to stockholders at NII's 1995 Annual
Meeting of Stockholders must be received by NII for inclusion in the proxy
statement for such annual meeting by May 15, 1995.
FOXMEYER
Any proposals intended to be presented to stockholders at FoxMeyer's 1995
Annual Meeting of Stockholders, in the event the Merger is not consummated, must
be received by FoxMeyer for inclusion in the proxy statement for such annual
meeting by May 15, 1995.
LEGAL MATTERS
Certain legal and tax matters in connection with the transaction will be
passed upon for NII by Weil, Gotshal & Manges (a partnership including
professional corporations), New York, New York.
EXPERTS
The audited financial statements and financial statement schedules of NII
and FoxMeyer incorporated by reference into this Joint Proxy
Statement/Prospectus and elsewhere in the Registration Statement have been
examined by Deloitte & Touche LLP, independent auditors, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
Representatives of Deloitte & Touche LLP, will be present at the NII Annual
Meeting and the FoxMeyer Annual Meeting and will be available to respond to
appropriate questions and have the opportunity to make a statement if they
desire.
OTHER MATTERS
As of the date of this Joint Proxy Statement/Prospectus, the Board of
Directors of NII and FoxMeyer do not intend to present, and have not been
informed that any other person intends to present, any matter for action at the
NII Annual Meeting or the FoxMeyer Annual Meeting, respectively, other than as
discussed herein.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
NATIONAL INTERGROUP, INC.,
FOXMEYER ACQUISITION CORP.
AND
FOXMEYER CORPORATION
DATED AS OF JUNE 30, 1994
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGER
SECTION 1.1. The Merger . . . . . . . . . . . . . . . . . . 2
SECTION 1.2. Effective Date . . . . . . . . . . . . . . . . 3
SECTION 1.3. Effects of the Merger . . . . . . . . . . . . 3
SECTION 1.4. Certificate of Incorporation . . . . . . . . . 3
SECTION 1.5. By-Laws . . . . . . . . . . . . . . . . . . . 3
SECTION 1.6. Directors . . . . . . . . . . . . . . . . . . 3
SECTION 1.7. Officers . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1. Conversion of Shares . . . . . . . . . . . . 4
SECTION 2.2. Exchange of Shares . . . . . . . . . . . . . 5
SECTION 2.3. Closing of Transfer Books . . . . . . . . . . . 8
SECTION 2.4. Stock Options . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1. Organization . . . . . . . . . . . . . . . . . 9
SECTION 3.2. Capitalization . . . . . . . . . . . . . . . . 9
SECTION 3.3. Authority Relative to This Agreement . . . . . 9
SECTION 3.4. Consents and Approvals; No Violation . . . . 10
SECTION 3.5. Absence of Material Adverse Change . . . . . 10
SECTION 3.6. Joint Proxy Statement/Prospectus . . . . . . 10
SECTION 3.7. Reports . . . . . . . . . . . . . . . . . . . 11
SECTION 3.8. Fairness Opinion . . . . . . . . . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
SECTION 4.1. Organization . . . . . . . . . . . . . . . . 12
SECTION 4.2. Capitalization . . . . . . . . . . . . . . . 12
SECTION 4.3. Authority Relative to This Agreement;
Consents and Approvals; No Violation . . . . 13
SECTION 4.4. Consents and Approvals; No Violation . . . . 13
SECTION 4.5. Absence of Material Adverse Change . . . . . 14
SECTION 4.6. Business of Acquisition . . . . . . . . . . . 14
SECTION 4.7. Joint Proxy Statement/Prospectus . . . . . . 14
<PAGE>
Page
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SECTION 4.8. Reports . . . . . . . . . . . . . . . . . . . . 15
SECTION 4.9. Continuity of Business Line . . . . . . . . . . 16
SECTION 4.10. Litigation . . . . . . . . . . . . . . . . . . 16
ARTICLE V
COVENANTS
SECTION 5.1. Capitalization . . . . . . . . . . . . . . . 16
SECTION 5.2. Conduct of Business of Acquisition . . . . . 17
SECTION 5.3. Registration Statement; Joint Proxy
Statement . . . . . . . . . . . . . . . . . . 17
SECTION 5.4. Stockholder Approval . . . . . . . . . . . . 18
SECTION 5.5. Best Efforts . . . . . . . . . . . . . . . . 19
SECTION 5.6. Consents . . . . . . . . . . . . . . . . . . 19
SECTION 5.7. NYSE Listing . . . . . . . . . . . . . . . . 19
SECTION 5.8. Fees and Expenses . . . . . . . . . . . . . . 19
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF
PARENT, ACQUISITION AND THE COMPANY
SECTION 6.1. Stockholder Approval . . . . . . . . . . . . 20
SECTION 6.2. Certain Proceedings . . . . . . . . . . . . . 20
SECTION 6.3. Exchange Listing . . . . . . . . . . . . . . 20
SECTION 6.4. Registration Statement . . . . . . . . . . . 20
SECTION 6.5. Blue Sky Laws . . . . . . . . . . . . . . . . 20
SECTION 6.6. Consents . . . . . . . . . . . . . . . . . . 20
SECTION 6.7. Tax Opinion . . . . . . . . . . . . . . . . . 20
SECTION 6.8. Fairness Opinion . . . . . . . . . . . . . . 21
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS
OF PARENT AND ACQUISITION
SECTION 7.1. Representations and Warranties True . . . . . 21
SECTION 7.2. Performance . . . . . . . . . . . . . . . . . 21
SECTION 7.3. Certificates . . . . . . . . . . . . . . . . 21
SECTION 7.4. Material Adverse Change . . . . . . . . . . . 21
SECTION 7.5. Regulatory Approvals . . . . . . . . . . . . 22
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
SECTION 8.1. Representations and Warranties True . . . . . 22
SECTION 8.2. Performance . . . . . . . . . . . . . . . . . 22
SECTION 8.3. Certificates . . . . . . . . . . . . . . . . 22
SECTION 8.4. Material Adverse Change . . . . . . . . . . . 22
SECTION 8.5. Regulatory Approvals . . . . . . . . . . . . 23
<PAGE>
Page
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ARTICLE IX
CLOSING
SECTION 9.1. Time and Place . . . . . . . . . . . . . . . 23
SECTION 9.2. Filings at the Closing . . . . . . . . . . . 23
ARTICLE X
TERMINATION AND ABANDONMENT
SECTION 10.1. Termination . . . . . . . . . . . . . . . . . 24
SECTION 10.2. Procedure and Effect of Termination . . . . . 24
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Amendment and Modification . . . . . . . . . 25
SECTION 11.2. Waiver of Compliance; Consents . . . . . . . 25
SECTION 11.3. Indemnification . . . . . . . . . . . . . . . 25
SECTION 11.4. Non-Survival of Warranties . . . . . . . . . 27
SECTION 11.5. Notices . . . . . . . . . . . . . . . . . . . 27
SECTION 11.6. Assignment . . . . . . . . . . . . . . . . . 28
SECTION 11.7. Governing Law . . . . . . . . . . . . . . . . 28
SECTION 11.8. Counterparts . . . . . . . . . . . . . . . . 28
SECTION 11.9. Interpretation . . . . . . . . . . . . . . . 29
SECTION 11.10. Entire Agreement . . . . . . . . . . . . . . 29
SCHEDULES
Schedule 3.4 FoxMeyer Conflicts
Schedule 4.2 Options
Schedule 4.4 NII Conflicts
Schedule 6.6 Consents
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
June 30, 1994, by and among NATIONAL INTERGROUP, INC., a Delaware
corporation ("Parent"), FoxMeyer Acquisition Corp., a Delaware
corporation ("Acquisition"), and FOXMEYER CORPORATION, a Delaware
corporation (the "Company"). The Company and Acquisition are
sometimes collectively referred to herein as the "Constituent
Corporations".
W I T N E S S E T H:
-------------------
WHEREAS, Parent has authorized capital stock consisting of
(i) 50,000,000 shares of common stock, $5.00 per share (the "Parent
Shares"), of which 12,836,803 shares are issued and outstanding as of
the date hereof, and (ii) 10,000,000 shares of preferred stock, $5.00
par value, of which (a) 924,000 shares of $5 Cumulative Convertible
Preferred Stock (the "Convertible Preferred Stock"), and (b) 3,579,060
shares of $4.20 Cumulative Exchangeable Series A Preferred Stock (the
"Series A Preferred Stock") are issued and outstanding as of the date
hereof; and
WHEREAS, the Company has authorized capital stock consisting
of (i) 60,000,000 shares of common stock, $.01 par value ("Common
Stock"), of which 28,200,000 shares are issued and outstanding as of
the date hereof, and (ii) 10,000,000 shares of preferred stock, $.01
par value, none of which is issued and outstanding as of the date
hereof; and
WHEREAS, Parent owns 22,690,000 shares, or approximately
80.5%, of the outstanding Common Stock; and
WHEREAS, Acquisition is a direct, wholly-owned subsidiary of
Parent; and
WHEREAS, the Board of Directors of each of Parent,
Acquisition and the Company believes it is in the best interest of
each respective corporation and their respective stockholders to
consummate the merger of the Company with and into Acquisition (the
"Merger") pursuant to the applicable provisions of the Delaware
General Corporation Law ("DGCL") and in accordance with the terms and
subject to the conditions of this Agreement in a transaction intended
to qualify as a reorganization within the meaning of Section
368(a)(1)(A) and Section 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, based upon the unanimous recommendation of the
special committee of the Board of Directors of the Company (the
<PAGE>
"Special Committee"), the Board of Directors of the Company, pursuant
to the applicable provisions of the DGCL, has approved the Merger upon
the terms and subject to the conditions set forth herein and has
recommended approval of this Agreement by the stockholders of the
Company; and
WHEREAS, the Boards of Directors of each of Acquisition and
the Parent have approved the Merger, upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants contained herein, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the
----------
conditions hereof and in accordance with the DGCL, on the Effective
Date (as defined in Section 1.2 hereof) the Company shall be merged
with and into Acquisition in accordance with the applicable provisions
of the DGCL, and the separate corporate existence of the Company shall
thereupon cease. Following the Merger, Acquisition shall continue as
the surviving corporation (hereinafter referred to for periods on and
after the Effective Date as the "Surviving Corporation") under the
laws of the State of Delaware under the name FoxMeyer Corporation. On
the Effective Date, the Surviving Corporation shall possess all the
rights, privileges, powers and franchises of a public as well as of a
private nature, and shall be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations; and
all and singular, rights, privileges, powers and franchises of each of
the Constituent Corporations, and all property, real, personal and
mixed, and all debts due to any of the Constituent Corporations on
whatever account, as well for stock subscriptions as all other things
in action or belonging to each of the Constituent Corporations shall
be vested in the Surviving Corporation; and all property, rights,
privileges, powers and franchises, and all and every other interest
shall be thereafter the property of the Surviving Corporation as they
were of the Constituent Corporations, and the title to any real estate
vested by deed or otherwise, under the laws of the State of Delaware,
in any of the Constituent Corporations, shall not revert or be in any
way impaired by reason of the DGCL; but all rights of creditors and
all liens upon any property of any of the Constituent Corporations
shall be preserved unimpaired, and all
<PAGE>
debts, liabilities and duties of the respective Constituent
Corporations shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it. At the
election of Parent, any direct wholly-owned subsidiary of Parent may
be substituted for Acquisition as a constituent corporation in the
Merger; provided that such substituted constituent corporation is
reasonably acceptable to the Special Committee.
SECTION 1.2. Effective Date. The Merger shall be
--------------
consummated by and shall be effective on the date (the "Effective
Date") of the filing with the Delaware Secretary of State of a
certificate of merger or, if applicable, a certificate of ownership
and merger, in such form as is required by, and executed in accordance
with, the relevant provisions of the DGCL, and such other documents as
may be required by the provisions of the DGCL (which filings shall be
made as soon as practicable following the satisfaction or waiver of
the conditions set forth in Article VI hereof).
SECTION 1.3. Effects of the Merger. The Merger shall have
---------------------
the effects set forth in Section 259 of the DGCL.
SECTION 1.4. Certificate of Incorporation. The Certificate
----------------------------
of Incorporation of Acquisition immediately prior to the Effective
Time shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof
and the DGCL, except that Article First of the Certificate of
Incorporation of the Surviving Corporation shall read in its entirety
as follows:
"FIRST: The name of the corporation is: FoxMeyer
Corporation."
SECTION 1.5. By-Laws. The By-Laws of Acquisition, as in
-------
effect immediately prior to the Effective Date, shall be the By-Laws
of the Surviving Corporation until thereafter amended as provided by
law.
SECTION 1.6. Directors. The directors of the Company on
---------
the Effective Date shall be the initial directors of the Surviving
Corporation and will hold office from the Effective Date until their
respective successors are duly elected or appointed and qualified in
the manner provided in the Certificate of Incorporation and By-Laws of
the Surviving Corporation, or as otherwise provided by law.
<PAGE>
SECTION 1.7. Officers. The officers of the Company on the
--------
Effective Date shall be the initial officers of the Surviving
Corporation and will hold office from the Effective Date until their
respective successors are duly elected or appointed and qualified in
the manner provided in the Certificate of Incorporation and By-Laws of
the Surviving Corporation, or as otherwise provided by law.
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1. Conversion of Shares. At the Effective Date,
--------------------
by virtue of the Merger and without any action on the part of Parent,
Acquisition, the Company or the stockholders thereof:
(i) Each share of Common Stock issued and outstanding
immediately prior to the Effective Date (other than shares held by
Parent or the Company) shall automatically be converted into the right
to receive, and shall be exchanged for, 0.90 Parent Shares (the
"Ratio"); provided, however, that if the product of (x) the Average
-------- -------
Stock Price and (y) the Ratio, is less than $14.40, the Ratio shall be
increased so that the product of (x) the Average Stock Price and
(y) the Ratio, as so increased, equals $14.40 (the Ratio, as adjusted,
being referred to herein as the "Exchange Ratio"). The "Average Stock
Price" shall mean the average per share closing price on the New York
Stock Exchange ("NYSE") of Parent Shares during the period of twenty
consecutive trading days commencing twenty-one trading days prior to
the date of the Stockholder Meeting of the Company (the "Meeting
Date") and ending on the second trading day prior to the Meeting Date.
The Parent Shares to be received upon the Merger shall be treasury
shares and are sometimes hereinafter referred to as the "Merger
Consideration."
(ii) Each share of Common Stock issued and outstanding
immediately prior to the Effective Date that is (A) owned by Parent or
the Company or (B) held in the treasury of the Company, shall be
cancelled and retired without any payment of any consideration
therefor and shall cease to exist, and no Parent Shares or other
consideration shall be delivered in exchange for such shares of Common
Stock.
(iii) Each share of Common Stock, par value $.01 per share,
of Acquisition issued and outstanding immediately prior to the
Effective Date shall remain unchanged and shall be the common stock of
the Surviving Corporation.
<PAGE>
SECTION 2.2. Exchange of Shares. (a) Prior to the
------------------
Effective Date, the Parent shall designate a bank or trust company to
act as exchange agent (the "Exchange Agent") in connection with the
Merger. On the Effective Date, Parent shall take all steps necessary
to enable and cause the Exchange Agent to receive the Merger
Consideration as and when certificates for shares of Common Stock are
properly surrendered. Parent Shares into which shares of Common Stock
shall be converted in the Merger shall be deemed to have been issued
as of the Effective Date. No dividends or other distributions
declared after the Effective Date with respect to Parent Shares and
payable to the holders of record thereof after the Effective Date
shall be paid to the holder of any unsurrendered Certificates with
respect to which Parent Shares shall have been issued in the Merger
until such Certificates shall be surrendered for exchange as provided
herein, but (i) upon such surrender there shall be paid, without
interest, to the person in whose name the certificates representing
such Parent Shares shall be issued the amount of dividends theretofore
paid with respect to such Parent Shares as of any record date
subsequent to the Effective Date and the amount of any cash payable to
such person in lieu of fractional Parent Shares pursuant to this
Section 2.2 and (ii) at the appropriate payment date or as soon as
practicable thereafter, there shall be paid to such person the amount
of dividends with a record date after the Effective Date but prior to
such surrender and a payment date subsequent to such surrender payable
with respect to such Parent Shares, subject in any case to any
applicable abandoned property, escheat or similar laws.
(b) Promptly after the Effective Date, the Company shall
cause the Exchange Agent to mail to each record holder as of
immediately prior to the Effective Date, and to each holder of an
outstanding certificate or certificates that as of the Effective Date
represent the right to receive the Merger Consideration (the
"Certificates"), a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates
to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment thereof.
(c) Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed and completed
in accordance with the instructions thereto, and such other documents
as may be requested, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration (rounded down
to the nearest whole number of Parent Shares) deliverable in respect
of the
<PAGE>
shares of Common Stock theretofore evidenced by such certificate or
certificates (together with any cash in lieu of fractional Parent
Shares pursuant to Section 2.2(e)) and such certificate or
certificates shall forthwith be cancelled. Until surrendered in
accordance with the provisions of this Section 2.2(c), each
Certificate shall represent for all purposes only the right to receive
upon such surrender the Merger Consideration, but shall have no other
rights. If a Certificate or Certificates evidencing more than one
share of Common Stock shall be surrendered for exchange as provided in
this Agreement at one time by the same holder, the number of full
Parent Shares and the amount of cash in lieu of fractional Parent
Shares deliverable upon the surrender thereof shall be computed on the
basis of the aggregate number of shares of Common Stock so
surrendered. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of shares of Common
Stock for any Merger Consideration delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(d) If the Parent Shares are to be delivered to a person
other than the person in whose name the Certificate surrendered in
exchange thereof is registered, it shall be a condition to the payment
of such Parent Shares that the Certificate so surrendered shall be
properly endorsed or accompanied by appropriate stock powers and
otherwise in proper form for transfer, that such transfer otherwise be
proper and that the person requesting such transfer pay to the
Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that
such taxes have been paid or are not required to be paid.
(e) No certificates representing fractional Parent Shares
shall be issued upon the surrender for exchange of Certificates
pursuant to this Section 2.2. No dividend, stock split or other
change in the capital structure of Parent shall be applicable with
respect to any fractional share interest. Such fractional share
interests shall not entitle the holder thereof to vote or to any
rights as a security holder of Parent. In lieu of any fractional
Parent Shares, the Exchange Agent shall, on behalf of all holders of
fractional Parent Shares as soon as practicable after the Effective
Date, aggregate all such fractional interests (collectively, the
"Fractional Shares") and, at Parent's option, such Fractional Shares
shall be purchased by Parent or otherwise sold by the Exchange Agent
as agent for the holders of such Fractional Shares, in either case at
then prevailing price on the New York Stock Exchange (the "NYSE"), all
in the manner provided in Section 2.2(f). Parent will pay all
<PAGE>
commissions, transfer taxes and other out-of-pocket transaction costs,
including expenses and compensation of the Exchange Agent, incurred in
connection with such sale of the Fractional Shares.
(f) To the extent not purchased by Parent, the sale of the
Fractional Shares by the Exchange Agent will be executed on the NYSE
or through one or more member firms of the NYSE and will be executed
in round lots to the extent practicable. In either case, the Exchange
Agent will determine the portion, if any, of the net proceeds of such
sale to which each holder of Fractional Shares is entitled, by
multiplying the amount of the aggregate net proceeds of the sale of
the Fractional Shares, by a fraction, the numerator of which is the
amount of Fractional Shares to which such holder is entitled and the
denominator of which is the aggregate amount of Fractional Shares to
which all holders of Fractional Shares are entitled.
(g) As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Fractional Shares in
lieu of such Fractional Shares, the Exchange Agent will mail such
amounts, without interest, to such holders; provided, however, that no
-------- -------
such amount will be paid to any holder of such Fractional Shares prior
to the surrender by such holder of the Certificates formerly
representing such holder's shares of Common Stock. All cash proceeds
from the sale of Fractional Shares to be paid pursuant to this
Section, if unclaimed at the sixth month anniversary of the Effective
Date, shall be released and paid by the Exchange Agent to Parent,
after which time persons entitled thereto may look only to Parent for
payment thereof. Notwithstanding the foregoing, neither the Exchange
Agent nor any party hereto shall be liable for any cash proceeds
delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(h) Promptly following the date that is six months after
the Effective Date, the Exchange Agent shall return to Parent all
Parent Shares in its possession, and the Exchange Agent's duties shall
terminate. Thereafter, each holder of a Certificate formerly
representing a share of Common Stock may surrender such Certificate to
Parent and (subject to applicable abandoned property, escheat or
similar laws) receive in exchange therefor the Merger Consideration.
(i) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed,
Parent shall issue in exchange for such lost, stolen or destroyed
certificate the Merger Consideration deliverable in
<PAGE>
respect thereof as determined in accordance with this Article II;
provided, however, that the Board of Directors of Parent may, in its
-------- -------
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to
give Parent a bond in such sum as it may direct as indemnity against
any claim that may be made against Parent with respect to the
Certificate alleged to have been lost, stolen or destroyed.
SECTION 2.3. Closing of Transfer Books. After the
-------------------------
Effective Date there shall be no transfers on the stock transfer books
of the Surviving Corporation of the shares of Common Stock that were
outstanding immediately prior to the Effective Date. If, after the
Effective Date, Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for the Merger
Consideration as provided in this Article II.
SECTION 2.4. Stock Options. At the Effective Date, the
-------------
Company's obligations with respect to each outstanding option to
purchase shares of Common Stock (collectively, the "Stock Options" and
each a "Stock Option") granted pursuant to the Company's Stock Option
and Performance Award Plan (the "Company Stock Option Plan") shall be
assumed by Parent. The Stock Options assumed by Parent shall continue
to have, and be subject to, the same terms and conditions set forth in
the stock option plans and agreements pursuant to which such Stock
Options were issued as in effect immediately prior to the Effective
Date, except that (a) the number of shares for which such Stock Option
shall be exercisable shall equal the product of the Exchange Ratio and
the number of shares of Common Stock subject to the Stock Option
immediately prior to the Effective Date (rounded down to the nearest
whole number), and (b) the per share exercise price for the Parent
Shares issuable upon the exercise of such assumed Stock Option shall
be equal to the aggregate exercise price for the shares of Common
Stock subject to the Stock Option, divided by the number of Parent
Shares deemed to be purchasable pursuant to the Option. The date of
grant shall be the date on which the Stock Option was originally
granted. Parent shall (i) reserve for issuance the number of Parent
Shares that will become issuable upon the exercise of such Stock
Options pursuant to this Section 2.4 and (ii) at the Effective Date,
execute a document evidencing the assumption by Parent of the
Company's obligations with respect thereto under this Section 2.4.
Nothing in this Section 2.4 shall affect the schedule of the vesting
(or the acceleration thereof) with respect to the Stock Options, in
accordance with the terms thereof, to be assumed by Parent as provided
in this Section 2.4.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and
Acquisition as follows:
SECTION 3.1. Organization. Each of the Company and its
------------
subsidiaries (the "Subsidiaries") is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each has all requisite corporate
power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
SECTION 3.2. Capitalization. The authorized capital stock
--------------
of the Company consists of (a) 60,000,000 shares of Common Stock, of
which at June 30, 1994 there were (i) 28,200,000 shares issued and
outstanding and 3,150,000 shares held in the Company's treasury and
(ii) 1,800,000 shares reserved for future issuance pursuant to the
Company Stock Option Plan and (b) 10,000,000 shares of preferred
stock, par value $.01 per share, none of which were issued and
outstanding. All issued and outstanding shares of Common Stock are
validly issued, fully paid, non-assessable and free of preemptive
rights.
SECTION 3.3. Authority Relative to This Agreement. The
------------------------------------
Company has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized and approved by the Company's Board of
Directors and no other corporate proceedings on the part of the
Company or any Subsidiary of the Company are necessary to authorize
this Agreement, and, except for the adoption of this Agreement by its
stockholders and the filing and recording of the Certificate of
Merger, no other corporate proceedings on the part of the Company are
necessary to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by the
Company, and constitutes a valid and binding obligation of the
Company enforceable against it in accordance with its terms, subject
to (i) approval in accordance with the DGCL of the stockholders of the
Company and (ii) applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforce-
ability, to general principles of equity, including principles of
commercial reasonableness, good
<PAGE>
faith and fair dealing (regardless of whether enforcement is sought in
a proceeding at law or in equity).
SECTION 3.4. Consents and Approvals; No Violation. Except
------------------------------------
for applicable requirements of the Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934 (the
"Exchange Act"), filings with various state blue sky authorities, and
filing and recordation of appropriate merger documents as required by
the DGCL, no filing with, and no permit, authorization, consent or
approval of, any public body or authority is necessary for the
execution and delivery by the Company of this Agreement or the
consummation by the Company of the transactions contemplated by this
Agreement. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or By-Laws of the Company or any of the
Subsidiaries, (ii) except as set forth on Schedule 3.4, result in a
violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, permit, agreement or other instrument or obligation to which
the Company or any of the Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound or
(iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, any of the Subsidiaries or any
of their properties or assets, excluding from the foregoing clauses
(ii) and (iii) violations, breaches or defaults that, either
individually or in the aggregate, would not have a material adverse
effect on the business, operations, financial condition or prospects
of the Company and the Subsidiaries taken as a whole.
SECTION 3.5. Absence of Material Adverse Change. Since
----------------------------------
March 31, 1994, there has not been any material adverse change in the
business, operations, properties, assets, liabilities or condition
(financial or otherwise) of the Company and its Subsidiaries taken as
a whole or any declaration of any dividend or other distribution with
respect to the Company's capital stock, other than dividends paid in
respect of the Common Stock on May 13, 1994.
SECTION 3.6. Joint Proxy Statement/Prospectus. None of the
--------------------------------
information supplied or to be supplied by the Company and the
Company's Special Committee for inclusion in the Registration
Statement (as defined in Section 5.3) or in the joint proxy statement/
prospectus (the "Proxy Statement") to be mailed to the
<PAGE>
stockholders of Parent and the Company in connection with any meetings
of stockholders of Parent and the Company convened in accordance with
Section 5.4 will, (a) in the case of the Registration Statement, at
the time it is filed with the Securities and Exchange Commission (the
"SEC") or any other regulatory authority, at the time it becomes
effective and at the Effective Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading, or (b) in the case of the Proxy Statement, at the time it
is filed with the SEC or any other regulatory authority, at the time
of the mailing of the Proxy Statement or any amendment or supplement
thereto, at the time of the meetings of the shareholders to which the
Proxy Statement relates and at the Effective Date, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Date any
event with respect to the Company, its officers and directors or any
of its Subsidiaries should occur which is required to be described in
an amendment of, or a supplement to, the Proxy Statement or the
Registration Statement, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. The
Proxy Statement and any other SEC filing will comply (with respect to
the Company) in all material respects, as to form, with the applicable
requirements of each of the Exchange Act and the Securities Act and
the respective rules and regulations thereunder.
SECTION 3.7. Reports. The Company has furnished to Parent
-------
an accurate and complete copy of each registration statement, report
and proxy statement filed by the Company with the SEC since September
1, 1991 (the "Company SEC Documents"). Since September 1, 1991 the
Company has filed all required forms, reports and documents required
to be filed by it pursuant to the Securities Act and the Exchange Act
and the rules and regulations thereunder. The Company SEC Documents,
including without limitation any financial statements or schedules
included therein, when filed, (a) did not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as
the case may be, and the applicable rules and regulations thereunder.
Other than as disclosed in filings by
<PAGE>
the Company with the SEC, the financial statements of the Company
(including the related notes thereto) included in the Company SEC
Documents comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be
indicated in such financial statements or in the notes thereto or, in
the case of the unaudited financial statements, as permitted by the
requirements of Form 10-Q) and fairly present in accordance with GAAP
(subject, in the case of the unaudited statements, to normal recurring
audit adjustments) the consolidated financial position of the Company
and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended.
SECTION 3.8. Fairness Opinion. The Special Committee has
----------------
received an opinion of Smith Barney Inc., financial advisor to the
Special Committee (the "Fairness Opinion"), to the effect that, as of
the date hereof, the Exchange Ratio is fair, from a financial point of
view, to the holders of the Common Stock of the Company, other than
Parent and its affiliates (the "Unaffiliated Company Stockholders").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Except as otherwise disclosed in writing to the Company
prior to the execution of this Agreement, each of Parent and
Acquisition represents and warrants to the Company as follows:
SECTION 4.1. Organization. Each of Parent and Acquisition
------------
is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
SECTION 4.2. Capitalization. (a) The authorized capital
--------------
stock of Parent consists of (i) 50,000,000 shares of common stock,
$5.00 par value, of which at June 30, 1994, there were 12,836,803
shares issued and outstanding and 11,255,941 shares held in Parent's
treasury, and (ii) 10,000,000 shares of preferred stock, $5.00 par
value, of which at June 30, 1994 there
<PAGE>
were (A) 924,000 shares of Convertible Preferred Stock, and (B)
3,579,060 shares of Series A Preferred Stock issued and outstanding.
The Parent Shares to be delivered to the holders of Common Stock
pursuant to Article II hereof, at the time of such delivery, will be
duly authorized, validly issued, fully paid and non-assessable and not
subject to any preemptive or similar rights. Except as set forth on
Schedule 4.2 or as otherwise contemplated in this Agreement, there are
not now, and at the Effective Date there will not be, any existing
options, warrants, calls, subscriptions, or other rights or other
agreements or commitments obligating Parent to issue, transfer or sell
any shares of capital stock of the Parent.
(b) The authorized capital stock of Acquisition consists of
28,200,000 shares of common stock, $.01 par value (the "Acquisition
Shares"), all of which are issued and outstanding as of the date
hereof. Parent owns all of the issued and outstanding Acquisition
Shares. All of the issued and outstanding Acquisition Shares are
validly issued, fully paid, non-assessable and free of preemptive
rights.
SECTION 4.3. Authority Relative to This Agreement; Consents
----------------------------------------------
and Approvals; No Violation. Each of Parent and Acquisition has all
---------------------------
requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized
and approved by the Board of Directors of Parent, for itself and as
the sole stockholder of Acquisition, and by the Board of Directors of
Acquisition, and no other corporate proceedings on the part of Parent
or Acquisition are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Parent and
Acquisition and constitutes a valid and binding agreement of each of
them, enforceable against each of them in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
SECTION 4.4. Consents and Approvals; No Violation. Except
------------------------------------
for any applicable requirements of the Securities Act, the Exchange
Act, and filing and recordation of appropriate merger
<PAGE>
documents as required by the DGCL, no filing with, and no permit,
authorization, consent or approval of, any public body is necessary
for the execution and delivery by Parent or Acquisition of this
Agreement or the consummation by Parent or Acquisition of the trans-
actions contemplated by this Agreement. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby by Parent or Acquisition will (i) conflict with or
result in any breach of any provision of the Certificate of
Incorporation or By-Laws of Parent or Acquisition, (ii) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to Parent or Acquisition or any of their respective
properties or assets, or (iii) except as set forth on Schedule 4.4,
result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default under, any note, bond,
mortgage, indenture, license, permit, agreement or other instrument to
which Parent or Acquisition is a party, or by which Parent or
Acquisition or any of their respective properties is bound, excluding
from the foregoing clauses (ii) and (iii) violations, breaches or
defaults which, either individually or in the aggregate, would not
have a material adverse effect on the business, operations or
financial condition of Parent or Acquisition.
SECTION 4.5. Absence of Material Adverse Change. Since
----------------------------------
March 31, 1994, there has not been any material adverse change in the
business, operations, properties, assets, liabilities or condition
(financial or otherwise) of Parent and its subsidiaries taken as a
whole or any declaration of any dividend or other distribution with
respect to Parent's capital stock other than (i) the cash dividend
with respect to the Convertible Preferred Stock, in the amount of
$1.25 per share, declared on June 17, 1994 and payable on July 15,
1994, and (ii) the dividend with respect to the Series A Preferred
Stock, in the amount of $1.05 per share, declared on June 17, 1994 and
payable on July 15, 1994, which dividend will be paid in the form of
additional shares of Series A Preferred Stock.
SECTION 4.6. Business of Acquisition. Acquisition has not
-----------------------
engaged, and will not, prior to the Closing, engage, in any business
other than in connection with the Merger.
SECTION 4.7. Joint Proxy Statement/Prospectus. None of the
--------------------------------
information supplied or to be supplied by Parent or Acquisition for
inclusion or incorporation by reference in the Proxy Statement or the
Registration Statement will, (a) in the case of the Registration
Statement, at the time it is filed with the SEC or any other
regulatory authority, at the time it becomes effective and at the
Effective Date, contain any untrue statement
<PAGE>
of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein
not misleading, or (b) in the case of the Proxy Statement, at the time
it is filed with the SEC or any other regulatory authority, at the
time of the mailing of the Proxy Statement or any amendment or
supplement thereto, at the time of the meetings of the stockholders to
which the Proxy Statement relates and at the Effective Date, contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Date any
event with respect to Parent, its officers and directors or any of its
subsidiaries should occur which is required to be described in an
amendment of, or a supplement to, the Proxy Statement or the
Registration Statement, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the shareholders of the Company. The
Proxy Statement and the Registration Statement and any other SEC
filing will comply (with respect to Parent and its Subsidiaries other
than the Company and its Subsidiaries) in all material respects, as to
form, with the applicable requirements of each of the Exchange Act and
the Securities Act and the respective rules and regulations
thereunder.
SECTION 4.8. Reports. Parent has furnished to the Company
-------
an accurate and complete copy of each registration statement, report
and proxy statement filed by Parent with the SEC since December 31,
1990 (the "Parent SEC Documents"). Since December 31, 1990 Parent has
filed all required forms, reports and documents required to be filed
by it pursuant to the Securities Act and the Exchange Act and the
rules and regulations thereunder. The Parent SEC Documents, including
without limitation any financial statements or schedules included
therein, when filed, (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and
(b) complied in all material respects with the applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and
the applicable rules and regulations thereunder. Other than as
disclosed in filings by Parent with the SEC, the financial statements
of Parent (including the related notes thereto) included in the Parent
SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been
<PAGE>
prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated in such financial
statements or in the notes thereto or, in the case of the unaudited
financial statements, as permitted by the requirements of Form 10-Q)
and fairly present in accordance with GAAP (subject, in the case of
the unaudited statements, to normal recurring audit adjustments) the
consolidated financial position of Parent and its consolidated
subsidiaries as at the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended.
4.9. Continuity of Business Line. Parent intends to cause
---------------------------
Acquisition to continue the historic business of the Company or use a
significant portion of the Company's historic business assets in a
business, in each case within the meaning of Treas. Reg.
section 1.368-1(d).
4.10. Litigation. Except as disclosed in the Parent SEC
----------
Documents, there are no actions, suits, investigations or proceedings
pending or, to the best knowledge of Parent, threatened, against
Parent or any of its Subsidiaries (other than the Company and its
Subisidiaries) that, if adversely determined, would be reasonably
likely to result in any claims against, or obligations or liabilities
of, Parent or any of its Subsidiaries that, alone or in the aggregate,
would have a material adverse effect with respect to the business,
operations, properties, assets, liabilities or condition (financial or
otherwise) of Parent and its Subsidiaries taken as a whole.
ARTICLE V
COVENANTS
SECTION 5.1. Capitalization. Prior to the Effective Date,
--------------
unless the other parties to this Agreement shall agree in writing and
except as otherwise expressly permitted or contemplated by this
Agreement:
(a) neither Parent nor the Company shall split, combine or
reclassify the outstanding Parent Shares or shares of Common Stock,
respectively, or declare, set aside or pay any dividend payable in
cash, stock or property or make any distribution with respect to
Parent Shares or shares of Common Stock, respectively, other than (ii)
in the case of Parent, the payment of dividends with respect to
Parent's outstanding Convertible Preferred Stock and Series A
Preferred Stock, and (ii) in the case of the Company, the payment of
regular quarterly
<PAGE>
dividends consistent with past practice; or redeem, purchase or
otherwise acquire (or agree to redeem, purchase or otherwise acquire),
directly or indirectly, any Parent Shares or shares of Common Stock,
respectively; and
(b) neither Parent nor the Company, or any of their
respective subsidiaries (including Acquisition) shall (i) issue or
agree to issue any additional Parent Shares or shares of Common Stock
respectively, or options, warrants or rights of any kind to acquire
any Parent Shares or shares of Common Stock, respectively, other than
(A) in the case of Parent, Parent Shares issuable pursuant to the
options outstanding on the date hereof granted under Parent's 1993
Stock Option and Performance Award Plan (the "Parent Stock Option
Plan") and, (B) in the case of the Company, shares of Common Stock
issuable pursuant to the Company Stock Option Plan; or (ii) amend or
modify any outstanding stock option granted pursuant to the Parent
Stock Option Plan or the Company Stock Option Plan, respectively, or
grant any stock appreciation rights or stock bonuses.
SECTION 5.2. Conduct of Business of Acquisition. During
----------------------------------
the period from the date of the Agreement to the Closing,
(i) Acquisition shall not engage in any activities of any nature other
than as contemplated by this Agreement, and (ii) Parent will continue
to own all of the outstanding Common Stock of Acquisition.
SECTION 5.3. Registration Statement; Joint Proxy Statement.
---------------------------------------------
Parent shall promptly prepare and file with the SEC a Registration
Statement (the "Registration Statement") under the Securities Act with
respect to the Parent Shares to be issued in the Merger and shall use
all reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly as practicable. Parent shall also
take any action required to be taken under state blue sky law or
securities laws in connection with issuance of Parent Shares pursuant
to the Merger, and the Company, Parent and Acquisition shall furnish
all information concerning the Company, Parent and Acquisition and the
holders of shares of Common Stock and shall take such other action as
may be reasonably requested in connection with any such action. The
Company and Parent shall prepare for inclusion in the Registration
Statement, shall file with the SEC under the Exchange Act at the time
the Registration Statement is filed as provided above, and shall use
all reasonable efforts to have cleared by the SEC, the Proxy Statement
with respect to the special meeting of stockholders of Parent and the
Company as provided in Section 5.4 below, and shall mail the Proxy
Statement
<PAGE>
to their respective stockholders as promptly as practicable after
clearance of the Proxy Statement with the SEC.
SECTION 5.4. Stockholder Approval. (a) Parent shall take
--------------------
all steps necessary to call, give notice of, convene and hold a
special meeting of its stockholders as soon as practicable for the
purpose of adopting and approving this Agreement and the transactions
contemplated hereby and for such other purposes as may be necessary or
desirable, and the Company shall take all steps necessary to call,
give notice of, convene and hold a special meeting of its stockholders
as soon as practicable for the purpose of adopting and approving this
Agreement and the transactions contemplated hereby and for such other
purposes as may be necessary or desirable.
(b) The Board of Directors of each of Parent and the
Company has unanimously determined that this Agreement is advisable
and in the best interests of its stockholders and shall recommend to
its stockholders the adoption and approval of this Agreement and the
transactions contemplated hereby and shall use its best efforts to
obtain the necessary approvals by its stockholders of this Agreement
and the transactions contemplated hereby. At any meeting of the
stockholders of the Company to vote on the approval and adoption of
this Agreement and the transactions contemplated hereby, the Parent
agrees to vote all shares of Common Stock beneficially owned by it in
favor of the approval and adoption of this Agreement. At the meeting
of the stockholders of Parent to vote on the approval and adoption of
this Agreement and the transactions contemplated hereby, Parent will
cause Abbey J. Butler, Melvin J. Estrin, Centaur Partners IV, Butler
Equities II, L.P. and Estrin Abod Equities Limited Partnership
(collectively, the "Parent Affiliated Stockholders") to vote or cause
to be voted all Parent Shares beneficially owned by such Parent
Affiliated Stockholders, within the meaning of Regulation 13D
promulgated under the Securities Exchange Act of 1934, in favor of the
approval and adoption of this Agreement and the transactions
contemplated hereby.
(c) The Special Committee has unanimously recommended to
the Board of Directors of the Company that the Merger is fair to and
in the best interests of the Unaffiliated Company Stockholders. Based
upon the recommendation of the Special Committee, the Board of
Directors of the Company has determined that the Merger is advisable
and in the best interests of the stockholders of the Company and shall
recommend to its stockholders the adoption and approval of this
Agreement and the transactions contemplated hereby; provided, however,
-------- -------
that at any time prior to the meeting of the stockholders of the
Company at
<PAGE>
which approval or adoption of this Agreement is presented to such
stockholders for a vote, either the Special Committee or the Board of
Directors of the Company, in accordance with their respective
fiduciary duties, as advised by counsel, may revoke, modify or qualify
its recommendation with respect to this Agreement and the transactions
contemplated hereby in the event that a Bona Fide Third Party Offer
(as defined in Section 10.01(f) hereof) is received by the Company and
the Company would be permitted to terminate this Agreement as a result
of the receipt of such Bona Fide Third Party Offer pursuant to Section
10.01(f) hereof.
SECTION 5.5. Best Efforts. Subject to the terms and
------------
conditions herein provided and, in the case of the Company, to the
proviso contained in Section 5.04(c), each of the parties hereto
agrees to use its best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and
make effective the transactions contemplated by this Agreement.
Parent shall cause Acquisition to perform all of its obligations under
this Agreement. In case at any time after the Effective Date any
further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each corporation
that is a party to this Agreement shall take all such necessary
action.
SECTION 5.6. Consents. Parent, Acquisition and the Company
--------
shall each use its best efforts to obtain consents of all third
parties and governmental authorities necessary to the consummation of
the transactions contemplated by this Agreement.
SECTION 5.7. NYSE Listing. If required, Parent shall use
------------
its best efforts to effect, on or before the Effective Date, approval
for listing on the NYSE, upon official notice of issuance, of the
Parent Shares to be issued pursuant to the Merger.
SECTION 5.8. Fees and Expenses. Each party hereto shall
-----------------
pay all costs and expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby.
<PAGE>
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF
PARENT, ACQUISITION AND THE COMPANY
The respective obligations of each party to effect the
Merger shall be subject to the fulfillment at or prior to the
Effective Date of the following conditions:
SECTION 6.1. Stockholder Approval. This Agreement and the
--------------------
Merger shall have been adopted and approved by the affirmative vote of
the holders of at least a majority of the outstanding shares of Common
Stock of the Company, by the affirmative vote of at least a majority
of the Parent Shares voting on this Agreement and the Merger, and by
the sole stockholder of Acquisition.
SECTION 6.2. Certain Proceedings. None of Parent, Holding,
-------------------
Acquisition or the Company shall be subject to any writ, order, decree
or injunction of a court of competent jurisdiction prohibiting or
restricting the consummation of the Merger.
SECTION 6.3. Exchange Listing. The Parent Shares required
----------------
to be issued in the Merger shall have been approved for listing on the
NYSE, subject to official notice of issuance.
SECTION 6.4. Registration Statement. The Registration
----------------------
Statement shall have been declared effective, shall be effective at
the Effective Time, and no stop order suspending such effectiveness
shall have been issued or proceedings for that purpose shall have been
instituted.
SECTION 6.5. Blue Sky Laws. Parent shall have received all
-------------
Blue Sky authorizations necessary to issue the Merger Consideration.
SECTION 6.6. Consents. Parent and the Company shall have
--------
obtained, on or before the Closing Date, the consents listed on
Schedule 6.6 hereto.
SECTION 6.7. Tax Opinion. Parent shall have delivered to
-----------
the Company an opinion of Parent's counsel, Weil, Gotshal & Manges,
reasonably acceptable to Latham & Watkins, counsel to the Special
Committee, to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code;
(ii) no gain or loss will be recognized by holders of shares of Common
Stock upon the exchange of such shares solely for Parent Shares by
reason of the Merger (except with respect to
<PAGE>
cash, if any, received in lieu of fractional shares), (iii) the tax
basis of the Parent Shares received by holders of shares of Common
Stock in the Merger will be the same as the tax basis of the shares of
Common Stock surrendered in exchange therefor and (iv) a holder's
holding period in such Parent Shares will include its holding period
in such shares of Common Stock provided the shares of Common Stock
were held as a capital asset at the Effective Time. In rendering such
opinion, Weil, Gotshal & Manges may receive and rely upon
representations contained in certificates reasonably acceptable to
Latham & Watkins, counsel to the Special Committee.
SECTION 6.8. Fairness Opinion. The Fairness Opinion shall
----------------
not have been modified, withdrawn or revoked as of the time of the
mailing of the Proxy Statement to the stockholders of the Company.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS
OF PARENT AND ACQUISITION
Each and every obligation of Parent and Acquisition under
this Agreement to be performed on or before the Closing Date shall be
subject to the satisfaction, on or before the Closing Date, of each of
the following conditions:
SECTION 7.1. Representations and Warranties True. The
-----------------------------------
representations and warranties of the Company contained herein shall
be true and correct in all material respects on the date of this
Agreement and at and on the Closing Date as though such
representations and warranties were made at and on such date, except
for changes permitted or contemplated by this Agreement.
SECTION 7.2. Performance. The Company shall have performed
-----------
and complied in all material respects with all agreements, obligations
and conditions required by this Agreement to be performed or complied
with by it on or prior to the Closing Date.
SECTION 7.3. Certificates. The Company shall furnish such
------------
certificates of its officers to evidence compliance with the
conditions set forth in this Article VII, as may be reasonably
requested by Parent.
SECTION 7.4. Material Adverse Change. Since March 31,
-----------------------
1994, there shall not have been any change or event that has
<PAGE>
resulted in, or may result in, any material adverse change in the
business, operations, properties, assets, liabilities or condition
(financial or otherwise) of the Company and its subsidiaries, taken as
a whole.
SECTION 7.5. Regulatory Approvals. All consents,
--------------------
approvals, permits and authorizations required to be obtained prior to
the Effective Date from governmental and regulatory authorities in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Parent,
Acquisition and the Company shall have been obtained without
restrictions, except where the failure to obtain such consents,
approvals, permits and authorizations which would not have a material
adverse effect on the business, operations, properties, assets,
liabilities or condition (financial or otherwise) of Parent or
Acquisition.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company under this Agreement to
effect the Merger shall be subject to the satisfaction on or before
the Closing Date, of each of the following conditions:
SECTION 8.1. Representations and Warranties True. The
-----------------------------------
representations and warranties of Parent and Acquisition contained
herein shall be true and correct in all material respects on the date
of this Agreement and at and on the Closing Date as though such
representations and warranties were made at and on such date, except
for changes permitted or contemplated by this Agreement.
SECTION 8.2. Performance. Parent and Acquisition shall
-----------
have performed and complied with all agreements, obligations and
conditions required by this Agreement to be performed or complied with
by them on or prior to the Closing Date.
SECTION 8.3. Certificates. Parent and Acquisition shall
------------
furnish such certificates of their respective officers to evidence
compliance with the conditions set forth in this Article VIII, as may
be reasonably requested by the Company.
SECTION 8.4. Material Adverse Change. Since March 31,
-----------------------
1994, there shall not have been any change or event (other than a
change or event solely with respect to the Company) that has resulted
in, or may result in, any material adverse change in the
<PAGE>
business, operations, properties, assets, liabilities or condition
(financial or otherwise) of Parent and its subsidiaries, taken as a
whole.
SECTION 8.5. Regulatory Approvals. All consents,
--------------------
approvals, permits and authorizations required to be obtained prior to
the Effective Date from governmental and regulatory authorities in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Parent,
Acquisition and the Company shall have been obtained without
restrictions, except where the failure to obtain such consents,
approvals, permits and authorizations could not reasonably be expected
to have a material adverse effect on the business, operations,
properties, assets, liabilities or condition (financial or otherwise)
of the Company.
ARTICLE IX
CLOSING
SECTION 9.1. Time and Place. Subject to the provisions of
--------------
Articles VI, VII, VIII and X, the closing of the Merger (the
"Closing") shall take place at the offices of Weil, Gotshal & Manges,
767 Fifth Avenue, New York, New York 10153, as soon as practicable but
in no event later than 9:30 A.M., local time, on the first business
day after the date on which each of the conditions set forth in
Articles VI, VII and VIII has been satisfied or waived by the party or
parties entitled to the benefit of such condition, or at such other
place, at such other time, or on such other date as Parent and the
Company may mutually agree. The date on which the Closing actually
occurs is herein referred to as the "Closing Date."
SECTION 9.2. Filings at the Closing. Subject to the
----------------------
provisions of Articles VI, VII, VIII, and X hereof, Parent,
Acquisition and the Company shall immediately after the Closing
(a) file with the Delaware Secretary of State a certificate of merger
in the form annexed as Annex B hereto and (b) take all such other and
further actions as may be required by law to make the Merger
effective.
<PAGE>
ARTICLE X
TERMINATION AND ABANDONMENT
SECTION 10.1. Termination. This Agreement may be
-----------
terminated at any time prior to the Effective Date, whether before or
after approval by the stockholders of Parent or the Company:
(a) by mutual consent of the Boards of Directors of Parent
and the Company;
(b) by either Parent or the Company if, without fault of
such terminating party, the Merger shall not have been consummated on
or before December 31, 1994, which date may be extended by the mutual
consent of the Boards of Directors of Parent and the Company;
(c) by Parent or the Company if any court of competent
jurisdiction in the United States or other governmental body in the
United States shall have issued an order (other than a temporary
restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger, and such
order, decree, ruling or other action shall have become final and
nonappealable;
(d) by either Parent or the Company, if the stockholders of
Parent or the Company fail to duly adopt and approve this Agreement
and the Merger as contemplated by Section 6.1; or
(e) by Parent prior to the stockholders' meeting of the
Company if the Average Stock Price is less than $14.40.
(f) by the Company, if, prior to the consummation of the
transactions contemplated hereby, the Company receives a bona fide
third party offer, which is not subject to any financing condition (a
"Bona Fide Third Party Offer"), to acquire the Common Stock that
involves the payment or issuance to all holders of the Common Stock of
consideration per share of the Common Stock with a value in excess of
the consideration per share of the Common Stock to be received by the
Unaffiliated Company Stockholders in the Merger, which offer the
Special Committee has determined is more favorable to the Unaffiliated
Company Stockholders.
SECTION 10.2. Procedure and Effect of Termination. In the
-----------------------------------
event of termination and abandonment of the Merger by Parent
<PAGE>
or the Company pursuant to Section 10.1, written notice thereof shall
forthwith be given to the other and this Agreement shall terminate and
the Merger shall be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as provided herein,
the obligations stated in this Section 10.2 and in Sections 5.8 and
11.3 shall survive any such termination.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Amendment and Modification. Subject to
--------------------------
applicable law, this Agreement may be amended, modified or
supplemented only by written agreement of Parent, Acquisition and the
Company at any time prior to the Effective Date with respect to any of
the terms contained herein; provided, however, that, after this
-------- -------
Agreement is adopted by the Company's stockholders pursuant to Section
5.4, no such amendment or modification shall reduce the amount or
change the form of the consideration to be delivered to the
stockholders of the Company.
SECTION 11.2. Waiver of Compliance; Consents. Any failure
------------------------------
of Parent or Acquisition on the one hand, or the Company, on the other
hand, to comply with any obligation, covenant, agreement or condition
herein may be waived by the Company or Parent or Acquisition,
respectively, only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements
for a waiver of compliance as set forth in this Section 11.1.
SECTION 11.3. Indemnification. (a) From and after the
---------------
Effective Date, the Surviving Corporation shall maintain, and Parent
agrees to cause the Surviving Corporation to maintain for a period of
at least six years from the Effective Date, (i) director and officer
liability insurance providing at least the same amounts and coverage
with respect to the Company's officers and directors as the current
policies maintained by or on behalf of the Company, and containing
terms and conditions which are no less advantageous with respect to
matters existing or occurring on or prior to the Effective Date, and
in the event any claim is made against present directors or officers
of the Company that is
<PAGE>
covered, in whole or in part, or potentially so covered by insurance,
the Surviving Corporation and Parent shall do nothing that would
forfeit, jeopardize, restrict or limit the insurance coverage
available for that claim until the final disposition of that claim;
provided, however, that if the cost of maintaining such insurance
-------- -------
exceeds the current cost related to providing such insurance (the
"Current Cost"), then the Surviving Corporation shall maintain and
Parent agrees to cause the Surviving Corporation to maintain such
director and officer liability insurance with the maximum amount of
coverage obtainable at twice such Current Cost, and (ii) all rights to
indemnification now existing in favor of the present directors or
officers of the Company and its respective subsidiaries as provided in
their respective certificates or articles of incorporation or by-laws
or otherwise in effect on the date hereof (other than pursuant to this
Agreement) shall survive the Merger for a period of six years;
provided, however, that all such rights to indemnification with
-------- -------
respect to any claim asserted, made or originated prior to the
expiration of such six-year period shall survive until the final
disposition of such Claim (as hereinafter defined), and that during
such period, the Certificate of Incorporation and By-Laws of the
Surviving Corporation shall not be amended to reduce or limit the
rights of indemnity of the present directors or officers of the
Company, or the ability of the Surviving Corporation to indemnify
them, nor to hinder, delay or make more difficult the exercise of such
rights of indemnity or the ability to indemnify.
(b) From and after the Effective Date, Parent shall
indemnify, defend and hold harmless each person who is now an officer
or director of the Company against all losses, claims, damages, costs,
expenses or liabilities, or in connection with any claim, action,
suit, proceeding or investigation (a "Claim"), arising out of the fact
that such person is an officer or director of the Company (or out of
any action taken by any such person on behalf of the Company),
pertaining to any matter existing or occurring on or prior to the
Effective Date (including, without limitation, the transactions
contemplated by this Agreement), whether asserted or claimed prior to,
or on or after, the Effective Date. In each case such indemnification
shall be to the full extent a corporation is permitted under
applicable law to indemnify its own directors and officers, as the
case may be (and Parent will pay expenses in advance of the final
disposition of any such action or proceeding to each such director or
officer of the Company seeking indemnification hereunder to the full
extent permitted by law).
<PAGE>
(c) Without limiting the foregoing, in any case in which
approval by the Surviving Corporation is required to effectuate any
indemnification under this Section 11.3, Parent shall cause the
Surviving Corporation to direct, at the election of the director or
officer of the Company seeking indemnification hereunder, that the
determination of any such approval shall be made by independent
counsel acceptable to Parent selected by such director or officer of
the Company seeking indemnification hereunder.
(d) This Section 11.3 shall survive the consummation of the
Merger. The provisions of this Section 11.3 are intended to be for
the benefit of, and shall be enforceable by the present directors or
officers of the Company, as the case may be. The rights provided
under this Section 11.3 shall be in addition to, and not in lieu of,
any rights to indemnity which any party may have under the Articles of
Incorporation or By-Laws of the Company or the Surviving Corporation
or any other agreements.
SECTION 11.4. Non-Survival of Warranties. The respective
--------------------------
representations and warranties of Parent, Acquisition and the Company
contained herein shall expire with, and be terminated and extinguished
by, the Merger, or the termination of this Agreement pursuant to
Section 10.1 or otherwise; and thereafter neither Parent, Acquisition
nor the Company, nor any officer or director thereof shall be under
any liability whatsoever with respect to any such representation or
warranty. This Section 11.4 shall have no effect upon any other
obligation of the parties hereto including, without limitation, the
obligations of the Surviving Corporation and Parent under Section 11.3
hereof, whether to be performed before or after the Closing.
SECTION 11.5. Notices. All notices and other
-------
communications hereunder shall be in writing and shall be deemed given
if delivered personally or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice; provided that notices of a change of address shall be
effective only upon receipt thereof):
(a) if to the Company, to:
FoxMeyer Corporation
1220 Senlac Drive
Carrollton, Texas 75006
Attn: Co-Chairmen
Telecopy:
<PAGE>
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20005-2505
Attn: John J. Huber, Esq.
Telecopy: 212-637-2201
(b) if to Parent or Acquisition, to:
National Intergroup, Inc.
1220 Senlac Drive
Carrollton, Texas 75006
Attn:
Telecopy:
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attn: Stephen E. Jacobs, Esq.
Telecopy: (212) 310-8007
SECTION 11.6. Assignment. This Agreement and all of the
----------
provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties, nor is
this Agreement intended to confer upon any other person except the
parties hereto any rights or remedies hereunder.
SECTION 11.7. Governing Law. This Agreement shall be
-------------
governed by the laws of the State of Delaware (regardless of the laws
that might otherwise govern under applicable Delaware principles of
conflicts of law) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies.
SECTION 11.8. Counterparts. This Agreement may be executed
------------
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
<PAGE>
SECTION 11.9. Interpretation. The article and section
--------------
headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not
in any way affect the meaning or interpretation of this Agreement. As
used in this Agreement, (i) the term "person" shall mean and include
an individual, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization and a government or any department or
agency thereof; (ii) the term "subsidiary" of any specified
corporation shall mean any corporation of which the outstanding
securities having ordinary voting power to elect a majority of the
board of directors are directly or indirectly owned by such specified
corporation.
SECTION 11.10. Entire Agreement. This Agreement, including
----------------
the exhibits hereto and the documents and instruments referred to
herein embodies the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are
no representations, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein.
This Agreement supersedes all prior agreements and the
understandings between the parties with respect to such subject
matter.
<PAGE>
IN WITNESS WHEREOF, Parent, Acquisition and the Company have
caused this Agreement to be signed by their respective duly authorized
officers on the date first above written.
NATIONAL INTERGROUP, INC.
By: /s/ Abbey J. Butler
-----------------------------
Name: Abbey J. Butler
Title: Co-Chief Executive Officer
FOXMEYER ACQUISITION CORP.
By: /s/ Abbey J. Butler
-----------------------------
Name: Abbey J. Butler
Title: Co-Chief Executive Officer
FOXMEYER CORPORATION
By: /s/ Thomas L. Anderson
-----------------------------
Name: Thomas L. Anderson
Title: President and Chief
Operating Officer
ANNEX B
SMITH BARNEY
September 12, 1994
The Special Committee of the
Board of Directors
FoxMeyer Corporation
1220 Senlac Drive
Carrollton, Texas 75006
Members of the Special Committee:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of FoxMeyer Corporation ("FoxMeyer"),
other than National Intergroup, Inc. ("NII") and its affiliates, of the
consideration to be received by such stockholders pursuant to the terms and
subject to the conditions set forth in the Agreement and Plan of Merger, dated
as of June 30, 1994 (the "Merger Agreement"), by and among NII, FoxMeyer
Acquisition Corp. ("Acquisition") and FoxMeyer. As more fully described in the
Merger Agreement, (i) FoxMeyer will be merged with and into Acquisition (the
"Merger") and (ii) each outstanding share of the common stock, par value $0.01
per share, of FoxMeyer (the "FoxMeyer Common Stock") will be converted into the
right to receive 0.90 of a share (the "Ratio") of the common stock, par value
$5.00 per share, of NII (the "NII Common Stock"); provided, that if the product
of the average per share closing price of NII Common Stock on the New York
Stock Exchange during the 20 consecutive trading day period commencing 21
trading days prior to the stockholder meeting for the Merger and ending on the
second trading day prior to such meeting (the "Average Stock Price") and the
Ratio is less than $14.40, the Ratio will be increased so that the product of
the Average Stock Price and the Ratio, as increased, equals $14.40 (the Ratio,
as so adjusted, the "Exchange Ratio").
In arriving at our opinion, we reviewed the Merger Agreement and the Joint
Proxy Statement/Prospectus to be distributed to stockholders in connection with
the Merger, and held discussions with certain senior officers, directors and
other representatives and advisors of FoxMeyer and the Special Committee and
certain senior officers and other representatives and advisors of NII
concerning the business, operations and prospects of FoxMeyer and NII. We
examined certain publicly available business and financial information relating
to FoxMeyer and NII as well as certain financial forecasts and other data for
FoxMeyer and NII which were provided to us by the respective managements of
FoxMeyer and NII. We reviewed the financial terms of the Merger as set forth
in the Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of FoxMeyer Common Stock and the
NII Common Stock; the respective companies' historical and projected earnings;
and the capitalization and financial condition of FoxMeyer and NII. We also
considered, to the extent publicly available, the financial terms of certain
other similar transactions recently effected which we considered comparable to
the Merger and analyzed certain financial and other publicly available
information relating to the businesses of other companies whose operations we
considered comparable to those of FoxMeyer and NII. We also evaluated the
potential pro forma financial impact of the Merger on NII. In addition to the
foregoing, we conducted such other analyses and examinations and
The Special Committee of the
Board of Directors
FoxMeyer Corporation
1220 Senlac Drive
Carrollton, Texas 75006
Page 2
considered such other financial, economic and market criteria as we deemed
necessary to arrive at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise discussed with us.
With respect to financial forecasts and other information provided to or
otherwise discussed with us, we assumed that such forecasts and other
information were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the respective managements of FoxMeyer and
NII as to the expected future financial performance of FoxMeyer and NII. We
also assumed that the Merger will be treated as a tax-free reorganization for
federal income tax purposes. Our opinion, as set forth herein, relates to the
relative values of FoxMeyer and NII. We are not expressing any opinion as to
what the value of the NII Common Stock actually will be when issued to FoxMeyer
stockholders pursuant to the Merger or the price at which the NII Common Stock
will trade subsequent to the Merger. We have not made or been provided with
an independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise) of FoxMeyer or NII nor have we made any physical inspection of
the properties or assets of FoxMeyer or NII. We were not requested to, and did
not, solicit third party indications of interest in acquiring all or any part
of FoxMeyer. Our opinion is necessarily based upon financial, stock market and
other conditions and circumstances existing and disclosed to us as of the date
hereof.
Smith Barney has been engaged to render financial advisory services to the
Special Committee in connection with the Merger and will receive a fee for our
services, including a fee upon the delivery of this opinion. In the ordinary
course of our business, we may actively trade the equity and debt securities of
FoxMeyer and NII for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.
Our advisory services and the opinion expressed herein are provided solely for
the use of the Special Committee in its evaluation of the proposed Merger and
are not on behalf of, and are not intended to confer rights or remedies upon,
NII or its affiliates, any stockholder of FoxMeyer or NII, or any person other
than the Special Committee. Our opinion may not be published or otherwise used
or referred to, nor shall any public reference to Smith Barney be made, without
our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of FoxMeyer Common Stock (other than
NII and its affiliates).
Very truly yours,
SMITH BARNEY INC.
<PAGE>
Annex C
FORM OF
-------
AMENDMENT
TO THE
1993 STOCK OPTION AND PERFORMANCE AWARD PLAN
OF
NATIONAL INTERGROUP, INC.
Amendment, dated ____________, 1994, to the 1993 Stock
Option and Performance Award Plan (the "Plan") of National
Intergroup, Inc. (the "Company"). Capitalized terms used herein
and not defined herein shall have the meanings ascribed thereto
in the Plan.
WHEREAS, the Board of Directors of the Company believes
that the aggregate number of shares of the Company's common
stock, par value $5 per share, available for the granting of
options under the Plan should be increased in order to continue
to give the Board of Directors flexibility in compensating
directors, officers and key employees of the Company;
NOW, THEREFORE, subject to the approval of the
stockholders of the Company as set forth in Section 2 hereof, the
Plan is hereby amended as follows:
1. The first sentence of Section 3 of the Plan is hereby
amended to read in its entirety as follows:
"Subject to adjustments provided in Section 11,
the maximum aggregate number of shares of common stock
of the Company which may be granted for all purposes
under the Plan shall be 4,000,000 shares."
2. Section 4 of the Plan is hereby amended to read in its
entirety as follows:
Grants under the Plan (i) may be made, pursuant to
Sections 6, 8 and 9, to key employees, officers and
directors (but not to any director who is not an employee)
of the Company, or any parent corporation or subsidiary
corporation thereof, who are regularly employed on a
salaried basis and who are so employed on the date of such
grant (the "Officer and Key Employee Participants"), (ii)
shall be made, subject to and in accordance with Section 7,
to individuals not regularly employed by the Company who
serve as directors of the Company (the "Outside Director
Participants"), and (iii) shall be made to individuals not
regularly employed by NII who serve as directors of any
subsidiary corporation of the Corporation, at the discretion
of the Committee administering the Plan.
<PAGE>
3. This Amendment shall become effective on the date first
approved by the affirmative vote of the holders of a majority of
the shares of common stock of the Company voting at a meeting of
the Company's stockholders.
IN WITNESS WHEREOF, the Company hereby executes this
Amendment on the date first above written.
NATIONAL INTERGROUP, INC.
By: ________________________________
Name:
Title:
<PAGE>
Annex D
FORM OF
-------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
NATIONAL INTERGROUP, INC.
Under Section 242 of the General Corporation Law
------------------------------------------------
The undersigned, NATIONAL INTERGROUP, INC., a
corporation organized and existing under the General
Corporation Law of Delaware (the "Corporation"), pursuant to
the provisions of Section 242 of the Delaware General
Corporation Law, hereby certifies that:
FIRST: The name of the corporation is NATIONAL
INTERGROUP, INC. The name under which the Corporation was
formed is National Intergroup, Inc.
SECOND: The Restated Certificate of
Incorporation of this Corporation is hereby amended as
follows:
1. to change the name of National Intergroup,
Inc. to "___________." The FIRST Article of the Restated
Certificate of Incorporation is hereby amended to read in
its entirety as follows:
"FIRST: The name of the Corporation is
_______________________."
2. to increase the number of authorized shares
of preferred stock, par value $5 per share, from 10,000,000
shares to 20,000,000 shares. The first sentence of Article
FOURTH of the Restated Certificate of Incorporation is
hereby amended to read in its entirety as follows:
"FOURTH: The total number of shares which the
Corporation shall have authority to issue is
70,000,000, of which 20,000,000 shall be preferred
stock, par value $5 per share, and 50,000,000
shares shall be common stock, par value $5 per
share."
IN WITNESS WHEREOF, the Corporation has caused its
corporate seal to be affixed hereto and this instrument to
be signed in its name by its Vice President and attested to
by its Secretary this ___ day of ______, 1994.
ATTEST: NATIONAL INTERGROUP, INC.
By: ______________________ By: ______________________
Name: Name:
Title: Title:
(CORPORATE SEAL)
<PAGE>
PROXY
NATIONAL INTERGROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 12, 1994
The undersigned, a stockholder of National Intergroup, Inc. (the
'Corporation'), hereby constitutes and appoints Abbey J. Butler and Melvyn J.
Estrin and each of them, as the true and lawful proxies and attorneys-in-fact of
the undersigned, with full power of substitution and revocation in each of them,
to represent the undersigned at the Annual Meeting of Stockholders of the
Corporation to be held at 9:00 A.M. on October 12, 1994, and at any and all
adjournments or postponements thereof, with authority to vote all shares held or
owned by the undersigned in accordance with the direction indicated herein.
Receipt of the Notice of Annual Meeting of Stockholders dated September 12,
1994 and the Joint Proxy Statement/Prospectus furnished therewith is hereby
acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ITEMS 1, 2, 3, 4, 5 AND 6 AND PURSUANT TO ITEM 7.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4, 5 AND 6.
(Continued and to be signed on the reverse side)
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
1. Election of Directors:
NOMINEES: Sheldon W. Fantle, Thomas L. Anderson
FOR WITHHELD
/ / / /
For, except votes WITHHELD from the following nominee(s):
- ----------------------------------------
2. Approval of the Merger Agreement (as described in the Joint Proxy
Statement/Prospectus) pursuant to which FoxMeyer Corporation will merge
into a wholly owned subsidiary of the Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
3. Approval of an amendment to the Restated Certificate of Incorporation
of the Corporation (as described in the Joint Proxy Statement/Prospectus)
pursuant to which the number of the Corporation's shares of preferred
stock, par value $5 per share, authorized for issuance will be increased
to 20,000,000.
FOR AGAINST ABSTAIN
/ / / / / /
4. Approval of an amendment to the Restated Certificate of Incorporation
of the Corporation (as described in the Joint Proxy Statement/Prospectus)
to change the Corporation's name.
FOR AGAINST ABSTAIN
/ / / / / /
5. Approval of an amendment to the 1993 Stock Option and Performance
Award Plan (as described in the Joint Proxy Statement/Prospectus) to
increase by 2,000,000 the number of shares of common stock of the
Corporation authorized for issuance thereunder.
FOR AGAINST ABSTAIN
/ / / / / /
6. Approval of a proposal to amend the 1993 Option Plan to allow grants
thereunder to individuals not regularly employed by NII who serve as
directors of any subsidiary corporation of the Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
7. In their discretion, the Proxies are authorized to vote upon such
other business as may properly be presented to the meeting or any
adjournment thereof.
SIGNATURE _______________________________________________________ DATE _______
The signature should agree with the name on your stock certificate. If acting as
attorney, executor, administrator, trustee, guardian, etc., you should so
indicate when signing. If the signer is a corporation, please sign the full
corporate name by duly authorized officer. If shares are held jointly, each
stockholder named should sign.
- -------------------------------------------------------------------------------
<PAGE>
PROXY
FOXMEYER CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 12, 1994
The undersigned, a stockholder of FoxMeyer Corporation (the 'Corporation'),
hereby constitutes and appoints Abbey J. Butler and Melvyn J. Estrin and each of
them, as the true and lawful proxies and attorneys-in-fact of the undersigned,
with full power of substitution and revocation in each of them, to represent the
undersigned at the Annual Meeting of Stockholders of the Corporation to be held
at 10:00 A.M. on October 12, 1994, and at any and all adjournments or
postponements thereof, with authority to vote all shares held or owned by the
undersigned in accordance with the direction indicated herein.
Receipt of the Notice of Annual Meeting of Stockholders dated September 12,
1994 and the Joint Proxy Statement/Prospectus furnished therewith is hereby
acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ITEMS 1 AND 2 AND PURSUANT TO ITEM 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
(Continued and to be signed on the reverse side)
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
<PAGE>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
1. Election of Directors:
NOMINEES: Abbey J. Butler, Melvyn J. Estrin,
Thomas L. Anderson, Daniel J. Callahan, III,
Harvey A. Fain, Bruce E. Kahler
FOR WITHHELD
/ / / /
For, except votes WITHHELD from the following nominee(s):
- ----------------------------------------
2. Approval of the Merger Agreement (as described in the Joint Proxy
Statement/Prospectus) to which FoxMeyer Corporation will merge into a
wholly owned subsidiary of the Corporation.
FOR AGAINST ABSTAIN
/ / / / / /
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly be presented to the meeting or any adjournment
thereof.
SIGNATURE _______________________________________________________ DATE _________
The signature should agree with the name on your stock certificate. If acting as
attorney, executor, administrator, trustee, guardian, etc., you should so
indicate when signing. If the signer is a corporation, please sign the full
corporate name by duly authorized officer. If shares are held jointly, each
stockholder named should sign.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT PAGE NO.
- ------------ ----------------------------------------------------------------- ---------
<S> <C> <C>
2 Agreement and Plan of Merger, dated as of June 30, 1994, by and
among National Intergroup, Inc., FoxMeyer Acquisition Corp., and
FoxMeyer Corporation (Filed as Exhibit 2 to NII's Current Report
on Form 8-K.)*
3.1 Restated Certificate of Incorporation of NII and all subsequent
amendments thereto. (Filed as Exhibit 3-A to NII's Annual Report
on Form 10-K for the fiscal year ended March 31, 1993.)*
3.2 By-laws of NII. (Filed as Exhibit 3-A to NII's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1991.)*
3.3 Form of Certificate of Amendment to NII's 1993 Stock Option and
Performance Award Plan.
3.4 Form of Certificate of Amendment to NII's Restated Certificate of
Incorporation.
5 Opinion of Weil, Gotshal & Manges.
8 Opinion of Weil, Gotshal & Manges regarding Tax Matters.
10.1 National Intergroup, Inc. 1993 Stock Option and Performance Award
Plan. (Filed as Exhibit 10-A to NII's Annual Report on Form 10-K
for the fiscal year ended March 31, 1994.)*
10.2 National Intergroup, Inc. Director's Retirement Plan dated
December 1, 1983. (Filed as Exhibit 10-A to NII's Annual Report
on Form 10-K for the fiscal year ended March 31, 1992.)*
10.3 FoxMeyer Corporation Employees' Savings and Profit Sharing
Program. (Filed as Exhibit 10-D to FoxMeyer Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1994.)*
10.4 FoxMeyer Corporation Fiscal Year 1994 Executive Incentive
Compensation Plan. (Filed as Exhibit 10-E to FoxMeyer
Corporation's Annual Report on Form 10-K for the fiscal year
ended March 31, 1994.)*
10.5 FoxMeyer Corporation Long-Term Incentive Plan. (Filed as Exhibit
10-F to FoxMeyer Corporation's Annual Report on Form 10-K for the
fiscal year ended March 31, 1994.)*
10.6 FoxMeyer Corporation Amended and Restated Supplemental Savings
Plan. (Filed as Exhibit 10-G to FoxMeyer Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1994.)*
10.7 FoxMeyer Drug Company Amended and Restated Special Severance
Plan. (Filed as Exhibit 10-L to FoxMeyer Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992.)*
10.8 Loan Agreement, dated as of January 13, 1994, among NII and
Banque Paribas, as Agent, and the Banks named therein. (Filed as
Exhibit 10-A to NII's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1993.)*
10.9 Tax Sharing Agreement, dated as of November 25, 1992, between
FoxMeyer Corporation and NII. (Filed as Exhibit 28(a) to FoxMeyer
Corporation's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1992.)*
10.10 Amendment, dated April 21, 1993 to the Tax Sharing Agreement,
dated as of November 25, 1992, between FoxMeyer Corporation and
NII. (Filed as Exhibit 10-M to FoxMeyer Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993.)*
10.11 Loan Agreement, dated as of November 25, 1992, between FoxMeyer
Corporation and NII. (Filed as Exhibit 28(b) to FoxMeyer
Corporation's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1992.)*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT PAGE NO.
- ------------ ----------------------------------------------------------------- ---------
<S> <C> <C>
10.12 Amendment, dated April 21, 1993 to the Loan Agreement, dated as
of November 25, 1992, between FoxMeyer Corporation and NII.
(Filed as Exhibit 10-O to FoxMeyer Corporation's Annual Report on
Form 10-K for the fiscal year ended March 31, 1994.)*
10.13 Amendment, dated December 17, 1993 to the Loan Agreement, dated
as of November 25, 1992, between FoxMeyer Corporation and NII.
(Filed as Exhibit 10-S to FoxMeyer Corporation's Annual Report on
Form 10-K for the fiscal year ended March 31, 1994.)*
10.14 Stock Purchase Pledge Agreement, dated as of November 25, 1992,
between FoxMeyer Corporation and NII. (Filed as Exhibit 28(c) to
FoxMeyer Corporation's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1992.)*
10.15 Working Capital Pledge Agreement, dated as of November 25, 1992,
between FoxMeyer Corporation and NII. (Filed as Exhibit 28(d) to
FoxMeyer Corporation's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1992.)*
10.16 Amended and Restated Management Agreement, dated as of January 1,
1992, between FoxMeyer Corporation and NII. (Filed as Exhibit
10-A to FoxMeyer Corporation's Annual Report on Form 10-K for the
fiscal year ended March 31, 1992.)*
10.17 Stock Purchase and Recapitalization Agreement, dated as of June
26, 1990, among NII, NII Capital Corporation, NKK Corporation,
NKK U.S.A. Corporation and National Steel Corporation. (Filed as
Exhibit 10-AQ to FoxMeyer Corporation's Annual Report on Form
10-K for the fiscal year ended March 31, 1992.)*
10.18 Amendment to Stock Purchase and Recapitalization Agreement, dated
as of July 31, 1991, among NII, NII Capital Corporation, NKK
Corporation, NKK U.S.A. Corporation and National Steel
Corporation. (Filed as Exhibit 2-F to National Steel
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991.)*
10.19 Put Agreement, dated as of June 26, 1990, among NII Capital
Corporation, NKK U.S.A. Corporation and National Steel
Corporation. (Filed as Exhibit 10-AQ to NII's Annual Report on
Form 10-K for the fiscal year ended March 31, 1990.)*
10.20 Amended and Restated Weirton Liabilities Agreement, dated as of
June 26, 1990, among NII, NII Capital Corporation and National
Steel Corporation. (Filed as Exhibit 10-AQ to NII's Annual Report
on Form 10-K for the fiscal year ended March 31, 1990.)*
10.21 Amendment to Amended and Restated Weirton Liabilities Agreement,
dated as of July 31, 1991, between NII, NII Capital Corporation
and National Steel Corporation. (Filed as Exhibit 10-H to
National Steel Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991.)*
10.22 Agreement, dated as of February 3, 1993, among NII, NII Capital
Corporation, NKK Corporation, NKK U.S.A. Corporation and National
Steel Corporation. (Filed as Exhibit 10.30 to National Steel
Corporation's Registration Statement on Form S-1 (File No.
33-57952).)*
10.23 Amended and Restated Loan Agreement, dated as of April 29, 1993,
by and among FoxMeyer Corporation, FoxMeyer Drug Company,
Merchandise Coordinator Services Corporation, Harris Wholesale
Company, the Lenders and Issuer named therein, Citicorp USA,
Inc., as Administrative Agent for the Lenders, and NationsBank of
Texas, N.A., and Banque Paribas, as Co-Agents for the Lenders.
(Filed as Exhibit 10-J to FoxMeyer Corporation's Annual Report on
Form 10-K for the fiscal year ended March 31, 1993.)*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT PAGE NO.
- ------------ ----------------------------------------------------------------- ---------
<S> <C> <C>
10.24 First Amendment to Amended and Restated Loan Agreement, dated as
of October 18, 1993, by and among FoxMeyer Corporation, FoxMeyer
Drug Company, Merchandise Coordinator Services Corporation,
Harris Wholesale Company, the Lenders and Issuer named therein,
Citicorp USA, Inc., as Administrative Agent for the Lenders, and
NationsBank of Texas, N.A. and Banque Paribas, as Co-Agents for
the Lenders. (Filed as Exhibit 10-B to FoxMeyer Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.)*
10.25 Credit Agreement, dated as of August 30, 1993, among FoxMeyer
Corporation, FoxMeyer Drug Company, Merchandise Coordinator
Services Corporation and Harris Wholesale Company, various
financial institutions named therein and Continental Bank, N.A.,
individually and as Agent. (Filed as Exhibit 10-C to FoxMeyer
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.)*
10.26 First Amendment to Credit Agreement, dated as of October 18,
1993, among FoxMeyer Corporation, FoxMeyer Drug Company,
Merchandise Coordinator Services Corporation and Harris Wholesale
Company, various financial institutions named therein and
Continental Bank, N.A., individually and as Agent. (Filed as
Exhibit 10-C to FoxMeyer Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993.)*
10.27 Form of Note Agreement, dated as of April 15, 1993, between
FoxMeyer Corporation and each Purchaser that is a party thereto,
relating to $198,000,000 of FoxMeyer Corporation's 7.09% Senior
Notes Due April 15, 2005. (Filed as Exhibit 4-A to FoxMeyer
Corporation's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993.)*
10.28 Trade Receivables Purchase and Sale Agreements, dated as of
October 29, 1993, among FoxMeyer Corporation and, as applicable,
Enterprise Funding Corporation, Corporate Asset Funding Company,
Inc, Citibank, N.A., Citicorp North America, Inc., individually
and as agent, and NationsBank of North Carolina, N.A.,
individually and as co-agent. (Filed as Exhibit 10-A to FoxMeyer
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.)*
10.29 Indenture for Ben Franklin Retail Stores, Inc. 7.5% Convertible
Subordinated Notes due June 1, 2003. (Filed as an Exhibit to Ben
Franklin Retail Stores, Inc.'s Registration Statement on Form S-1
File No. 33-62632.)*
10.30 Amended and Restated Loan Agreement, dated June 22, 1994, between
Ben Franklin Retail Stores, Inc. and subsidiaries and LaSalle
National Bank. (Filed as Exhibit 10.36 to Ben Franklin Retail
Stores, Inc.'s Annual Report on Form 10-K for the fiscal year
ended March 31, 1994.)*
10.31 Employment Agreement, dated as of October 24, 1991, between NII
and Abbey J. Butler. (Filed as Exhibit 10-W to NII's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992.)*
10.32 Employment Agreement, dated as of October 24, 1991, between NII
and Melvyn J. Estrin. (Filed as Exhibit 10-X to NII's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992.)*
10.33 Employment Agreement, dated as of January 15, 1994, between
FoxMeyer Corporation and Peter B. McKee. (Filed as Exhibit 10-X
to FoxMeyer Corporation's Annual Report on Form 10-K for the
fiscal year ended March 31, 1994.)*
10.34 Employment Agreement, dated as of August 10, 1994, between
FoxMeyer Corporation and Thomas L. Anderson.
10.35 Employment Agreement, dated as of September 1, 1992, between
FoxMeyer Corporation and Robert R. Brown (Filed as Exhibit 28(e)
to FoxMeyer's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1992.)*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT PAGE NO.
- ------------ ----------------------------------------------------------------- ---------
<S> <C> <C>
10.36 Third Amendment to Credit Agreement, Consent and Waiver, dated as
of August 30, 1994, among FoxMeyer Corporation, FoxMeyer Drug
Company, Merchandise Coordinator Services Corporation, Harris
Wholesale Company, certain financial institutions and Continental
Bank.
10.37 Third Amendment to Amended and Restated Loan Agreement, Consent
and Waiver, dated as of August 26, 1994, among FoxMeyer
Corporation, FoxMeyer Drug Company, Harris Wholesale Company,
Citicorp U.S.A., Inc., NationsBank of Texas and Banque Paribas.
10.38 Second Amendment to Amended and Restated Loan Agreement, dated as
of June 20, 1994, by and among FoxMeyer Corporation, FoxMeyer
Drug Company, Merchandise Coordinator Services Corporation,
Harris Wholesale Company, the Lenders and Issuer named therein,
Citicorp U.S.A., Inc., as Administrative Agent for the Lenders,
and NationsBank of Texas, N.A. and Banque Paribas, as Co-Agents
for the Lenders. (Filed as Exhibit 10-A to FoxMeyer Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1994.)*
21 Subsidiaries of NII. (Filed as Exhibit 21 to NII's Form 10-K for
fiscal year ended March 31, 1994.)*
23.1 Consent of Deloitte and Touche LLP.
23.2 Consent of Weil, Gotshal & Manges (included in the opinion filed
as Exhibit 5).
23.3 Consent of Smith Barney Inc.
23.4 Consent of Weil, Gotshal & Manges regarding Tax Matters
(included in the opinion filed as Exhibit 8).
24 Powers of Attorney (included as part of the signature page of
this Registration Statement).
</TABLE>
- ------------------
*Incorporated by reference
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant is a Delaware corporation. Section 145 of the Delaware
General Corporation Law (the 'DGCL') provides that a Delaware corporation has
the power to indemnify its officers and directors in certain circumstances.
Subsection (a) of Section 145 of the DGCL empowers a corporation to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of his service as director, officer, employee or agent of the
corporation, or his service, at the corporation's request, as a director,
officer, employee or agent of another corporation or enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding provided that such director or officer acted in good faith and in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding,
provided that such director or officer had no reasonable cause to believe his
conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
director or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person acted in any of the capacities set forth
above, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit
provided that such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such director or officer shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such director or officer is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) or (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; provided
that indemnification provided for by Section 145 or granted pursuant thereto
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled; and empowers the corporation to purchase and maintain insurance
on behalf of a director of officer of the corporation against any liability
asserted against him or incurred by him in any such capacity or arising out of
his status as such whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
In addition, Section 102(b)(7) of the DGCL permits Delaware corporations to
include a provision in their certificates of incorporation eliminating or
limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provisions shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (iii) for unlawful
payment of dividends or other unlawful distributions, or (iv) for any
transactions from which the director derived an improper personal benefit.
The Registrant's Restated Certificate of Incorporation provides that a
director of the Registrant shall not be personally liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (A) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (B) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (C) under Section 174 of the DGCL or (D) for any transaction from which the
director derives an improper personal benefit. The Registrant's Restated
Certificate of Incorporation further provides that to the full extent permitted
by Section 145 of the DGCL the Registrant shall indemnify directors and officers
of the Registrant.
II-1
<PAGE>
The Registrant's by-laws provide that the Registrant shall indemnify its
Directors and officers against all reasonable expense incurred by them in
defending claims made or suits brought against them as Directors or officers and
against all liability in such suits, except in such cases as involve gross
negligence or willful misconduct in the performance of their duties.
ITEM 21. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ------------ -----------------------------------------------------------------
<S> <C>
2 Agreement and Plan of Merger, dated as of June 30, 1994, by and
among National Intergroup, Inc., FoxMeyer Acquisition Corp., and
FoxMeyer Corporation (Filed as Exhibit 2 to NII's Current Report
on Form 8-K.)*
3.1 Restated Certificate of Incorporation of NII and all subsequent
amendments thereto. (Filed as Exhibit 3-A to NII's Annual Report
on Form 10-K for the fiscal year ended March 31, 1993.)*
3.2 By-laws of NII. (Filed as Exhibit 3-A to NII's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1991.)*
3.3 Form of Certificate of Amendment to NII's 1993 Stock Option and
Performance Award Plan.
3.4 Form of Certificate of Amendment to NII's Restated Certificate of
Incorporation.
5 Opinion of Weil, Gotshal & Manges.
8 Opinion of Weil, Gotshal & Manges regarding Tax Matters.
10.1 National Intergroup, Inc. 1993 Stock Option and Performance Award
Plan. (Filed as Exhibit 10-A to NII's Annual Report on Form 10-K
for the fiscal year ended March 31, 1994.)*
10.2 National Intergroup, Inc. Director's Retirement Plan dated
December 1, 1983. (Filed as Exhibit 10-A to NII's Annual Report
on Form 10-K for the fiscal year ended March 31, 1992.)*
10.3 FoxMeyer Corporation Employees' Savings and Profit Sharing
Program. (Filed as Exhibit 10-D to FoxMeyer Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1994.)*
10.4 FoxMeyer Corporation Fiscal Year 1994 Executive Incentive
Compensation Plan. (Filed as Exhibit 10-E to FoxMeyer
Corporation's Annual Report on Form 10-K for the fiscal year
ended March 31, 1994.)*
10.5 FoxMeyer Corporation Long-Term Incentive Plan. (Filed as Exhibit
10-F to FoxMeyer Corporation's Annual Report on Form 10-K for the
fiscal year ended March 31, 1994.)*
10.6 FoxMeyer Corporation Amended and Restated Supplemental Savings
Plan. (Filed as Exhibit 10-G to FoxMeyer Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1994.)*
10.7 FoxMeyer Drug Company Amended and Restated Special Severance
Plan. (Filed as Exhibit 10-L to FoxMeyer Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992.)*
10.8 Loan Agreement, dated as of January 13, 1994, among NII and
Banque Paribas, as Agent, and the Banks named therein. (Filed as
Exhibit 10-A to NII's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1993.)*
10.9 Tax Sharing Agreement, dated as of November 25, 1992, between
FoxMeyer Corporation and NII. (Filed as Exhibit 28(a) to FoxMeyer
Corporation's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1992.)*
10.10 Amendment, dated April 21, 1993 to the Tax Sharing Agreement,
dated as of November 25, 1992, between FoxMeyer Corporation and
NII. (Filed as Exhibit 10-M to FoxMeyer Corporation's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993.)*
10.11 Loan Agreement, dated as of November 25, 1992, between FoxMeyer
Corporation and NII. (Filed as Exhibit 28(b) to FoxMeyer
Corporation's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1992.)*
10.12 Amendment, dated April 21, 1993 to the Loan Agreement, dated as
of November 25, 1992, between FoxMeyer Corporation and NII.
(Filed as Exhibit 10-O to FoxMeyer Corporation's Annual Report on
Form 10-K for the fiscal year ended March 31, 1994.)*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ------------ -----------------------------------------------------------------
10.13 Amendment, dated December 17, 1993 to the Loan Agreement, dated
as of November 25, 1992, between FoxMeyer Corporation and NII.
(Filed as Exhibit 10-S to FoxMeyer Corporation's Annual Report on
Form 10-K for the fiscal year ended March 31, 1994.)*
<S> <C>
10.14 Stock Purchase Pledge Agreement, dated as of November 25, 1992,
between FoxMeyer Corporation and NII. (Filed as Exhibit 28(c) to
FoxMeyer Corporation's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1992.)*
10.15 Working Capital Pledge Agreement, dated as of November 25, 1992,
between FoxMeyer Corporation and NII. (Filed as Exhibit 28(d) to
FoxMeyer Corporation's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1992.)*
10.16 Amended and Restated Management Agreement, dated as of January 1,
1992, between FoxMeyer Corporation and NII. (Filed as Exhibit
10-A to FoxMeyer Corporation's Annual Report on Form 10-K for the
fiscal year ended March 31, 1992.)*
10.17 Stock Purchase and Recapitalization Agreement, dated as of June
26, 1990, among NII, NII Capital Corporation, NKK Corporation,
NKK U.S.A. Corporation and National Steel Corporation. (Filed as
Exhibit 10-AQ to FoxMeyer Corporation's Annual Report on Form
10-K for the fiscal year ended March 31, 1992.)*
10.18 Amendment to Stock Purchase and Recapitalization Agreement, dated
as of July 31, 1991, among NII, NII Capital Corporation, NKK
Corporation, NKK U.S.A. Corporation and National Steel
Corporation. (Filed as Exhibit 2-F to National Steel
Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991.)*
10.19 Put Agreement, dated as of June 26, 1990, among NII Capital
Corporation, NKK U.S.A. Corporation and National Steel
Corporation. (Filed as Exhibit 10-AQ to NII's Annual Report on
Form 10-K for the fiscal year ended March 31, 1990.)*
10.20 Amended and Restated Weirton Liabilities Agreement, dated as of
June 26, 1990, among NII, NII Capital Corporation and National
Steel Corporation. (Filed as Exhibit 10-AQ to NII's Annual Report
on Form 10-K for the fiscal year ended March 31, 1990.)*
10.21 Amendment to Amended and Restated Weirton Liabilities Agreement,
dated as of July 31, 1991, between NII, NII Capital Corporation
and National Steel Corporation. (Filed as Exhibit 10-H to
National Steel Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991.)*
10.22 Agreement, dated as of February 3, 1993, among NII, NII Capital
Corporation, NKK Corporation, NKK U.S.A. Corporation and National
Steel Corporation. (Filed as Exhibit 10.30 to National Steel
Corporation's Registration Statement on Form S-1 (File No.
33-57952).)*
10.23 Amended and Restated Loan Agreement, dated as of April 29, 1993,
by and among FoxMeyer Corporation, FoxMeyer Drug Company,
Merchandise Coordinator Services Corporation, Harris Wholesale
Company, the Lenders and Issuer named therein, Citicorp USA,
Inc., as Administrative Agent for the Lenders, and NationsBank of
Texas, N.A., and Banque Paribas, as Co-Agents for the Lenders.
(Filed as Exhibit 10-J to FoxMeyer Corporation's Annual Report on
Form 10-K for the fiscal year ended March 31, 1993.)*
10.24 First Amendment to Amended and Restated Loan Agreement, dated as
of October 18, 1993, by and among FoxMeyer Corporation, FoxMeyer
Drug Company, Merchandise Coordinator Services Corporation,
Harris Wholesale Company, the Lenders and Issuer named therein,
Citicorp USA, Inc., as Administrative Agent for the Lenders, and
NationsBank of Texas, N.A. and Banque Paribas, as Co-Agents for
the Lenders. (Filed as Exhibit 10-B to FoxMeyer Corporation's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.)*
10.25 Credit Agreement, dated as of August 30, 1993, among FoxMeyer
Corporation, FoxMeyer Drug Company, Merchandise Coordinator
Services Corporation and Harris Wholesale Company, various
financial institutions named therein and Continental Bank, N.A.,
individually and as Agent. (Filed as Exhibit 10-C to FoxMeyer
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.)*
10.26 First Amendment to Credit Agreement, dated as of October 18,
1993, among FoxMeyer Corporation, FoxMeyer Drug Company,
Merchandise Coordinator Services Corporation and Harris Wholesale
Company, various financial institutions named therein and
Continental Bank, N.A., individually and as Agent. (Filed as
Exhibit 10-C to FoxMeyer Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993.)*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ------------ -----------------------------------------------------------------
10.27 Form of Note Agreement, dated as of April 15, 1993, between
FoxMeyer Corporation and each Purchaser that is a party thereto,
relating to $198,000,000 of FoxMeyer Corporation's 7.09% Senior
Notes Due April 15, 2005. (Filed as Exhibit 4-A to FoxMeyer
Corporation's Annual Report on Form 10-K for the fiscal year
ended March 31, 1993.)*
<S> <C>
10.28 Trade Receivables Purchase and Sale Agreements, dated as of
October 29, 1993, among FoxMeyer Corporation and, as applicable,
Enterprise Funding Corporation, Corporate Asset Funding Company,
Inc, Citibank, N.A., Citicorp North America, Inc., individually
and as agent, and NationsBank of North Carolina, N.A.,
individually and as co-agent. (Filed as Exhibit 10-A to FoxMeyer
Corporation's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.)*
10.29 Indenture for Ben Franklin Retail Stores, Inc. 7.5% Convertible
Subordinated Notes due June 1, 2003. (Filed as an Exhibit to Ben
Franklin Retail Stores, Inc.'s Registration Statement on Form S-1
File No. 33-62632.)*
10.30 Amended and Restated Loan Agreement, dated June 22, 1994, between
Ben Franklin Retail Stores, Inc. and subsidiaries and LaSalle
National Bank. (Filed as Exhibit 10.36 to Ben Franklin Retail
Stores, Inc.'s Annual Report on Form 10-K for the fiscal year
ended March 31, 1994.)*
10.31 Employment Agreement, dated as of October 24, 1991, between NII
and Abbey J. Butler. (Filed as Exhibit 10-W to NII's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992.)*
10.32 Employment Agreement, dated as of October 24, 1991, between NII
and Melvyn J. Estrin. (Filed as Exhibit 10-X to NII's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992.)*
10.33 Employment Agreement, dated as of January 15, 1994, between
FoxMeyer Corporation and Peter B. McKee. (Filed as Exhibit 10-X
to FoxMeyer Corporation's Annual Report on Form 10-K for the
fiscal year ended March 31, 1994.)*
10.34 Employment Agreement, dated as of August 10, 1994, between
FoxMeyer Corporation and Thomas L. Anderson.
10.35 Employment Agreement, dated as of September 1, 1992, between
FoxMeyer Corporation and Robert R. Brown (Filed as Exhibit 28(e)
to FoxMeyer's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1992.)*
10.36 Third Amendment to Credit Agreement, Consent and Waiver, dated as
of August 30, 1994, among FoxMeyer Corporation, FoxMeyer Drug
Company, Merchandise Coordinator Services Corporation, Harris
Wholesale Company, certain financial institutions and Continental
Bank.
10.37 Third Amendment to Amended and Restated Loan Agreement, Consent
and Waiver, dated as of August 26, 1994, among FoxMeyer
Corporation, FoxMeyer Drug Company, Harris Wholesale Company,
Citicorp U.S.A., Inc., NationsBank of Texas and Banque Paribas.
10.38 Second Amendment to Amended and Restated Loan Agreement, dated as
of June 20, 1994, by and among FoxMeyer Corporation, FoxMeyer
Drug Company, Merchandise Coordinator Services Corporation,
Harris Wholesale Company, the Lenders and Issuer named therein,
Citicorp U.S.A., Inc., as Administrative Agent for the Lenders,
and NationsBank of Texas, N.A. and Banque Paribas, as Co-Agents
for the Lenders. (Filed as Exhibit 10-A to FoxMeyer Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1994.)*
21 Subsidiaries of NII. (Filed as Exhibit 21 to NII's Form 10-K for
fiscal year ended March 31, 1994.)*
23.1 Consent of Deloitte and Touche LLP.
23.2 Consent of Weil, Gotshal & Manges (included in the opinion filed
as Exhibit 5).
23.3 Consent of Smith Barney Inc.
23.4 Consent of Weil, Gotshal & Manges regarding Tax Matters
(included in the opinion filed as Exhibit 8).
24 Powers of Attorney (included as part of the signature page of
this Registration Statement).
</TABLE>
- ------------------
*Incorporated by reference
II-4
<PAGE>
(b) Financial Statement Schedules.
--Schedule III--Condensed Financial Information of NII**
--Schedule VIII--Valuation and Qualifying Accounts of NII**
--Independent Auditor's Report**
- ------------------
**Incorporated by reference to NII's Form 10-K for the year ended March 31,
1994.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (i) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of expenses
incurred or paid by a director, officer or controlling person of such Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, such Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by its is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registrant statement.
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
II-5
<PAGE>
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrants have duly caused this Registration Statement to be signed on their
behalf by the undersigned, thereunto duly authorized in the City of Dallas,
State of Texas, on September 12, 1994.
NATIONAL INTERGROUP, INC.
By: /s/ PETER B. MCKEE
--------------------------------
Name: Peter B. McKee
Title: Vice President and Chief
Financial Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below on this Registration Statement hereby constitutes and appoints Abbey J.
Butler, Melvyn J. Estrin and Peter B. McKee and each of them, with full power to
act without the other, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities (until revoked in writing), to sign any and all
amendments (including post-effective amendments thereto) to this Form S-4
Registration Statement of National Intergroup, Inc. and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary fully to all intents and purposes as
he might or could do in person thereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated on September 12, 1994.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------- ------------------------------ --------------------
<S> <C> <C>
/s/ ABBEY J. BUTLER Co-Chairman of the Board and September 12, 1994
- ------------------------- Co-Chief Executive Officer
Abbey J. Butler (principal executive
officer)
/s/ MELVYN J. ESTRIN Co-Chairman of the Board and September 12, 1994
- ------------------------- Co-Chief Executive Officer
Melvyn J. Estrin (principal executive
officer)
/s/ PETER B. MCKEE Vice President and Chief September 12, 1994
- ------------------------- Financial Officer (principal
Peter B. McKee financial officer)
/s/ EDWARD L. MASSMAN Controller September 12, 1994
- -------------------------
Edward L. Massman
/s/ SHELDON W. FANTLE Director September 12, 1994
- -------------------------
Sheldon W. Fantle
/s/ PAUL M. FINFER Director September 12, 1994
- -------------------------
Paul M. Finfer
/s/ ALFRED H. KINGON Director September 12, 1994
- -------------------------
Alfred H. Kingon
Director , 1994
- -------------------------
William G. Tull
</TABLE>
<PAGE>
EXHIBIT 3.3
FORM OF
-------
AMENDMENT
TO THE
1993 STOCK OPTION AND PERFORMANCE AWARD PLAN
OF
NATIONAL INTERGROUP, INC.
Amendment, dated ____________, 1994, to the 1993 Stock
Option and Performance Award Plan (the "Plan") of National
Intergroup, Inc. (the "Company"). Capitalized terms used herein
and not defined herein shall have the meanings ascribed thereto
in the Plan.
WHEREAS, the Board of Directors of the Company believes
that the aggregate number of shares of the Company's common
stock, par value $5 per share, available for the granting of
options under the Plan should be increased in order to continue
to give the Board of Directors flexibility in compensating
directors, officers and key employees of the Company;
NOW, THEREFORE, subject to the approval of the
stockholders of the Company as set forth in Section 2 hereof, the
Plan is hereby amended as follows:
1. The first sentence of Section 3 of the Plan is hereby
amended to read in its entirety as follows:
"Subject to adjustments provided in Section 11,
the maximum aggregate number of shares of common stock
of the Company which may be granted for all purposes
under the Plan shall be 4,000,000 shares."
2. Section 4 of the Plan is hereby amended to read in its
entirety as follows:
Grants under the Plan (i) may be made, pursuant to
Sections 6, 8 and 9, to key employees, officers and
directors (but not to any director who is not an employee)
of the Company, or any parent corporation or subsidiary
corporation thereof, who are regularly employed on a
salaried basis and who are so employed on the date of such
grant (the "Officer and Key Employee Participants"), (ii)
shall be made, subject to and in accordance with Section 7,
to individuals not regularly employed by the Company who
serve as directors of the Company (the "Outside Director
Participants"), and (iii) shall be made to individuals not
regularly employed by NII who serve as directors of any
subsidiary corporation of the Corporation, at the discretion
of the Committee administering the Plan.
<PAGE>
3. This Amendment shall become effective on the date first
approved by the affirmative vote of the holders of a majority of
the shares of common stock of the Company voting at a meeting of
the Company's stockholders.
IN WITNESS WHEREOF, the Company hereby executes this
Amendment on the date first above written.
NATIONAL INTERGROUP, INC.
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT 3.4
FORM OF
-------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
NATIONAL INTERGROUP, INC.
Under Section 242 of the General Corporation Law
------------------------------------------------
The undersigned, NATIONAL INTERGROUP, INC., a
corporation organized and existing under the General
Corporation Law of Delaware (the "Corporation"), pursuant to
the provisions of Section 242 of the Delaware General
Corporation Law, hereby certifies that:
FIRST: The name of the corporation is NATIONAL
INTERGROUP, INC. The name under which the Corporation was
formed is National Intergroup, Inc.
SECOND: The Restated Certificate of
Incorporation of this Corporation is hereby amended as
follows:
1. to change the name of National Intergroup,
Inc. to "___________." The FIRST Article of the Restated
Certificate of Incorporation is hereby amended to read in
its entirety as follows:
"FIRST: The name of the Corporation is
_______________________."
2. to increase the number of authorized shares
of preferred stock, par value $5 per share, from 10,000,000
shares to 20,000,000 shares. The first sentence of Article
FOURTH of the Restated Certificate of Incorporation is
hereby amended to read in its entirety as follows:
"FOURTH: The total number of shares which the
Corporation shall have authority to issue is
70,000,000, of which 20,000,000 shall be preferred
stock, par value $5 per share, and 50,000,000
shares shall be common stock, par value $5 per
share."
IN WITNESS WHEREOF, the Corporation has caused its
corporate seal to be affixed hereto and this instrument to
be signed in its name by its Vice President and attested to
by its Secretary this ___ day of ______, 1994.
ATTEST: NATIONAL INTERGROUP, INC.
By: ______________________ By: ______________________
Name: Name:
Title: Title:
(CORPORATE SEAL)
<PAGE>
Exhibit 5
WEIL, GOTSHAL & MANGES
A Partnership Including Professional Corporations
767 Fifth Avenue New York, NY 10153-0119
(212) 310-8000
Fax: (212) 310-8007
Writer's Direct Line
September 12, 1994
National Intergroup, Inc.
1220 Senlac Drive
Carrollton, Texas 75006
Re: National Intergroup, Inc. --
Registration Statement on Form S-4
----------------------------------
Gentlemen:
We have acted as counsel to National Intergroup, Inc., a
Delaware corporation (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission of
the Company's Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended, relating to
the 6,510,000 common shares, par value $5.00 per share (the "Common
Shares"), of the Company to be issued pursuant to the Agreement and
Plan of Merger, dated as of June 30, 1994 (the "Merger Agreement"), by
and among the Company, FoxMeyer Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of the Company
("Acquisition"), and FoxMeyer Corporation, a Delaware corporation and
an 80.5% owned subsidiary of the Company ("FoxMeyer"), whereby
FoxMeyer will be merged with and into Acquisition.
In so acting, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the
Registration Statement, the Merger Agreement, and such corporate
records, agreements, documents and other instruments, and such
certificates or comparable documents of public officials and of
officers and representatives of the Company, and have made such
inquiries of such officers and representatives as we have deemed
relevant and necessary as a basis for the opinions hereinafter set
forth.
<PAGE>
National Intergroup, Inc.
September 12, 1994
Page
In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of documents submitted
to us as certified or photostatic copies and the authenticity of the
originals of such latter documents. As to all questions of fact
material to this opinion that have not been independently established,
we have relied upon certificates or comparable documents of officers
and representatives of the Company.
Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that the Common Shares to be
issued pursuant to the Merger Agreement have been duly authorized by
all necessary corporate action of the Company and, when issued and
delivered in accordance with the terms of the Merger Agreement, will
be validly issued, fully paid and nonassessable.
The opinions herein are limited to the corporate laws of the
State of Delaware and the federal laws of the United States, and we
express no opinion as to the effect on the matters covered by this
opinion of the laws of any other jurisdiction.
We hereby consent to the use of this opinion as an exhibit
to the Registration Statement. We further consent to any and all
references to our firm in the Joint Proxy Statement/ Prospectus which
is a part of said Registration Statement.
Very truly yours,
Weil, Gotshal & Manges
<PAGE>
Exhibit 8
WEIL, GOTSHAL & MANGES
A Partnership Including Professional Corporations
767 Fifth Avenue New York, NY 10153-0119
(212) 310-8000
Fax: (212) 310-8007
Writer's Direct Line
September 12, 1994
National Intergroup, Inc.
1220 Senlac Drive
Carrollton, Texas 75006
FoxMeyer Corporation
1220 Senlac Drive
Carrollton, Texas 75006
Ladies and Gentlemen:
You have requested our opinion regarding certain federal
income tax consequences of the merger (the "Merger") of FoxMeyer
Corporation, a Delaware Corporation ("FoxMeyer"), with and into FoxMeyer
Acquisition Corp., a Delaware corporation ("Sub"), which is a direct
wholly-owned subsidiary of National Intergroup, Inc., a Delaware
corporation ("Parent").
In formulating our opinion, we examined such documents as we
deemed appropriate, including the Agreement and Plan of Merger among
Parent, Sub and FoxMeyer dated as of June 30, 1994 (the "Merger
Agreement") and the Joint Proxy Statement/Prospectus to be distributed
to stockholders in connection with the Merger and which is included in
the Registration Statement on Form S-4, as filed by Parent with the
Securities and Exchange Commission (the "SEC") on September 12, 1994
(the "Joint Proxy Statement/Prospectus").
Our opinion set forth below assumes (1) the accuracy of the
statements and facts concerning the Merger set forth in the Merger
Agreement and the Joint Proxy Statement/Prospectus, (2) that the
Merger is consummated in the manner contemplated by, and in accordance
with the terms set forth in, the Merger Agreement and the Joint Proxy
Statement/Prospectus and (3) the accuracy of (i) the representations
<PAGE>
National Intergroup, Inc. and
FoxMeyer Corporation
September 12, 1994
Page 2
made to us by FoxMeyer, which are set forth in the Officer's
Certificate delivered to us by FoxMeyer,
dated the date hereof and (ii) the representations made to us by
Parent, which are set forth in the Officer's Certificate delivered to
us by Parent, dated the date hereof.
Based upon the facts and statements set forth above, our
examination and review of the documents referred to above and subject
to the assumptions set forth above, we are of the opinion that:
1. The Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
2. No gain or loss will be recognized by the stockholders
of FoxMeyer as a result of the receipt solely of Parent shares in
the Merger in exchange for FoxMeyer shares.
3. The tax basis of the Parent shares received by
stockholders of FoxMeyer in the Merger will be the same as the
tax basis of the shares of FoxMeyer common stock surrendered in
exchange therefor.
4. A holder's holding period in such Parent shares will
include its holding period in such shares of FoxMeyer common
stock provided the shares of FoxMeyer common stock were held as a
capital asset on the date of the Merger.
We express no opinion concerning any tax consequences of the proposed
Merger other than those specifically set forth herein.
Our opinion is based on current provisions of the Code, the
Treasury Regulations promulgated thereunder, published pronouncements
of the Internal Revenue Service and case law, any of which may be
changed at any time with retroactive effect. Any change in applicable
laws or the facts and circumstances surrounding the Merger, or any
inaccuracy in the statements, facts, assumptions and representations
on which we have relied, may affect the continuing validity of the
opinion set forth herein. We assume no responsibility to inform you
of any such change or inaccuracy that may occur or come to our
attention.
<PAGE>
National Intergroup, Inc. and
FoxMeyer Corporation
September 12, 1994
Page 3
We hereby consent to your filing this opinion as an exhibit
to the Joint Proxy Statement/Prospectus and to the reference to our
firm therein.
Very truly yours,
Weil, Gotshal & Manges
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated and effective as of
August 10, 1994, is entered into by and between FoxMeyer Corporation, a Delaware
corporation (the "Company"), and Thomas L. Anderson ("Executive").
RECITALS
A. The Company desires to employ Executive on certain terms and
conditions.
B. Executive desires to be employed by the Company on such terms and
conditions.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein the parties do hereby mutually agree as follows:
1. Employment. The Company hereby agrees to employ Executive and
Executive hereby agrees to be employed by the Company on the terms and subject
to the conditions of this Agreement.
2. Term of Employment. This Amendment shall, subject to Section 5
hereof, remain in effect from the date of this Agreement through August 9, 1997
(the "Term of Employment").
3. Position and Responsibilities. The Company hereby employs
Executive to serve as President of the Company. Executive shall have such
duties, responsibilities and authority as may, from time to time, be assigned to
Executive by the Chief Executive Officers of the Company or by the Board of
Directors of the Company (the "Board of Directors").
4. Compensation. As compensation for all services to be performed
by Executive under this Agreement, the Company shall compensate Executive as
follows:
a. Base Salary. The Company shall pay Executive a minimum
monthly base salary of $33,333.34 (the same, as it may be adjusted
from time to time, is referred to herein as the "Monthly Base
Salary"). During the term of this Agreement, the Board of Directors
shall review Executive's Monthly
<PAGE>
Base Salary periodically to determine whether such salary shall be
adjusted in accordance with the duties and responsibilities of
Executive and his performance thereof, but no adjustment shall
reduce Executive's base salary below the minimum Monthly Base Salary
set forth above.
b. Benefits, Incentives and Perquisites. Executive shall be
entitled to participate in the incentive, stock option and employee
benefit plans of the Company and the perquisites enjoyed by other
senior officers of the Company as presently in effect or as they
may be modified from time to time, provided that the Company may
not reduce the benefits provided to Executive pursuant to
Executive's life insurance, accidental death and dismemberment,
long-term disability and business travel accident insurance during
the term of this Agreement.
5. Termination. This Agreement may be terminated upon the following
terms:
a. Termination Upon Death. In the event of Executive's death
during the Term of Employment, this Agreement shall terminate immediately.
b. Termination Upon Disability. The Company shall have the
right to terminate this Agreement upon the "Disability" of Executive by
providing ten (10) days written notice to Executive. "Disability" as used in
this section shall mean any illness or any impairment of mind or body that (i)
renders it impossible or impracticable for Executive to perform his duties and
responsibilities hereunder for a continuous period of at least six (6) months or
(ii) is likely to prevent Executive from performing his duties and
responsibilities hereunder for more than nine (9) months during any 18-month
period, each as determined in good faith by a physician selected by the Board of
Directors. The Company's selection of a physician shall be subject to
Executive's approval, which shall not be unreasonably withheld. Any refusal
without reasonable cause by Executive to submit to a medical examination for the
purpose of certifying Disability under this section shall be deemed to
constitute conclusive evidence of Executive's Disability. In the event of
termination upon Disability, Executive shall continue to receive the Monthly
Base Salary in effect at the time of termination (reduced by any amounts payable
to Executive as disability benefits under any Company plan, social security or
otherwise) for the remainder of the Term of Employment.
c. Termination for Cause. The Company shall have the right to
terminate this Agreement, and have no further obligation to Executive under this
Agreement,
<PAGE>
for "Cause" after giving written notice of termination of Executive. "Cause"
as used in this section shall mean:
(i) willful misconduct or gross negligence in the performance
by Executive of his duties and responsibilities hereunder;
(ii) the intentional failure by Executive to follow any
reasonable directive of the Company's Chief Executive Officers
or the Board of Directors in carrying out his duties or
responsibilities hereunder;
(iii) the willful and continued failure by Executive to
substantially perform his duties and responsibilities
hereunder after receipt by him of written notice thereof from
the Chief Executive Officers of the Company and Executive has
been provided with thirty (30) days to respond to such written
notice;
(iv) the theft or misappropriation of funds or the disclosure
of trade secrets or other confidential or proprietary
information in violation of Section 6 of this Agreement; or
(v) the conviction of Executive for (A) a crime involving an
act or acts of dishonesty or moral turpitude or (B) a felony.
d. Termination without Cause. The Company shall have the
right to terminate Executive's employment at any time without Cause
("Termination Without Cause"), upon thirty (30) days written notice. In the
event of the Termination Without Cause of Executive's employment and provided
that Executive complies with Section 6 and 7 hereof, the Company agrees to
provide Executive with:
(a) monthly severance payments equivalent to Executive's
Monthly Base Salary on the effective date of Termination
Without Cause for a period equal to the longer of (i) the
remaining Term of Employment under this Agreement or
(ii) two years.
(b) Individual outplacement counseling, to be paid for by the
Company, with a party mutually acceptable to Executive
and the Company, to begin within six (6) months from
the date of such Termination Without Cause.
<PAGE>
(c) For the period applicable under subparagraph (a) above,
medical and dental benefits coverage, less any amount
that Executive is required to pay to receive such medical
and dental coverage had termination of his employment
not occurred.
Without in any way limiting the generality of what may be deemed to constitute a
Termination Without Cause hereunder, it is hereby agreed that following (i) the
acquisition by any person or entity or affiliated group of persons or entities
(other than Abbey J. Butler, Melvyn J. Estrin or entities affiliated with either
of them) of more than 50% of the then outstanding shares of common stock of the
Company or the Company's parent, National Intergroup, Inc., or (ii) the sale,
transfer or other disposition, in one or more related transactions, by the
Company or National Intergroup, Inc. of all or substantially all of the assets
of the Company or National Intergroup, Inc. to an unaffiliated party, (A) any
termination of Executive's employment for any reason (other than death or
Disability) and (B) any material reduction of Executive's duties,
responsibilities and authority shall be deemed to constitute a Termination
Without Cause hereunder.
6. Nondisclosure.
a. Executive acknowledges that during the course of the
performance of his services for the Company he will acquire confidential
information with respect to the Company's business operations, including,
without limitation, the Company's existing and contemplated products and
services, trade secrets, know-how, business and financial methods or practices,
plans, prices and pricing policies, strategies, marketing and selling techniques
and information, customer lists, and operational methods and confidential and
proprietary information relating to the Company (collectively, the "Confidential
Information"). Executive agrees that during the term of this Agreement and
thereafter, Executive shall not divulge any Confidential Information to any
person, directly or indirectly, except to the Company, its directors, officers,
agents and representatives and its subsidiaries and affiliated companies, or as
may reasonably be necessary in connection with his duties on behalf of the
Company or unless required by law.
b. Executive acknowledges that all documents, written
information, records, data, computer information and material, tapes, film, maps
and other material of any kind relating to Confidential Information, including,
without limitation, memoranda, notes, sketches, records, reports, manuals,
business plans and notebooks (collectively, "Materials") in Executive's
possession or under his control during the term of his employment hereunder are
and shall remain the property of the Company and agrees that if
<PAGE>
his relationship with Company is terminated (for whatever reason), he shall not
take with him but shall leave with the Company all Materials and any copies
thereof or, if such Materials are not on the premises of the Company, he shall
return the same to the Company immediately upon his termination.
c. This Section 6 shall survive any termination of this
Agreement and shall continue to bind Executive in accordance with its terms.
The existence of any claim or cause of action by Executive against the Company
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the Company's enforcement of the covenants contained in this
Agreement.
7. Noncompetition. Executive agrees that during the term of this
Agreement and for two years thereafter, Executive shall not (i) become involved,
directly or indirectly, as a director, officer, employee, consultant, agent,
representative, more than 5% stockholder or partner of a corporation or
partnership of other business enterprise engaged in any line of business in
which the Company is actively engaged or at the time of termination of
Executive's employment or has under active consideration at that time and (ii)
directly or indirectly, hire or seek to hire in any capacity any person who was
an employee of the Company on the date of termination of Executive's employment
or within ninety (90) days prior to such date. Reference to the Company in
section 6 and 7 above shall be deemed to include National Intergroup Inc. and
it's majority-owned subsidiaries.
8. Remedies. In the event that Executive breaches any of the
provisions of Sections 6 or 7 above, in addition to any legal rights and
remedies that the Company may have to enforce the provisions of this Agreement,
the Company shall have no further obligations to Executive under this Agreement.
In the event of such a breach, Executive agrees that any and all proceeds,
funds, payments and proprietary interests of every kind and description arising
from, or attributable to, such breach shall be the sole and exclusive property
of the Company and the Company shall be entitled to recover any additional
actual damages incurred as a result of such breach.
9. Legal Construction. The parties hereto agree that if at any
time it shall be determined that the restrictions contained in Section 7 are
unreasonable as to time or scope, or both, by any court of competent
jurisdiction, the Company shall be entitled to enforce this Agreement for such
period of time and such scope as may be determined to be reasonable by any such
court.
10. Injunctive Relief. Notwithstanding anything contained in this
Agreement to the contrary, in the event of a breach of the provisions of
Sections 6 or 7
<PAGE>
above, the Company shall, in addition to any other remedies available under law,
be entitled to an injunction enjoining Executive or any person or persons acting
for or with Executive in any capacity whatsoever from violating any of the terms
thereof.
11. Severability. If any provision of this Agreement shall for any
reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision was never contained herein and the remaining
provisions of this Agreement shall remain in full force and effect.
12. Waiver and Limitation. Any waiver by either party of a
provision or a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any other provision or subsequent breach of any
provision hereof.
13. Taxes. Executive shall be responsible for the payment of all
individual taxes on all amounts paid or benefits provided to him under this
Agreement. All compensation paid to Executive shall be subject to any
withholdings as from time to time may be required to be made pursuant to law,
government regulations or order, or by agreement with, or consent of, Executive.
14. No Funding. The right of Executive under this Agreement shall
be that of a general creditor of the Company and Executive shall have no
preferred claims on, or any beneficial ownership in, the assets of the Company.
15. Entire Agreement. This Agreement, and the agreements,
documents and compensation, incentive and option plans referred to herein,
contain the entire agreement between the parties hereto relating to the subject
matter hereof and supersede any and all other prior or contemporaneous
employment, compensation, incentive or retirement agreements, either oral or in
writing, between the parties.
16. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
legatees, legal representatives, successors and assigns. Executive may not
assign any of his rights or responsibilities under this Agreement.
17. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally, mailed by certified mail (return receipt requested) or sent by
overnight delivery service, cable,
<PAGE>
telegram, facsimile transmission or telex to the parties at the following
addresses or at such other addresses as shall be specified by the parties by
like notice:
a. if to the Company:
FoxMeyer Corporation
1220 Senlac Drive
Carrollton, Texas 75006
Attention: Sandra K. Stevens
Vice President - Human Resources
b. if to Executive:
Thomas L. Anderson
#4 Spyglass Court
Frisco, Texas 75034
18. Headings. Section and subsection headings used in this
Agreement have been inserted solely for convenience of reference and do not
constitute a part of this Agreement and are not intended to affect the
interpretation of any provision of this Agreement.
19. Amendments. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
20. Governing Law. This Agreement and all performance hereunder
shall be governed by and construed in accordance with the laws of the State of
Texas without regard to the principles of conflict of laws thereof.
21. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
FoxMeyer Corporation
By: __________________________________
Abbey J. Butler
Co-Chief Executive Officer
__________________________________
Thomas L. Anderson
<PAGE>
EXHIBIT 10.36
THIRD AMENDMENT TO
CREDIT AGREEMENT, CONSENT AND WAIVER
THIS THIRD AMENDMENT TO CREDIT AGREEMENT, CONSENT AND
WAIVER dated as of August 30, 1994 (this "Third Amendment")
is entered into among FOXMEYER CORPORATION, a Delaware
corporation (the "Company"), (ii) FOXMEYER DRUG COMPANY, a
Kansas corporation, MERCHANDISE COORDINATOR SERVICES
CORPORATION, a Delaware corporation, and HARRIS WHOLESALE
COMPANY, a Delaware corporation (the "Operating
Subsidiaries"), (iii) certain financial institutions (the
"Banks") and CONTINENTAL BANK, as agent for the Banks (in
such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Company, the Operating Subsidiaries, the
Banks and the Agent entered into a Credit Agreement, dated
as of August 30, 1993, as amended by (i) that certain First
Amendment to Credit Agreement, dated as of October 18, 1993,
and (ii) that certain Second Amendment to Amended and
Restated Loan Agreement, dated as of June 20, 1994, among
the Company, the Operating Subsidiaries, Citicorp USA, Inc.,
as administrative agent, and Nationsbank of Texas, N.A. and
Banque Paribas, as co-agents, certain provisions of which
automatically amended the original credit agreement (as
amended by the First Amendment) pursuant to Section 14.1 of
the original credit agreement (as so amended, the "Credit
Agreement");
WHEREAS, the Company has requested a waiver of certain
provisions of the Credit Agreement required to effect the
merger (the "Merger") of the Company with and into FoxMeyer
Acquisition Corp., a Delaware corporation (the "Successor"),
a newly formed, wholly owned subsidiary of National Inter-
group, Inc. ("NII"), pursuant to an Agreement and Plan of
Merger, dated as of June 30, 1994 (the "Merger Agreement")
among NII, the Successor and the Company;
WHEREAS, by that certain Third Amendment to Amended and
Restated Loan Agreement (the "Citicorp Third Amendment"),
dated on or about August 30, 1994, a copy of which is
attached hereto as Exhibit A, amending the Citicorp Credit
Agreement, certain provisions of the Credit Agreement will
be automatically amended upon approval in writing by lenders
under the Citicorp Credit Agreement and Banks holding in the
aggregate at least 66-2/3% of the "Commitments" (as defined
<PAGE>
in the Citicorp Credit Agreement) and the Commitments taken
as a whole.
WHEREAS, the Company has requested that the Termination
Date be extended until February 28, 1995, and that the
commitment fee and interest rate for Loans each be reduced;
and
WHEREAS, the Banks executing this Third Amendment and
the Agent have agreed to provide such waivers and consents
and make such amendments upon the terms and conditions set
forth below;
NOW, THEREFORE, for valuable consideration hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. Unless otherwise defined
herein, terms are used herein as defined in the Credit
Agreement.
Section 2. Amendments. The Credit Agreement is hereby
amended as follows:
(a) the definition of "Termination Date" at
Section 1.2 of the Credit Agreement is hereby amended
to read in its entirety as follows:
"`Termination' Date means February 28, 1994
or such other date on which the Commitments shall
terminate pursuant to Section 6 or 12.";
(b) Section 4.1 is hereby amended to read in its
entirety as follows:
"4.1. Interest Rates. The Company promises
to pay interest on the unpaid principal amount of
each Loan for the period commencing on the date of
such Loan until such Loan is paid in full, as
follows:
(a) at all times while such Loan is a
Floating Rate Loan, at a rate per annum equal to
the Alternate Reference Rate from time to time in
effect; and
(b) at all times while such Loan is a
Eurodollar Loan, at a rate per annum equal to the
sum of the Eurodollar Rate (Reserve Adjusted)
2
<PAGE>
applicable to each Interest Period for such
Eurodollar Loan plus 0.875%."; and
(c) the commitment fee of "3/8 of 1% per
annum" set forth in the third line of Section 5.1
is hereby replaced with "1/4 of 1% per annum."
Section 3. Consents and Waiver. On the basis of the
information concerning the Merger set forth in the
preliminary Prospectus/Proxy Statement of NII and the
Company filed with the Securities Exchange Commission on
July 15, 1994 (the "Proxy Statement"), and subject to the
satisfaction of the conditions provided in Section 5 hereof,
the Agent and the Banks hereby (a) consent to the Merger and
agree, in this specific instance, to waive the provisions of
Section 9.13 of the Credit Agreement and (b) consent to the
amendments to the Citicorp Agreement, as set forth in the
Citicorp Third Amendment. The Company acknowledges that the
consents and waiver granted in this Section 3 extend only to
the requirements of the Credit Agreement set forth in this
Section 3 and shall not be deemed to extend to any other or
additional state of facts or circumstances or any other
covenant, obligation, representation or warranty of any
party under the Credit Agreement or the other Loan
Documents.
Section 4. References. From and after the effective
date of the Merger and the effectiveness of the amendment,
consents and waiver provided in Section 3 of this Third
Amendment, all references to the Company in the Credit
Agreement and the other Loan Documents shall be deemed to be
references to the Successor, and the Successor shall succeed
to, and be substituted for, and may exercise every right of,
the Company under the Credit Agreement and the other Loan
Documents for all purposes of the Credit Agreement and the
other Loan Documents.
Section 5. Effectiveness of Third Amendment;
Conditions to Consent and Amendment.
(a) The consents, waiver and the amendment
effected by Section 2 of this Third Amendment shall be
effective upon satisfaction of the following, in a
manner acceptable to Agent:
(i) All of the Banks and the Agent shall
have executed and delivered counterparts of this
Third Amendment.
3
<PAGE>
(ii) All of the Guarantors shall have exe-
cuted and delivered the Consent and Agreement
attached to this Third Amendment.
(b) The consents, waiver and amendment effected
by Sections 3 and 4 of this Third Amendment shall be
effective upon the satisfaction of the following, in a
manner acceptable to the Agent:
(i) The Required Banks (and such additional
Banks as shall be necessary under Section 14.1(b)
of the Credit Agreement) shall have executed and
delivered counterparts of this Third Amendment.
(ii) All of the Guarantors shall have exe-
cuted and delivered the Consent and Agreement
attached to this Third Amendment.
(iii) The Successor shall have executed and
delivered an instrument of assumption and agree-
ment, assuming all of the obligations of the
Company under, and agreeing to be bound by and
perform all of the provisions applicable to the
Company of, the Credit Agreement and the other
Loan Documents as the successor to the Company
pursuant to the Merger, together with endorsements
of the Notes, all in form and substance
satisfactory to Agent;
(iv) The Successor shall have delivered to
Agent the instruments and other documents
concerning the Successor as was required of the
Company pursuant to Sections 11.1.3 and 11.1.4 of
the Credit Agreement.
(v) The Agent shall have received a
favorable legal opinion of Weil, Gotshal & Manges,
counsel to the Successor, substantially to the
effect (1) provided in Exhibit E to the Credit
Agreement, and (2) that the Merger has become
effective in accordance with Delaware law.
(vi) (a) The Merger shall have become effec-
tive on or before December 31, 1994, in accordance
with the Merger Agreement and the Proxy Statement
(without the substitution of any other Subsidiary
of NII for the Successor or any waiver of or other
departure from the material terms or conditions
4
<PAGE>
thereof, except to reflect the elimination of con-
sents referenced therein that are not required),
in compliance with all applicable laws and regula-
tions and with all required approvals and consents
having been obtained (without any material condi-
tions or the imposition of or agreement to any
material obligations), (b) the Agent shall have
received complete copies of the Merger Agreement
(including the schedules thereto) and the Proxy
Statement (including the final form thereof and
any supplements thereto) and (c) the Agent shall
have received a certificate from the Chief Finan-
cial Officer of the Company certifying the
fulfillment of the conditions of this clause (vi).
(vii) The representations and warranties
provided in Article IX of the Credit Agreement
shall be true and correct with respect to the
Successor on the effective date of the Merger
(immediately after giving effect to the Merger and
the waiver of Section 9.13 of the Credit Agreement
to the extent contemplated by Section 3 hereof) as
if made on such date (except to the extent that
such representations and warranties are expressly
by their terms made only as of another specific
date), and no Unmatured Event of Default or Event
of Default shall have occurred or be continuing on
the effective date of the Merger (before and after
giving effect to the Merger).
(viii) The Agent shall have received such other
documents, instruments, and certificates as it
shall deem necessary or appropriate in connection
with this Third Amendment and the transactions
contemplated hereby.
Section 6. Representations and Warranties. The
Company represents and warrants that the Proxy Statement
does not contain any misstatement of a material fact or omit
the statement of a material fact necessary to make the
statements contained therein not misleading. The Company
also represents and warrants, and each Operating Subsidiary
as to matters relating to such Operating Subsidiary
represents and warrants, that this Third Amendment has been
duly authorized, executed and delivered by the Company and
the Operating Subsidiaries and constitutes the legal, valid,
and binding obligations of the Company and the Operating
Subsidiaries, enforceable in accordance with its terms
5
<PAGE>
(subject as to enforcement of remedies to any applicable
bankruptcy, reorganization, moratorium, or similar laws or
principles of equity affecting the enforcement of creditors'
rights generally). The Company further represents and
warrants that (a) there exists no Event of Default or
Unmatured Event of Default on the date hereof (before and
after giving effect to the transactions contemplated
hereby), (b) the representations and warranties set forth in
Section 9 of the Credit Agreement are true and correct on
the date hereof (except to the extent that such
representations or warranties are expressly by their terms
made only as of another specific date or are expressly
waived hereunder), and (c) the Company and the Operating
Subsidiaries have complied with all agreements and
conditions to be complied with by any of them under the
Credit Agreement and other Loan Documents by the date
hereof.
Section 7. Entire Agreement; Ratification. This
Third Amendment embodies the entire agreement of the parties
and supersedes any prior agreements or understandings with
respect to the subject matter hereof. Except as modified or
supplemented hereby, the Credit Agreement and all other Loan
Papers shall continue in full force and effect. From and
after the date of effectiveness of the amendment, consents
and waiver provided in Sections 2,3 and 4 of this Third
Amendment, all references in the Credit Agreement and any of
the other Loan Documents to the Credit Agreement shall be
deemed to be references to the Credit Agreement as amended
hereby.
SECTION 8. GOVERNING LAW. THIS THIRD AMENDMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ILLINOIS AND APPLICABLE U.S. FEDERAL
LAWS.
Section 9. Counterparts. This Third Amendment
may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument.
In making proof hereof, it shall not be necessary to produce
or account for any counterpart other than one signed by the
party against which enforcement is sought.
Section 10. NO ORAL AGREEMENTS. TO THE EXTENT,
IF ANY, THAT TEXAS LAW MAY APPLY, THIS THIRD AMENDMENT,
TOGETHER WITH THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS, CONSTITUTES A "LOAN AGREEMENT" FOR THE PURPOSES
OF SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE,
6
<PAGE>
AND REPRESENTS THE FINAL AGREEMENT BETWEEN AND AMONG THE
PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
IN WITNESS WHEREOF, the Company, Operating
Subsidiaries, the Agent and the Banks have caused this Third
Amendment to be executed and delivered by their duly
authorized officers effective as of the date first above
written.
COMPANY:
FOXMEYER CORPORATION
By: ____________________________
Title: Vice President &
Treasurer
OPERATING SUBSIDIARIES:
FOXMEYER DRUG COMPANY
By: ____________________________
Title: Vice President &
Treasurer
MERCHANDISE COORDINATOR SERVICES
CORPORATION
By: ____________________________
Title: Vice President &
Treasurer
HARRIS WHOLESALE COMPANY
By: ____________________________
Title: Vice President &
Treasurer
7
<PAGE>
AGENT AND BANKS:
CONTINENTAL BANK, individually
and as Agent
By: ____________________________
Title:
FUJI BANK, LTD.
By: ____________________________
Title:
THE BANK OF TOKYO, LTD.
By: ____________________________
Title:
8
<PAGE>
CONSENT AND AGREEMENT
The undersigned, being all of the Guarantors (as
defined in the Credit Agreement), hereby consent and agree
to the foregoing Third Amendment to the Credit Agreement and
hereby confirm their respective obligations under their
respective Guaranty Agreements (as defined in the Credit
Agreement), which shall remain in full force and effect.
FOXMEYER DRUG COMPANY, a Kansas
corporation
DRXCARE, INC.
HEALTH MART, INC.
FOXMEYER DRUG COMPANY, a
Delaware corporation
IV PARTNERS, INC.
FOXMEYER REALTY COMPANY
FOXMEYER SOFTWARE, INC.
HEALTHCARE TRANSPORTATION
SYSTEM, INC.
MERCHANDISE COORDINATOR SERVICES
CORPORATION
CAROL STREAM HOLDINGS, INC.
HARRIS WHOLESALE COMPANY
By
------------------------------------
Title:
9
<PAGE>
EXHIBIT 10.37
THIRD AMENDMENT TO AMENDED AND
RESTATED LOAN AGREEMENT, CONSENT AND WAIVER
THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN
AGREEMENT, CONSENT AND WAIVER (this "Third Amendment") is
dated as of August 26, 1994, among (i) FOXMEYER CORPORATION,
a Delaware corporation ("Borrower"), (ii) FOXMEYER DRUG
COMPANY, a Kansas corporation, MERCHANDISE COORDINATOR
SERVICES CORPORATION, a Delaware corporation, and HARRIS
WHOLESALE COMPANY, a Delaware corporation (the "Operating
Subsidiaries"), (iii) the LENDERS and ISSUER referred to
therein, and (iv) CITICORP USA, INC., a Delaware corpora-
tion, as Administrative Agent ("Administrative Agent"), and
NATIONSBANK OF TEXAS, N.A., a bank organized under the laws
of the United States, and BANQUE PARIBAS, a bank organized
under the laws of the Republic of France, as Co-Agents
("Co-Agents").
W I T N E S S E T H :
WHEREAS, Borrower, Operating Subsidiaries, Lenders
and Issuer, and Administrative Agent and Co-Agents entered
into an Amended and Restated Loan Agreement dated as of
April 29, 1993, as amended as of October 18, 1993 and June
20, 1994 (the "Loan Agreement");
WHEREAS, Borrower has requested (i) a consent of
the Lenders to the merger (the "Merger") of Borrower with
and into FoxMeyer Acquisition Corp., a Delaware corporation
(the "Successor"), a newly formed, wholly owned subsidiary
of National Intergroup, Inc. ("NII"), pursuant to an Agree-
ment and Plan of Merger, dated as of June 30, 1994 (the
"Merger Agreement"), among NII, the Successor and Borrower
and (ii) the waiver by the Lenders of certain provisions of
the Loan Agreement required to effect the Merger;
WHEREAS, Borrower has also requested that the
ability of Borrower to make certain equity acquisitions and
investments be increased through an amendment to the Loan
Agreement;
WHEREAS, the Lenders, Issuer, and Administrative
Agent and Co-Agents have agreed to provide such consent and
waiver and make such amendment, all upon the terms and
conditions set forth below;
<PAGE>
NOW, THEREFORE, for valuable consideration hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. Unless otherwise defined
herein, terms are used herein as defined in the Loan
Agreement.
Section 2. Consents and Waiver. On the basis of
the information concerning the Merger set forth in the
preliminary Prospectus/Proxy Statement of NII and Borrower
filed with the Securities and Exchange Commission on July
15, 1994 (the "Proxy Statement"), and subject to the
satisfaction of the conditions provided in Section 5(a)
hereof, Agent, the Co-Agents, the Lenders and Issuer hereby
(a) consent to the Merger and agree, in this specific
instance, to waive the provisions of Sections 5.13, 6.1(b),
6.2(m), 6.2(q) and 6.2(y) of the Loan Agreement to the
extent, and only to the extent, that such sections prohibit
the Merger and (b) consent, pursuant to Section 9.6(a) of
the Loan Agreement, to the assignment of the Loan Agreement
and the other Loan Papers from Borrower to the Successor
resulting by operation of law from the Merger. The fore-
going consents and waiver shall not, and are not intended
to, relieve the Successor of its obligations under Section
6.2(y) of the Loan Agreement as successor to Borrower,
including without limitation its obligations to maintain the
separate existence of it and its Subsidiaries and the
separate conduct of the affairs of it and its Subsidiaries,
from and after the Merger. Borrower acknowledges that the
consents and waiver granted in this Section 2 extend only to
the requirements of the Loan Agreement set forth in this
Section 2 and shall not be deemed to extend to any other or
additional state of facts or circumstances or any other
covenant, obligation, representation or warranty of any
party under the Loan Agreement or the other Loan Papers.
Section 3. References. From and after the
effective date of the Merger and the effectiveness of the
consent, waiver and amendment provided in Section 2 of this
Third Amendment, all references to Borrower in the Loan
Agreement and the other Loan Papers shall be deemed to be
references to the Successor, and the Successor shall succeed
to, and be substituted for, and may exercise every right of,
Borrower under the Loan Agreement and the other Loan Papers
for all purposes of the Loan Agreement and the other Loan
Papers.
2
<PAGE>
Section 4. Amendment of Section 6.2. Subject to
the satisfaction of the conditions provided in Section 5(b)
hereof:
(a) Section 6.2(k) of the Loan Agreement is here-
by amended by deleting the amount "$20,000,000" and
inserting in place thereof the amount "$25,000,000";
and
(b) Section 6.2(l) of the Loan Agreement is
hereby amended by deleting the amount "$9,000,000" and
inserting in place thereof the amount "$25,000,000."
Section 5. Effectiveness of Consent, Waiver and
Amendment.
(a) The consents, waiver and the amendment
effected by Sections 2 and 3 of this Third Amendment
shall be effective upon satisfaction of the following,
in a manner acceptable to Administrative Agent:
(i) All of the Lenders, Issuer, Administra-
tive Agent and Co-Agents shall have executed and
delivered this Third Amendment.
(ii) All of the Guarantors shall have exe-
cuted and delivered the Consent and Agreement
attached to this Third Amendment.
(iii) The Successor shall have executed and
delivered an instrument of assumption and agree-
ment, assuming all of the obligations of Borrower
under, and agreeing to be bound by and perform all
of the provisions applicable to Borrower of, the
Loan Agreement and the other Loan Papers as the
successor to Borrower pursuant to the Merger,
together with endorsements of the Notes, all in
form and substance satisfactory to Administrative
Agent;
(iv) The Successor shall have delivered to
Administrative Agent the instruments and other
documents concerning the Successor as was required
of Borrower pursuant to Sections 4.1(c), (d) and
(f) of the Loan Agreement.
(v) Administrative Agent shall have received
(A) a favorable legal opinion of Weil, Gotshal &
3
<PAGE>
Manges, counsel to the Successor, substantially to
the effect (1) provided in Exhibit J to the Loan
Agreement, (2) that the Merger has become effec-
tive in accordance with Delaware law and (3) as to
such other matters as Administrative Agent may
request, and (B) a favorable legal opinion of
Gibson, Dunn & Crutcher, counsel to the Agent, all
in form and substance satisfactory to Administra-
tive Agent.
(vi) (A) the Merger shall have become effec-
tive on or before December 31, 1994, in accordance
with the Merger Agreement and the Proxy Statement
(without the substitution of any other Subsidiary
of NII for the Successor or any waiver of or other
departure from the material terms or conditions
thereof, except to reflect the elimination of con-
sents referenced therein that are not required),
in compliance with all applicable laws and regula-
tions and with all required approvals and consents
having been obtained (without any material condi-
tions or the imposition of or agreement to any
material obligations), (B) Administrative Agent
shall have received complete copies of the Merger
Agreement (including the schedules thereto) and
the Proxy Statement (including the final form
thereof and any supplements thereto) and (C)
Administrative Agent shall have received a
certificate from the Chief Financial Officer of
Borrower certifying the fulfillment of the
conditions of this clause (vi).
(vii) The representations and warranties
provided in Article V of the Loan Agreement shall
be true and correct with respect to the Successor
on the effective date of the Merger (immediately
after giving effect to the Merger and the waiver
of Section 5.13 of the Loan Agreement to the
extent contemplated by Section 2 hereof) as if
made on such date (except to the extent that such
representations and warranties are expressly by
their terms made only as of another specific
date), and no Potential Default or Event of
Default shall have occurred or be continuing on
the effective date of the Merger (before and after
giving effect to the Merger).
4
<PAGE>
(viii) Administrative Agent shall have received
such other documents, instruments, and certifi-
cates as it shall deem necessary or appropriate in
connection with this Third Amendment and the tran-
sactions contemplated hereby.
(b) The amendments effected by Section 4 of this
Third Amendment shall be effective upon satisfaction of
the following, in a manner acceptable to Administrative
Agent:
(i) The Required Lenders, Issuer, Adminis-
trative Agent and Co-Agents shall have executed
and delivered this Third Amendment.
(ii) All of the Guarantors shall have exe-
cuted and delivered the Consent and Agreement
attached to this Third Amendment.
Section 6. Representations and Warranties.
Borrower represents and warrants that the Proxy Statement
does not contain any misstatement of a material fact or omit
the statement of a material fact necessary to make the
statements contained therein not misleading. Borrower also
represents and warrants, and each Operating Subsidiary as to
matters relating to such Operating Subsidiary represents and
warrants, that this Third Amendment has been duly autho-
rized, executed and delivered by Borrower and the Operating
Subsidiaries and constitutes the legal, valid, and binding
obligations of Borrower and the Operating Subsidiaries,
enforceable in accordance with its terms (subject as to
enforcement of remedies to any applicable bankruptcy, reor-
ganization, moratorium, or similar laws or principles of
equity affecting the enforcement of creditors' rights
generally). Borrower further represents and warrants that
(a) there exists no Potential Default or Event of Default on
the date hereof, (b) the representations and warranties set
forth in Article V of the Loan Agreement are true and
correct on the date hereof (except to the extent that such
representations or warranties are expressly by their terms
made only as of another specific date), and (c) Borrower and
the Operating Subsidiaries have complied with all agreements
and conditions to be complied with by it under the Loan
Agreement and other Loan Papers by the date hereof.
Section 7. Entire Agreement; Ratification. This
Third Amendment embodies the entire agreement of the parties
and supersedes any prior agreements or understandings with
5
<PAGE>
respect to the subject matter hereof. Except as modified or
supplemented hereby, the Loan Agreement and all other Loan
Papers shall continue in full force and effect.
SECTION 8. GOVERNING LAW. THIS THIRD AMENDMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND APPLICABLE U.S. FEDERAL LAWS.
Section 9. Counterparts. This Third Amendment
may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument.
In making proof hereof, it shall not be necessary to produce
or account for any counterpart other than one signed by the
party against which enforcement is sought.
Section 10. NO ORAL AGREEMENTS. THIS THIRD
AMENDMENT, TOGETHER WITH THE LOAN AGREEMENT AND THE OTHER
LOAN PAPERS, CONSTITUTES A "LOAN AGREEMENT" FOR THE PURPOSES
OF SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE,
AND REPRESENTS THE FINAL AGREEMENT BETWEEN AND AMONG THE
PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN (A)
BORROWER OR ANY OPERATING SUBSIDIARY AND (B) ADMINISTRATIVE
AGENT, ANY CO-AGENT, ANY LENDER OR ISSUER.
6
<PAGE>
IN WITNESS WHEREOF, this Third Amendment to
Amended and Restated Loan Agreement, Consent and Waiver is
executed as of the date first set forth above.
FOXMEYER CORPORATION
By: ____________________________
Title: Vice President &
Treasurer
FOXMEYER DRUG COMPANY
By: ____________________________
Title: Vice President &
Treasurer
MERCHANDISE COORDINATOR SERVICES
CORPORATION
By: ____________________________
Title: Vice President &
Treasurer
HARRIS WHOLESALE COMPANY
By: ____________________________
Title: Vice President &
Treasurer
CITICORP USA, INC., individually
and as Administrative Agent
By: ____________________________
Title:
7
<PAGE>
NATIONSBANK OF TEXAS, N.A.,
individually and as Co-Agent
By: ____________________________
Title:
By: ____________________________
Title:
BANQUE PARIBAS, individually and as
Co-Agent
By: ____________________________
Title:
By: ____________________________
Title:
CITIBANK, N.A., as Issuer (and not
a Lender)
By: ____________________________
Title:
FIRST BANK NATIONAL ASSOCIATION
By: ____________________________
Title:
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By: ____________________________
Title:
8
<PAGE>
CONTINENTAL BANK N.A.
By: ____________________________
Title:
FIRST INTERSTATE BANK OF TEXAS,
N.A.
By: ____________________________
Title:
CREDIT SUISSE
By: ____________________________
Title:
By: ____________________________
Title:
PNC BANK, N.A.
By: ____________________________
Title:
9
<PAGE>
CONSENT AND AGREEMENT
The undersigned, being all of the Guarantors (as
defined in the Loan Agreement), hereby consent and agree to
the foregoing Third Amendment and hereby confirm their
respective obligations under their respective Guaranty
Agreements (as defined in the Loan Agreement), which shall
remain in full force and effect.
FOXMEYER DRUG COMPANY, a Kansas
corporation
DRXCARE, INC.
HEALTH CARE PHARMACY PROVIDERS,
INC.
HEALTH MART, INC.
FOXMEYER DRUG COMPANY, a Delaware
corporation
IV PARTNERS, INC.
FOXMEYER REALTY COMPANY
FOXMEYER SOFTWARE, INC.
HEALTHCARE TRANSPORTATION SYSTEM,
INC.
MERCHANDISE COORDINATOR SERVICES
CORPORATION
CAROL STREAM HOLDINGS, INC.
HARRIS WHOLESALE COMPANY
By
--------------------------------------------
Title: Vice President & Treasurer
10
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in
this Registration Statement of National Intergroup, Inc. and
FoxMeyer Corporation on Form S-4 of (i) our reports dated
May 11, 1994, appearing in and incorporated by reference in
the Annual Report of Form 10-K of National Intergroup, Inc.
for the year ended March 31, 1993, (ii) our reports dated
May 11, 1994, appearing in and incorporated by reference in
the Annual Report on Form 10-K of FoxMeyer Corporation for
the year ended March 31, 1994 and (iii) to the reference to
us under the heading "Experts" in the Joint Proxy
Statement/Prospectus, which is part of this Registration
Statement.
Deloitte & Touche LLP
Dallas, Texas
September 8, 1994
Exhibit 23.3
CONSENT
OF
SMITH BARNEY INC.
We hereby consent to (i) the inclusion of our opinion letter to the
Board of Directors of FoxMeyer Corporation ("FoxMeyer") as Annex B to the Joint
Proxy Statement/Prospectus of FoxMeyer and National Intergroup, Inc. ("NII")
relating to the proposed merger of FoxMeyer with and into FoxMeyer Acquisition
Corp., a wholly owned subsidiary of NII, and (ii) all references made to our
firm and such opinion in such Joint Proxy Statement/Prospectus under the
captions "SUMMARY -- Opinion of the Special Committee's Financial Advisor" and
"THE MERGER -- Background of the Merger," "-- FoxMeyer's Reasons for the Merger
and Recommendation of the Special Committee" and "-- Opinion of the Special
Committee's Financial Advisor." In giving such consent, we do not admit that we
come within the category of persons whose consent is required under, and we do
not admit and we disclaim that we are "experts" for purposes of, the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
By: /s/ SMITH BARNEY INC.
-----------------------------------
SMITH BARNEY INC.
New York, New York
September 12, 1994
