ENSTAR INC, S-1, 1997-03-26

ENSTAR INC
S-1, 1997-03-26
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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<PAGE> 1

REGISTRATION NO. 333-

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------

ENSTAR INC.
(Exact Name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
MINNESOTA 3661 41-1831611
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
6479 CITY WEST PARKWAY PETER E. FLYNN
EDEN PRAIRIE, MINNESOTA 55344 EXECUTIVE VICE PRESIDENT
(612) 941-3200 6479 CITY WEST PARKWAY
(Address, including zip code, and telephone EDEN PRAIRIE, MINNESOTA 55344
number, including area code, of Registrant's (612) 941-3200
principal executive offices) (Name, address, including zip code, and
telephone number,
including area code, of agent for service)
</TABLE>

-------------------------
Copy to:

J. Andrew Herring
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, MN 55402-1498
(612) 340-2600
-------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
-------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
===============================================================================================================
PROPOSED PROPOSED PROPOSED
TITLE OF EACH AMOUNT MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Subordinated Debentures.... $25,000,000 100% $25,000,000 $7,576
===============================================================================================================
</TABLE>

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED MARCH 26, 1997

$25,000,000

ENSTAR INC.
8.00% TWO YEAR
9.75% FIVE YEAR
11.00% TEN YEAR

SUBORDINATED DEBENTURES
MINIMUM INVESTMENT OF $1,000
-------------------------

ENStar Inc. ("ENStar" or the "Company") is offering hereby Subordinated
Debentures in the aggregate principal amount of $25 million. The Subordinated
Debentures are unsecured obligations subordinated to all Senior Indebtedness (as
defined in the Indenture pursuant to which the Debentures will be issued) of the
Company, which may vary from time to time. The Subordinated Debentures are pari
passu with all other unsecured indebtedness of the Company, unless such
indebtedness is specifically subordinated to the Debentures. The Indenture does
not limit the amount of Senior Indebtedness or other indebtedness of the
Company. As of March 25, 1997, the Company had no outstanding Senior
Indebtedness, other than Senior Indebtedness in the aggregate amount of
approximately $27.2 million (the "Michael Assumed Indebtedness"). The Michael
Assumed Indebtedness ranks senior to the Subordinated Debentures and represents
indebtedness of Michael Foods, Inc (formerly known as North Star Universal,
Inc.,) the former shareholder of the Company ("NSU"), assumed by the Company in
connection with the Reorganization Transactions described herein. See "Business
- -- Reorganization Transactions." Michael has agreed to satisfy, and indemnify
the Company in full for, all payment and other obligations in respect of such
Michael Assumed Indebtedness. As of March 25, 1997, the Company had outstanding
other indebtedness in the aggregate principal amount of approximately $3.0
million represented by subordinated debentures that rank pari passu with the
Subordinated Debentures offered hereby. The Company is a holding company.
Accordingly, to pay the principal and interest on the Debentures, the Company
will be dependent on dividends or other transfers from its subsidiaries or it
will be required to issue additional indebtedness or additional equity
securities or to sell certain of its assets.

The interest rates at which the Subordinated Debentures will be offered are
expected to change by order of the Company from time to time based on the
Company's financial needs and current market conditions, but any such change
will not affect the interest rate of any Subordinated Debentures purchased prior
to the effective date of such change. Any changes in the interest rates at which
the Subordinated Debentures will be offered will be made by post-effective
amendment to this Prospectus setting forth such changes to the interest rates.
Interest on each Debenture will be payable, at the election of the initial
purchaser, quarterly, at maturity, or, if the Debenture is in a denomination of
$5,000 or more, monthly.

The Company may, at its option, redeem any or all of the Debentures prior
to maturity on at least 30 days (but not more than 60 days) notice to each
holder of Debentures to be redeemed, without a premium, at a price of 100% of
the principal amount of the Debentures, plus accrued interest on a daily basis
to the redemption date. The Company may not reissue redeemed Debentures.

The Subordinated Debentures are offered by officers and employees of the
Company directly without an underwriter and on a continuous basis with an
expected termination date in April 1999; however, the Company reserves the right
to terminate this offering at any time prior to such date. No minimum amount of
Subordinated Debentures must be sold in order for the Company to accept and
deposit the proceeds of this offering. There is no assurance that all or any
portion of the offered Subordinated Debentures will be sold. It is unlikely that
any trading market for the Subordinated Debentures will develop, or, if
developed, will be sustained, or that the Debentures may be resold at any price.
The Company reserves the right to reject any subscription, in whole or in part.

The Subordinated Debentures offered hereby are not deposits or accounts
with a bank, savings and loan association or other financial institution
regulated by federal or state banking authorities and such securities are not
entitled to any of the regulatory protections applicable to deposits or accounts
with such regulated financial institutions, including deposit insurance or
governmental guarantees.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C>
============================================================================================================
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO
PUBLIC COMMISSION COMPANY(1)
- ------------------------------------------------------------------------------------------------------------
Per Debenture................................... 100% None 100%
- ------------------------------------------------------------------------------------------------------------
Total........................................... $25,000,000 None $25,000,000
============================================================================================================
</TABLE>

(1) Before deducting expenses payable by the Company estimated at $95,000.

THE DATE OF THIS PROSPECTUS IS MARCH , 1997
<PAGE> 3

ADDITIONAL INFORMATION

A Registration Statement on Form S-1, including amendments thereto,
relating to the Debentures offered hereby has been filed with the Securities and
Exchange Commission (the "Commission"). This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete, and
in each instance reference is made to the copy of such contract or documents
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. For further information with
respect to the Company and the Debentures offered hereby, reference is made to
the Registration Statement and the exhibits and schedules thereto. A copy of the
Registration Statement, including exhibits and schedules thereto, may be
inspected by anyone without charge at the Commission's principal office in
Washington, D.C. and copies of all or any part thereof may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of certain fees prescribed by the Commission. A copy of
the Registration Statement is also available on the Commission's Edgar site on
the World Wide Web at: http://www.sec.gov.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and Financial Statements and the
Notes thereto appearing elsewhere in this Prospectus.

THE COMPANY

ENStar, a Minnesota corporation formed in 1995, is a holding company. Its
principal subsidiaries are Americable, Inc. ("Americable") and Transition
Networks, Inc. ("Transition"). Americable is a provider of connectivity and
networking products and services. Transition is a manufacturer of connectivity
devices used in local area network ("LAN") applications. At March 25, 1997,
ENStar (through Americable) also owned 1,025,000 shares of common stock of
CorVel Corporation ("CorVel"), or an approximate 23% interest in CorVel, a
provider of cost containment and managed care services designed to address the
medical costs of workers' compensation.

ENStar was formerly a wholly owned subsidiary of NSU. In connection with
transactions (the "Reorganization Transactions") consummated pursuant to a
reorganization agreement entered into between NSU and Michael Foods, Inc.
("Michael"), NSU transferred, on or prior to February 28, 1997, to ENStar
certain of its assets, including its shares of common stock of Americable and
Transition and its shares of CorVel and certain other assets. Pursuant to the
Reorganization Transactions, (i) NSU merged with Michael and (ii) the
outstanding common stock of ENStar (the "ENStar Common Stock") was distributed
to the shareholders of NSU (the "Distribution"). As a result of the
Distribution, ENStar ceased to be a subsidiary of NSU and became a publicly
owned company whose stock is quoted on the Nasdaq National Market under the
symbol "ENSR." In connection with the Reorganization Transactions, Michael has
agreed to pay in full all Michael Assumed Indebtedness within six months of
consummation of the Reorganization Transactions, and Michael has notified
holders of the Michael Assumed Indebtedness that it intends to redeem such
indebtedness on April 15, 1997. In connection with the Reorganization
Transactions, ENStar agreed to indemnify Michael against certain losses arising
from the Reorganization Transactions and to assume certain liabilities of NSU.
See "BUSINESS -- Reorganization Transactions."

Americable is a provider of networking and connectivity products and
services used in providing solutions for customers operating a wide range of
data communications systems. As a network integrator, Americable Network
Technologies provides products and services designed to build and manage LAN and
wide area network ("WAN") infrastructures for large and medium sized
organizations. These network services include planning, implementation,
maintenance, security and product fulfillment. Following the completion of the
Reorganization Transactions, Americable's network integration business was
renamed ENStar Networking Corporation. As a value-added distributor, Americable
supplies a wide array of voice and data communications related products such as
cable (both copper and fiber optic), cable assemblies, components (blocks,
jacks, connectors, patch cords and patch panels) and networking hardware.
Through American Custom Products, Americable provides manufacturing capabilities
designed to satisfy the needs of customers that require custom or specialty
cable assemblies.

Transition develops, manufactures, markets and supports a broad line of
data networking hardware products that provide physical connectivity for LANs
and mini- and mainframe networks. Physical connectivity devices enable computing
and other electronic devices to communicate over a LAN. These devices include
high-speed switches, managed and unmanaged hubs, transceivers, media converters
and other related networking devices. Transition's products include intelligent
hubs and switches and passive and active terminal and related products.
Transition sells its products to a number of volume distributors and value-added
resellers ("VARs") throughout the United States and certain countries worldwide.

CorVel is an independent nationwide provider of medical cost containment
and managed care services designed to address escalating medical costs. CorVel's
services include preferred provider organizations, automated medical fee
auditing, medical case management, independent medical examinations, utilization
review and vocational rehabilitation services. Such services are provided to
insurance companies, third party administrators and employers to assist them in
managing the medical costs and monitoring the quality of care associated with
medical claims. The common stock of CorVel is included on the Nasdaq National
Market under the symbol CRVL.

The mailing address of ENStar's principal executive office is 6479 City
West Parkway, Eden Prairie, Minnesota, 55344; its telephone number is (612)
941-3200.
3
<PAGE> 5

THE OFFERING

Securities Offered............ The Company is offering up to $25,000,000
principal amount Subordinated Debentures (the
"Debentures"). The Two, Five and Ten Year
Debentures have maturities of two, five and ten
years, respectively, and mature on the first
day of the month immediately following the
second, fifth and tenth anniversary of the date
of issuance, respectively. See "DESCRIPTION OF
DEBENTURES -- General."

Interest Rate and Payment..... Interest on the Debentures will accrue from the
date of issuance. Interest will be payable
quarterly or at maturity at the option of the
Debenture holder. If the interest is paid at
maturity only, it will be compounded quarterly.
Additionally, holders of Debentures in
denominations of $5,000 or more may elect to
receive interest payments monthly. Once issued,
the interest rate applicable to a Debenture
will not adjust prior to maturity. See
"DESCRIPTION OF DEBENTURES -- Interest."

Redemption.................... The Debentures are redeemable at the Company's
option, in whole or in part, at any time prior
to maturity on at least 30 days (but not more
than 60 days) notice to each holder of
Debentures to be redeemed, without a premium,
at a price of 100% of the principal amount of
the Debentures, plus accrued interest on a
daily basis to the redemption date. See
"DESCRIPTION OF DEBENTURES -- Redemption at the
Option of the Company."

Repayment upon Death.......... Under certain circumstances, the Company will
repay up to $25,000 in aggregate principal
amount of Debentures at par upon the death of a
Debenture holder. See "DESCRIPTION OF
DEBENTURES -- Redemption by the Holder Upon
Death."

Subordination................. The Debentures are unsecured obligations of the
Company and subordinated to all present and
future Senior Indebtedness of the Company, as
defined in the Indenture. The Debentures are
pari passu with all other unsecured
indebtedness of the Company, unless such
indebtedness is specially subordinated to the
Debentures. There are no restrictions in the
Indenture on incurring additional Senior
Indebtedness or other indebtedness. As of March
25, 1997, the Company had no outstanding Senior
Indebtedness, other than Senior Indebtedness in
the aggregate amount of approximately $27.2
million (the "Michael Assumed Indebtedness").
The Michael Assumed Indebtedness ranks senior
to the Subordinated Debentures and was assumed
by the Company in connection with
Reorganization Transactions. Michael has agreed
to satisfy, and indemnify the Company in full
for, all payment and other obligations in
respect of such Michael Assumed Indebtedness.
In addition, in connection with the
Reorganization Transactions, Michael has agreed
to pay in full all Michael Assumed Indebtedness
within six months of consummation of the
Reorganization Transactions, and Michael has
notified holders of the Michael Assumed
Indebtedness that it intends to redeem such
indebtedness on April 15, 1997. As of March 25,
1997, the Company had outstanding other
indebtedness in the aggregate principal amount
of approximately $3.0 million represented by
subordinated debentures that rank pari passu
with the Subordinated Debentures offered
hereby. See "DESCRIPTION OF DEBENTURES --
Subordination."
4
<PAGE> 6

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth certain selected historical consolidated
financial information of ENStar that has been derived from and should be read in
conjunction with ENStar's Consolidated Financial Statements, including the Notes
thereto, which are included elsewhere in this Prospectus:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA(1)
Revenues........................................ $64,123 $54,891 $47,193 $46,756 $42,025
Operating income (loss)......................... (53) 1,033 (702) (1,978) (1,151)
Interest expense, net........................... (204) (247) (348) (361) (373)
Income (loss) before income taxes and equity in
earnings of unconsolidated subsidiary......... (257) 786 (1,050) (2,339) (1,524)
------- ------- ------- ------- -------
Net income (loss)............................... $ 1,072 $ 1,572 $ 286 $(1,524) $ (550)
======= ======= ======= ======= =======
Net income (loss) per share(2).................. $ 0.32 $ 0.49 $ 0.09 $ (0.48) $ (0.17)
======= ======= ======= ======= =======
Weighted average common and common equivalent
shares outstanding(2)......................... 3,309 3,217 3,235 3,146 3,146
CONSOLIDATED BALANCE SHEET DATA (END OF
PERIOD)(1)
Total assets.................................... $36,015 $35,251 $32,243 $30,222 $30,318
Long-term debt, including current maturities.... 1,178 1,246 3,607 3,443 3,898
Shareholders' equity............................ 20,947 19,694 18,176 17,035 17,262
</TABLE>

- -------------------------
(1) See Notes 1 and 2 to Notes to ENStar's Consolidated Financial Statements for
a description of the entities included in the consolidated financial
statements and the basis on which the consolidated financial statements were
prepared.
(2) Net income (loss) per share was computed using the weighted average number
of outstanding shares of NSU Common Stock during each period presented
adjusted for the Distribution of one share of ENStar Common Stock for every
three shares of NSU Common Stock outstanding. Except for 1994, in which year
stock options were not dilutive for computation of earnings per share at
NSU, such options were dilutive when computing earnings per share for
ENStar.
5
<PAGE> 7

RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating an investment in the
Debentures.

ABSENCE OF INSURANCE AND GUARANTEES

The Debentures are not insured or guaranteed by any governmental agency or
any public or private entity as are certificates of deposit or other accounts
offered by banks, savings and loan associations or credit unions. In these
respects, the Debentures are similar to the subordinated unsecured debt
securities of other commercial entities, but are unlike certificates of deposits
or other similar accounts offered by banks and savings institutions.

LIMITED COVENANTS; ABSENCE OF SINKING FUND

The Debentures do not have the benefit of extensive covenants. The
covenants in the Indenture are not designed to protect holders of the Debentures
in the event of a material adverse change in the Company's financial condition
or results of operations. These covenants do not place any restriction on the
Company's ability, among other things, to create or incur Senior Indebtedness or
other indebtedness or to pay dividends. The Indenture does not contain
provisions that permit the holders of Debentures to require that the Company
repurchase or redeem the Debentures in the event of a takeover, redemption,
recapitalization or similar restructuring, and the Indenture does not contain
covenants specifically designed to protect holders of the Debentures in the
event of a highly leveraged transaction involving the Company. In addition, the
Debentures will not have the benefit of sinking fund payments by the Company.

NO MARKET FOR THE DEBENTURES

The Debentures will not be listed on a national securities exchange or
authorized for quotation on the Nasdaq National Market. It is unlikely that any
trading market for the Debentures will develop, or if developed, will be
sustained, or that the Debentures may be resold at any price. In addition, the
Debentures may be issued in uneven amounts which could further restrict the
ability to trade the Debentures.

LIMITED HISTORY OF PROFITABILITY; UNCERTAINTY OF FUTURE RESULTS

ENStar has a limited history of profitability. ENStar experienced operating
losses during 1992, 1993, 1994 and 1996. During 1995, ENStar generated operating
income of approximately $1.0 million. Further ENStar expects to record an
operating loss for the year ended December 31, 1997 primarily as a result of
expected reduction in demand from certain large customers at Americable and the
costs associated with the addition to the number of services offered to
Americable customers, the addition of new engineering and sales personnel at
Americable and Transition and weaker than expected demand for Transition's
products. Americable derives its revenues from three primary lines of business:
networking products and services, cable and connectivity products and cable
assemblies. Americable has recently increased the focus of its business on
network services, which are generally more profitable. No assurance can be made,
however, that Americable will be successful in increasing revenues from its
network services. In addition, Americable continues to make significant
investments in new sales, engineering and technical personnel.

Transition's ability to maintain its present level of sales and its
historical sales growth is highly dependent upon its ability to offer new
products that meet customers' demands in a rapidly changing market, particularly
in light of the relatively short life cycle of its products. In order to achieve
market acceptance of new products, Transition plans to continue its investment
in research and development. Transition had research and development expenses of
approximately $1.2 million (10% of net sales) in 1994, $1.0 million (7% of net
sales) in 1995 and $1.5 million (9% of net sales) in 1996. See
"BUSINESS -- Research and Development." There can be no assurance, however, that
its research and development efforts will result in commercially successful new
products in the future. In addition, Transition believes that sales and
marketing expenses will continue to increase in terms of absolute dollars in an
effort to differentiate its products and enhance its competitive position.

6
<PAGE> 8

These anticipated increases in operating expenses at both Americable and
Transition may result in lower operating profit at ENStar, if the companies are
unable to maintain their respective current gross profit margins and continued
sales growth. Further, if Americable is not successful in generating higher
volumes of service revenues, its operating margins could decline and its ability
to maintain its current operating profitability could be materially adversely
affected. Based on the above factors, there can be no assurance that ENStar will
be able to increase or sustain its profitability on a quarterly or annual basis
in the future.

Sustained operating losses could lead to cash flow shortages, which in turn
could materially adversely affect ENStar's ability to make scheduled payments on
its indebtedness, including the Debentures. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- Results of
Operations."

CASH FLOW DEFICITS

ENStar has experienced cash flow deficits from operations in certain prior
years. ENStar's ratio of earnings to fixed charges for each of the five fiscal
years ended December 31, 1996, 1995, 1994, 1993 and 1992 was (.50), 2.54,
(0.72), (2.68) and (1.46), respectively. During the years 1996, 1994, 1993, and
1992, the Company's earnings were inadequate to cover its fixed charges. The
coverage deficiency was approximately $257,000, $1,050,000, $2,339,000 and
$1,524,000 for the fiscal years ended December 31, 1996, 1994, 1993 and 1992,
respectively. Based on the Company's recent cash flow deficits, the Company does
not expect its fixed charges to decrease significantly or for its earnings from
its operating subsidiaries to improve significantly. The Company's ability to
repay the Debentures could be adversely affected if its cash flow deficits
continue and the Company were unable to raise additional funds through the
issuance of new debt or equity securities or the sale of assets of the Company.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION -- Capital Resources and Liquidity."

SUBORDINATION OF DEBENTURES; NO LIMITATION ON INDEBTEDNESS OF THE COMPANY

The Debentures are subordinate and junior to any and all Senior
Indebtedness of the Company, as defined in the Indenture and rank pari passu
with all other unsecured indebtedness of the Company not expressly subordinated
to the Debentures. There are no restrictions in the Indenture regarding the
amount of Senior Indebtedness or other indebtedness of the Company, which may
fluctuate. In the event of a default on the Senior Indebtedness or the
liquidation of the Company, all Senior Indebtedness must be paid prior to any
payment of principal or interest on the Debentures. As of March 25, 1997, the
Company had no outstanding Senior Indebtedness, other than Michael Assumed
Indebtedness in the aggregate amount of approximately $27.2 million. The Michael
Assumed Indebtedness was assumed by the Company in connection with the
Reorganization Transactions. Michael has agreed to satisfy, and indemnify the
Company in full for, all payment and other obligations in respect of such
Michael Assumed Indebtedness, and has agreed to cause NSU to pay in full all
Michael Assumed Indebtedness within six months of consummation of the
Reorganization Transactions. Michael has notified holders of the Michael Assumed
Indebtedness that it intends to redeem the Michael Assumed Indebtedness on April
15, 1997. As of March 25, 1997, the Company had outstanding other indebtedness
in the aggregate principal amount of approximately $3.0 million represented by
subordinated debentures that rank pari passu with the Subordinated Debentures
offered hereby. See "DESCRIPTION OF THE DEBENTURES -- Subordination."

NO SECURITY FOR PAYMENT

The Debentures offered hereby are unsecured and do not have the benefit of
a sinking fund or other similar provision providing for retirement of the
Debentures at their maturity. The Company is a holding company. Accordingly, to
pay the principal and interest on the Debentures, the Company will be dependent
on dividends or other transfers from its subsidiaries or it will be required to
issue additional indebtedness or additional equity securities or to sell certain
of its assets. The ability of the Company's subsidiaries to pay dividends or
make other transfers to the Company may be restricted by their respective
operating performances, cash flows and covenants with such subsidiaries' lender.
Further, no assurance can be made that the

7
<PAGE> 9

Company will be able to issue additional indebtedness, additional equity
securities or sell any of its assets on favorable terms or at all. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION -- Capital Resources and Liquidity."

REDEMPTION

The Company, at its option, may at any time redeem all or a portion of the
outstanding Debentures at any time prior to maturity on at least 30 days (but
not more than 60 days) notice to each holder of Debentures to be redeemed. If
the Company redeems less than all of the outstanding Debentures, the Company
will redeem the Debentures by interest rate or maturity. The Debentures will be
redeemed without a premium at a price of 100% of the principal amount plus
accrued but unpaid interest. Upon redemption, former holders of Debentures
redeemed will no longer have rights under the Indenture. See "DESCRIPTION OF
DEBENTURES -- Redemption at the Option of the Company."

NO FIRM UNDERWRITING COMMITMENT

The Debentures are being offered by officers and employees of the Company
without a firm underwriting commitment. While the Company intends to seek to
sell $25 million principal amount of Debentures, the Company has not established
a minimum amount of proceeds that must be received from the sale of Debentures
in order to accept proceeds from Debentures actually sold. Accordingly, no
assurance can be given as to the principal amount of Debentures that will be
sold. See "USE OF PROCEEDS."

CERTAIN RISKS PERTAINING TO THE CORVEL COMMON STOCK

Because CorVel is not a wholly owned subsidiary, the Company does not have
the ability to utilize cash flows from CorVel in connection with its wholly
owned operating subsidiaries or to repay its indebtedness, including the
Debentures. The only cash the Company can obtain from CorVel is cash dividend
payments made to all CorVel shareholders. Since its initial public offering,
CorVel has not paid any dividends and it has indicated that it does not
anticipate doing so during the foreseeable future. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -- Capital
Resources and Liquidity."

ENStar does not have any agreement with CorVel requiring CorVel to register
the shares of CorVel Common Stock currently held by ENStar for sale under
federal or state securities laws. In the absence of registration of its CorVel
Common Stock, the ability of ENStar or, after the Distribution, Americable to
sell the CorVel Common Stock will be limited to sales pursuant to Rule 144 of
the Securities Act of 1933, as amended (the "Securities Act"), and the volume
limitations thereof, and to private negotiated sales, which may adversely affect
the ability of ENStar to sell a large portion of the holdings of CorVel Common
Stock at a given time.

PRODUCT AND SERVICE DEVELOPMENT RISKS

With respect to Transition, the market for networking products is subject
to rapid technological change, evolving industry standards and frequent new
product introductions and, therefore, requires a high level of expenditures for
research and development. Transition may be required to incur significant
expenditures to develop such product offerings. There can be no assurance that
Transition will be successful in identifying, sourcing, developing and marketing
product enhancements or new products that respond to this rapidly changing
market. Also, there can be no assurance that its product enhancements and new
products will adequately meet the requirements of the marketplace and achieve
market acceptance. A critical factor in market acceptance of product
enhancements and new products is the timely introduction of such products and
enhancements in order to take advantage of existing market opportunities.
Transition has, in the past, experienced delays in the introduction of certain
of its new products and enhancements. See "BUSINESS -- Business
Strategy -- Transition" and "-- Products and Services -- Transition."

The markets for Americable's products and services are also characterized
by rapidly changing technology and frequent new product and service offerings by
its competitors. The introduction of new technologies can render existing
products and services obsolete or unmarketable. Americable's continued

8
<PAGE> 10

success will depend on its ability to enhance existing products and services and
to develop and introduce, on a timely and cost-effective basis, new products and
services that keep pace with technological developments and address increasingly
sophisticated customer requirements. See "BUSINESS -- Business Strategy --
Americable" and "-- Products and Services -- Americable."

ENStar's business, financial condition and results of operations could be
materially adversely affected if Transition were to incur delays in developing
or introducing new products or product enhancements or if such new products or
product enhancements did not gain market acceptance or in the event that
Americable were to incur delays in sourcing and developing new products and
services or that these products and services would achieve market acceptance.

EXPANSION STRATEGY

ENStar's expansion strategy includes both internal growth and the
identification and pursuit of acquisition opportunities at Americable.
Americable currently operates in six locations and the success and the rate of
Americable's expansion into new geographical markets will depend on a number of
factors, including general economic and business conditions affecting the
industries of Americable's customers in such markets, competition, the
availability of sufficient capital, the availability of sufficient inventory to
meet customer demand, and the ability to attract and retain qualified personnel
and operate effectively in geographic areas in which Americable has no prior
experience. As a result, there can be no assurance that Americable will be able
to achieve its planned expansion on a timely or profitable basis.

Americable intends to identify and pursue acquisition opportunities as a
means to expand its geographic coverage and enhance service capabilities offered
to its customers. However, viable acquisition candidates may not be available to
Americable on acceptable terms or at all. Furthermore, Americable has not
engaged in any significant acquisitions recently, and no assurance can be made
that Americable will be able to successfully acquire or integrate the operations
of another business into the operations and business of Americable. Americable
has no present commitments, agreements or understandings with respect to any
acquisitions.

If Americable continues to grow, it may be required to make further
investments in personnel and information technology systems. Failure to
successfully hire or retain such personnel or implement such systems could have
a material adverse effect on ENStar's results of operations and financial
condition. There can be no assurance that Americable will be able to manage its
expanding operations effectively, that it will be able to maintain or accelerate
its recent growth or that Americable will be able to continue to operate
profitably. See "BUSINESS -- Business Strategy."

FLUCTUATIONS IN QUARTERLY RESULTS

ENStar's quarterly revenues and operating results have varied significantly
in the past and will likely continue to do so in the future. Quarterly revenues
and operating results may fluctuate as a result of the demand for Americable's
and Transition's products and services, the introduction of new hardware and
software technologies offering improved features, the introduction of new
products and services by competitors, changes in the level of operating
expenses, competitive conditions and economic conditions generally. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION."

At Americable, the purchase of its products and services generally involves
a significant commitment of capital, with the delays frequently associated with
large capital expenditures and required authorization procedures within an
organization. Such expenditures by customers can range from $50,000 to over
$500,000. The sales cycle for Americable's products and services generally
ranges from three to nine months depending on the size of the project, extent of
competition and degree of the customer's technical expertise. For these and
other reasons, Americable's operating results are subject to a number of risks
over which it has little or no control, including customers' technology life
cycle needs, budgetary constraints and internal authorization reviews. Further,
Americable is increasing its operating expenses, including an increase in
personnel, based on anticipated revenue growth in its networking line of
business.

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<PAGE> 11

A variety of factors may cause period-to-period fluctuations in the
operating results of Transition. Such factors include, but are not limited to,
product mix, competitive pricing pressures, material costs and timely
availability, revenue and expenses related to new product introductions, as well
as delays in customer purchases in anticipation of new products or enhancements
by Transition or its competitors. Further, Transition plans to continue to
invest in research and development, sales and marketing and technical support
staff.

ENStar's operating results also could be adversely affected if it is unable
to adjust spending sufficiently in a timely manner to compensate for any
unexpected revenue shortfall.

DEPENDENCE ON, AND NEED TO RECRUIT AND RETAIN, KEY PERSONNEL

ENStar's success depends to a significant extent on its ability to attract
and retain key personnel. In particular, Americable and Transition are dependent
on their respective engineering and technical personnel. Competition for such
technical personnel is intense and no assurance can be given that ENStar will be
able to recruit and to retain such personnel. The failure to recruit and to
retain management and technical personnel could have a material adverse effect
on ENStar's anticipated growth, revenues and results of operations.

CONCENTRATION OF REVENUES

During 1995 and 1996, Mayo Foundation accounted for approximately 11% and
12%, respectively, of Americable's net sales. During the first quarter of 1997,
Americable has experienced a significant reduction in demand from Mayo
Foundation which is expected to continue. This reduction in demand will
adversely impact ENStar's results of operations during 1997, and thereafter, to
the extent sales from new and existing customers at Americable are not
sufficient to offset this decline. No other customers accounted for more than
10% of Americable's revenues. In addition, Americable derived approximately 61%
of its revenues from its 100 largest customers in 1995, and 62% of its revenues
from its 100 largest customers in 1996. While Americable seeks to build
long-term customer relationships, revenues from any particular customer can
fluctuate from period to period due to such customer's purchasing patterns.

Transition distributes its products through an expanding network of
reseller channels, which include a number of regionally based domestic and
international volume distributors and, to a lesser extent, VARs. In 1995 and
1996, Americable was Transition's largest domestic customer accounting for
approximately 14% and 13%, respectively, of domestic net sales (9% and 9%,
respectively, overall). During 1995 and 1996, Transition's largest international
customer accounted for approximately 11% and 11%, respectively, of international
net sales (4% and 4%, respectively, overall). Moreover, the ten distributors
that sold the largest amount of Transition's products accounted for
approximately 39% and 43%, respectively, of Transition's net sales for 1995 and
1996.

Any termination or significant disruption of the companies' relationships
with a number of its principal customers could have a material adverse effect on
ENStar's business, financial condition and results of operations. In addition, a
deterioration in the financial condition of any of its principal customers could
expose ENStar to the possibility of large accounts receivable write-offs, which
would adversely affect ENStar's financial condition and results of operations.
See "BUSINESS -- Marketing and Customers."

DEPENDENCE ON KEY SUPPLIERS AND PRODUCT SUPPLY

The networking industry has experienced product supply shortages and
customer order backlogs due to the inability of certain manufacturers to supply
certain products on a timely basis. In addition, certain suppliers have
initiated new channels of distribution that increase competition for the
available product supply. There can be no assurance that suppliers will be able
to maintain an adequate supply of products to fulfill Americable's and
Transition's customer orders on a timely basis. Both Americable and Transition
have experienced product supply shortages in the past and expect to experience
such shortages from time to time in the future. Failure to obtain adequate
product supplies or fulfill customer orders on a timely basis or substantial
change in the cost of components could affect the companies' ability to deliver
products in a timely

10
<PAGE> 12

and cost-effective manner and could have a material adverse effect on ENStar's
business, financial condition, and results of operations.

Transition's products include certain components, including some produced
by Novacom Technologies, Ltd., that are currently available from single or
limited sources, some of which require long order lead times. Although
Transition believes that it would be able to obtain alternative sources of
supply for the components included in its products if required, there can be no
assurance that Transition will be able to locate any such sources or will be
able to obtain alternative sources of supply on a timely and economic basis, if
at all. Any reduction in supply, interruption or extended delay in timely supply
or change in costs of components could materially adversely affect Transition's
business and results of operations and, consequently, the business, financial
condition and results of operations of ENStar.

A significant portion of Americable's revenues is derived from sales of
network hardware, including products of various major suppliers. During 1996,
approximately 23% of the Americable's sales represented products manufactured by
Bay Networks, Inc. Americable's agreements with those suppliers from which it
purchases products directly generally contain provisions for periodic renewals
and for termination by the supplier without cause, generally upon relatively
short notice. Although Americable believes its supplier relationships are good,
there can be no assurance that Americable's relationships will continue as
presently in effect. Although Americable believes that it would be able to
obtain alternative sources of supply for its products if required, there can be
no assurance that Americable will be able to locate any such sources or will be
able to obtain alternative sources of supply on a timely and economic basis, if
at all. The loss of a major supplier, including Bay Networks, Inc., the
deterioration of Americable's relationship with a major supplier or the failure
of Americable to establish good relationships with major new suppliers as they
develop could have a material adverse effect on ENStar's business.

INVENTORY MANAGEMENT

The networking industry is characterized by rapid product improvement and
technological change resulting in relatively short product life cycles and rapid
product obsolescence, which can place inventory at considerable valuation risk.
The typical life cycle of Transition's products ranges from 18 months to three
years for its basic LAN and terminal products and from 12 to 18 months for its
advanced LAN products. Some of Transition's products include components that are
currently available from limited sources and require long order lead times.
Because of the long lead times and Transition's desire to be responsive to
customer demand, Transition has maintained higher inventory levels compared to
other networking manufacturers. Transition's inventories are valued at the lower
of cost or market and management periodically assesses the appropriateness of
the inventory valuations giving consideration to any slow-moving and nonsalable
inventory relative to current market selling prices of comparable products.
Provisions for inventory obsolescence are recorded in the period any valuation
impairments are identified. For 1995 and 1996, total inventory write-offs as a
percentage of net sales were approximately 1% and 2.3%, respectively. During the
fourth quarter of 1996, Transition recorded approximately $500,000 of provision
for inventory obsolescence related to the discontinuance of one of its advanced
LAN stackable hub product lines. Due to the ongoing risk of product obsolescence
and changes in customer demand, there can be no assurances that Transition will
be able to successfully manage its existing and future inventories.

Although it is industry practice for Americable's suppliers to provide
price protection to VARs such as Americable in order to reduce the risk of
inventory devaluation, such policies are subject to change. Americable also has
the option of returning, subject to certain limitations, a percentage of its
current product inventories each quarter to certain manufacturers as it assesses
each product's current and forecasted demand. The amount of inventory that can
be returned to suppliers varies under Americable's agreements and such return
policies may provide only limited protection against excess inventory. There can
be no assurance that suppliers will continue such policies, that unforeseen new
product developments will not affect Americable adversely or that Americable can
successfully manage its existing and future inventories. Any inventory
adjustments could adversely affect ENStar's financial condition and results of
operations.

11
<PAGE> 13

COMPETITION

Each of ENStar's businesses faces substantial competition from a large
number of companies, some of which are larger, have greater financial resources,
broader name recognition and, in many cases, lower product and operating costs
than ENStar.

The industry in which Transition operates is highly competitive, and
Transition believes that such competition will continue to intensify. The
industry is characterized by rapid technological change, short product life
cycles, frequent product introductions and evolving industry standards.
Transition competes with a number of independent companies focused on the LAN
market, including companies with significantly greater financial resources, more
extensive business experience, and greater market and service capabilities than
Transition. Transition competes with a number of companies focused on designing
and manufacturing products for the LAN market, including, among others, 3Com
Corp., Bay Networks, Inc., Cabletron System, Inc. Allied Telesyn International
and Digi International. Americable faces competition from large system
integrators such as CompuCom Systems Inc., Vanstar Corporation and a significant
number of smaller regional VARs and network integrators. Additional competitors
within Americable's distribution business include, among others, Anixter
International Inc., and Anicom, Inc., Inc. See "BUSINESS -- Competition." There
can be no assurance that ENStar will be able to compete successfully.

ENStar expects to face further competition from new market entrants and
possible alliances between competitors in the future. Certain of ENStar's
current and potential competitors have greater financial, technical, marketing
and other resources than ENStar. As a result, they may be able to respond more
quickly to new or emerging technologies and changes in customer requirements or
to devote greater resources to the development, promotion and sale of their
products and services than ENStar. No assurance can be given that ENStar will be
able to compete successfully against current and future competitors. See
"BUSINESS -- Competition."

CONTROL BY MICHAEL FAMILY

James A. Michael and Jeffrey J. Michael, each a member of the Board of
Directors of ENStar, and certain limited partnerships controlled by them (the
"Michael Family Shareholders"), beneficially own approximately 1,906,158 (or
57.6%) of the outstanding Common Stock of ENStar as of March 3, 1997. See
"Principal Shareholders." Accordingly, the Michael Family Shareholders will have
the ability to exercise significant influence over the business and affairs of
ENStar, including the ability to approve or reject corporate actions requiring
the approval of shareholders.

INDEMNIFICATION OBLIGATIONS WITH RESPECT TO REORGANIZATION TRANSACTIONS

In connection with the Reorganization Transactions, ENStar agreed to
indemnify Michael against certain losses and to assume certain liabilities of
NSU, including any liabilities arising out of the Distribution and any taxes
resulting from the Distribution. See "BUSINESS -- Reorganization Transactions."
There can be no assurance that any obligation to indemnify Michael for any such
loss or other liability will not have a material adverse effect on the business,
financial condition and results of operations of ENStar.

12
<PAGE> 14

THE COMPANY

ENStar was formerly a wholly owned subsidiary of NSU. In connection with
the Reorganization Transactions, NSU transferred to ENStar, on or prior to
February 28, 1997, certain of its assets, including its shares of common stock
of Americable and Transition and its shares of CorVel, and certain other assets.
Pursuant to the Reorganization Transactions, (i) NSU merged with Michael and
(ii) the outstanding common stock of ENStar (the "ENStar Common Stock") was
distributed to the shareholders of NSU (the "Distribution"). As a result of the
Distribution, ENStar ceased to be a subsidiary of NSU and became a publicly
owned company whose stock is quoted on the Nasdaq National Market under the
symbol "ENSR." In connection with the Reorganization Transactions, Michael
agreed to pay in full all Michael Assumed Indebtedness within six months of
consummation of the Reorganization Transactions. Michael has notified holders of
the Michael Assumed Indebtedness that it intends to redeem the Michael Assumed
Indebtedness on April 15, 1997. In addition, in connection with the
Reorganization Transactions, ENStar agreed to indemnify Michael against certain
losses and to assume certain liabilities of NSU. See "BUSINESS -- Reorganization
Transactions." ENStar is a holding company. Its principal subsidiaries are
Americable and Transition. ENStar also owns 1,025,000 shares of common stock of
CorVel, or an approximate 23% interest in CorVel, a provider of cost containment
and managed care services designed to address the medical costs of workers'
compensation.

Americable was organized as a Minnesota corporation in 1981 and was
acquired by NSU in 1986. Americable is a provider of networking and connectivity
products and services used in providing solutions for customers operating a wide
range of data communications systems. As a network integrator, Americable
Network Technologies provides products and services designed to build and manage
LAN and WAN infrastructures for large and medium sized end-users. These network
services include planning, implementation, maintenance, security and product
fulfillment. Following the completion of the Reorganization Transactions,
Americable's network integration business was renamed ENStar Networking
Corporation. As a value-added distributor, Americable supplies a wide array of
voice and data communications related products such as cable (both copper and
fiber optic), cable assemblies, components (blocks, jacks, connectors, patch
cords and patch panels) and networking hardware. Through Americable Custom
Products, Americable provides manufacturing capabilities to satisfy the needs of
customers that require custom or specialty cable assemblies.

Transition develops, manufactures, markets and supports a broad line of
data networking hardware products that provide physical connectivity for LANs
and mini- and mainframe networks. Physical connectivity devices enable computing
and other electronic devices to communicate over a LAN. These devices include
high-speed switches, managed and unmanaged hubs, transceivers, media converters
and other related networking devices. Transition's products include intelligent
hubs and switches and passive and active terminal and related products.
Transition sells its products to a number of volume distributors and VARs
throughout the United States and certain countries worldwide.

The mailing address of ENStar's principal executive office is 6479 City
West Parkway, Eden Prairie, Minnesota, 55344; its telephone number is (612)
941-3200.

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<PAGE> 15

RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges..................... (.50) 2.54 (0.72) (2.68) (1.46)
Deficiency in earnings to fixed charges................ $257 $ -- $1,050 $2,339 $1,524
</TABLE>

For purposes of calculating the ratios of earnings to fixed charges,
earnings are defined as income (loss) before income taxes plus fixed charges.
Fixed charges consist of interest expense and the estimated interest portion on
rental payments.

USE OF PROCEEDS

The primary purposes of this offering are to provide additional financing
for the Company's growth and to increase the Company's financial flexibility.
Net proceeds, including interest earned thereon, to the Company from the sale of
the Debentures will be used for general corporate purposes and investment in
ENStar's operating companies. Proceeds from the sale of Debentures may also be
used from time to time to repurchase ENStar Common Stock depending on market
conditions, and, at such time as outstanding Debentures come due, the Company
may use proceeds from the sale of new Debentures offered hereby to retire such
maturing Debentures. In addition, proceeds from the sale of the Debentures may
be used to fund future acquisitions at Americable, although the Company has no
present commitments, agreements or understandings with respect to any such
acquisitions.

There is no minimum number or amount of Debentures required to be sold in
order to deposit and use the proceeds from sale of Debentures, and there can be
no assurance that all or any portion of the Debentures will be sold.
Accordingly, the amount of Debentures sold may be substantially less than the
maximum offered hereby. In such event, the net proceeds from the sale of the
Debentures will be used for the purposes set forth above.

PLAN OF DISTRIBUTION

The Company is offering hereby up to $25 million aggregate principal amount
of the Debentures. The Debentures will be offered by authorized officers and
employees of the Company directly without an underwriter and on a continuous
basis with an expected termination date in April 1999; however, the Company
reserves the right to terminate this offering of Debentures at any time prior to
such date. In compliance with Rule 3a4-1 of the Exchange Act of 1934, the
officers and employees of the Company will limit their participation in the
offering of Debentures to preparation of written communication or delivery of
communication through the mail or other means that do not involve oral
solicitation by the officer or employee, responding to inquiries of a potential
purchaser in a communication initiated by the potential purchaser, or performing
ministerial and clerical work related to the offering. No underwriting discounts
or commissions of any kind will be paid to such officers or employees in
connection with this offering. No minimum amount of the Debentures must be sold
in order for the Company to accept and deposit the proceeds of this offering.

The Debentures only may be purchased by means of the offer to purchase
Debentures contained in the form of Subscription Agreement provided by the
Company (the "Subscription Agreement"). The Company will not accept an offer to
purchase Debentures or negotiate checks delivered for payment on the sale of
Debentures unless the prospective purchaser has previously received this
Prospectus. In the event that the Company receives a properly executed
Subscription Agreement and payment for the purchase of Debentures from any
person who has previously received this Prospectus, but who has not received a
current post-effective amendment thereto, the Company will not accept the
Subscription Agreement nor accept any payment therefor until the lapse of five
business days following the mailing of a confirmation of sale and current post-
effective amendment to such prospective purchaser. During this five business day
period, any prospective purchaser of Debentures may revoke his or her offer,
orally or in writing, and the Company will promptly

14
<PAGE> 16

return any checks or funds previously delivered to it. Once the Company accepts
an offer, however, orders to purchase Debentures and the issuance of such
certificates will be deemed to have occurred as of the date of receipt by the
Company of a Subscription Agreement and payment. The Company reserves the right
to reject any offer to purchase in whole or in part.

Prospective purchasers who have submitted Subscription Agreements and
payment of the purchase price for Debentures may revoke their offer by writing
the Company at 6479 City West Parkway, Eden Prairie, Minnesota 55344, Attention:
Investment Department, or by calling (612) 941-3200. Investors seeking
information as to the current interest rates for the Debentures may contact the
Company at (800) 247-1246 to receive a current quote as to such rates.

15
<PAGE> 17

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following selected financial data of the Company are qualified by
reference to and should be read in conjunction with Management's Discussion and
Analysis of Results of Operations and Financial Condition and the Consolidated
Financial Statements and the Notes thereto included elsewhere herein. (See Notes
1 and 2 to Notes to Consolidated Financial Statements for a description of the
entities included in the consolidated financial statements and the basis on
which the consolidated financial statements were prepared.) The consolidated
statements of operations data for the years ended December 31, 1996, 1995 and
1994, and the consolidated balance sheet data December 31, 1996 and 1995 are
derived from, and are qualified by reference to, the audited consolidated
financial statements included elsewhere in this Prospectus and should be read in
conjunction with those consolidated financial statements and notes thereto. The
consolidated statements of operations data for the years ended December 31, 1993
and 1992 and the consolidated balance sheet data at December 31, 1994, 1993 and
1992 are derived from audited consolidated financial statements not included
herein.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA
Revenues........................................ $64,123 $54,891 $47,193 $46,756 $42,025
Operating income (loss)......................... (53) 1,033 (702) (1,978) (1,151)
Interest expense, net........................... (204) (247) (348) (361) (373)
Income (loss) before income taxes and equity in
earnings of unconsolidated subsidiary......... (257) 786 (1,050) (2,339) (1,524)
------- ------- ------- ------- -------
Net income (loss)............................... $ 1,072 $ 1,572 $ 286 $(1,524) $ (550)
======= ======= ======= ======= =======
Net income (loss) per share(1).................. $ 0.32 $ 0.49 $ 0.09 $ (0.48) $ (0.17)
======= ======= ======= ======= =======
Weighted average common and common equivalent
shares outstanding(1)......................... 3,309 3,217 3,235 3,146 3,146
CONSOLIDATED BALANCE SHEET DATA (END OF PERIOD)
Total assets.................................... $36,015 $35,251 $32,243 $30,222 $30,318
Long-term debt, including current maturities.... 1,178 1,246 3,607 3,443 3,898
Shareholders' equity............................ 20,947 19,694 18,176 17,035 17,262
</TABLE>

- -------------------------
(1) Net income (loss) per share was computed using the weighted average number
of outstanding shares of NSU Common Stock during each period presented
adjusted for the Distribution of one share of ENStar Common Stock for every
three shares of NSU Common Stock outstanding. Except for 1994, in which year
stock options were not dilutive for computation of earnings per share at
NSU, such options were dilutive when computing earnings per share for
ENStar.

16
<PAGE> 18

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. This Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below, as well as those discussed elsewhere
in this Prospectus. See "RISK FACTORS."

GENERAL

ENStar is a holding company. Its principal subsidiaries are Americable,
Inc. ("Americable") and Transition Networks, Inc. ("Transition"). Americable is
a provider of connectivity and networking products and services. Transition is a
manufacturer of connectivity devices used in local area network ("LAN")
applications. At December 31, 1996 ENStar also owned 1,225,000 shares of common
stock of CorVel Corporation ("CorVel"), or an approximate 26% interest in
CorVel, a provider of cost containment and managed care services designed to
address the medical costs of workers' compensation. In January 1997, ENStar sold
200,000 shares of CorVel reducing its ownership interest to approximately 23%
and, in connection with the Reorganization Transactions, distributed the
proceeds of approximately $5.1 million from the sale to NSU in the form of a
dividend. The financial statements of ENStar reflect the investment in CorVel
assuming ENStar owned a 26% ownership interest for all periods presented.
ENStar's investment in CorVel is accounted for as an unconsolidated subsidiary
using the equity method of accounting. The common stock of CorVel is included on
the Nasdaq National Market under the symbol CRVL.

Americable has historically been a distributor of connectivity and
networking products. As part of its business strategy, Americable has recently
focused on increasing its level of service revenues, which are generally more
profitable. Service revenue is primarily derived from network integration
services such as network management, maintenance, design and implementation.
Americable intends to implement this strategy through continued internal
investments in additional sales, engineering and technical personnel at existing
and new geographic locations in order to enhance its ability to satisfy the
changing technology requirements of its customers. Americable expects that
increased operating expenses resulting from these investments will reduce its
profitability over the next twelve months to the extent it is unable to maintain
its gross margins or continued sales growth.

Historically, in excess of 90% of Transition's revenues have been derived
from the sale of its terminal and basic LAN products. These products have life
cycles of 18 to 36 months and are generally sold based on price, availability
and functionality. More recently, Transition has focused its product development
and marketing efforts on expanding its advanced LAN products in an effort to
increase sales with existing customers and participate in broader market
opportunities. Due to the increasing design and manufacturing complexities
associated with the integration of technologies, the development of advanced LAN
products requires a more substantial investment in engineering personnel and
related costs. As a result, Transition's future operations are highly dependent
on its ability to introduce advanced LAN products on a timely basis that meet
customer demands.

As described in Note 2 to the Consolidated Financial Statements of ENStar,
the Consolidated Statements of Operations of ENStar include an allocation of
general and administrative costs incurred by

17
<PAGE> 19

NSU prior to the consummation of the Reorganization Transactions in the
management of the operating companies, investment holding and other assets of
ENStar. Management believes these allocations are reasonable and present the
operations of ENStar as though it has been operated on a stand alone basis prior
to the consummation of the Reorganization Transactions.

The following are summarized operating results for ENStar's two operating
subsidiaries for the years ended December 31, 1996, 1995, and 1994 (in
thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues
Americable................................................ $48,667 $42,160 $36,940
Transition................................................ 17,055 14,266 11,779
Eliminations.............................................. (1,599) (1,535) (1,526)
------- ------- -------
$64,123 $54,891 $47,193
======= ======= =======
Gross Profit
Americable................................................ $11,000 $ 9,979 $ 8,262
Transition................................................ 5,837 5,387 4,603
------- ------- -------
$16,837 $15,366 $12,865
======= ======= =======
Selling, General and Administrative Expenses
Americable................................................ $ 9,829 $ 8,814 $ 8,220
Transition................................................ 5,934 4,465 4,252
Allocable corporate expenses.............................. 1,127 1,054 1,095
------- ------- -------
$16,890 $14,333 $13,567
======= ======= =======
Operating Income (Loss)
Americable................................................ $ 1,171 $ 1,165 $ 42
Transition................................................ (97) 922 351
Allocable corporate expenses.............................. (1,127) (1,054) (1,095)
------- ------- -------
$ (53) $ 1,033 $ (702)
======= ======= =======
</TABLE>

RESULTS OF OPERATIONS

1996 vs. 1995

Consolidated revenues increased $9.2 million, or 17%, to $64.1 million from
$54.9 million in 1995.

Revenues at Americable increased approximately $6.5 million, or 15%, to
$48.7 million. This includes increased sales of networking products of
approximately $8.3 million and increased revenues from installation and services
of approximately $700,000, both due primarily to higher demand. Included in
these amounts is approximately $1.6 million of higher sales of networking
products to one customer, which is not expected to continue throughout 1997. For
1996, sales of networking products and services and installation were
approximately $25 million, or 51%, of Americable's revenues. Sales of cable and
other connectivity products decreased approximately $2.3 million, due primarily
to lower volume to contractors and resellers and lower demand for certain types
of bulk cable due to increased market supply of such product in 1996. In
addition, sales of cable assemblies decreased approximately $200,000, due to
lower demand experienced between periods.

Revenues at Transition increased approximately $2.8 million, or 20%, to
$17.1 million. Sales of Transition's advanced LAN products increased
approximately $1.2 million or 79% to $2.6 million, reflecting additional
revenues from new products and product enhancements introduced during 1995 and
1996. Sales from new product introductions and enhancements accounted for
approximately 21% of net sales for 1996 versus 9% for 1995. Sales of basic LAN
and terminal products increased approximately $1.6 million, or 14%, to $14.5
million. Sales to domestic customers increased approximately $2 million, or 24%,
to $11.1 million

18
<PAGE> 20

which primarily reflects higher demand for Transition's products. Sales to
international customers increased approximately $800,000, or 15%, to $6 million,
which was primarily a result of the addition of new customers. Sales to
international customers accounted for approximately 35% and 37% of net sales in
1996 and 1995, respectively. Transition's ability to maintain its present level
of sales and its continued sales growth is highly dependent upon its ability to
offer new products that meet customer's demands in a rapidly changing market,
particularly in light of the relatively short life cycle of its products.

Consolidated gross profit, as a percent of revenues, decreased to 26.3% in
1996 as compared to 28% in 1995. Decreased margins at Americable are primarily
attributable to a higher volume of lower margin networking products and lower
pricing on cable due to competition and overall higher market supply on certain
types of bulk cable. Decreased margins at Transition are primarily the result of
approximately $500,000 of inventory write-downs recorded in the fourth quarter
of 1996. ENStar expects its gross profit margins to continue to decline in 1997
due to expected competitive pricing pressures on products sold by both
Americable and Transition.

ENStar's selling, general and administrative expenses increased
approximately $2.6 million or 17.8%, to $16.9 million from $14.3 million in
1995. The increase in operating expenses at Americable reflects increased
selling expenses of approximately $757,000 due to higher sales salaries,
commissions and related expenses and approximately $422,000 of higher
engineering expenses due to the addition of technical and engineering personnel.
Overall, general and administrative expenses of Americable were relatively
unchanged between years.

Americable anticipates that its revenues in 1997 will be adversely impacted
by an expected reduction in demand from its two largest customers in addition to
the effects related to its transition to more of a networking service provider.
Further, Americable expects that its selling expenses, as a percentage of
revenues, will increase in 1997. Such increases will result from the addition of
sales and technical personnel and promotional, training and other related costs
associated with its service offerings. As a result of these anticipated
increases in operating expenses, in addition to possible reductions in revenues,
ENStar expects to record operating losses during 1997.

Transition had increased operating expenses of approximately $1.5 million,
or 33%, which reflects increased engineering expenses of approximately $520,000
due to the addition of engineering personnel associated with new product
development. In addition, this increase also reflects higher sales and marketing
expenses of approximately $890,000, associated with advertising, participation
in trade shows, and other promotional expenses. In an effort to successfully
develop and launch new advanced LAN products, Transition anticipates the
increased levels of spending on engineering, marketing and promotional costs to
continue during 1997. If such increased level of spending does not result in the
timely introduction of commercially successful products, Transition may
experience significantly reduced levels of sales growth and operating results.

ENStar's research and development expenses (incurred exclusively within
Transition) were approximately $1.5 million and $1 million for 1996 and 1995,
respectively. The increase in research and development expenses is primarily due
to the addition of new engineering personnel associated with new product
development.

Corporate expenses increased approximately $73,000, or 7% primarily due to
higher professional fees.

Net interest expense decreased $43,000 to $204,000 from $247,000 in 1995,
due primarily to lower interest rates between years under the Americable and
Transition credit facilities.

The income tax provision in 1996 and 1995 reflects ENStar's estimated
effective annual tax rate. See Note 7 to Consolidated Financial Statements of
ENStar.

Equity in earnings of unconsolidated subsidiaries increased approximately
$100,000 to $1.3 million from $1.2 million in 1995, which is a result of higher
earnings at CorVel. Further information with respect to the results of
operations of CorVel is contained in the Management's Discussion and Analysis of
Financial

19
<PAGE> 21

Condition and Results of Operations section of its annual and quarterly reports
as filed on Forms 10-K and 10-Q with the Securities and Exchange Commission.

1995 VERSUS 1994

Revenues at Americable increased approximately $5.2 million, or 14.1%, to
$42.1 million. This includes increased revenues of $4.5 million resulting from
higher demand for networking products. Of this amount, approximately $3.1
million of sales were attributable to higher volume of networking products with
a large end-user customer. The increase in revenue of Americable also includes
approximately $650,000 of higher volume of service revenues due to increased
focus on services and the addition of technical personnel. In addition, sales of
cable assemblies increased by approximately $100,000, primarily as a result of
higher demand for OEM assemblies, which was offset by reduced pricing within
modular assembly applications due to technological changes.

Revenues at Transition increased approximately $2.5 million, or 21%, which
includes increased sales of approximately $1.1 million, or 25%, to international
customers and approximately $1.4 million, or 19% higher sales to domestic
customers. Sales to international customers consisted of 37% and 35% of
Transition's revenues in 1995 and 1994, respectively. This growth was due to
increased unit sales of its terminal products and both its basic and advanced
LAN product groups. Overall, these increases are primarily a result of new
product introductions during the end of 1994 and throughout 1995. During 1995,
new product introductions and enhancements accounted for $1.1 million, or 9% of
net sales.

Consolidated gross profit, as a percentage of revenues, increased to 28% in
1995 as compared to 27.3% in 1994. Increased margins at Americable were
primarily attributable to a higher mix of value-added service revenue and, to a
lesser extent, improved pricing and improved manufacturing efficiencies within
its cable assembly operations. Decreased margins at Transition were a result of
lower pricing on certain product lines due to increased competition.

ENStar's selling, general and administrative expenses increased $766,000,
or 5.6% to $14.3 million from $13.6 million in 1994. Operating expenses at
Americable increased approximately $600,000, or 7%. This increase reflects
higher selling expenses of approximately $700,000, primarily a result of higher
sales commissions and the addition of technical and engineering personnel, along
with additional expense for amounts earned under its incentive compensation
program of approximately $200,000. These increases were offset by the impact of
approximately $300,000 of annualized savings realized through reorganizations
effected within its U.S. operations in the third quarter of 1994 and the first
quarter of 1995.

ENStar's research and development expenses (incurred exclusively within
Transition) were approximately $1.0 million in 1995, compared to approximately
$1.2 million in 1994.

Transition increased operating expenses approximately $213,000 or 5%. This
includes approximately $125,000 of increased sales and marketing expenses due to
higher promotional and advertising expenses associated with new product
introductions and the company's name change, and approximately $220,000 of
increased engineering expenses associated with the additional personnel to
support new product development. In addition, this increase reflects higher
expenses of approximately $175,000 related to moving to a new facility and the
addition of administrative personnel and related facility expenses needed to
support its overall growth. These increases were offset by a decrease in
engineering expenses of approximately $300,000 due to lower spending on parts,
equipment, and other costs related to hardware development projects. This
reflects a shift towards higher software development associated with its
advanced LAN products.

Net interest expense decreased by approximately $100,000 due primarily to
lower outstanding borrowings under Americable's revolving credit facility.

ENStar's effective combined income tax rate was 51.5% in 1995 and (32.4%)
in 1994. See Note 7 to the Consolidated Financial Statements of ENStar.

Equity in earnings of the Company's unconsolidated subsidiary increased
$195,000 to approximately $1.2 million in 1995 from approximately $1.0 million
in 1994, which is a result of higher earnings at CorVel.

20
<PAGE> 22

CorVel's net earnings for the twelve months ended December 31, 1995 were
approximately $7.0 million, an increase of approximately $1.5 million or 27%
from the previous year.

CAPITAL RESOURCES AND LIQUIDITY

ENStar has experienced cash flow deficits from operations in certain prior
years and has experienced fluctuations in its working capital, which are
primarily attributable to the increase in receivables and inventories associated
with growth in sales and timing of payments on accounts payable. Cash used in
operations was approximately $72,000 in 1996 and $1 million in 1994, versus net
cash provided from operations of approximately $1.1 million in 1995.

ENStar does not have the use of cash generated by CorVel and its
subsidiaries. Also, since its initial public offering in 1991, CorVel has not
declared any dividends and has indicated that it does not anticipate doing so
for the foreseeable future. ENStar may from time to time, depending on market
conditions and other factors, sell a portion of its CorVel holdings. The ability
of ENStar to sell its CorVel holdings is limited, however, to sales pursuant to
Rule 144 of the Securities Act and the volume limitations thereof, and to
private negotiated sales, which may adversely affect the ability of ENStar to
sell a large portion of the CorVel holdings at a given time.

In November 1996, ENStar commenced a program (the "Debenture Program"),
similar to one previously maintained by NSU, whereby it sells subordinated
debentures of various maturities to primarily individual investors. The
debentures are offered on a continuous basis at interest rates that change from
time to time depending on market conditions. At December 31, 1996, the Company
had $945,000 principal amount of subordinated debentures outstanding with
weighted average interest rate of 9.44%. Interest on ENStar's outstanding
debentures accrues annually and is payable monthly, quarterly, or at maturity.

In January 1997, ENStar sold 200,000 shares of CorVel for approximately
$5.1 million cash. Prior to consummation of the Reorganization Transactions on
February 28, 1997, these proceeds along with approximately $1.4 million were
paid in the form of a cash dividend to NSU.

On August 9, 1996, Americable and Transition amended the terms of their
revolving credit facility with First Bank National Association to provide
borrowings up to $4 million and $2 million, respectively, due in June 1998.
Borrowings under the amended revolving credit facilities are based on eligible
accounts receivable and inventory with interest at prime (8.25% at December 31,
1996), with optional fixed rate advances at the London Interbank Offered Rate
("LIBOR") plus 2.5%. At December 31, 1996, there were outstanding borrowings of
approximately $1.3 million under the revolving line of credit. There were
approximately $4.7 million of available borrowings under these credit facilities
at December 31, 1996.

ENStar expects to be able to fund its working capital and capital
expenditure requirements for 1997 with cash flow from operations along with the
amounts available under the credit facilities of its operating companies. During
1997, ENStar's operating plans call for approximately $1.1 million in capital
expenditures.

21
<PAGE> 23

BUSINESS

GENERAL

ENStar was formed in December 1995 as a wholly owned subsidiary of NSU. In
connection with the Reorganization Transactions, NSU transferred to ENStar, on
or prior to February 28, 1997, certain of its assets, including its shares of
common stock of Americable and Transition and its shares of CorVel, and certain
other assets. Pursuant to the Reorganization Transactions, (i) NSU merged with
Michael and (ii) the outstanding common stock of ENStar (the "ENStar Common
Stock") was distributed to the shareholders of NSU (the "Distribution"). As a
result of the Distribution, ENStar ceased to be a subsidiary of NSU and became a
publicly owned company whose stock is quoted on the Nasdaq National Market under
the symbol "ENSR." See "-- Reorganization Transactions."

ENStar's operations consist of the operations of Americable and Transition.
ENStar directly employs seven management and administrative employees. In
addition, at March 25, 1997, ENStar owned 1,025,000 shares of CorVel common
stock, which represents approximately 23% of the outstanding shares of CorVel
common stock. The CorVel common stock is traded on the Nasdaq National Market
under the Symbol CRVL. The closing price per share of the CorVel common stock on
March 24, 1997, was $25.50.

ENStar may sell from time to time some of its CorVel common stock pursuant
to Rule 144 of the Securities Act, or in a registered public offering. Although
neither ENStar nor Americable has any contractual right to require CorVel to
register its shares of CorVel common stock, CorVel has indicated that it is
generally willing to register the shares currently held by ENStar.

UNCONSOLIDATED SUBSIDIARY

CorVel. Since its initial public offering in June 1991, CorVel has been
operated as an independent company. As a less-than-majority-owned subsidiary of
NSU, CorVel's operations have not been consolidated with ENStar, and ENStar's
investment in CorVel is accounted for under the equity method of accounting. The
following summary of CorVel's business has been prepared from information
reported by CorVel. Additional information regarding CorVel is available from
the reports and other documents prepared and filed by CorVel with the
Commission.

Since its initial public offering in June 1991, Jeffrey J. Michael and
Peter E. Flynn, have been members of the Board of Directors of CorVel. Based on
the past service of Messrs. Michael and Flynn on CorVel's Board of Directors and
the Company's position as a significant shareholder of CorVel, the Company
believes that Messrs. Michael and Flynn will continue to serve as members of the
CorVel Board of Directors and be nominated for re-election to the CorVel Board
at the next annual meeting of stockholders of CorVel. There are no agreements,
however, between ENStar and CorVel or any of CorVel's stockholders requiring the
nomination of Messrs. Michael and Flynn or any designees of ENStar for election
as directors of CorVel.

In connection with the Distribution, ENStar transferred all of its CorVel
Common Stock to Americable to satisfy certain federal income tax requirements
relating to the Reorganization Transactions. Neither ENStar nor Americable has
any agreement with CorVel requiring CorVel to register the shares of CorVel
Common Stock. In the absence of registration of its CorVel Common Stock, the
ability of ENStar to sell the holdings of CorVel Common Stock will be limited to
sales pursuant to Rule 144 of the Securities Act, and the volume limitations
thereof, and to private negotiated sales, which may adversely affect the ability
of ENStar to sell a large portion of holdings of CorVel Common Stock at a given
time.

22
<PAGE> 24

OPERATING SUBSIDIARIES

GENERAL

Americable. Americable was organized as a Minnesota corporation in 1981 and
was acquired by NSU in December 1986. Americable is a provider of networking and
connectivity products and services used in providing solutions for customers
operating a wide range of data communications systems. Americable's operations
are organized into two primary business units, Americable Network Technologies
and Americable Distribution, which are described in more detail below.

As a network integrator, Americable Network Technologies provides products
and services designed to build and manage LAN and WAN infrastructures for large
and medium sized end-users. These networking services include planning,
implementation, maintenance, security and product fulfillment. Following the
completion of the Reorganization Transactions, Americable's network integration
business was renamed ENStar Networking Corporation. Americable offers
customized, integrated solutions to meet its customers' LAN/WAN needs through a
combination of a broad range of network electronics and software from leading
manufacturers and through high-quality technical services.

As a value-added distributor, Americable supplies a wide array of voice and
data communication related products such as cable (both copper and fiber optic),
cable assemblies, components (blocks, jacks, connectors, patch cords, patch
panels) and networking hardware. The principal focus of Americable's
distribution business, conducted primarily through National Distribution Sales
in Minneapolis, Minnesota, is to provide quality products, prompt reliable
delivery of such products and strong customer service both before and after the
products are sold. Americable sells to a wide range of customers throughout the
United States in the voice and data communications aftermarket, including
resellers, other distributors, systems integrators, installers and end-users.

Through Americable Custom Products, Americable manufactures a wide variety
of cable assemblies, subassemblies and specialty products for its customers.
While some of these products are manufactured to standard specifications for
sale by Americable through its distribution business, most are custom designed
and manufactured by Americable to customer specifications. These customer
designed products are manufactured for both end-users and OEMs.

Transition. Transition develops, manufactures, markets and supports a broad
line of data networking hardware products that provide physical connectivity for
LANs and mini- and mainframe networks. Physical connectivity devices enable
computing and other electronic devices to communicate over a LAN. These devices
include high-speed switches, managed and unmanaged hubs, transceivers, media
converters and other related networking devices.

Transition's products include intelligent hubs and switches, passive and
active terminal network products, including baluns, media converters and
transceivers, unmanaged Ethernet and Token Ring hubs and related host modules,
multi-port multi-media repeaters, network adapter cards and other passive
devices. Transition sells its products to a number of volume distributors and
VARs throughout the United States and certain countries world-wide. The
customers that purchase Transition products through its network of distributors
and VARs include system integrators, installers and end-users.

23
<PAGE> 25

efforts on expanding its advanced LAN products in an effort to increase sales
with existing customers and participate in broader market opportunities. Due to
the increasing design and manufacturing complexities associated with the
integration of technologies, the development of advanced LAN products require a
more substantial investment in engineering personnel and related costs. As a
result, Transition's future operations are highly dependent on its ability to
introduce advanced LAN products on a timely basis that meet customer demands.

INDUSTRY

A growing number of organizations are re-engineering their businesses and
are using PC-based network technology to enhance productivity. PC networks
increase speed and flexibility, provide improved functionality to end-users and
provide greater productivity, often at lower costs. The growth in demand for
personal computers, along with recent advances in networking technology, have
led to an increase in demand for interconnected LANs and WANs. Such networks
facilitate efficient and rapid data communications among connected work groups
and departments providing for more effective utilization of information and
computing resources. As LANs have proliferated, demand for multi-vendor
interoperability has led to industry standard network protocols and access
methods such as Ethernet and Token-Ring.

More recently there has been an increasing demand to connect users of LANs
in other geographic areas using WANs. Applications such as online services,
electronic mail, sharing of databases, multi-site product development and
transaction processing are leading the demand for the inter-networking of LANs
and WANs. The integration of LANs and WANs requires data communication products
which efficiently, reliably and quickly transmit data to appropriate locations.

In the face of this rapidly changing technological environment, the
decision-making process that organizations face when planning, selecting and
implementing information technology solutions is growing more complex.
Organizations must select from numerous product options with shortening life
cycles. Although networks enhance business productivity, they typically present
complex management problems and increased administrative costs. Thus, many
organizations find it increasingly difficult and costly to maintain the internal
infrastructure needed to support their networks. As a result of these trends,
companies increasingly seek to outsource the management and support of their PC
network infrastructure.

According to Data Com Market Forecast, it is estimated that in 1997 the
overall market in the United States for networking products and services was
approximately $80 billion.

BUSINESS STRATEGY

Americable. Americable's objective is to be a leading provider of a
complete range of network products and services to medium to large sized
enterprises throughout the United States. To meet this goal, Americable believes
it must seek to maintain its current customer relationships and continually
expand its customer base in the regions in which it operates, continue to
develop strong relationships with its key suppliers, look for opportunities to
expand its branch locations and develop and enhance its value-added service
offerings.

During 1996, approximately 5,000 customers purchased products or services
from Americable. Management at Americable believes that preserving and enhancing
these relationships is a constant priority. Continuous quality improvement in
its operations along with expansion and enhancement of its product and service
offerings are some of the means that Americable utilizes to enhance its customer
relationships.

Management at Americable also believes that developing strong relationships
with the leading manufacturers of networking products allows Americable to offer
its customers name brand products that provide the best value in meeting their
networking needs. Americable has developed relationships with leading
manufacturers within each of its principal product lines, such as Bay Networks,
Inc., AMP Incorporated and Berk-Tek Inc. and seeks to add new relationships to
expand its value-added service capabilities. Americable believes that utilizing
a select range of suppliers allows it to provide superior customer service
because its technical personnel are more familiar with the products sold and
because such high quality products are generally more reliable. Further, such
strong relationships result in greater continuity of product supply.

24
<PAGE> 26

From 1991 to 1996, Americable's domestic sales have increased from $27.6
million to $48.7 million. This increase in sales has been generated through
internal growth at Americable's four principal locations in Atlanta, Chicago,
Dallas and Minneapolis, primarily as a result of the addition of new sales,
engineering and technical personnel. Also during 1995, Americable opened smaller
satellite offices in Milwaukee, Wisconsin and Fargo, North Dakota. Americable
plans to continue its growth strategy through the addition of new sales,
engineering and technical personnel in both existing locations and new
geographic markets. Americable also intends to look for opportunities to acquire
businesses in the same or related industries in an effort to expand
geographically or enhance its value-added service offerings.

Since 1989, Americable has made substantial investments in the development
of its value-added networking capabilities primarily through the addition of
engineering and technical personnel. During 1995, Americable introduced a number
of service offerings designed to provide its customers with customized
integrated solutions to meet their unique network computing needs. Revenues from
technical services and installation in 1996 represented 8% of Americable's total
revenues, of which approximately 2% represents services performed by Americable
personnel. The remaining portion of these services are rendered primarily
through subcontractors engaged by Americable. Americable expects to continue
utilizing the services of outside contractors in addition to its internal
personnel in meeting its customers' needs. Americable believes there are
opportunities to increase Americable's overall gross margins by increasing the
volume of services that it currently offers to its customers and intends to
focus on increasing its service revenues.

Transition. The market for Transition's products is characterized by rapid
technological change, constantly evolving industry standards and rigorous
competition with respect to timely product innovation. Because the introduction
of products embodying new technology and the emergence of new industry standards
can render existing products obsolete and unmarketable, Transition believes that
its future success will depend upon its ability to develop, manufacture and
market new products and enhancements to existing products on a cost-effective
and timely basis. Transition seeks to identify niche market opportunities for
new or enhanced products and quickly respond by offering a new or enhanced
product that may have greater capabilities, better functionability or
flexibility, greater ease of use or equivalent capabilities or functionability
but a lower price point than other competitive products.

As LANs have proliferated, demand for multi-vendor interoperability has led
to industry standard network protocols and access methods such as Ethernet,
Token-Ring and Fiber Distributed Data Interface ("FDDI"). Transition has
developed the majority of its LAN products using industry standards, primarily
Ethernet. Ethernet's cabling media has evolved from coaxial cable to its
associated 10BaseTL fiber optic cabling. Management at Transition believes that
the LAN/WAN products market will continue to be driven by the migration of
end-users to new applications that demand more speed and flexibility.
Accordingly, Transition's research and development efforts have been targeted at
high speed (100Mbs+) LANs and the integration of LANs and WANs into a single
platform.

PRODUCTS AND SERVICES

Americable. The following is a summary of Americable's consolidated sales
by principal product group for 1996:

<TABLE>
<CAPTION>
AS A PERCENT OF SALES
---------------------
<S> <C>
Networking Products........................... 51%
Services and Installation..................... 8%
Cable Assemblies.............................. 15%
Bulk Cable.................................... 12%
Other Connectivity Products................... 14%
</TABLE>

In an effort to offer its customers a "One Company, One Call" solution,
each of the above products and service groups is delivered through one or both
of Americable's operating units. Each unit works in concert with the others to
leverage Americable's product and service offerings across its broad customer
base. Set forth below is a description of each unit's operations and market
focus.

25
<PAGE> 27

Americable Network Technologies

Through Americable Network Technologies, Americable provides products and
services designed to build and manage LAN and WAN infrastructures for large and
medium sized enterprises. As a network integrator, Americable offers the
following customized, integrated LAN/WAN solutions:

- Network Planning -- Through the combination of its advanced engineering
and project management teams, Americable assists its customers with
project planning including requirements design, detailed design and
implementation planning. These services are either offered as part of an
overall project or arranged separately as a billable service.

- Network Implementation -- Americable supplies, implements and supports a
select range of suppliers of electronics and software platforms from
manufacturers such as Bay Networks, Inc., 3Com Corp., Cisco Systems Inc.,
Shiva Corp., Microsoft Corp., Sun Microsystems Inc. and Compaq Computer
Corporation. Americable's line of network products include concentrators,
hubs, switches and routers for both existing and emerging technologies
such as Ethernet, Token Ring, FDDI, Fast Ethernet and Asynchronous
Transfer Mode ("ATM"). Americable also offers remote access products and
services that allow the end-user to operate outside of his or her office
while still being able to connect to his or her LAN.

- Network Management -- Americable provides and installs network management
systems that provide its customers with the capability of network
troubleshooting, diagnostics, security, optimization and proactive
network maintenance all from a single workstation. Americable installs
Bay Networks, Inc.'s Optivity network management software, and can also
supply each of the four industry-leading network management system (NMS)
platforms including: Hewlett Packard's OpenView/UNIX and OpenView/DOS,
Sun Microsystems' SunNet Manager, IBM's NetView/6000 and Novell's NetWare
Management System (NMS). Through its Technical Response Center, (TRC),
Americable also offers its customers the capabilities for remote network
management, diagnostics and security.

- Structured Wiring Systems -- Americable provides project management,
design and implementation of structured wiring systems for data
communications.

- Network Maintenance -- Americable provides a broad line of maintenance
services including fixed fee network support, telephone support,
guaranteed response times, next business day on-site response for problem
resolution, "spare-in-the-air" hardware replacement and cabling system
diagnosis and repair. Through the TRC Americable can provide remote
diagnostic capabilities as part of its maintenance services. The TRC is
capable of receiving a customer call, remotely diagnosing the problem,
searching for an application solution and, if necessary, dispatching a
regional engineer to perform on-site troubleshooting. In addition,
Americable offers several fixed price service offerings for preventative
maintenance such as CASE (Cable Analysis Service) and EASE (Enterprise
Analysis Service).

- Network Security -- Americable offers a wide-range of security services
for customers with Internet and intranetwork applications. Such services
includes policy development, physical security planning, security
verification, network and systems security, employee security, remote
access security and security management. Americable is an authorized
reseller of the CheckPoint Fire Wall - 1, a security product offered by
CheckPoint Software Technologies, Ltd., in addition to products offered
by Internet Security Systems Inc. ("ISS") and Security Dynamics
Technologies, Inc.

Americable is committed to providing networking products, services and
systems to customers of all sizes in the geographic areas served by its four
principal regional offices. Sales from Americable Network Technologies
constituted approximately 77% of Americable's net sales in 1996. In addition to
value-added distribution sales, Americable Network Technologies will oversee the
design and implementation of projects involving multiple LANs across a WAN,
consisting of multi-vendor hardware products and several thousand nodes.
Value-added projects generally range in size from $10,000 to $500,000. During
1996, sales derived from value-added projects and services consisted of
approximately 17% of Americable's net sales. Value-added projects and services
sales include sales of products such as bulk cable, cable assemblies and
networking devices and services such as training, installation and maintenance.

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<PAGE> 28

Americable Distribution

Through its distribution business, operated principally through National
Distribution Sales, Americable maintains a wide variety of high-quality products
in its inventory. Product inventory ranges from connectivity products such as
bulk cable, connectors, patch panels, racks and other cable accessories to more
complex networking electronic devices such as concentrators, hubs, switches and
routers. As a distributor, Americable generally inventories products from
multiple manufacturers. Principal manufacturers of connectivity products include
Berk-Tek, Inc., Amp Incorporated, General Cable Corp., The Siemon Company and
Leviton Manufacturing, Inc. In addition, in an effort to reduce its inventory
levels, Americable purchases a number of networking products through large
distributors such as Tech Data Corporation, Gates/Arrow and Ingram Micro, Inc.

Americable also maintains an integrated, real-time, on-line computerized
system for order entry, fulfillment and inventory control. This on-line computer
system allows sales personnel to advise customers over the phone of product
specifications, availability and order status. All orders are normally shipped
within 24 hours of receipt and, when necessary, can be shipped on a "same-day"
basis.

National Distribution Sales seeks to add value for its customers by
providing superior customer service. All of Americable's sales representatives
and other sales and marketing personnel are trained to assist customers in
product selection, implementation and system upgrading and expansion. The
National Distribution Sales sales representatives are supported by the technical
staff of Americable Network Technologies, who have a broad range of expertise in
various networking technologies.

National Distribution Sales services customers of all sizes in the voice
and data communications aftermarket. Customer orders range in size from under
$50 to several hundred thousand dollars. Average order size of the division
during 1996 was approximately $700. The distribution business of Americable
(including sales of cable assemblies) constituted approximately 23% of
Americable's net sales in 1996.

As a natural extension of its distribution business, and consistent with
Americable's marketing strategy to be a single-source provider for its
customers, Americable Custom Products provides manufacturing capabilities to
satisfy the individual needs of those customers that may require custom or
specialty cable assemblies. Americable, working to its customers'
specifications, can manufacture custom designed products such as copper,
fiber-optic, small computer system interface (SCSI) and AS/400 cable assemblies
and subassemblies.

All Americable manufactured products are subject to strict quality control
standards to insure that they are of the same high quality as other, vendor
manufactured, distributed products. Americable is in the process of implementing
the quality standards of ISO 9002 for its manufacturing and primary distribution
operation in Minneapolis. ISO 9002 is an international protocol for documenting
processes and procedures used in establishing a consistent manufacturing quality
system.

Sales from Americable Custom Products are generated from both end-user and
OEM customers. For 1996, sales to OEM customers constituted approximately 24% of
total cable assembly sales and approximately 4% of Americable net sales.

Transition. Transition's products encompass three inter-networking and
physical connectivity product families, which include (i) passive and active
terminal network products, (ii) basic LAN products and (iii) advanced LAN
products. These products encompass LAN and WAN components, which allow
Transition to offer work-group and enterprise-wide networking solutions. The
following table sets forth the percentage of sales attributable to each product
family:

<TABLE>
<CAPTION>
AS A PERCENT OF SALES
---------------------
<S> <C>
Terminal network products................................... 23%
Basic LAN products.......................................... 62%
Advanced LAN products....................................... 15%
</TABLE>

27
<PAGE> 29

The terminal products family of products includes both passive and active
connectivity devices such as baluns, media converters, and transceivers that
attach personal computers to a network, thereby enabling the user to communicate
with other users in the LAN. In addition, Transition's "PowerStar" line of
active hubs provide cost-effective solutions for converting a S/3X or AS/400
Twinax daisy chain topology to an unshielded twisted pair star topology, thereby
improving network reliability and flexibility.

Transition's basic LAN product line includes unmanaged Ethernet and Token
Ring hubs and related host modules; multi-port multi-media repeaters that
regenerate the signal, thereby allowing expansion capabilities and providing
connectivity and management of the different cabling schemes used throughout a
LAN; network adapter cards that provide direct connection from the personal
computer to a LAN; and other passive devices that provide a structured wiring
system for mini- and mainframe computer environments. Transition has developed
its Ethernet and Token Ring LAN products using industry standards.

The advanced LAN product family of Transition is a potentially high growth
product area with devices that utilize computer processors and sophisticated
internal software to manage and direct information across complex networks.
Transition's advanced LAN products are led by a multi-function hybrid
bridge/router that allows high speed switching across networks. This group of
products also includes manageable, stackable Ethernet and Token Ring hubs.
Transition believes that as network centric systems continue to grow in
sophistication, this product area will provide additional revenue opportunities.
The majority of Transition's research and development has been concentrated in
advanced LAN products with new offerings planned for 1996. Transition expects a
significant portion of its sales growth in the future will be derived from the
introduction of new advanced LAN products. However, there can be no assurance
that Transition will be able to develop and introduce new LAN products in a
timely manner or at all or that any such products will gain market acceptance
and that the sales growth will be achieved.

MARKETING AND CUSTOMERS

Americable. Americable provides its products and services to customers in
various industries including health care, financial services, manufacturing and
education. Americable also sells products to a number of installers, resellers,
other distributors and system integrators. Customer relationships are developed
both face-to-face and via the telephone.

Americable's marketing strategy is two-tiered. A national effort is
centered on telemarketing through National Distribution Sales in Minneapolis,
Minnesota. Additionally, Americable operates each of its business units from its
four principal regional offices in order to provide its customers in each region
the full array of value-added networking products and services offered by the
company.

Americable employs 20 outside sales representatives in addition to 40
telemarketing and sales support representatives. The sales force is supplemented
by 50 regional technical service engineers and technicians and two corporate
product managers. Americable sales representatives undergo continuous training
and attend company-sponsored classes in order to enhance their technical
expertise and marketing techniques. Also, many of Americable sales and technical
personnel attend vendor-sponsored training and education programs mandated by
such vendors in order for Americable to qualify as an authorized reseller of
their products.

Americable also uses direct mailings, brochures and catalogs in marketing
the products that it distributes. Americable's catalog, which generally is
published every 18 months, is designed to provide end-users with not only
product specifications, but additional technical information to assist them in
connection with their system design. Americable's latest catalog was released in
April 1996.

During 1995 and 1996, Mayo Foundation accounted for approximately 11% and
14%, respectively, of net sales. In addition, in 1995 and 1996, Americable
derived approximately 61% and 65%, respectively, of its sales from its largest
100 customers.

Transition. Transition distributes its products through a number of volume
distributors and VARs throughout the United States and in over 50 countries
worldwide. Distributors and VARs purchase Transition's products at standard
discounts based on certain volume-based incentive programs. Transition's
international sales have accounted for a substantial portion of its sales
growth, coming primarily from the

28
<PAGE> 30

United Kingdom, South Africa, Australia and Sweden. During 1995 and 1996,
revenues from outside the United States accounted for approximately 37% and 35%,
respectively, of net sales.

Transition's continued growth will be dependent, in part, upon its ability
to expand its domestic and international distributor base with high quality
VARs. A significant benefit for a distributor or VAR is that Transition does not
sell directly to end-users. Transition's distributors and VARs carry other
products that are complementary to, and compete with those of Transition, and
these non-exclusive distributors and VARs may choose to give higher priority to
products of other suppliers or competitors.

Transition has several marketing programs to support the sale and
distribution of its products. Its marketing programs are designed to generate
sales leads for its distribution channels, as well as to enhance brandname
recognition. Transition's marketing activities include frequent participation in
industry trade shows, advertising in major trade publications, public relations
campaigns, the distribution of sales literature and product specifications, and
ongoing communications with its distributors. In addition, Transition offers
comprehensive pre- and post-sales technical support, distributor/VAR product
training, and a strategic test partner program. Transition utilizes reseller
incentive programs such as co-op funds to increase localized print advertising
and name recognition.

RESEARCH AND DEVELOPMENT

Transition. Transition performs all of its research and development
activities at its headquarters in Eden Prairie, Minnesota. Transition believes
that its future success depends on its ability to achieve market acceptance of
new product offerings, especially in the advanced LAN products area. The
engineering staff has increased by 36% since the end of 1994, to accelerate
development in this area. Although there can be no assurance that its
development efforts will result in commercially successful products, Transition
intends to continue to make substantial investments in the development of new
and enhanced products. Research and development expenses were approximately $1.2
million (10% of net sales) in 1994, $1.0 million (7% of net sales) in 1995 and
$1.5 million (9% of net sales) for the year ended December 31, 1996. For 1997,
Transition has budgeted research and development expenses of approximately $1.9
million.

MANUFACTURING

Americable. Americable's manufacturing operations consist of the
manufacture of custom or specialty cable assemblies including copper,
fiber-optic, small computer system interface (SCSI) and AS/400 cable assemblies
and subassemblies.

Transition. Transition's manufacturing operations consist primarily of the
final assembly and quality control testing of materials, components and
subassemblies. Transition uses third parties to perform printed circuit board
assembly. Transition's products include certain components that are currently
available from single or limited sources and may require long order lead times.
Any reduction in supply or substantial change in costs of components could
affect Transition's ability to deliver its products in a timely and
cost-effective manner and may adversely impact Transition's operating results.

COMPETITION

Americable. Americable faces substantial competition within each of its
business segments from a large number of companies, some of which are larger,
have greater financial resources, broader name recognition and, in many cases,
lower product and operating costs than Americable. Americable Network
Technologies faces competition from large system integrators such as CompuCom
Corporation, Vanstar Corporation and a significant number of smaller regional
and network integrators. Significant competitors in the National Distribution
Sales unit's business include Anixter International, Inc. and Anicom, Inc. The
products of Americable Custom Products are not protected from competition by
virtue of any proprietary rights such as trade secrets or patents. Americable
Custom Products encounters competition from domestic companies such as Kent
Electronics Corporation and a number of smaller domestic companies, in addition
to a number of products manufactured outside the United States.

29
<PAGE> 31

Transition. The industry in which Transition operates is highly
competitive, and Transition believes that such competition will continue to
intensify. The industry is characterized by rapid technological change, short
product life-cycles, frequent product introductions and evolving industry
standards. Transition competes with a number of independent companies focused on
designing and manufacturing products for the LAN market, including, among
others, 3Com Corp., Bay Networks, Inc., Cabletron System, Inc., Allied Telesyn
International, and Digi International. Most of Transition's competitors are
established companies with significantly greater financial resources, more
extensive business experience, and greater market and service capabilities than
Transition. There can be no assurance that Transition will be able to compete
successfully.

Transition's ability to compete successfully depends upon its ability to
adapt to market changes on a timely basis. There are many networking products
currently being offered in the market segments in which Transition competes.
Transition believes that customers evaluate competing products on the basis of
required product features for a particular installation, performance, price and
ease of use. In addition, after installation, customers evaluate the suppliers'
ability to provide readily accessible on-site/remote technical support, if
required, and its reliability when deciding on future orders for additional
equipment. Failure to obtain significant customer satisfaction or market share
could have a material adverse effect on Transition.

PROPERTIES

Americable. Americable's principal distribution and manufacturing
operations are located in Minneapolis, Minnesota (39,000 square feet). This
facility includes office, warehouse and production space. Americable also has
branch operations in Chicago, Illinois (10,000 square feet), Dallas, Texas
(10,000 square feet), and Atlanta, Georgia (9,900 square feet) in addition to
satellite offices in Milwaukee, Wisconsin and Fargo, North Dakota. All of
Americable's facilities are leased.

Transition. Transition's headquarters, including its executive and
corporate administration offices, manufacturing, sales and technical support are
located in Eden Prairie, Minnesota, which consists of approximately 27,000
square feet of leased space. Of this space, approximately 1,900 square feet is
occupied by ENStar's corporate offices.

LEGAL PROCEEDINGS

Americable and Transition are engaged in routine litigation incidental to
their respective businesses, which management believes will not have a material
adverse effect upon the business or consolidated financial position of either
company.

REORGANIZATION TRANSACTIONS

Pursuant to the Reorganization Transaction, NSU merged with Michael and the
outstanding ENStar Common Stock was distributed to the shareholders of NSU in
the Distribution. As a result of the Distribution, ENStar ceased to be a
subsidiary of NSU and became a publicly owned company whose stock is quoted on
the Nasdaq National Market under the symbol "ENSR."

In connection with the Reorganization Transactions, Michael has agreed to
pay in full all Michael Assumed Indebtedness within six months of consummation
of the Reorganization Transactions. Michael has notified holders of the Michael
Assumed Indebtedness that it intends to redeem the Michael Assumed Indebtedness
on April 15, 1997. Michael also agreed to pay, perform and discharge all
liabilities of NSU arising at any time prior to February 28, 1997 (the effective
date of the Reorganization Transactions (the "Effective Date")), other than the
following liabilities retained by NSU: (i) liabilities arising from the
assertion of dissenters rights by NSU shareholders in connection with the
Reorganization Transactions, (ii) obligations under certain agreements entered
into in connection with the Reorganization Transactions.

In connection with the Reorganization Transactions, ENStar agreed to
indemnify Michael and any subsidiaries of Michael against certain liabilities
including: (i) all liabilities (other than the liabilities assumed by Michael)
of NSU or any NSU subsidiary, arising out of: (a) the liabilities transferred to
ENStar by NSU and (b) the transactions contemplated by the agreement governing
the Distribution (the "Distribution

30
<PAGE> 32

Agreement"), including the Distribution and any taxes as a result of the
Distribution; (ii) all liabilities arising from any claim made by any
shareholder of ENStar or by any shareholder or former shareholder of NSU prior
to the Effective Date relating to any act or omission of NSU on or prior to the
Effective Date in connection with the Reorganization Transactions; (iii) all
liabilities assumed by ENStar relating to the employee benefit plans of NSU;
(iv) any breach of the Distribution Agreement by ENStar; and (v) damages, costs,
and expenses including attorney's fees incurred in defending and settling claims
for such liabilities.

In connection with the Reorganization Transactions, Michael agreed to
indemnify ENStar against: (i) all liabilities of NSU, Michael or any subsidiary
of NSU or Michael arising out of transactions or events entered into or
occurring after the Effective Date, or any action or inaction, including but not
limited to, contracts, commitments and litigation, with respect to, entered into
or based upon transactions or events occurring after the Effective Date with
respect to NSU, Michael, any subsidiary of NSU after the Effective Date or any
subsidiary of Michael, other than any liability arising out of liabilities
transferred to ENStar by NSU; (ii) all liabilities assumed by Michael; (iii) all
liabilities of Michael or any subsidiary of Michael; (iv) all liabilities
arising from any claim made by any current or former Michael stockholder or
shareholder of NSU after the Effective Date who was a Michael stockholder or NSU
shareholder immediately prior to the Effective Date relating to any act or
omission of Michael in connection with the Reorganization Transactions; (v) any
breach of the Distribution Agreement by NSU; and (vi) damages, costs and
expenses including attorney's fees incurred in defending and settling claims for
such obligations, expenses or liabilities.

31
<PAGE> 33

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS OF ENSTAR

The directors and executive officers of ENStar are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James H. Michael.................. 75 Chairman of the Board of Directors
Miles E. Efron.................... 69 Director
Richard J. Braun.................. 51 Director
Jeffrey J. Michael................ 39 Director, President and Chief Executive
Officer
Peter E. Flynn.................... 36 Executive Vice President
Thomas S. Wargolet................ 33 Chief Financial Officer and Secretary
C.S. Mondelli..................... 46 President and Chief Executive Officer,
Transition
</TABLE>

Mr. James H. Michael has served as Chairman of the Board of ENStar since
March 1996. Prior to such time, Mr. Michael served on the Board of Directors of
NSU since July 1991. Mr. Michael is the father of Jeffrey J. Michael, ENStar's
President and Chief Executive Officer.

Mr. Miles E. Efron has served on the Board of Directors of ENStar since
March 1996. Prior to such time, Mr. Efron served on the Board of Directors of
NSU since July 1991. Mr. Efron was President and Chief Executive Officer of NSU
from October 1988 to December 31, 1990, and was Senior Vice President of NSU
from 1985 until October of 1988. Mr. Efron also is a director of Michael.

Mr. Richard J. Braun has served as a director of ENStar since March 1996.
Prior to such time, Mr. Braun served on the Board of Directors of NSU since
1994, he currently serves as Chief Executive Officer of Silicon Biology, Inc., a
technology company specializing in generic classification technology, and as a
principal of Excelsior Investment Group Ltd. Mr. Braun was the Managing Director
of Headwaters Capital Management L.L.C. during 1995. From 1992-1994, Mr. Braun
served as Chief Operating Officer and a Director of Employee Benefit Plans,
Inc., and from 1989-1991 was Executive Vice President, Chief Operating Officer
and a Director of Reich and Tang L.P., a publicly held investment advisor and
broker-dealer. From 1988-1989, Mr. Braun served as President and Chief Executive
Officer of Super Cycle, Inc., a former subsidiary of NSU. Mr. Braun is a
director of RSI Systems, Inc.

Mr. Jeffrey J. Michael has served as the President and Chief Executive
Officer of ENStar since March 1996. Mr. Michael was an initial director and
officer (serving as President and Secretary) of ENStar at the time it was
organized in December 1995 until March 1996. Mr. Michael continues to serve on
the Board of Directors of ENStar. Prior to the closing of the Reorganization
Transactions, Mr. Michael served as President and Chief Executive Officer of NSU
since December 1990. Mr. Michael served as Vice President-Finance from April
1989 to December 1990. Prior to April 1989, Mr. Michael was employed by NSU in
various capacities. Jeffrey J. Michael is the son of James H. Michael. Mr.
Michael is also a director of Michael and CorVel.

Mr. Peter E. Flynn has served as the Executive Vice President of ENStar
since March 1996. Mr. Flynn was an initial director and officer (serving as Vice
President and Treasurer) of ENStar at the time it was organized in December 1995
until March 1996. Prior to the closing of the Reorganization Transactions, Mr.
Flynn served as Executive Vice President, Chief Financial Officer and Secretary
of NSU since December 1990. In December 1992, he also became the President and
Chief Operating Officer of Transition. Mr. Flynn served as Treasurer of NSU from
April 1989 to December 1990. Prior to joining NSU in 1990, Mr. Flynn was an
Audit Manager with Arthur Andersen & Co. Mr. Flynn is a director of CorVel.

Mr. Thomas S. Wargolet has served as Chief Financial Officer and Secretary
of ENStar since March 1996. Prior to such time, Mr. Wargolet serves as the
Controller of NSU since September 1989. Mr. Wargolet was also the Director of
Finance of Americable from September 1991 until January 1995. Since January
1995,

32
<PAGE> 34

Mr. Wargolet has been the Vice President of Finance and Operations of
Americable. Prior to joining NSU in 1989, Mr. Wargolet was an Audit Senior with
Arthur Andersen & Co.

Mr. C.S. (Sal) Mondelli joined Transition in February 1995 as Vice
President of Sales and Marketing, prior to becoming President and Chief
Executive Officer of Transition in May 1996. Prior to joining Transition Mr.
Mondelli was an Executive Vice President with Prodea Software Corporation and
served in a variety of marketing and management positions with IBM Corporation.

Officers of ENStar will be elected annually by the Board of Directors.

COMPENSATION OF DIRECTORS OF ENSTAR

Directors who are not officers or employees of ENStar receive an annual
retainer of $8,000. Such directors also receive $300 per meeting for each
meeting of the Board of Directors or committee of the Board of Directors that
they attend. Directors incurring travel expenses to attend meetings are
reimbursed in full. ENStar non-employee directors are eligible to receive
certain stock options pursuant to the ENStar 1996 Stock Incentive Plan discussed
below.

COMMITTEES OF THE BOARD OF ENSTAR

Audit Committee. ENStar has established a standing Audit Committee, which
consists of Mr. Efron and Mr. Braun with Mr. Braun serving as Chairman. The
Audit Committee will review and make recommendations and reports to the Board
with respect to (i) the independent auditors, (ii) the quality and effectiveness
of internal controls, (iii) engagement or discharge of the independent auditors,
(iv) professional services provided by the independent auditors, and (v) the
review and approval of major changes in ENStar's accounting principals and
practices.

Compensation Committee. ENStar has a standing Compensation Committee which
consists of Mr. Efron as Chairman and Mr. Braun. The Compensation Committee will
consider and recommend to the Board salary schedules and other remuneration for
ENStar's executive officers. This committee will also administer the ENStar 1996
Stock Incentive Plan.

1996 STOCK INCENTIVE PLAN

In March, 1996, the Board of Directors of ENStar approved and adopted, and
NSU, as sole shareholder of ENStar, approved the ENStar 1996 Stock Incentive
Plan (the "ENStar Stock Incentive Plan"). The ENStar Stock Incenctive Plan
permits the granting of a variety of different types of awards: (i) stock
options, including incentive stock options and non-qualified stock options; (ii)
stock appreciation rights (SARs); (iii) restricted stock and restricted stock
units; (iv) performance awards; (v) dividend equivalents; and (vi) other awards
valued in whole or in part by reference to or otherwise based upon ENStar Common
Stock. The ENStar Stock Incentive Plan contains limitations on the number of
shares an employee may be granted annually and on assignment or transfer of
awards. The aggregate number of shares of ENStar Common Stock that may be issued
under all awards granted under the ENStar Stock Incentive Plan is 300,000
(subject to adjustment in certain circumstances). The Compensation Committee has
the authority to select the individuals to whom awards under the ENStar Stock
Incentive Plan are granted and to determine the terms and types of awards to be
granted.

Any employee, officer, consultant or independent contractor of ENStar and
its affiliates selected by the Committee is eligible to receive an award under
the ENStar Stock Incentive Plan. Each non-employee director of ENStar, upon his
or her initial election as a director, shall be granted an option to purchase
4,000 shares of ENStar Common Stock. Commencing with the 1997 Annual Meeting,
each non-employee director of ENStar also shall be granted an option to purchase
1,000 shares of ENStar Common Stock on the date of the annual meeting of
shareholders each year if the director will remain in office immediately
following such meeting. The exercise price of each option shall be equal to 100
percent of the fair market value per share on the date of grant. Such options
shall be non-qualified stock options, shall become exercisable six months after

33
<PAGE> 35

the date of grant, and shall terminate on the fifth anniversary of the date of
grant or earlier, under certain circumstances.

In connection with their election as directors and the adoption of the
ENStar Stock Incentive Plan, each of Messrs. James H. Michael, Miles E. Efron
and Richard J. Braun were granted an option to purchase 4,000 shares of ENStar
Common Stock. The exercise price of such options is at $9.00 per share.

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table provides certain summary information concerning
compensation paid to or accrued in 1996 by the Chief Executive Officer and all
other executive officers of the Company whose salary and bonus earned in 1996
exceeded $100,000 (the "Named Executive Officers"). All of the amounts set forth
below were paid by NSU except for the grant of certain stock options.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION(1)(2)(3)
--------------------------- ------ ----- ---------- ---------------------
<S> <C> <C> <C> <C>
Jeffrey J. Michael..................... $235,000 $ -- 28,500 $7,196
President and Chief Executive Officer
Peter E. Flynn......................... 161,330 100,000 23,500 6,889
Executive Vice President
Thomas S. Wargolet..................... 87,231 26,100 49,250(5) 2,890
Chief Financial Officer and Secretary
C.S. Mondelli.......................... 120,000 24,000 70,000(6) 2,769
President and Chief Executive Officer
of Transition
Gary L. Eizenga(4)..................... 165,577 65,000 150,000(7) 4,750
Former President and Chief Executive
Officer of Americable
</TABLE>

- -------------------------

(1) Represents amounts contributed to the NSU 401(k) Plan for the benefit of
each of the Named Executive Officers in the following amounts: Mr. Michael,
$4,750; Mr. Flynn, $4,750; Mr. Wargolet, $2,890; Mr. Mondelli, $2,769; and
Mr. Eizenga, $4,750.

(2) None of the Named Executive Officers held or received any awards of
restricted shares.

(3) Includes life and disability insurance premiums paid by NSU for the benefit
of each of Messrs. Michael and Flynn.

(4) Mr. Eizenga's employment with Americable was terminated in February 1997.

(5) Includes options to purchase 35,000 shares of Americable common stock.

(6) Represents options to purchase shares of Transition common stock.

(7) Represents options to purchase shares of Americable common stock.

34
<PAGE> 36

Option Grants

The following table summarizes options granted during the year ended
December 31, 1996 to the Named Executive Officers.

OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
GRANTED PRICE APPRECIATION
TO EXERCISE FOR OPTION TERM(3)
OPTIONS EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED(1) IN 1996(2) PER SHARE DATE 5%($) 10%($)
---- ---------- ---------- --------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey J. Michael............... 28,500 37.0% $9.00 03/05/06 $161,311 408,795
Peter E. Flynn................... 23,500 30.5 9.00 03/05/06 133,011 337,077
Thomas S. Wargolet............... 14,250 18.5 9.00 03/05/06 80,656 204,397
35,000(4) 10.1 0.82 12/02/06 18,049 45,740
C.S. Mondelli.................... 70,000(5) 23.5 1.25 10/01/06 55,028 139,452
Gary L. Eizenga.................. 150,000(4) 43.5 0.82 12/02/06 77,354 196,030
</TABLE>

- -------------------------
(1) Unless otherwise indicated, each option represents the right to purchase one
share of Common Stock of ENStar. The options shown in this table are all
non-qualified stock options granted pursuant to the ENStar Stock Incentive
Plan. The options to purchase shares of ENStar Common Stock granted to
Messrs. Michael, Flynn and Wargolet for 28,500 shares, 23,500 shares and
14,250 shares, respectively, become exercisable with respect to 25% of such
shares over a period of four years from the date of grant and have a term of
ten years. The options to purchase shares of Americable common stock granted
to Mr. Wargolet for 35,000 shares become exercisable with respect to 20% of
such shares on the date of grant and on each anniversary of the date of
grant during the four year period thereafter, and have a term of ten years.
The options to purchase shares of Americable common stock grant to Mr.
Eizenga for 150,000 shares become exercisable with respect to 50% of such
shares on the date of grant, 20% on each second and third anniversary of the
date of grant and 10% on the third anniversary of the date of grant, and
have a term of ten years. The options granted to Mr. Eizenga were terminate,
unexercised, in connection with the termination of his employment with
Americable in February 1997. The options to purchase shares of Transition
Common Stock granted to Mr. Mondelli for 70,000 shares become exercisable
with respect to 20% of such shares on the date of grant and on each February
20 during the four year period following the date of grant, and have a term
of ten years. To the extent not already exercisable, the options generally
become exercisable in the event of a merger in which ENStar, Americable or
Transition, as the case may be, is not the surviving corporation, a transfer
of all the stock of ENStar, Americable or Transition, as applicable, a sale
of substantially all the assets, or a dissolution or liquidation, of ENStar,
Americable or Transition, as applicable.

(2) In 1996, ENStar, Americable and Transition granted employees options to
purchase an aggregate of 77,083 shares of ENStar Common Stock, 345,000
shares of Americable common stock and 298,500 shares of Transition common
stock, respectively.

(3) The compounding assumes a ten year exercise period for all option grants.
The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent ENStar's estimate or projection of future Common Stock prices.
These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock of ENStar, Americable and Transition, as
applicable, and overall stock market conditions. The amounts represented in
the table may not necessarily be achieved.

(4) Represents the right to purchase shares of common stock of Americable.

(5) Represents the right to purchase shares of common stock of Transition.

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<PAGE> 37

Option Values

The following table summarizes the value of options held at December 31,
1996 by the Named Executive Officers. No options held by such executive officers
were exercised during 1996.

AGGREGATED OPTION VALUES AT DECEMBER 31, 1996

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1996 AT DECEMBER 31, 1996
------------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jeffrey J. Michael........................ -- 28,500 -- --
Peter E. Flynn............................ -- 23,500 -- --
Thomas S. Wargolet........................ -- 14,250 -- --
7,000(1) 28,000(1) -- --
C. S. Mondelli............................ 14,000(2) 56,000(2) -- --
Gary L. Eizenga........................... 75,000(1) 75,000(1) -- --
</TABLE>

- -------------------------
(1) Represents the right to purchase shares of Common Stock of Americable.

(2) Represents the right to purchase shares of Common Stock of Transition.

The options to purchase Americable common stock and Transition common stock
granted to certain of the Named Executive Officers in 1996 were granted pursuant
to the Americable, Inc. 1996 Stock Option Plan (the "Americable Plan") and the
Transition Networks, Inc. 1996 Stock Option Plan (the "Transition Plan"),
respectively. There are 4,400,000 shares of Americable common stock currently
outstanding and 600,000 shares of Americable common stock reserved for issuance
under the Americable Plan. Options to purchase 345,000 shares were granted in
1996 under the Americable Plan. There are 2,900,000 shares of Transition common
stock currently outstanding and 750,000 shares of Transition common stock
reserved for issuance under the Transition Plan. Options to purchase 298,500
shares were granted in 1996 under the Transition Plan. The exercise price of the
options granted pursuant to the Americable Plan was determined by the Board of
Directors of Americable, based on the then current fair value of the common
stock. The exercise price of the options granted pursuant to the Transition Plan
also was determined by the Board of Directors of Transition, based on the then
current fair value of the common stock. Pursuant to the terms of the applicable
option agreements under the plans, the shares of common stock that may be
purchased pursuant to the options are subject to restrictions on transfer and
certain repurchase rights by each of the respective issuers and by ENStar, based
on a valuation formula. The option agreements also include certain covenants
with respect to nondisclosure of confidential information and non-competition.

Prior to the termination of his employment with Americable, Gary Eizenga
was a party to a stock option agreement pursuant to which he was granted an
option to purchase from NSU up to 500 shares of the common stock of Americable,
or approximately 2.5% of the outstanding shares of Americable, subject to
adjustment in the event of a recapitalization, stock-split or stock dividend, at
a price per share equal to the book value per share as of September 30, 1989. In
December 1996, in connection with the grant of a new option to purchase 150,000
shares of Common Stock of Americable, Mr. Eizenga agreed to terminate the
earlier stock option agreement.

In connection with the termination of his employment with Americable, Mr.
Eizenga and the Company entered into an agreement providing for the continued
payment of his base salary and related benefits for up to one year and for the
payment of $25,000 in respect of outstanding options to purchase common stock.

36
<PAGE> 38

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the common stock of ENStar as of March 3, 1997, by each
Named Executive Officer and Director of ENStar, by each shareholder who is known
by ENStar to own beneficially more than 5 percent of the outstanding common
stock of ENStar, and by all officers and Directors of NSU as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
------------------------------------ ----------------------- --------
<S> <C> <C>
James H. Michael............................................ 1,032,133(2) 31.2%
Jeffrey J. Michael.......................................... 874,025(3) 26.4%
Miles E. Efron.............................................. 148,967(4) 4.5%
Peter E. Flynn.............................................. 5,875(5) *
Thomas S. Wargolet.......................................... 3,862(6) *
Richard J. Braun............................................ 4,000(7) *
C.S. Mondelli............................................... -- --
Gary L. Eizenga............................................. -- --
Heartland Advisors, Inc..................................... 331,433(8) 10.0%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
All officers and directors as a group (6 persons)........... 2,068,862(8) 62.0%
</TABLE>

- -------------------------
* Less than one percent.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes generally voting power
and/or investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable within 60 days of the
date hereof ("Currently Exercisable Option") are deemed outstanding for
computing the percentage beneficially owned by the person holding such
options but are not deemed outstanding for computing the percentage
beneficially owned by any other person.

(2) Includes 942,165 shares of Common Stock held by 4J2R1C Limited Partnership,
as to which Mr. James H. Michael, as managing general partner, exercises
sole voting and dispositive power. Mr. James H. Michael has disclaimed any
beneficial ownership of the shares beneficially owned by Mr. Jeffrey J.
Michael. Includes 4,000 shares of Common Stock issuable pursuant to
Currently Exercisable Options.

(3) Includes 865,667 shares of Common Stock held by 3J2R Limited Partnership, as
to which Mr. James H. Michael, as general partner, exercises sole voting and
dispositive power. Mr. Jeffrey J. Michael has disclaimed any beneficial
ownership of the shares beneficially owned by Mr. James H. Michael. Includes
7,125 shares of Common Stock issuable pursuant to Currently Exercisable
Options.

(4) Includes 4,000 shares of Common Stock issuable pursuant to Currently
Exercisable Options.

(5) Includes 5,875 shares of Common Stock issuable pursuant to Currently
Exercisable Options.

(6) Includes 3,562 shares of Common Stock issuable pursuant to Currently
Exercisable Options.

(7) Includes 4,000 shares of Common Stock issuable pursuant to Currently
Exercisable Options.

(8) Based on information in a Schedule 13D Report delivered to NSU (the former
shareholder of ENStar) showing information as of February 9, 1996 and
indicating that Heartland Advisors, Inc. is an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, and that Heartland
Advisors, Inc. has sole voting power over 290,667 of such shares and sole
dispositive power over all such shares.

(9) Shares shown as beneficially owned include 28,562 shares not outstanding,
but which may be acquired pursuant to Currently Exercisable Options.

37
<PAGE> 39

DESCRIPTION OF DEBENTURES

GENERAL

The Debentures will be issued under an Indenture, as supplemented (the
"Indenture"), between the Company and National City Bank of Minneapolis, as
Trustee (the "Trustee"). The Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part, and a copy is
available for inspection at the principal executive offices of the Trustee. The
following discussion summarizes certain provisions of the Indenture and is
subject to, and is qualified in its entirety by reference to all of the
provisions of the Indenture, including the definitions therein of certain terms.
Whenever particular provisions of or terms defined in the Indenture are referred
to in this Prospectus, such provisions or defined terms are incorporated herein
by reference. Section and article references appearing below are to the
Indenture.

The Debentures are unsecured obligations of the Company and will rank on a
parity with other outstanding unsecured obligations of the Company with the
exception of Senior Indebtedness. See "-- Provisions Relating to
Debentures -- Subordination." There is no sinking fund or similar provision for
payment of the Debentures at maturity. Maturing Debentures will be paid from
general funds of the Company or from the sale of new Debentures.

The interest rates payable on sold Debentures will be subject to change by
the Company from time to time based on market conditions and the Company's
financial requirements, but no such change will affect the interest rate on any
Debentures purchased prior to the effective date of such change. (Section
2.02(b)). The interest rate applicable to the Debentures will be the rate set
forth in this Prospectus or in a post-effective amendment to this Prospectus, if
any, in effect as of the date of the issuance of such Debenture. (Section
2.02(b)). The Debentures will mature on the first day of the month immediately
following the second, fifth and tenth anniversary of their respective dates of
issue, unless previously redeemed at the option of the Company. Interest payable
on the Debentures will be calculated based on a 365 day year.

The Debentures will be issued only in registered form, without coupons, in
any amount of $1,000 or more. (Section 2.02(c)).

PROVISIONS RELATING TO DEBENTURES

Subordination. Payment of principal and interest on the Debentures is
subordinated and subject to the prior payment in full of all Senior
Indebtedness. (Section 10.01). Upon (i) the maturity of such Senior
Indebtedness, including by lapse of time, acceleration or otherwise, (ii) the
happening of an event of default with respect to any Senior Indebtedness
permitting the holders thereof to accelerate the maturity thereof, or (iii) any
distribution of the assets of the Company upon the dissolution, winding up,
liquidation or reorganization of the Company, the holders of such Senior
Indebtedness will be entitled to receive payment in full before the holders of
the Debentures are entitled to receive any payment. (Article 10).

Under the Indenture, "Senior Indebtedness" means all Indebtedness (other
than the Debentures), whether outstanding on the date of execution of the
Indenture or thereafter created, incurred, assumed, or guaranteed by the Company
(and all renewals, extensions or refunding thereof), unless the instrument under
which such Indebtedness is created, incurred, assumed or guaranteed expressly
provides that such Indebtedness is not senior or superior in right of payment to
the Debentures. Senior Indebtedness under the Indenture also includes all NSU
Assumed Indebtedness. (Section 10.02). "Indebtedness" means any indebtedness,
contingent or otherwise, in respect of borrowed money, or evidence by bonds,
notes, debentures or similar instruments or letters of credit, or representing
the balance deferred and unpaid of the purchase price of any property or
interest therein, except any such balance that constitutes a trade payable.
(Section 10.02).

The Indenture does not limit the amount of additional indebtedness,
including Senior Indebtedness, which the Company or any subsidiary can create,
incur, assume or guarantee. As a result of these subordination provisions,
holders of the Debentures may recover less ratably than holders of Senior
Indebtedness of the Company, in the event of insolvency. As of March 25, 1997,
the Company had no outstanding Senior Indebtedness, other than Michael Assumed
Indebtedness in the aggregate amount of approximately $27.2 million. The Michael
Assumed Indebtedness ranks senior to the Subordinated Debentures

38
<PAGE> 40

and represents indebtedness of NSU assumed by the Company in connection with the
transfer by NSU to the Company of all of the capital stock of Americable and
Transition and the shares of CorVel common stock. In connection with the
Reorganization Transactions, Michael has agreed to satisfy, and indemnify the
Company in full for, all payment and other obligations in respect of such
Michael Assumed Indebtedness. In addition, in connection with the Reorganization
Transactions, Michael agreed to pay in full all Michael Assumed Indebtedness
within six months of consummation of the Reorganization Transactions. Michael
has notified holders of the Michael Assumed Indebtedness that it intends to
redeem the Michael Assumed Indebtedness on April 15, 1997. In addition, as of
March 25, 1997, the Company had outstanding other indebtedness in the aggregate
principal amount of approximately $3.0 million represented by subordinated
debentures that rank pari passu with the Subordinated Debentures offered hereby.

The Debentures to be sold pursuant to this offering rank in parity with
each other. The Company may sell, and is permitted pursuant to the Indenture to
sell, additional subordinated debentures ranking in parity with the Debentures
being offered hereby.

Interest. Interest on each Debenture will accrue from the date of issuance
and will be payable, at the election of the initial purchaser, quarterly, at
maturity, or if the Debenture is in a denomination of $5,000 or more, monthly.
If interest is paid at maturity only, it will be compounded quarterly.

The election by the purchaser at the time of the purchase for payment of
interest at maturity may be changed only once to provide for the payment either
quarterly or monthly. Accrued and unpaid interest as of the effective date of
the change will be added to the principal amount of the Debenture and simple
interest will be paid thereafter on the new principal amount. To change the
payment option a holder of a Debenture must: (a) furnish the Company with a
written notice of such election; (b) forward the actual certificate evidencing
the Debenture to the Company for notation of current value and change in
interest payment; and (c) provide such additional documentation and other
materials as the Company deems necessary.

Interest Accrual Date. Interest on the Debentures accrues from the date of
issuance, which is deemed to be the date the Company receives a properly
executed Subscription Agreement and appropriate funds, provided such are
received prior to 3:00 p.m. on a business day. Otherwise, if the Company
receives such funds on a nonbusiness day or after 3:00 p.m. on a business day,
then the date of issuance will be deemed to be the next business day. For this
purpose, the Company's business days will be deemed to be Monday through Friday,
except for Minnesota legal holidays. (Sections 1.01 and 2.02(b)).

Taxes. The following discussion is based on provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable regulations
thereunder, judicial authority and current administrative ruling, all of which
may be retroactively subject to change. Each prospective purchaser of Debentures
is advised to consult his or her own tax advisor. Interest on the Debentures is
taxable as it accrues, including interest on Debentures which is payable only at
maturity. As a consequence, a holder of a Debenture who elects payment of
interest at maturity is required to recognize the interest income on such
Debenture as it accrues although payment of such interest is deferred until
maturity. Under the Code, the Company is required to report the interest earned
on Debentures with respect to each holder to the Internal Revenue Service. No
portion of interest will be withheld for holders providing the Company with a
taxpayer identification number on Forms W-8 or W-9, except on accounts held by
foreign business entities. With respect to those investors who do not provide
the Company with a taxpayer identification number on Forms W-8 or W-9, the
Company will withhold 31% of any interest paid. It is the Company's policy that
no sale will be made to anyone refusing to provide a taxpayer identification
number on Forms W-8 or W-9.

Additional Interest. In addition to the interest rates payable as set forth
above, the Company may make such additional payments of interest, premiums or
other benefits on such of the Debentures, in such amounts, in such form, on such
terms and at such times as shall be determined from time to time by the Company
("Additional Interest"). (Section 2.02(b)). Such Additional Interest payments
may be modified or discontinued at any time. (Section 2.02(b)). For example,
such Additional Interest payments may be limited to new investors, or to current
investors increasing or renewing their investments in the Company's Debentures.
Also, such Additional Interest payments may be limited to current or new
investors residing in a particular geographic area.

39
<PAGE> 41

Redemption at the Option of the Company. The Company may, at its option,
redeem any or all of the Debentures on at least 30 days notice to each holder of
Debentures to be redeemed at his or her registered address at a price of 100% of
the principal amount of the Debentures, plus accrued interest on a daily basis
to the redemption date. (Section 3.04). The Company may select Debentures for
redemption by interest rate or maturity. (Section 3.03). In the event of
redemption of less than all of a series or class of Debentures selected for
redemption by the Company, the Debentures will be chosen for redemption by the
Trustee as provided in the Indenture, generally pro rata or by lot. (Section
3.03). On and after the redemption date, interest ceases to accrue on Debentures
or portions of them called for redemption. (Article 3).

Redemption by the Holder Upon Death; Offers by the Company to Repurchase
Debentures. A maximum principal amount of $25,000 in one or more Debentures may
be redeemed at the election of the estate of the original owner (if such person
was still the holder) following such person's death, as established to the
satisfaction of the Company. (Section 3.08(a)). The redemption price, in the
event of such a death, will be the principal amount of the Debenture, plus
interest accrued and not previously paid, to the date of redemption. (Section
3.08(a)). If two or more persons are joint record owners of a Debenture, the
election to redeem will not apply until all record owners are deceased, except
that, if the joint owners are husband and wife, the election may be made after
the death of either spouse. (Section 3.08(d)). Except as described above,
Debenture holders have no right to require redemption of amounts under the
Debenture. Any offer to repurchase Debentures made by the Company at the
holders' option will be made in compliance with any applicable tender offer
rules under the Securities Exchange Act of 1934, as amended, including Rule
14e-1 thereunder. (Article 3).

Modification of Indenture. The Indenture may be modified by the Company and
the Trustee at any time or times with the consent of the holders of not less
than a majority in principal amount of the Debentures that are then outstanding,
but no modification of the Indenture may be made which will affect the terms of
payment of, the principal of, or any interest on any Debenture, without the
consent of the holder thereof, or reduce the percentage of Debenture holders
whose consent to modification is required. (Section 9.02). Without action by the
Debenture holders, the Company and the Trustee may amend the Indenture or enter
into supplemental indentures allowing for uncertificated Debentures, clarifying
any ambiguity or correcting any defect or inconsistency in the Indenture, making
any change to the Indenture that does not adversely affect the legal rights of
the Debenture holders, or increasing the aggregate principal amount of
Debentures to be issued under the Indenture. (Article 9).

Place, Method and Time of Payment. Principal and interest on the Debentures
will be payable at the principal executive office of the Company, as it may be
established from time to time, or at such other place as the Company may
designate for that purpose; provided, however, that payments may be made at the
option of the Company by check or draft mailed to the person entitled thereto at
his or her address appearing in the register which the Company maintains for
that purpose. (Section 2.06). Any payment of principal or interest which shall
be due on a non-business day will be payable by the Company on the next business
day immediately following such non-business day. (Section 11.07).

Events of Default. An Event of Default is defined in the Indenture as being
a default in payment of principal on the Debentures which has not been cured; a
default for 30 days in payment of any installment of interest on the Debentures;
acceleration of maturity of any Senior Indebtedness in an amount exceeding
$500,000 under the terms of the instrument under which such Senior Indebtedness
is or may be outstanding, if such acceleration is not annulled within 30 days
after written notice; or certain events of bankruptcy, insolvency or
reorganization or default in the performance or breach of any covenant or
warranty of the Company in the Indenture and continuance of such default in
performance or breach for a period of 60 days after notice of such default has
been received by the Company from the Trustee or from the holders of at least
25% in principal amount of the outstanding Debentures. (Section 6.01). The
Company is required to file annually with the Trustee an Officer's Certificate
as to the absence of certain defaults under the terms of the Indenture. (Section
4.03). The Indenture provides that the holders of a majority of the aggregate
principal amount of the Debentures at the time outstanding may, on behalf of all
holders, waive any past default or Event of Default except in payment of
principal or interest on the Debentures. (Section 6.04).

40
<PAGE> 42

Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Debenture holders,
unless such Debenture holders shall have offered to the Trustee reasonable
indemnity. (Section 6.06(3)). Subject to such provisions for the indemnification
of the Trustee, the holders of a majority in principal amount of the Debentures
at the time outstanding have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any power conferred on the Trustee. (Section 6.05). The Indenture contains
certain limitations on the right of an individual Debenture holder to institute
legal proceedings in the event of the Company's default. (Section 6.06).

Satisfaction and Discharge of Indenture. The Indenture may be discharged
upon the payment of all Debentures outstanding thereunder or upon deposit in
trust of funds sufficient therefor, plus compliance with certain formal
procedures. (Article 8).

Reports. The Company plans to publish annual reports containing audited
financial statements and quarterly reports containing unaudited financial
information for the first three quarters of each fiscal year. Copies of such
reports will be sent to any Debenture holder upon written request.

Service Charges. The Company reserves the right to assess service charges
for issuing Debentures to replace lost or stolen Debentures, changing the
registration of a Debenture when such change is occasioned by a change in name
of the holder, issuing a replacement interest payment check, or a transferring
(whether by operation of law or otherwise) of the Debenture by the holder to
another holder. (Sections 2.05, 2.07 and 2.08).

Any holder who requests the replacement of any interest payment check 10
days or less from issue date accepts any bank charges, including stop payment
order charges. The charges amount will be subtracted from the replacement
interest payment check.

Transfer and Exchange. A holder may transfer or exchange Debentures in
accordance with the Indenture. The Company, as the registrar under the
Indenture, may require a holder, among other things, to furnish appropriate
endorsements and transfer documents, and to pay any taxes and fees required by
law or permitted by the Indenture. The Company is not required to transfer or
exchange any Debentures selected for redemption. (Section 2.07). Also, the
Company is not required to transfer or exchange any Debenture for a period of
fifteen business days before the maturity of such Debentures. (Section 2.07).

Concerning the Trustee. The Indenture contains certain limitations on the
right of the Trustee, should it become a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain property with
respect to any such claim as security or otherwise. The Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest (as defined) and if any of the Indenture securities are in
default it must eliminate such conflict or resign.

The holders of a majority in principal amount of the then outstanding
Debentures issued under the Indenture will have the right to direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the Trustee with respect to the Debentures. (Section 6.05). The
Indenture provides that in case an Event of Default shall occur, and is not
cured, the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent person in the conduct of his or her own affairs.
(Section 7.01(a)). Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the holders of the Debentures issued thereunder, unless they
shall have offered to the Trustee security and indemnity satisfactory to it.
(Section 7.01(e)).

41
<PAGE> 43

VALIDITY OF DEBENTURES

Certain matters with respect to the validity of the Debentures offered
hereby will be passed upon for the Company by Dorsey & Whitney LLP, Minneapolis,
Minnesota.

EXPERTS

The consolidated financial statements of ENStar Inc. as of December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996 have been audited by Grant Thornton LLP, independent auditors, as set forth
in their reports included herein, and are included in reliance upon such reports
given upon the authority of said firm as experts in accounting and auditing.

The consolidated financial statements and schedule of CorVel Corporation as
of March 31, 1996, and 1995 and for each of the three years in the period ended
March 31, 1996 have been included in reliance on their report audited by Ernst &
Young LLP given on their the authority as experts in auditing and accounting.

42
<PAGE> 44

ENSTAR INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF ENSTAR PAGE
------------------------------ ----
<S> <C>
Consolidated Statements of Operations for the three years
ended December 31, 1996, 1995
and 1994.................................................. F-2
Consolidated Balance Sheets as of December 31, 1996 and
1995...................................................... F-3
Consolidated Statements of Shareholders' Equity for the
three years ended December 31, 1996, 1995 and 1994........ F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 1996, 1995
and 1994.................................................. F-5
Notes to Consolidated Financial Statements.................. F-6
Report of Independent Certified Public Accountants.......... F-14
Report of Independent Certified Public Accountants on
Schedule.................................................. F-15
Schedule II -- Valuation and Qualifying Accounts............ F-16
</TABLE>

<TABLE>
<CAPTION>
FINANCIAL STATEMENTS OF CORVEL
------------------------------
<S> <C>
Consolidated Statements of Income for the three years ended
March 31, 1994, 1995 and 1996............................. F-17
Consolidated Balance Sheets as of March 31, 1995 and 1996... F-18
Consolidated Statements of Stockholders' Equity for the
three years ended March 31, 1994, 1995 and 1996........... F-19
Consolidated Statements of Cash Flows for the three years
ended March 31, 1994, 1995
and 1996.................................................. F-20
Notes to Consolidated Financial Statements.................. F-21
Report of Independent Auditors.............................. F-26
Condensed Consolidated Statements of Income for the nine
months ended December 31, 1995 and 1996................... F-27
Condensed Consolidated Balance Sheets as of March 31, 1996
and as of December 31, 1996............................... F-28
Condensed Consolidated Statements of Cash Flows for the nine
months ended December 31, 1995
and 1996.................................................. F-29
Notes to Condensed Consolidated Financial Statements........ F-30
Schedule II -- Valuation and Qualifying Accounts............ F-31
</TABLE>

F-1
<PAGE> 45

ENSTAR INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
---- ---- ----
(IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues.................................................... $64,123 $54,891 $47,193
Operating and product costs................................. 47,286 39,525 34,328
------- ------- -------
Gross profit................................................ 16,837 15,366 12,865
Selling, general and administrative expenses................ 16,890 14,333 13,567
------- ------- -------
Operating income (loss)..................................... (53) 1,033 (702)
Interest expense, net....................................... (204) (247) (348)
------- ------- -------
Income (loss) before taxes and equity in earnings of
unconsolidated subsidiary................................. (257) 786 (1,050)
Income tax provision (benefit).............................. (25) 405 (340)
------- ------- -------
Income (loss) before equity in earnings of unconsolidated
subsidiary................................................ (232) 381 (710)
Equity in earnings of unconsolidated subsidiary............. 1,304 1,191 996
------- ------- -------
Net income.................................................. $ 1,072 $ 1,572 $ 286
======= ======= =======
Net income per share........................................ $ 0.32 $ 0.49 $ 0.09
======= ======= =======
Weighted average shares outstanding......................... 3,309 3,217 3,235
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-2
<PAGE> 46

ENSTAR INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 824 $ 246
Accounts receivable, net of allowance for doubtful
accounts ($440 in 1996 and $400 in 1995)............... 8,785 8,784
Inventories............................................... 5,706 6,631
Prepaid expenses and other................................ 481 274
Net assets held for sale.................................. -- 1,032
------- -------
Total current assets................................... 15,796 16,967
Property and equipment, net................................. 1,742 1,453
Goodwill.................................................... 4,801 4,960
Investment in unconsolidated subsidiary..................... 13,519 11,682
Other....................................................... 157 189
------- -------
$36,015 $35,251
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable to bank..................................... $ 1,310 $ 937
Current maturities of long-term debt...................... 28 1,088
Accounts payable.......................................... 4,101 5,239
Accrued expenses.......................................... 4,830 5,163
------- -------
Total current liabilities............................ 10,269 12,427
Long-term debt, less current maturities..................... 1,150 158
Deferred income taxes....................................... 3,649 2,972
Commitments and contingencies............................... -- --
Shareholders' equity........................................ 20,947 19,694
------- -------
$36,015 $35,251
======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-3
<PAGE> 47

ENSTAR INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL OPERATING TOTAL
SHARES PAID-IN RETAINED UNIT SHAREHOLDERS'
ISSUED AMOUNT CAPITAL EARNINGS EQUITY EQUITY
--------- ------ ---------- -------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994........... -- $ -- $ -- $ -- $17,035 $17,035
Net income......................... -- -- -- -- 286 286
Effect of equity transactions of
unconsolidated subsidiary....... -- -- -- -- 73 73
Additional capital invested........ -- -- -- -- 782 782
--------- ---- ------- ---- ------- -------
Balance at December 31, 1994......... -- -- -- -- 18,176 18,176
Net income......................... -- -- -- -- 1,572 1,572
Effect of equity transactions of
unconsolidated subsidiary....... -- -- -- -- 42 42
Constructive dividend.............. -- -- -- -- (96) (96)
--------- ---- ------- ---- ------- -------
Balance at December 31, 1995......... -- -- -- -- 19,694 19,694
Net income......................... -- -- -- -- 868 868
Effect of equity transactions of
unconsolidated subsidiary....... -- -- -- -- (45) (45)
Constructive dividend.............. -- -- -- -- (309) (309)
--------- ---- ------- ---- ------- -------
Balance at November 6, 1996.......... -- -- -- -- 20,208 20,208
Contribution of common stock of
Americable, Transition and
CorVel to ENStar Inc. by North
Star Universal, Inc. (NSU)...... -- -- 20,208 -- (20,208) --
Issuance of shares of ENStar common
stock to shareholders in February
1997............................... 3,306,000 33 (33) -- -- --
Net income from November 7, 1996
through December 31, 1996.......... -- -- -- 204 -- 204
Effect of equity transactions of
unconsolidated subsidiary.......... -- -- (125) -- -- (125)
Additional capital invested.......... -- -- 660 -- -- 660
--------- ---- ------- ---- ------- -------
Balance at December 31, 1996......... 3,306,000 $ 33 $20,710 $204 $ -- $20,947
========= ==== ======= ==== ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-4
<PAGE> 48

ENSTAR INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................................ $ 1,072 $ 1,572 $ 286
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Equity in earnings of unconsolidated subsidiary........ (1,304) (1,191) (996)
Depreciation and amortization.......................... 940 837 848
Deferred income taxes.................................. (25) (465) (200)
Changes in operating assets and liabilities
Accounts receivable.................................. (1) (1,268) (1,980)
Inventories.......................................... 925 (548) 420
Accounts payable, accrued expenses and other......... (1,679) 2,202 653
-------- -------- --------
Net cash provided by (used in) operating activities.... (72) 1,139 (969)
-------- -------- --------
Cash flows from investing activities
Capital expenditures................................... (1,070) (543) (541)
Collections on notes receivable........................ 258 1,096 577
Other.................................................. (226) -- --
-------- -------- --------
Net cash provided by (used in) investing activities.... (1,038) 553 36
-------- -------- --------
Cash flows from financing activities
Proceeds from long-term debt........................... 69,017 56,073 48,868
Payments on long-term debt............................. (68,712) (57,497) (48,704)
Additional capital invested (constructive dividends)... 1,383 (96) 782
-------- -------- --------
Net cash provided by (used in) financing activities.... 1,688 (1,520) 946
-------- -------- --------
Net increase in cash and cash equivalents.............. 578 172 13
Cash and cash equivalents at beginning of year.............. 246 74 61
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 824 $ 246 $ 74
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-5
<PAGE> 49

ENSTAR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND BUSINESS

ENStar Inc. ("ENStar") is a holding company principally comprised of two
operating companies, Americable, Inc. ("Americable") and Transition Networks,
Inc. ("Transition"), and an equity investment in CorVel Corporation ("CorVel").
ENStar was formerly an operating unit of North Star Universal, Inc. ("North
Star"). In November 1996 North Star contributed the operating unit's assets to
ENStar. On February 28, 1997 North Star, in connection with its merger with
Michael Foods, Inc. ("Michael Foods"), distributed its ownership interest in
ENStar to North Star's shareholders through a tax free dividend, thus causing
ENStar to become a publicly held company.

Americable is a provider of connectivity and networking products and
services and represents approximately 75% of the Company's consolidated sales.
Transition designs, manufactures and markets connectivity devices and network
applications, and accounts for approximately 25% of sales. CorVel is a health
care services company. At December 31, 1996 and 1995 the Company owned a 26% and
27% ownership in CorVel. The Company's investment in CorVel is accounted for as
an unconsolidated subsidiary using the equity method of accounting. In January
1997, ENStar sold a portion of its investment in CorVel which reduced its
ownership percentage to approximately 23%. The proceeds from this sale of
$5,150,000 were distributed to North Star in the form of a dividend prior to the
merger with Michael Foods.

NOTE 2 -- SUMMARY OF ACCOUNTING POLICIES

BASIS OF PRESENTATION The accompanying consolidated financial statements
prior to November 1996 were financial statements of the operating unit comprised
of the entities and assets described in note 1. Operating unit equity was
converted to contributed capital at the time North Star contributed the capital
stock of Americable, Transition, and CorVel to ENStar. There was no change in
the historical cost basis of the assets and liabilities of any of the entities
or investment contributed to ENStar. The consolidated, and formerly combined,
financial statements include an allocation of general and administrative costs
incurred by North Star in the management of the operating companies. Management
believes these allocations are reasonable and present the operations of the
Company as though it had operated on a stand-alone basis. Previously, operating
unit equity included the historical equity of each entity, the net investment in
CorVel and intercompany payables owed to North Star. The net annual advances
between the former operating unit and North Star were considered additional
capital invested from, or constructive dividend to, North Star. Accordingly, the
accompanying consolidated financial statements may not necessarily be indicative
of the results that would have been obtained if the Company had been operated as
a stand alone entity through out all periods presented.

CASH AND CASH EQUIVALENTS The Company considers its highly liquid temporary
investments with original maturities of three months or less to be cash
equivalents. The carrying value of cash and cash equivalents approximate fair
value because of the short-term maturity of these investments.

INVENTORIES Inventories are stated at the lower of average cost (determined
on a first-in, first-out basis) or market. During the fourth quarter of 1996,
the Company recorded a $500,000 lower-of-cost-or-market adjustment to inventory.
Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
---- ----
<S> <C> <C>
Finished goods.............................................. $3,285 $4,092
Purchased parts............................................. 2,421 2,539
------ ------
$5,706 $6,631
====== ======
</TABLE>

PROPERTY AND EQUIPMENT Property and equipment are recorded at cost.
Depreciation and amortization for financial reporting purposes are provided on
the straight-line method over the estimated useful lives of the

F-6
<PAGE> 50

ENSTAR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

respective assets which are generally three to five years. Accelerated methods
are used for income tax reporting. Property and equipment consist of the
following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
---- ----
<S> <C> <C>
Leasehold improvements...................................... $ 183 $ 304
Office and computer equipment............................... 3,490 3,720
------ ------
3,673 4,024
Less -- accumulated depreciation and amortization........... 1,931 2,571
------ ------
$1,742 $1,453
====== ======
</TABLE>

GOODWILL Goodwill is amortized on a straight-line basis over a period of 40
years. Accumulated amortization was $1,542,000 and $1,384,000 at December 31,
1996 and 1995, respectively. The Company maintains separate financial records
for each of its acquired entities and evaluates its goodwill annually to
determine potential impairment by comparing the carrying value to the
undiscounted future cash flows of the related assets. The Company modifies the
life or adjusts the value of a subsidiary's goodwill if an impairment is
identified.

ACCRUED EXPENSES Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
---- ----
<S> <C> <C>
Payroll and related benefits................................ $ 701 $ 749
Insurance reserves.......................................... 968 905
Discontinued operations..................................... 2,000 1,614
Other....................................................... 1,105 1,895
------ ------
$4,774 $5,163
====== ======
</TABLE>

REVENUE RECOGNITION The Company recognizes revenue from product sales at
the time product is shipped to a customer. Service revenue is recognized at the
time service is provided or ratably over the contractual service period.

RESEARCH AND DEVELOPMENT All research and development costs are charged to
expense as incurred. Research and development expenses were approximately $1.5
million in 1996, $1 million in 1995, and $1.2 million in 1994.

ADVERTISING The Company expenses advertising costs as incurred, except for
direct response advertising, which is capitalized and amortized over its
expected period of future benefit. Direct response advertising consists
primarily of catalog production costs which are amortized over the estimated
useful life of the publication, generally two years. Advertising costs charged
to expense were approximately $1.1 million in 1996, $600,000 in 1995, and
$600,000 in 1994. Deferred advertising costs included within prepaid expense was
$95,000 and $25,000 at December 31, 1996 and 1995, respectively.

NET INCOME PER SHARE Net income per share was computed based on the
weighted average number of shares of North Star common stock outstanding
(9,927,000, 9,650,000 and 9,704,000 for the years ended December 31, 1996, 1995
and 1994) after giving effect to the assumed exercise of North Star's
outstanding stock options for North Star common stock, except when the effects
are antidilutive. This weighted average number of shares was adjusted to reflect
the distribution of ENStar Inc. common stock to North Star shareholders whereby
one share of ENStar Inc. common stock was issued to each holder of three shares
of North Star common stock.

F-7
<PAGE> 51

ENSTAR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CAPITAL STOCK The Company has available for issue 100,000,000 shares,
consisting of 20,000,000 shares of preferred stock, par value of $.01 per share,
of which none have been issued or are outstanding at December 31, 1996 and
80,000,000 shares of common stock, par value of $.01 per share, of which
3,306,000 were issued in February 1997 in connection with the distribution of
ENStar common stock to NSU shareholders. These shares have been reported in the
Company's financial statements as if they were outstanding at December 31, 1996.

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION The Company increased its
investment in its unconsolidated subsidiary by $70,000 and $122,000 and
shareholders' equity by $42,000 and $73,000 during the years ended December 31,
1995 and 1994, respectively, as a result of equity transactions of CorVel. In
addition, the Company had cash payments for interest of $225,000 in 1996,
$247,000 in 1995, and $348,000 in 1994.

For the year ended December 31, 1996, the Company's investment in its
unconsolidated subsidiary decreased by $337,000 while shareholders' equity
decreased by $170,000, net of deferred taxes. In addition, the constructive
dividend for 1996, includes $1,032,000 of net assets held for sale which were
transferred by the Company to North Star as discussed in Note 4.

STOCK BASED COMPENSATION The Company utilizes the intrinsic value method of
accounting for its employee stock based compensation plans. Information related
to the fair value based method of accounting is contained in Note 9.

USE OF ESTIMATES In the preparation of the consolidated financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities and related revenues and
expenses. Actual results could differ from the estimates used by management.

RECLASSIFICATIONS Certain 1995 and 1994 amounts have been reclassified to
conform to the 1996 presentation.

NOTE 3 -- INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

The Company's unconsolidated subsidiary consists of its investment in
CorVel, a health care services company. CorVel has a fiscal year end of March
31. The following is unaudited summarized balance sheet and income statement
information for CorVel as of, and for the twelve month period ended December 31,
1996 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Current assets.............................................. $ 44,861
Noncurrent assets........................................... 18,267
Current liabilities......................................... 10,028
Noncurrent liabilities...................................... 2,361
Revenues.................................................... 118,339
Gross profit................................................ 21,702
Net income.................................................. 8,230
</TABLE>

At December 31, 1996, shareholders' equity includes approximately $5
million of unremitted earnings related to the Company's investment in CorVel. At
December 31, 1996, the fair value of the Company's investment in CorVel, based
on the closing market price, was approximately $35.5 million (see Note 1 for
details related to the sale of a portion of this investment).

F-8
<PAGE> 52

ENSTAR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 4 -- NET ASSETS HELD FOR SALE

On April 26, 1996, NSU completed the sale of Enstar's net assets held for
sale. The proceeds from the sale were retained by NSU. The book value of the
assets sold has been included within the constructive dividend to NSU for the
year ended December 31, 1996.

NOTE 5 -- NOTES PAYABLE AND LONG-TERM DEBT

During 1995 and a portion of 1996, Americable and Transition maintained a
revolving line of credit which provided aggregate borrowings up to $5.5 million.
Borrowings under this facility were based on eligible accounts receivable and
inventory with interest at prime plus 1.5% (10% at December 31, 1995). Amounts
outstanding under the revolving line of credit at December 31, 1995 are
classified within notes payable to the bank. The credit agreement included
certain restrictive covenants including minimum net worth requirements,
limitations on additional indebtedness and minimum interest coverage. At
December 31, 1995, Americable and Transition were in compliance with the
covenants of this agreement.

On August 9, 1996, Americable and Transition amended the terms of their
revolving line of credit facility with their principal bank to provide
borrowings up to $4 million and $2 million, respectively, due in June 1998.
Borrowings under the amended facility are based on eligible accounts receivable
and inventory with interest at prime (8.25% at December 31, 1996) with optional
fixed rate advances at the London Interbank Offered Rate ("LIBOR") plus 2.5%. At
December 31, 1996, there were aggregate outstanding borrowings of $1,310,000
under these revolving lines of credit. In addition, there was approximately $4.7
million of available borrowings under these credit facilities at December 31,
1996. The amended credit agreement includes certain restrictive covenants
including minimum net worth requirements, limitations on additional indebtedness
and minimum interest coverage, with which the Companies were in compliance.

The carrying value of long-term debt, which approximates fair value,
consists of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
---- ----
<S> <C> <C>
Subordinated debentures..................................... $ 945 $ --
Term note payable........................................... -- 1,071
Other....................................................... 233 175
------ ------
1,178 1,246
Less current maturities..................................... 28 1,088
------ ------
$1,150 $ 158
====== ======
</TABLE>

During 1996, the Company registered with the Securities and Exchange
Commission $10 million of debentures, of which $9,055,000 remained unissued at
December 31, 1996. Subordinated debentures are unsecured and due in varying
monthly installments beginning November 1998 through 2003 and had a weighted
average interest rate of 9.44% at December 31, 1996.

F-9
<PAGE> 53

ENSTAR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Aggregate minimum annual principal payments of long-term debt are as
follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1997........................................................ $ 28
1998........................................................ 150
1999........................................................ 266
2000........................................................ 39
2001........................................................ 91
2002 and thereafter......................................... 604
------
$1,178
======
</TABLE>

NOTE 6 -- INCOME TAXES

The activity of the Company has been included in the income tax return of
North Star. For financial reporting purposes, the Company has been allocated a
provision for income taxes in an amount generally equivalent to the provision
that would have resulted had the Company filed separate income tax returns. The
provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current
Federal.......................................... $ 45 $ 740 $(120)
State............................................ 9 130 (20)
---- ----- -----
54 870 (140)
---- ----- -----
Deferred:
Federal.......................................... (69) (405) (175)
State............................................ (10) (60) (25)
---- ----- -----
(79) (465) (200)
---- ----- -----
$(25) $ 405 $(340)
==== ===== =====
</TABLE>

The following is a reconciliation of income taxes at the federal statutory
rate to the effective rate:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate............................... (34.0)% 34.0% (34.0)%
State income taxes................................... (.3) 8.9 (4.3)
Goodwill amortization................................ 21.1 7.0 5.1
Other................................................ 3.5 1.6 0.8
----- ---- -----
(9.7)% 51.5% (32.4)%
===== ==== =====
</TABLE>

To the extent the Company's financial reporting basis in its investment in
unconsolidated subsidiaries exceeds its tax basis, and is not expected to be
realized in a tax-free manner, the Company records a deferred income tax
liability. At December 31, 1996, the deferred tax liability includes the initial
tax effect of $1.8 million for the difference in the financial reporting and tax
basis of the Company's investment in CorVel following its initial public
offering along with income taxes recorded on the equity in earnings of CorVel of
$869,000 in 1996, $794,000 in 1995 and $664,000 in 1994.

F-10
<PAGE> 54

ENSTAR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of the cumulative temporary differences resulting in the
net deferred tax liability are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Investment in Corvel............................... $(5,072) $(4,339) $(3,517)
Accrued expenses not deductible until paid......... 1,956 1,729 1,338
Other.............................................. (533) (362) (436)
------- ------- -------
$(3,649) $(2,972) $(2,615)
======= ======= =======
</TABLE>

NOTE 7 -- COMMITMENTS AND CONTINGENCIES

LEASING COMMITMENTS The Company leases certain equipment and facilities
under operating leases. The future aggregate minimum rental payments under such
leases which expire at various dates through 2002 are as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1997................................. $674
1998................................. 600
1999................................. 598
2000................................. 418
2001................................. 263
2002 and thereafter.................. 101
</TABLE>

Certain of the leases provide for payment of taxes and other expenses.
Total rent expense on all leases including month-to-month leases for the years
ended December 31 was: $1,022,000 in 1996, $939,000 in 1995, and $823,000 in
1994.

CONTINGENCIES As a result of the transfer of a substantial portion of the
assets of North Star to ENStar, ENStar entered into a supplemental indenture
with North Star in which ENStar assumed the obligations of North Star with
respect to certain debenture indebtedness of North Star. North Star however,
separately agreed to satisfy, and hold ENStar harmless from, all payment and
other obligations with respect to such debenture indebtedness. Michael Foods,
with stockholder equity of approximately $188 million at December 31, 1996,
became obligated to repay such indebtedness within six months following the
merger. ENStar will remain contingently liable for the debenture indebtedness of
North Star until repaid. Michael Foods has notified holders of such debenture
indebtedness that it intends to repay such indebtedness on April 15, 1997. The
amount of such indebtedness, net of cash transferred to Michael Foods, was
$21,250,000 at February 21, 1997, the date of the merger with Michael Foods. In
addition, ENStar, through the operation of an indemnification agreement, is
contingently liable for any, and all, liabilities arising from the activities of
North Star, through, and including, the reorganization of North Star and Michael
Foods. Under the terms of the indemnification agreement, the Company is required
to maintain certain minimum levels of market capitalization or net worth for a
period of five years.

NOTE 8 -- EMPLOYEE RETIREMENT PLAN

ENStar maintains an incentive savings plan for its employees. Full-time
employees that meet certain requirements are eligible to participate in the
plan. Contributions are made annually, primarily at the discretion of ENStar's
Board of Directors. Contributions of $189,000, $144,000, $138,000, were charged
to operations in the years ended December 31, 1996, 1995 and 1994.

F-11
<PAGE> 55

ENSTAR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9 -- STOCK OPTIONS

The Company and each of its operating subsidiaries adopted employee stock
option plans for the benefit of selected officers and key employees during 1996.
These plans were approved by the respective Company's Board of Director's in
1996. The following is a brief summary of each of the Plans:

ENSTAR A total of 300,000 shares of common stock are reserved for issuance
under the ENStar Plan. Options are granted at or above fair market value and
expire ten years after the date of grant. The 77,100 stock options issued during
1996 and outstanding at December 31, 1996 have an exercise price of $9.00 per
share as determined by the Board as their best estimate of a price greater than
or equal to the market value of those shares at the date of grant. The options
become exercisable at a rate of 25% on the anniversary of the date of grant in
each of the first four years following the grant. The fair value of the employee
options granted during 1996 was $3.89 and was estimated on the date of grant
using the Black-Scholes option pricing model. The following weighted average
assumptions were used for grants issued in 1996: no dividends to be paid,
expected volatility of 57.5%, a risk-free interest rate of 5.53%, and an
expected life of 3 years.

AMERICABLE A total of 600,000 shares of Americable common stock are
reserved for issuance under the Americable Plan. Options are granted at or above
fair market value and expire ten years after the date of grant. The 345,000
stock options issued during 1996 and outstanding at December 31, 1996 have an
exercise price of $0.83 per share as determined by the Board as their best
estimate of a price greater than or equal to the market value of those shares at
the date of grant. The options become exercisable at various rates over the
first five years following the grant with 101,000 exercisable at December 31,
1996. The fair value of the employee options granted during 1996 was $0.52 and
was estimated on the date of grant using the Black-Scholes option pricing model.
The following weighted average assumptions were used for grants issued in 1996:
no dividends to be paid, expected volatility of 98%, a risk-free interest rate
of 5.88%, and an expected life of 3 years.

TRANSITION A total of 750,000 shares of Transition common stock are
reserved for issuance under the Transition Plan. Options are granted at or above
fair market value and expire ten years after the date of grant. The 298,500
stock options issued during 1996 and outstanding at December 31, 1996 have an
exercise price of $1.25 per share as determined by the Board as their best
estimate of a price greater than or equal to the market value of those shares at
the date of grant. The options become exercisable at various rates over the
first five years following the grant with 16,100 exercisable at December 31,
1996. The fair value of the employee options granted during 1996 was $0.48 and
was estimated on the date of grant using the Black-Scholes option pricing model.
The following weighted average assumptions were used for grants issued in 1996:
no dividends to be paid, expected volatility of 49%, a risk-free interest rate
of 5.88%, and an expected life of 3 years.

Had the Company or its operating subsidiaries elected to use the fair value
based method of accounting for stock options, the pro forma effect on net income
for 1996 would have been expense of approximately $73,000 or 2 cents per share.
This may not be representative of the future effects of applying this statement.

NOTE 10 -- RELATED PARTY TRANSACTION

At December 31, 1995, ENStar had an unsecured note receivable from North
Star's majority shareholder and former chairman of the board of $257,872 which
was paid in full during 1996.

F-12
<PAGE> 56

ENSTAR INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- GEOGRAPHIC AREA AND BUSINESS SEGMENT INFORMATION

The Company, through Transition, has international export sales throughout
the world. Substantially all of the export sales are denominated in U.S.
dollars. Revenues classified by major geographic area are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues from unaffiliated customers in the
United States............................................. $58,124 $49,668 $43,020
Europe.................................................... 4,192 3,363 2,737
Other..................................................... 1,807 1,860 1,436
------- ------- -------
$64,123 $54,891 $47,193
======= ======= =======
</TABLE>

F-13
<PAGE> 57

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors of ENStar Inc.

We have audited the accompanying consolidated balance sheets of ENStar Inc.
as of December 31, 1996 and 1995, and the related consolidated statements of net
income, shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
ENStar Inc. as of December 31, 1996 and 1995, and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended December 31, 1996, in conformity with generally accepted
accounting principles.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota
February 19, 1997 (except for Note 1
as to which the date is February 28,
1997)

F-14
<PAGE> 58

REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULE

BOARD OF DIRECTORS OF ENSTAR INC.

In connection with our audit of the consolidated financial statements of
ENStar Inc. referred to in our report dated February 19, 1997, we have also
audited Schedule II for each of the three years in the period ended December 31,
1996. In our opinion, this schedule presents fairly, in all material respects,
the information required to be set forth therein.

/s/ GRANT THORNTON LLP

Minneapolis, Minnesota
February 19, 1997 (except for Note 1 as to
which the date is February 28, 1997)

F-15
<PAGE> 59

ENSTAR INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31,
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS
-----------------------
CHARGES
BALANCE AT CHARGED TO TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS- AT END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE(1) PERIOD
----------- ---------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
1994.................................... $344 $115 -- $(126) $333
1995.................................... 333 135 -- (68) 400
1996.................................... 400 132 -- (92) 440
</TABLE>

- -------------------------
(1) Write off of accounts deemed uncollectible.

F-16
<PAGE> 60

CORVEL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenues........................................... $80,619,000 $95,783,000 $109,052,000
Costs and Expenses
Cost of revenues................................... 67,331,000 78,950,000 88,937,000
General and administrative......................... 6,057,000 7,186,000 8,106,000
----------- ----------- ------------
73,388,000 86,136,000 97,043,000
----------- ----------- ------------
Income before income taxes......................... 7,231,000 9,647,000 12,009,000
Income tax provision............................... 2,821,000 3,762,000 4,684,000
----------- ----------- ------------
Net Income......................................... $ 4,410,000 $ 5,885,000 $ 7,325,000
=========== =========== ============
Net income per common and common equivalent
share............................................ $ 1.01 $ 1.30 $ 1.57
=========== =========== ============
Weighted average shares outstanding................ 4,369,000 4,542,000 4,674,000
</TABLE>

See accompanying notes to consolidated financial statements.

F-17
<PAGE> 61

CORVEL CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1995 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $13,211,000 $17,113,000
Accounts receivable (less allowance for doubtful accounts
of $825,000 in 1995 and $1,268,000 in 1996)............ 15,868,000 18,394,000
Prepaid taxes and expenses................................ 182,000 545,000
Deferred income taxes..................................... 1,809,000 2,032,000
----------- -----------
Total current assets................................. 31,070,000 38,084,000
----------- -----------
Property and equipment, net................................. 8,872,000 11,468,000
Other assets................................................ 4,023,000 4,432,000
----------- -----------
$43,965,000 $53,984,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts and taxes payable................................ $ 2,357,000 $ 3,057,000
Accrued liabilities....................................... 4,628,000 4,246,000
----------- -----------
Total current liabilities............................ 6,985,000 7,303,000
----------- -----------
Deferred income taxes....................................... 1,226,000 1,370,000
Commitments and contingencies
Stockholders' equity
Common stock, $.0001 par value: 20,000,000 shares
authorized; 4,238,250 and 4,593,675 shares issued and
outstanding at March 31, 1995 and 1996, respectively
Paid in capital............................................. 24,169,000 26,401,000
Retained earnings........................................... 11,585,000 18,910,000
----------- -----------
Total stockholders' equity........................... 35,754,000 45,311,000
----------- -----------
$43,965,000 $53,984,000
=========== ===========
</TABLE>

See accompanying notes to the consolidated financial statements.

F-18
<PAGE> 62

CORVEL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON COMMON STOCK TOTAL
STOCK AND RETAINED SHAREHOLDERS'
SHARES PAID IN CAPITAL EARNINGS EQUITY
------ --------------- -------- -------------
<S> <C> <C> <C> <C>
Balance -- March 31, 1993.................. 3,706,649 $19,067,000 $ 1,290,000 $20,357,000
Stock issued under employee stock
purchase plan......................... 20,448 295,000 295,000
Stock issued under employee stock option
plan and related income tax
benefits.............................. 344,098 2,263,000 2,263,000
Net income............................... 4,410,000 4,410,000
--------- ----------- ----------- -----------
Balance -- March 31, 1994.................. 4,071,195 21,625,000 5,700,000 27,325,000
Stock issued under employee stock
purchase plan......................... 19,634 374,000 374,000
Stock issued under employee stock option
plan and related income tax
benefits.............................. 147,421 2,170,000 2,170,000
Net income............................... 5,885,000 5,885,000
--------- ----------- ----------- -----------
Balance -- March 31, 1995.................. 4,238,250 24,169,000 11,585,000 35,754,000
--------- ----------- ----------- -----------
Stock issued under employee stock
purchase plan......................... 18,384 444,000 444,000
Stock issued under employee stock option
plan and related income tax benefits,
net of shares repurchased upon
exercise.............................. 337,041 1,788,000 1,788,000
Net income............................... 7,325,000 7,325,000
--------- ----------- ----------- -----------
Balance -- March 31, 1996.................. 4,593,675 $26,401,000 $18,910,000 $45,311,000
========= =========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-19
<PAGE> 63

CORVEL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income........................................... $4,410,000 $ 5,885,000 $ 7,325,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization..................... 2,363,000 2,335,000 3,048,000
Deferred income taxes............................. 546,000 (44,000) (79,000)
Loss on write down and disposal of
property and equipment.......................... 75,000 39,000 23,000
Changes in operating assets and liabilities
Accounts receivable............................. (1,976,000) (2,657,000) (2,526,000)
Prepaid income taxes and expenses............... (144,000) 795,000 (363,000)
Accounts and taxes payable...................... 378,000 27,000 700,000
Accrued liabilities............................. 1,085,000 538,000 (382,000)
Other assets.................................... 33,000 (425,000) (511,000)
---------- ----------- -----------
Net cash provided by operating activities............ 6,770,000 6,493,000 7,235,000
---------- ----------- -----------
Cash flows from investing activities
Purchases of property and equipment.................. (4,406,000) (4,219,000) (5,565,000)
---------- ----------- -----------
Net cash used in investing activities................ (4,406,000) (4,219,000) (5,565,000)
Cash flows from financing activities
Proceeds and tax benefits from exercise of stock
options........................................... 2,558,000 2,544,000 2,232,000
---------- ----------- -----------
Net cash provided by financing activities............ 2,558,000 2,544,000 2,232,000
---------- ----------- -----------
Increase in cash and cash equivalents.................. 4,922,000 4,818,000 3,902,000
Cash and cash equivalents at beginning of year......... 3,471,000 8,393,000 13,211,000
---------- ----------- -----------
Cash and cash equivalents at end of year............... $8,393,000 $13,211,000 $17,113,000
========== =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-20
<PAGE> 64

CORVEL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION: CorVel Corporation (the Company) provides services and
programs nationwide that are designed to enable insurance carriers, third party
administrators and employers with self-insured programs to administer, manage
and control the cost of workers compensation benefits.

BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of CorVel Corporation and its subsidiaries. Significant intercompany
accounts and transactions have been eliminated in consolidation.

The consolidated financial statements are presented on the accrual basis of
accounting in accordance with generally accepted accounting principles which
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of March 31, 1995 and 1996 and revenues and
expenses for the three years ending March 31, 1996. Estimates made by the
Company relate primarily to the valuation of accounts receivable and estimation
of accrued liabilities. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS: Cash and cash equivalents consists of short-term
highly-liquid investments with maturities of 90 days or less when purchased. The
carrying amounts of the Company's financial instruments approximate their
relative fair values at March 31, 1995 and 1996.

CONCENTRATIONS OF CREDIT RISK: The Company performs periodic credit
evaluations of its customers' financial condition and does not require
collateral. No customer represented 10% of accounts receivable at March 31, 1995
and 1996. Receivables generally are due within 60 days. Credit losses relating
to customers in the workers compensation insurance industry consistently have
been within management's expectations.

PROPERTY AND EQUIPMENT: Property and equipment is stated at cost.
Depreciation and amortization is provided using the straight-line and
accelerated methods over the estimated useful lives of the assets which range
from three to seven years.

LONG-LIVED ASSETS: The Company elected the early adoption of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" (Statement No. 121). In accordance with Statement No. 121,
long-lived assets and certain identifiable intangibles held and used by the
Company will be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.

OTHER ASSETS: Other assets consists primarily of the excess of the purchase
price over the estimated fair value of the net assets of businesses acquired
(goodwill) and is being amortized on a straight-line basis over periods not
exceeding 40 years. Goodwill amounted to $3,344,000 (net of accumulated
amortization of $652,000) at March 31, 1995 and $3,636,000 (net of accumulated
amortization of $754,000) at March 31, 1996.

REVENUE RECOGNITION: The Company's revenues are recognized primarily as
services are rendered based on time and expenses incurred. A certain portion of
the Company's revenues are derived from fee schedule auditing which is based on
the number of provider charges audited and, to a limited extent, on a percentage
of savings achieved for the Company's clients. Accounts receivable includes
$1,318,000 and $1,527,000 of unbilled receivables at March 31, 1995 and 1996,
respectively. No one customer accounted for more than 10% of consolidated
revenues during the years ended March 31, 1994, 1995 and 1996.

INCOME TAXES: The consolidated financial statements reflect the application
of Statement of Financial Accounting Standards No. 109 -- "Accounting for Income
Taxes".

INCOME PER SHARE: Income per share is computed by dividing net income by
the weighted average number of common and common equivalent shares outstanding
during the year.

STOCK OPTIONS: The Company follows Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options. The Financial
Accounting Standards Board issued Statement of Financial Accounting Standards

F-21
<PAGE> 65

CORVEL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123) in October
1995. SFAS No. 123 establishes financial accounting and reporting standards for
stock-based compensation plans and for transactions in which an entity issues
its equity instruments to acquire goods and services from nonemployees. The new
accounting standards prescribed by SFAS No. 123 are optional, and the Company
may continue to account for its plans under previous standards. The Company does
not expect to adopt the new accounting standards, consequently, SFAS No. 123
will not have an impact on the Company's consolidated results of operations or
financial position. However, proforma disclosures of net earnings and earnings
per share will be made in fiscal 1997, as if the SFAS No. 123 accounting
standards had been adopted.

NOTE B -- PROPERTY AND EQUIPMENT

Property and equipment consists of the following at March 31:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Office equipment and computers...................... $11,074,000 $15,542,000
Computer software................................... 3,490,000 4,207,000
Leasehold improvements.............................. 356,000 613,000
----------- -----------
14,920,000 20,362,000
Less: accumulated depreciation and amortization..... 6,048,000 8,894,000
----------- -----------
$ 8,872,000 $11,468,000
=========== ===========
</TABLE>

NOTE C -- ACCRUED LIABILITIES

Accrued liabilities consists of the following at March 31:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Payroll and related benefits.......................... $2,327,000 $2,366,000
Self insurance reserves............................... 1,017,000 737,000
Other................................................. 1,284,000 1,143,000
---------- ----------
$4,628,000 $4,246,000
========== ==========
</TABLE>

NOTE D -- INCOME TAXES

The income tax provision consists of the following for the three years
ended March 31:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current -- Federal....................... $ 1,903,000 $3,172,000 $ 4,045,000
Current -- State......................... 372,000 634,000 718,000
Tax benefits from option exercises....... (1,403,000) (991,000) (4,245,000)
Utilization of net operating loss........ (538,000)
----------- ---------- -----------
Subtotal............................ 872,000 2,277,000 518,000
----------- ---------- -----------
Deferred -- Federal...................... 460,000 (37,000) (102,000)
Deferred -- State........................ 86,000 (7,000) 23,000
----------- ---------- -----------
Subtotal............................ 546,000 (44,000) (79,000)
----------- ---------- -----------
Charge in lieu of income taxes
attributable to tax benefits from stock
option exercises and utilization of net
operating loss carryovers.............. 1,403,000 1,529,000 4,245,000
----------- ---------- -----------
$ 2,821,000 $3,762,000 $ 4,684,000
=========== ========== ===========
</TABLE>

F-22
<PAGE> 66

CORVEL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a reconciliation of the income tax provision from the
statutory federal income tax rate to the effective rate for the three years
ended March 31 (35% for the three fiscal years ended March 31, 1996):

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate..... $2,531,000 $3,377,000 $4,203,000
State income taxes, net of federal
benefit............................. 300,000 399,000 446,000
Goodwill amortization................. 35,000 35,000 37,000
Other................................. (45,000) (49,000) (2,000)
---------- ---------- ----------
$2,821,000 $3,762,000 $4,684,000
========== ========== ==========
</TABLE>

Income taxes paid totaled $925,000, $1,100,000 and $1,193,000 for the years
ended March 31, 1994, 1995, and 1996, respectively. At March 31, 1994, the
Company had net operating loss (NOL's) carryforwards of $1,600,000 for income
tax purposes, expiring in 2007 for financial reporting purposes. A valuation
allowance of $538,000 was recorded in 1994 to offset the deferred tax assets
related to the NOL's. This $538,000 valuation allowance was applied to
additional paid in capital in 1995 since the related NOL's were principally
attributable to deductions for the exercise of non qualified stock options in
1994.

Deferred taxes at March 31, 1995 and 1996 are:

<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Accrued liabilities not currently deductible.... $ 1,525,000 $ 1,310,000
Allowance for doubtful accounts................. 284,000 495,000
Other........................................... 0 227,000
----------- -----------
Deferred assets................................... 1,809,000 2,032,000
Deferred tax liabilities:
Excess of tax under book basis of fixed
assets....................................... (1,226,000) (1,370,000)
----------- -----------
Deferred liability.............................. (1,226,000) (1,370,000)
----------- -----------
Net deferred tax asset............................ $ 583,000 $ 662,000
=========== ===========
</TABLE>

NOTE E -- STOCK OPTION PLAN

Under the Company's Restated 1988 Executive Stock Option Plan, as amended,
options for up to 1,335,000 shares of the Company's common stock may be granted
to key employees, nonemployee directors and consultants at prices not less than
85% of the fair value of the stock at the date of grant as determined by the
Board. Options granted under the Plan may be either incentive stock options or
non-statutory stock options

F-23
<PAGE> 67

CORVEL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and are generally exercisable beginning one year from the date of grant and vest
monthly thereafter for three years. Summarized information for this Plan
follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Options outstanding at the beginning of
the year.............................. 687,980 444,040 404,539
Options granted......................... 111,635 88,850 81,300
Options exercised....................... 338,998 110,421 105,672
Options canceled........................ 16,577 17,930 16,756
----------- ----------- ------------
Options outstanding at the end of the
year.................................. 444,040 404,539 363,411
=========== =========== ============
At the end of the year:
Prices of outstanding options........... $.01-$22.75 $.33-$26.50 $8.67-$31.50
Average price per share................. $11.36 $15.11 $18.33
Exercisable options..................... 182,920 199,484 182,575
Options available for future grants..... 137,908 266,988 202,444
</TABLE>

In addition to options granted under the Plan, the Company's President was
issued an option to purchase 750,000 shares of common stock at an exercise price
of $.0001 per share in January 1988. Options to purchase 5,100, 37,000, and
362,900 shares of common stock were exercised in fiscal 1994, 1995 and 1996,
respectively. As of March 31, 1996, options to purchase 60,000 shares of common
stock were outstanding, all of which were exercisable at a nominal price.

NOTE F -- EMPLOYEE STOCK PURCHASE PLAN

In fiscal 1992, the Company's Board of Directors approved the 1991 Employee
Stock Purchase Plan, as amended, that provides for the issuance of up to 150,000
shares of the Company's common stock. Under the plan, participating employees
are granted nontransferable, six-month options on October 1 and April 1 of each
year. These options entitle employees to purchase the number of whole shares
that their individual payroll deduction authorizations indicate can be purchased
at the end of the six-month period at 85% of the fair market value of the
Company's common stock at the date of grant or on the last day of the six-month
period, whichever is less. Employees are allowed to participate up to 20% of
their gross pay. Summarized plan information is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Employee contributions.......................... $295,000 $374,000 $444,000
Shares acquired................................. 20,448 19,634 18,384
Average purchase price.......................... $14.43 $19.02 $24.15
</TABLE>

NOTE G -- COMMITMENTS AND CONTINGENCIES

The Company leases office facilities under noncancelable operating leases.
Future minimum rental commitments under operating leases at March 31, 1996 are
$3,576,000 in fiscal 1997, $2,491,000 in fiscal 1998, $1,375,000 in fiscal 1999,
$793,000 in fiscal 2000, $256,000 in fiscal 2001, and none thereafter. Total
rental expense of $3,080,000, $3,559,000, and $3,901,000 was charged to
operations for the years ended March 31, 1994, 1995, and 1996, respectively.

The Company is involved in litigation arising in the normal course of
business. The Company believes that resolution of these matters will not result
in any payment that, in the aggregate, would be material to the financial
position and results of the operations of the Company.

F-24
<PAGE> 68

CORVEL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE H -- SAVINGS PLAN

The Company maintains a retirement savings plan for its employees which is
a qualified plan under section 401(k) of the Internal Revenue Code. Full time
employees that meet certain requirements are eligible to participate in the
plan. Contributions are made annually primarily at the discretion of the
Company's Board of Directors. Contributions of $133,000, $157,000, and $50,000,
were charged to operations for the years ended March 31, 1994, 1995, and 1996,
respectively.

NOTE I -- QUARTERLY RESULTS

The following is a summary of unaudited results of operations for the two
years ended March 31, 1995 and 1996:

<TABLE>
<CAPTION>
NET INCOME PER
COMMON AND COMMON
REVENUES GROSS PROFIT NET INCOME EQUIVALENT SHARE
-------- ------------ ---------- -----------------
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED MARCH 31, 1995:
First Quarter.......................... $22,071,000 $3,844,000 $1,344,000 $.30
Second Quarter......................... 22,921,000 4,008,000 1,402,000 .31
Third Quarter.......................... 24,701,000 4,313,000 1,507,000 .33
Fourth Quarter......................... 26,090,000 4,668,000 1,632,000 .35
FISCAL YEAR ENDED MARCH 31, 1996:
First Quarter.......................... $26,779,000 $4,856,000 $1,701,000 $.37
Second Quarter......................... 26,863,000 4,989,000 1,818,000 .39
Third Quarter.......................... 27,082,000 5,127,000 1,887,000 .40
Fourth Quarter......................... 28,328,000 5,143,000 1,919,000 .41
</TABLE>

F-25
<PAGE> 69

REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of Directors
CorVel Corporation

We have audited the accompanying consolidated balance sheets of CorVel
Corporation as of March 31, 1995 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended March 31, 1996. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial statements
and this schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CorVel Corporation at March 31, 1995 and 1996, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule when
considered in relationship to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Orange County, California
May 8, 1996

F-26
<PAGE> 70

CORVEL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
-------------------------------
1995 1996
---- ----
<S> <C> <C>
REVENUES.................................................... $80,724,000 $90,011,000
Cost of Revenues............................................ 65,752,000 73,452,000
----------- -----------
Gross profit................................................ 14,972,000 16,559,000
General and administrative expenses......................... 6,108,000 6,380,000
----------- -----------
Income before income taxes.................................. 8,864,000 10,179,000
Income tax provision........................................ 3,458,000 3,868,000
----------- -----------
NET INCOME.................................................. $ 5,406,000 $ 6,311,000
=========== ===========
Net income per common and common equivalent share........... $ 1.16 $ 1.33
=========== ===========
Weighted average common and common equivalent shares........ 4,657,000 4,752,000
</TABLE>

See accompanying notes to consolidated financial statements.

F-27
<PAGE> 71

CORVEL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................................. $17,113,000 $23,077,000
Accounts receivable, net.................................. 18,394,000 20,275,000
Prepaid taxes and expenses................................ 545,000 159,000
Deferred income taxes..................................... 2,032,000 1,350,000
----------- -----------
Total current assets................................... 38,084,000 44,861,000
----------- -----------
Property and Equipment, Net................................. 11,468,000 12,638,000
Other Assets................................................ 4,432,000 5,629,000
----------- -----------
TOTAL ASSETS...................................... $53,984,000 $63,128,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable.......................................... $ 3,057,000 $ 4,883,000
Accrued liabilities....................................... 4,246,000 5,145,000
----------- -----------
Total current liabilities.............................. 7,303,000 10,028,000
----------- -----------
Deferred income taxes....................................... 1,370,000 2,361,000
Stockholders' Equity
Common stock................................................ -- --
Paid-in-capital............................................. 26,401,000 27,637,000
Treasury stock.............................................. -- (2,119,000)
Retained earnings........................................... 18,910,000 25,221,000
----------- -----------
Total stockholders' equity............................. 45,311,000 50,739,000
----------- -----------
TOTAL LIABILITIES AND EQUITY...................... $53,984,000 $63,128,000
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-28
<PAGE> 72

CORVEL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
----------------------------
1995 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities
Net income................................................ $ 5,406,000 $ 6,311,000
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 2,186,000 2,981,000
Changes in operating assets and liabilities
Accounts receivable.................................. (1,892,000) (1,881,000)
Prepaid taxes and expenses........................... 374,000 1,068,000
Accounts payable..................................... 1,046,000 1,826,000
Accrued liabilities.................................. 665,000 899,000
Income taxes payable................................. (461,000) 991,000
Other assets......................................... (660,000) (88,000)
----------- -----------
Net cash provided by operating activities................. 6,664,000 12,107,000
----------- -----------
Cash flows from investing activities
Net assets purchased in acquisition....................... -- (1,375,000)
Additions to property and equipment....................... (4,145,000) (3,885,000)
----------- -----------
Net cash used in investing activities..................... (4,145,000) (5,260,000)
----------- -----------
Cash flows from financing activities
Repurchase of common stock.................................. -- (2,119,000)
Sale of common and exercise of stock options and related
tax benefits.............................................. 1,632,000 1,236,000
----------- -----------
Net cash provided by financing activities................. 1,632,000 (883,000)
----------- -----------
Increase (decrease) in cash:................................ 4,151,000 5,964,000
Cash and cash equivalents at beginning...................... 13,211,000 17,113,000
----------- -----------
Cash and cash equivalents at end............................ $17,362,000 $23,077,000
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-29
<PAGE> 73

CORVEL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)

A. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine months ended December 31, 1996 are not
necessarily indicative of the results that may be expected for the year ended
March 31, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended March 31, 1996 included in
the Company's registration statement on Form 10-K.

B. EARNINGS PER SHARE

Earnings per common and common equivalent shares were computed by dividing
net income by the weighted average number of shares of common stock and common
stock equivalents outstanding during the quarter.

F-30
<PAGE> 74

SCHEDULE II

CORVEL CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year Ended March 31, 1996:............ $825,000 $500,000 $-- $57,000 $1,268,000
Year Ended March 31, 1995:............ 725,000 100,000 -- -- 825,000
Year Ended March 31, 1994:............ 485,000 240,000 -- -- 725,000
</TABLE>

F-31
<PAGE> 75

======================================================

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information.................. 2
Prospectus Summary...................... 3
Risk Factors............................ 6
The Company............................. 13
Ratio of Earnings to Fixed Charges...... 14
Use of Proceeds......................... 14
Plan of Distribution.................... 14
Selected Financial Data................. 16
Management's Discussion and Analysis of
Results of Operations and Financial
Condition............................. 17
Business................................ 22
Management.............................. 32
Principal Shareholders.................. 37
Description of Debentures............... 38
Validity of Debentures.................. 42
Experts................................. 42
Index to Consolidated Financial
Statements............................ F-1
</TABLE>

======================================================

======================================================
ENSTAR INC.
8.00% TWO YEAR
9.75% FIVE YEAR
11.00% TEN YEAR

SUBORDINATED DEBENTURES
--------------------

PROSPECTUS
--------------------
MARCH , 1997

======================================================
<PAGE> 76

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following fees and expenses will be paid by the Company in connection
with the issuance and distribution of the securities registered hereby. All such
expenses, except for the SEC fees, are estimated.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 7,576
Legal fees and expenses..................................... 30,000
Accounting fees and expenses................................ 20,000
Blue Sky fees and expenses.................................. 2,000
Printing expenses........................................... 30,000
Miscellaneous............................................... 5,424
-------
Total.................................................. $95,000
=======
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 302A.521 of the Minnesota Statutes provides in substance that,
unless prohibited by its articles of incorporation, a corporation must indemnify
an officer or director who is made or threatened to be made a party to a
proceeding because of his or her capacity as an officer or director, against
judgments, penalties and fines and reasonable expenses, including attorneys'
fees and disbursements incurred by such person in connection with the
proceeding, if certain criteria are met. These criteria, all of which must be
met by the person seeking indemnification are (a) that no other organization has
paid the expenses for which indemnification is requested; (b) that such person
must have conducted himself or herself in good faith; (c) that no improper
personal benefits were obtained by such person and such person did not engage in
self-dealing as defined in the Minnesota Business Corporation Act; (d) that if
the action is a criminal prosecution, there must have been no reasonable cause
for such person to have believed that the conduct was unlawful; and (e) that
such person must have acted in a manner reasonably believed to have been in the
best interests of the corporation. Provision is made in the statute for
determinations as to eligibility for indemnification. The determination is made
by the members of the corporation's board of directors who are at the time not a
party to the proceedings under consideration, by special legal counsel selected
by the board of directors, by the shareholders who are not parties to the
proceedings or by a court in the State of Minnesota. Article Nine of the Bylaws
of the Company provides that the Company shall indemnify such persons, for such
liabilities, in such manner, under such circumstances and to such extent as
permitted by Section 302A.521, as now enacted or hereafter amended.

ENStar will also maintain an insurance policy or policies to assist in
funding indemnification of directors and officers for certain liabilities.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of December
21, 1995, by and among North Star Universal, Inc., Michael
Foods, Inc. and NSU Merger Co. (schedules omitted -- the
Company agrees to furnish a copy of any schedule to the
Commission upon request) (filed as exhibit 2 to the
Company's Registration Statement on Form S-4, Registration
No. 333-1925, and incorporated herein by reference).
2.2 Subscription Agreement for the purchase of Debentures (filed
as exhibit 10.1 to the Company's Registration Statement on
Form S-4, Registration No. 333-1925, and incorporated herein
by reference).
3.1 Articles of Incorporation of the Company (filed as exhibit
3.1 to the Company's Registration Statement on Form S-4,
Registration No. 333-1925, and incorporated herein by
reference).
3.2 Bylaws of the Company (filed as exhibit 3.2 to the Company's
Registration Statement on Form S-4, Registration No.
333-1925, and incorporated herein by reference).
</TABLE>

II-1
<PAGE> 77

<TABLE>
<C> <S>
4.1 Indenture (including form of Debenture), dated as of
November 7, 1996, between the Company and National City Bank
of Minneapolis, as trustee.
4.2 Form of Supplemental Indenture to the Indenture, dated as of
November 7, 1996, between the Company and National City Bank
of Minneapolis, as Trustee.
5.1 Opinion of Dorsey & Whitney LLP
10.1 1996 Stock Incentive Plan, including forms of option
agreements (filed as exhibit 10.15 to the Company's
Registration Statement on Form S-4, Registration No.
333-1925, and incorporated herein by reference).
10.2 Sixth Amendment to Amended and Restated Loan and Security
Agreement, dated August 9, 1996, among Americable, Inc.,
Transition Networks, Inc., Cable Distribution Systems, Inc.,
and First Bank National Association, amending the terms of
the Amended and Restated Loan and Security Agreement (filed
as exhibit 10.1 to the Company's Registration Statement on
Form S-4, Registration No. 333-1925, and incorporated herein
by reference).
10.3 Lease Agreement dated June 13, 1995 between Transition and
West Life & Annuity Insurance Company for lease of premises
at 6475 City West Parkway, Eden Prairie, Minnesota. (filed
as exhibit 10.11 to the Company's Registration Statement on
Form S-4, Registration No. 333-1925, and incorporated herein
by reference).
10.4 Lease Agreement dated February 21, 1989 between Americable
and Ryan/Flying Cloud Associates Limited Partnership,
including amendments thereto, for the lease of premises at
7450 Flying Cloud Drive, Eden Prairie, Minnesota. (filed as
exhibit 10.12 to the Company's Registration Statement on
Form S-4, Registration No. 333-1925, and incorporated herein
by reference).
10.5 Distribution Agreement between North Star Universal, Inc.,
and the Company (Filed as an exhibit to Agreement and Plan
of Reorganization, dated as of December 21, 1995, by and
among North Star Universal, Inc., Michael Foods, Inc. and
NSU Merger Co., which agreement was filed as exhibit 2 to
the Company's Registration Statement on Form S-4,
Registration No. 333-1925, and is incorporated herein by
reference).
10.6 Commercial Lease Agreement between Americable, Inc. and
LaSalle National Trust (filed as exhibit 10.4 to the
Quarterly Report on Form 10-Q of North Star Universal, Inc.
for the quarter ended September 30, 1996 and incorporated
herein by reference)
10.7 Commercial Lease Agreement between Americable, Inc. and
Petroleum, Inc. (filed as exhibit 10.3 to the Quarterly
Report on Form 10-Q of North Star Universal, Inc. for the
quarter ended June 30, 1996 and incorporated herein by
reference)
10.8 Separation and General Release, dated February 17, 1997,
between Americable and Gary L. Eizenga (filed as exhibit
10.8 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and incorporated herein by
reference).
10.9 Americable, Inc. 1996 Stock Option Plan.
10.10 Transition Networks, Inc. 1996 Stock Option Plan.
12 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Dorsey & Whitney LLP (contained in Exhibit 5).
23.2 Consent of Grant Thornton LLP as independent public
accountants to ENStar Inc.
23.3 Consent of Ernst & Young LLP as independent public
accountants to CorVel Corporation.
*25.1 Statement of Eligibility and Qualification of National City
Bank of Minneapolis, as trustee,
under the Trust Indenture Act of 1939.
27.1 Financial Data Schedules (for SEC use only)
</TABLE>

- -------------------------
* To be filed by amendment.

(b) Financial Statement Schedules

II-2
<PAGE> 78

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant further undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 79

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to the Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis, State of Minnesota, on March 25, 1997.

ENSTAR INC.

By /s/ JEFFREY J. MICHAEL

--------------------------------------
Jeffrey J. Michael,
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<S> <C> <C> <C>
By /s/ JEFFREY J. MICHAEL Dated: March 25, 1997
------------------------------------------------
Jeffrey J. Michael
President, Chief Executive Officer and Director
(principal executive officer)

By /s/ THOMAS WARGOLET Dated: March 25, 1997
------------------------------------------------
Thomas Wargolet
Chief Financial Officer and Secretary (principal
financial and accounting officer)

By /s/ MILES E. EFRON Dated: March 25, 1997
------------------------------------------------
Miles E. Efron
Director

By /s/ JAMES H. MICHAEL Dated: March 25, 1997
------------------------------------------------
James H. Michael
Chairman of the Board of Directors

By /s/ RICHARD J. BRAUN Dated: March 25, 1997
------------------------------------------------
Richard J. Braun
Director
</TABLE>

II-4

<PAGE> 1
EXHIBIT 4.1

==========================================================

ENSTAR INC.

Subordinated Debentures

______________________

INDENTURE

Dated as of November 7, 1996

______________________

National City Bank of Minneapolis

Trustee

==========================================================

<PAGE> 2

"CROSS-REFERENCE TABLE*

<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
------------ -----------------
<S> <C>
310 (a)(1) .................................... 7.10
(a)(2) .................................... 7.10
(a)(3) .................................... N.A.
(a)(4) .................................... N.A.
(b) .................................... 7.08, 7.10; 11.02
(c) .................................... N.A.
311 (a) .................................... 7.11
(b) .................................... 7.11
(c) .................................... N.A.
312 (a) .................................... 2.06
(b) .................................... 11.03
(c) .................................... 11.03
313 (a) .................................... 7.06
(b)(l) .................................... N.A.
(b)(2) .................................... 7.06
(c) .................................... 11.02
(d) .................................... 7.06
314 (a) .................................... 4.02; 11.02
(b) .................................... N.A.
(c)(l) .................................... 11.04
(c)(2) .................................... 11.04
(c)(3) .................................... N.A.
(d) .................................... N.A.
(e) .................................... 11.05
(f) .................................... 4.03
315 (a) .................................... 7.01(b)
(b) .................................... 7.05; 11.02
(c) .................................... 7.01(a)
(d) .................................... 7.01(c)
(e) .................................... 6.11
316 (a)(last sentence)......................... 2.10
(a)(l)(A) ................................. 6.05
(a)(l)(B) ................................. 6.04
(a)(2) .................................. N.A.
(b) .................................... 6.07
317 (a)(1) .................................... 6.08
(a)(2) .................................... 6.09
(b) .................................... 2.05
318 (a) .................................... 11.01
</TABLE>

N.A. MEANS NOT APPLICABLE.
- ---------------

* This Cross-Reference Table is not part of the Indenture.

-i-
<PAGE> 3

TABLE OF CONTENTS

Page

ARTICLE ONE

DEFINITIONS AND INCORPORATION BY REFERENCE

<C> <S> <C>
SECTION 1.01 Definitions................................................................ 1
SECTION 1.02 Other Definitions.......................................................... 2
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.......................... 2
SECTION 1.04 Rules of Construction...................................................... 3

ARTICLE TWO

THE SECURITIES

SECTION 2.01 Form and Dating............................................................ 3
SECTION 2.02 Terms...................................................................... 3
SECTION 2.03 Execution and Authentication............................................... 4
SECTION 2.04 Registrar and Paying Agent................................................. 4
SECTION 2.05 Paying Agent to Hold Money in Trust........................................ 5
SECTION 2.06 Certificateholder Lists.................................................... 5
SECTION 2.07 Transfer and Exchange...................................................... 5
SECTION 2.08 Replacement Securities..................................................... 5
SECTION 2.09 Outstanding Debentures..................................................... 6
SECTION 2.10 Treasury Debentures........................................................ 6
SECTION 2.11 Temporary Debentures....................................................... 6
SECTION 2.12 Cancellation............................................................... 6
SECTION 2.13 Default Interest........................................................... 6

ARTICLE THREE

REDEMPTION

SECTION 3.01 Applicability of Article................................................... 7
SECTION 3.02 Notices to Trustee......................................................... 7
SECTION 3.03 Selection of Debentures to Be Redeemed..................................... 7
SECTION 3.04 Notice of Redemption....................................................... 7
SECTION 3.05 Effect of Notice of Redemption............................................. 8
SECTION 3.06 Deposit of Redemption Price................................................ 8
SECTION 3.07 Debentures Redeemed in Part................................................ 8
SECTION 3.08 Redemption Option upon Death or Disability of Holder....................... 8
</TABLE>

-ii-
<PAGE> 4

ARTICLE FOUR

COVENANTS

<TABLE>
<C> <S> <C>
SECTION 4.01 Payment of Debentures...................................................... 9
SECTION 4.02 SEC Reports................................................................ 9
SECTION 4.03 Compliance Certificate..................................................... 9
SECTION 4.04 Usury Laws................................................................. 10
SECTION 4.05 Money for Debenture Payments to Be Held in Trust........................... 10
SECTION 4.06 Continued Existence........................................................ 10

ARTICLE FIVE

SUCCESSORS

SECTION 5.01 When Company May Merge, Etc................................................ 10

ARTICLE SIX

DEFAULTS AND REMEDIES

SECTION 6.01 Events of Default.......................................................... 10
SECTION 6.02 Acceleration............................................................... 12
SECTION 6.03 Other Remedies............................................................. 12
SECTION 6.04 Waiver of Past Defaults.................................................... 12
SECTION 6.05 Control by Majority........................................................ 12
SECTION 6.06 Limitation on Suits........................................................ 13
SECTION 6.07 Rights of Holders to Receive Payment....................................... 13
SECTION 6.08 Collection Suit by Trustee................................................. 13
SECTION 6.09 Trustee May File Proofs of Claim........................................... 13
SECTION 6.10 Priorities................................................................. 13
SECTION 6.11 Undertaking for Costs...................................................... 14

ARTICLE SEVEN

TRUSTEE

SECTION 7.01 Duties of Trustee.......................................................... 14
SECTION 7.02 Rights of Trustee.......................................................... 15
SECTION 7.03 Individual Rights of Trustee............................................... 15
SECTION 7.04 Trustee's Disclaimer....................................................... 15
SECTION 7.05 Notice of Defaults......................................................... 15
SECTION 7.06 Reports by Trustee to Holders.............................................. 16
SECTION 7.07 Compensation and Indemnity................................................. 16
SECTION 7.08 Replacement of Trustee..................................................... 16
SECTION 7.09 Successor Trustee by Merger, etc........................................... 17
SECTION 7.10 Eligibility; Disqualification.............................................. 17
SECTION 7.11 Preferential Collection of Claims Against Company.......................... 17
</TABLE>

-iii-
<PAGE> 5

ARTICLE EIGHT

DISCHARGE OF INDENTURE

<TABLE>
<C> <S> <C>
SECTION 8.01 Termination of Company's Obligations...................................... 18
SECTION 8.02 Application of Trust Money................................................ 18
SECTION 8.03 Repayment to the Company.................................................. 18

ARTICLE NINE

AMENDMENTS

SECTION 9.01 Without Consent of Holders................................................ 19
SECTION 9.02 With Consent of Holders................................................... 19
SECTION 9.03 Compliance with Trust Indenture Act....................................... 20
SECTION 9.04 Revocation and Effect of Consents......................................... 20
SECTION 9.05 Notation on or Exchange of Debentures..................................... 20
SECTION 9.06 Trustee Protected......................................................... 20

ARTICLE TEN

SUBORDINATION

SECTION 10.01 Agreement to Subordinate.................................................. 20
SECTION 10.02 Certain Definitions....................................................... 20
SECTION 10.03 Liquidation; Dissolution; Bankruptcy...................................... 21
SECTION 10.04 Default on Senior Indebtedness............................................ 21
SECTION 10.05 Acceleration of Debentures................................................ 22
SECTION 10.06 When Distribution Must be Paid Over....................................... 22
SECTION 10.07 Notice by Company......................................................... 22
SECTION 10.08 Subrogation............................................................... 22
SECTION 10.09 Relative Rights........................................................... 23
SECTION 10.10 Subordination May Not Be Impaired by Company.............................. 23
SECTION 10.11 Distribution or Notice to Representative.................................. 23
SECTION 10.12 Rights of Trustee and Paying Agent........................................ 23

ARTICLE ELEVEN

MISCELLANEOUS

SECTION 11.01 Trust Indenture Act Controls.............................................. 23
SECTION 11.02 Notices................................................................... 24
SECTION 11.03 Communications by Holders with Other Holders.............................. 24
SECTION 11.04 Certificate and Opinion as to Conditions Precedent........................ 24
SECTION 11.05 Statements Required in Certificate or Opinion............................. 24
SECTION 11.06 Rules by Trustee and Agents............................................... 25
SECTION 11.07 Legal Holidays............................................................ 25
SECTION 11.08 No Recourse Against Others................................................ 25
SECTION 11.09 Duplicate Originals....................................................... 25
SECTION 11.10 Variable Provisions....................................................... 25
SECTION 11.11 Governing Law............................................................. 26
</TABLE>

<PAGE> 6
<TABLE>
<C> <S> <C>
SECTION 11.12 No Adverse Interpretation of Other Agreements............................. 26
SECTION 11.13 Successors................................................................ 26
SECTION 11.14 Severability.............................................................. 26
SIGNATURES .......................................................................... 27
</TABLE>

EXHIBIT A - FORM OF DEBENTURE

-v-
<PAGE> 7

INDENTURE dated as of November 7, 1996, between ENSTAR INC., a Minnesota
corporation ("Company"), and NATIONAL CITY BANK OF MINNEAPOLIS, a National
Banking Association ("Trustee").

Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's Subordinated
Debentures:

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Definitions.

"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company.

"Agent" means any Registrar, Paying Agent or co-registrar.

"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board.

"Company" means the party named as such above until a successor replaces
it and thereafter means the successor or any other obliger with respect to the
Debentures.

"Company Order" means an order signed in the name of the Company by its
Chairman of the Board, President or a Vice President, and by its Treasurer, an
Assistant Treasurer, Controller, an Assistant Controller, Secretary or an
Assistant Secretary, and delivered to the Trustee.

"Date of Issue" means the date that the Company receives the funds for the
purchase of a Debenture if such funds are received prior to 3:00 p.m. on a
business day or the next business day if the Company receives such funds on a
non-business day or after 3:00 p.m. on a business day. For this purpose, the
Company's business days will be deemed to be Monday through Friday, except on
Minnesota legal holidays.

"Debentures" means the Subordinated Debentures described above issued
under this Indenture.

"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.

"Holder" or "Certificateholder" means a person in whose name a Debenture
is registered.

"Indenture" means this Indenture as amended from time to time.

"Officers' Certificate" means a certificate signed by two officers of the
Company, one of whom must be the President, the Treasurer or a Vice-President
of the Company.

"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.

"person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

<PAGE> 8

"principal" of a debt security means the principal of the security plus
the premium, if any, on the
security.

"SEC" means the Securities and Exchange Commission.

"Stated Maturity," when used with respect to a Debenture, means the date
specified in such Debenture as the fixed date on which the principal of such
Debenture and any accrued but unpaid interest is due and payable.

"subsidiary" means any person of which at least a majority of capital
stock having ordinary voting power for the election of directors or other
governing body of such person is owned by the Company directly or through one
or more subsidiaries.

"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb) as
in effect on the date of execution of this Indenture.

"Trustee" means the party named as such above until a successor replaces
it and thereafter means the successor.

"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.

Section 1.02. Other Definitions.

Defined
in
Term Section
---- --------

"Additional Interest" 2.02(b)
"Bankruptcy Law" 6.01
"Custodian" 6.01
"Debt" 10.02
"Event of Default" 6.01
"Indebtedness" 10.01
"Legal Holiday" 11.07
"Officer" 11.10
"Representative" 10.02
"Senior Indebtedness" 10.02
"U.S. Government Obligations" 8.01

Section 1.03. Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.

The following TIA terms used in this Indenture have the following
meanings:

"indenture securities" means the Debentures;

"indenture security holder" means a Certificateholder;

"indenture to be qualified" means this Indenture;

-2-
<PAGE> 9

"indenture trustee" or "institutional trustee" means the Trustee;

"obligor" on the Debentures means the Company.

All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings assigned to them.

Section 1.04. Rules of Construction.

Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted
accounting principles in effect on the date of execution of
this Indenture;

(3) "or" is not exclusive;

(4) words in the singular include the plural, and in the plural
include the singular; and

(5) provisions apply to successive events and transactions.

ARTICLE 2

THE DEBENTURES

Section 2.01. Form and Dating.

The Debentures shall be substantially in the form of Exhibit A, with
such appropriate insertions, omissions, substitutions and other variations
required or permitted by this Indenture. The Debentures may have notations,
legends or endorsements required by law, stock exchange rule or usage.

Section 2.02. Terms.

(a) Amount Unlimited; Terms. The aggregate principal amount of
Debentures which may be authenticated and delivered under this Indenture is
unlimited. Debentures may be issued in one or more series. The initial
aggregate principal amount of the Debentures to be authenticated and delivered
under this Indenture shall be $10,000,000. The aggregate principal amount may
be increased, without the need for approval of any Holders of the Trustee by
means of Company Order, as set forth in Section 9.01.

(b) Interest. Subject to change by Company Order as provided herein,
interest on the Debentures shall be established initially by Company Order and
shall be payable at the rate set forth in such Company Order, until the
principal thereof is paid or made available for payment. After the date of the
Company Order, the rate of interest to be paid on the Debentures may be changed
from time to time by Company Order, provided that any change of interest rates
shall not alter the interest rate on Debentures issued prior to the effective
date of such Company Order. The Debentures shall bear interest from and
commencing with their Date of Issue. In addition to the rate of interest for
the Debentures as set forth below, the Company shall be obligated to make such
additional payments of

-3-
<PAGE> 10

interest, premiums or other benefits (referred to herein as "Additional
Interest") on such of the Debentures, in such amounts, in such form, on such
terms and at such times as shall be determined from time to time by Company
Order, and the Company's undertaking to pay such Additional Interest shall be an
enforceable obligation to the extent specified in the Company Order. Such
Additional Interest payments may be modified or discontinued at any time by
Company Order.

(d) Subordination. The Debentures shall be subordinated and
junior in right of payment to all Senior Indebtedness of the Company as provided
in Article 10.

Section 2.03. Execution and Authentication.

Two Officers shall sign the Debentures for the Company by manual
or facsimile signature.

If an Officer whose signature is on a Debenture no longer holds
that office at the time the Debenture is authenticated, the Debenture shall
nevertheless be valid.

A Debenture shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Debenture has been authenticated under this Indenture.

The Trustee shall authenticate Debentures for original issue up
to the aggregate principal amount as stated in the Company Order upon receipt by
the Trustee of the Company Order. The aggregate principal amount of Debentures
outstanding at any time may not exceed that amount except as provided in Section
2.08.

The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Debentures. An authenticating agent may authenticate
Debentures whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same right as an Agent to deal with the Company or
an Affiliate.

Section 2.04. Registrar and Paying Agent.

The Company shall maintain an office or agency where Debentures
may be presented for registration of transfer or for exchange ("Registrar") and
an office or agency where Debentures may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Debentures and of their
transfer and exchange. The Company may appoint one or more co-registrars and
one or more additional paying agents. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Certificateholder. The term
"Paying Agent" includes any additional paying agent. The Company shall notify
the Trustee of the name and address of any Agent not a party to this Indenture.
If the Company fails to appoint or maintain another entity as Registrar or
Paying Agent, the Trustee shall act as such. The Company or any of its
subsidiaries may act as Paying Agent or Registrar.

-4-
<PAGE> 11

Section 2.05. Paying Agent to Hold Money in Trust.

The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Certificateholders or the Trustee all money held by the Paying Agent
for the payment of principal or interest on the Debentures, and will notify the
Trustee of any failure by the Company in making any such payment. While any
such failure continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent shall have no further liability for the money. If the Company
acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Certificateholders all money held by it as Paying Agent. The
Paying Agent may charge for its expenses in issuing a replacement interest
check.

Section 2.06. Certificateholder Lists.

The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Certificateholders. If the Trustee is not the Registrar, the Company shall
timely furnish to the Trustee the changes in this list and will furnish an
updated list of the names and addresses of Certificateholders in such form and
as of such date and at such other times as the Trustee may request in writing.

Section 2.07. Transfer and Exchange.

Where Debentures are presented to the Registrar or a co-registrar
with a request to register, transfer or to exchange them for an equal principal
amount of Debentures but of other denominations, the Registrar shall register
the transfer or make the exchange if its requirements for such transactions are
met, subject to the requirement that the Debentures be issued in denominations
of $1,000 or greater. To permit registrations of transfer and exchanges, the
Company shall issue and the Trustee shall authenticate Debentures at the
Registrar's request. The Company may charge for its expenses in transferring or
exchanging a Debenture.

The Company shall not be required (i) to issue, transfer or
exchange any Debenture during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Debentures
selected for redemption pursuant to Section 4.02 and ending at the close of
business on the day of such mailing, or (ii) to transfer or exchange any
Debenture so selected for redemption in whole or in part.

Section 2.08. Replacement Debentures.

If the Holder of a Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue and the Trustee
shall authenticate a replacement Debenture if the Trustee's requirements are
met. If required by the Trustee or the Company, an indemnity bond must be
sufficient in the judgment of both to protect the Company, the Trustee, any
Agent or any authenticating agent from any loss which any of them may suffer if
a Debenture is replaced. The Trustee may waive such indemnity bond if so
instructed by the Company. The Company may charge for its expenses in replacing
a Debenture.

Every replacement Debenture is an additional obligation of the
Company.

Section 2.09. Outstanding Debentures.

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The Debentures outstanding at any time are all the Debentures
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, and those described in this Section as not outstanding.

If a Debenture is replaced pursuant to Section 2.08, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a bona fide purchaser.

If Debentures are considered paid under Section 4.01, they cease
to be outstanding and interest on them ceases to accrue.

Section 2.10. Treasury Debentures.

In determining whether the Holders of the required principal
amount of the Debentures have concurred in any direction, waiver or consent,
Debentures owned by the Company or an Affiliate shall be disregarded, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Debentures which the
Trustee knows are so owned shall be so disregarded.

Section 2.11. Temporary Debentures.

Until definitive Debentures are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Debentures. Temporary
Debentures shall be substantially in the form of definitive Debentures but may
have variations that the Company considers appropriate. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
Debentures in exchange for temporary Debentures.

Section 2.12. Cancellation.

The Company at any time may deliver Debentures to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Debentures surrendered to them for registration of transfer, exchange or
payment. The Trustee shall cancel all Debentures surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall dispose of
canceled Debentures as the Company directs. The Company may not issue new
Debentures to replace Debentures that it has paid or that have been delivered to
the Trustee for cancellation.

Section 2.13. Defaulted Interest.

If the Company fails to make a payment of interest on the
Debentures, it shall pay such interest thereafter in any lawful manner. It
shall pay such interest, plus any interest payable on it, to the persons who are
Certificateholders of Debentures on a subsequent special record date. The
Company shall fix the special record date and payment date. At least 15 days
before the special record date, the Company shall mail to Certificateholders of
Debentures a notice that states the special record date, payment date, and
amount of such interest to be paid.

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ARTICLE 3

REDEMPTION

Section 3.01 Applicability of Article.

Redemption of Debentures at the election of the Company, as
permitted or required by any provision of this Indenture, shall be made in
accordance with such provision and this Article.

Section 3.02. Notices to Trustee.

If the Company wants to redeem the Debentures pursuant to
paragraph 5 of the Debentures, it shall notify the Trustee by Officers'
Certificate of the redemption date and the principal amount of Debentures to be
redeemed. The Company shall give each notice provided for in this Section at
least fifty days before the redemption date.

Section 3.03. Selection of Debentures to Be Redeemed.

If fewer than all the Debentures are to be redeemed, the Company
shall select the Debentures to be redeemed by interest rate or maturity, and so
inform the Trustee by Officers' Certificate, subject to the remainder of this
section. If less than all of a grouping of Debentures, as specified by
Officers' Certificate, are to be redeemed, the portion thereof selected for
redemption shall be determined ratably or by lot. If fewer than all of such
grouping of Debentures as specified by Officers' Certificate are to be redeemed,
the Trustee shall then make the selection not more than 50 days before the
redemption date, from Debentures outstanding not previously called for
redemption. The Trustee may select for redemption portions of the principal of
Debentures that have denominations greater than $1,000. Provisions of this
Indenture that apply to Debentures called for redemption also apply to portions
of Debentures called for redemption. The Trustee shall notify the Company
promptly of the Debentures or portions of Debentures to be called for
redemption.

Section 3.04. Notice of Redemption.

At least 30 days but not more than 60 days before a redemption
date, the Company shall mail a notice of redemption by first-class mail to each
Holder of Debentures whose Debentures are to be redeemed.

The notice shall identify the Debentures to be redeemed and shall
state:

(1) the redemption date;

(2) the redemption price;

(3) the name and address of the Paying Agent;

(4) that Debentures called for redemption must be surrendered to
the Paying Agent to collect the redemption price; and

(5) that interest on Debentures called for redemption ceases to
accrue on and after the redemption date.

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At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.

Section 3.05. Effect of Notice of Redemption.

Once notice of redemption is mailed, Debentures called for
redemption become due and payable on the redemption date at the redemption
price.

Section 3.06. Deposit of Redemption Price.

On or before the redemption date, the Company shall deposit with
the Paying Agent, or if the Company is acting as Paying Agent it shall deposit
into a separate trust account pursuant to Section 2.05 hereof, money sufficient
to pay the redemption price of and accrued interest on all Debentures to be
redeemed on that date. The Paying Agent shall return to the Company any money
not required for that purpose, within two years following the redemption date.

Section 3.07. Debentures Redeemed in Part.

Upon surrender of a Debenture that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder a new
Debenture equal in principal amount to the unredeemed portion of the Debenture
surrendered.

Section 3.08. Redemption Option upon Death of Holder.

(a) Subject to the provisions of Article Ten and this Article
Three, upon the death of any Holder of one or more Debentures the Company shall
be required to pay up to $25,000 aggregate principal amount of, without any
premium, together with interest accrued to the redemption date on, all or such
part (in integral multiples of $100 in excess of $1,000) of the Debentures held
by the Holder of such Debentures at the date of such Holder's death, as
requested in the manner, and subject to the limitations, set forth below.
Redemption of such Debentures shall be made within 30 days following the receipt
by the Company or the Trustee of all of the following:

(1) a written request for redemption of the Debentures signed by
a duly authorized representative of the Holder, which request shall set forth
the name of the Holder, the date of death of the Holder and the principal amount
of the Debentures to be redeemed;

(2) the Debentures to be redeemed; and

(3) evidence satisfactory to the Trustee and the Company of the
death of such Holder and the authority of the representative to such extent as
may be required by the Trustee or Company.

(b) The Debentures held by the Holder shall not be entitled to
redemption pursuant to this Section unless all of the following conditions are
met:

(1) the Debentures to be redeemed have been registered in the
Holder's name since their Date of Issue; and

(2) either the Company or the Trustee has been notified in
writing of the request for redemption within 180 days after the date of the
Holder's death.

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(c) Authorized representatives of a Holder shall include the
following: executors, administrators or other legal representatives of an
estate; trustees of a trust; joint owners of Debentures owned in joint tenancy
or tenancy by the entirety; attorneys-in-fact; and other persons generally
recognized as having legal authority to act on behalf of another.

(d) If two or more persons are joint record holders of a
Debenture, the election to redeem will not apply until all record holders are
deceased, except that, if the joint holders are husband and wife, the election
may be made after the death of either spouse.

(e) The redemption of Debentures pursuant to this Section 3.08
shall be made according to the terms of Sections 3.06 and 3.07 herein.

ARTICLE 4

COVENANTS

Section 4.01. Payment of Debentures.

The Company shall pay the principal of and interest on the
Debentures on the dates and in the manner provided in the Debentures. Principal
and interest shall be considered paid on the date due if the Paying Agent holds
on that date money designated for and sufficient to pay all principal and
interest then due.

The Company shall pay interest on overdue principal at the rate
borne by the Debentures; it shall pay interest on overdue installments of
interest at the same rate to the extent lawful.

Section 4.02. SEC Reports.

The Company shall file with the Trustee within 15 days after it
files them with the SEC copies of the annual reports and of the information,
documents, and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) for the Debentures which the
Company may be required to file with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended. The Company also shall comply
with the other provisions of TIA Section 314(a).

Section 4.03. Compliance Certificate.

The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company, an Officers' Certificate stating
that a review of the activities of the Company and its subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge) and that to
the best of his or her knowledge no event has occurred and remains in existence
by reason of which payments on account of the principal of or interest, if any,
on the Debentures are prohibited. See Section 11.10.

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Section 4.04. Usury Laws.

The Company will not voluntarily claim and will actively resist
any attempts to claim the benefit of any usury laws against the Holders of the
Debentures.

Section 4.05. Money for Debenture Payments to Be Held in Trust.

Whenever the Company shall have one or more Paying Agents, it
will, on or prior to each date for the payment of the principal of or interest
on the Debentures, deposit with a Paying Agent a sum sufficient to pay the
principal or interest so becoming due, such sum to be held in trust for the
benefit of the persons entitled to such payments; and, unless such Paying Agent
is the Trustee, the Company will promptly notify the Trustee of its action or
failure so to act.

The Company will cause each Paying Agent other than the Trustee
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:

(1) hold all sums held by it for the payment of the principal of
or interest on the Debentures in trust for the benefit of the persons
entitled thereto until such sums shall be paid to such persons or otherwise
disposed of as herein provided;

(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Debentures) in the making of any payment of
principal or interest; and

(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Paying Agent.

For the purpose of obtaining the satisfaction and discharge of
this Indenture or for any other purpose, the Company may at any time pay, or
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
terms as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by the Company or any Paying Agent to the Trustee,
the Company or such Paying Agent, as the case may be, shall be released from all
further liability with respect to such money.

Section 4.06. Continued Existence.

Subject to Article 5, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence as
a corporation.

ARTICLE 5

SUCCESSORS

Section 5.01. When Company May Merge, Etc.

The Company shall not consolidate or merge with or into, or
transfer or lease all or substantially all of its assets to, any corporation,
person or entity person unless the corporation formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale or
conveyance shall have been made, assumes by supplemental indenture all the
obligations of the Company under the Debentures then outstanding and this
Indenture.

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The Company shall deliver to the Trustee prior to the proposed
transaction an Officers' Certificate to the foregoing effect and an Opinion of
Counsel stating that the proposed transaction and such supplemental indenture
comply with this Indenture.

The surviving corporation shall be the successor Company, but the
predecessor Company in the case of a transfer or lease shall not be released
from the obligation to pay the principal of and interest on the Debentures.

ARTICLE 6

DEFAULTS AND REMEDIES

Section 6.01. Events of Default.

An "Event of Default" occurs if:

(1) the Company defaults in the payment of interest on any
Debenture when the same becomes due and payable and the Default continues
for a period of 30 days;

(2) the Company defaults in the payment of the principal of any
Debenture when the same becomes due and payable at maturity, upon
redemption or otherwise, which default has not been cured;

(3) the Company fails to comply with any of its other agreements
or covenants in, or provisions of, the Debentures or this Indenture and the
Default continues for the period and after the notice specified below;

(4) the Company or any material subsidiary pursuant to or within
the meaning of any Bankruptcy Law:

(A) commences a voluntary proceeding under any such
Bankruptcy Law,

(B) consents to the entry of an order for relief against it
in an involuntary Bankruptcy proceeding,

(D) makes a general assignment for the benefit of its
creditors, or

(E) generally is unable to pay its debts as the same become
due;

(5) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:

(A) is for relief against the Company or any material
subsidiary in an involuntary Bankruptcy proceeding,

(B) appoints a Custodian of the Company or any material
subsidiary or for all or substantially all of its property, or

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<PAGE> 18

(C) orders the liquidation of the Company or any material
subsidiary, and the order or decree remains unstayed and in effect for
60 days;

(6) the maturity of any Senior Indebtedness in an amount
exceeding $500,000 is accelerated under the terms of the instrument under
which such Senior Indebtedness is outstanding, if such acceleration is not
annulled within 30 days after written notice.

The term "Bankruptcy Law" means title 11, U.S. Code or any
similar Federal or State Law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.

A Default under clause (3) is not an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Debentures notify the Company of the Default and the Company does
not cure the Default within 60 days after receipt of the notice. The notice
must specify the Default, demand that it be remedied and state that the notice
is a "Notice of Default."

Section 6.02. Acceleration.

If an Event of Default occurs and is continuing, the Trustee by notice to
the Company, or the Holders of at least 25% in principal amount of the then
outstanding Debentures, by notice to the Company and the Trustee, may declare
the principal of and accrued interest on all the Debentures to be due and
payable. Upon such declaration the principal and interest owing on the then
outstanding Debentures shall be due and payable immediately. The Holders of a
majority in principal amount of the then outstanding Debentures, by notice to
the Trustee, may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived, except nonpayment of principal or interest
that has become due solely because of the acceleration.

Section 6.03. Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal or interest on
the Debentures or to enforce the performance of any provision of the Debentures
or this Indenture.

The Trustee may maintain a proceeding even if it does not possess
any of the Debentures or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of Debentures in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.

Section 6.04. Waiver of Past Defaults.

The Holders of a majority in principal amount of the then
outstanding Debentures, by notice to the Trustee, may waive an existing Default
or Event of Default and its consequences except a continuing Default or Event of
Default in the payment of the principal of or interest on the Debentures.

Section 6.05. Control by Majority.

The Holders of a majority in principal amount of the then
outstanding Debentures may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any

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direction that conflicts with law or this Indenture, is unduly prejudicial to
the rights of other Holders of the Debentures, or would involve the Trustee in
personal liability.

Section 6.06. Limitation on Suits.

The Holder of Debentures may pursue a remedy with respect to this
Indenture or the Debentures only if:

(1) the Holder gives to the Trustee notice of a continuing Event
of Default;

(2) the Holders of at least 25% in principal amount of the then
outstanding Debentures make a request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;

(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and

(5) during such 60-day period the Holders of a majority of
principal amount of the then outstanding Debentures do not give the Trustee
a direction inconsistent with the request.

A Certificateholder may not use this Indenture to prejudice the
rights of another Holder of the Debentures or to obtain a preference or priority
over another Holder of the Debentures.

Section 6.07. Rights of Holders to Receive Payment.

Notwithstanding any other provision of this Indenture, the right
of any Holder of a Debenture to receive payment of principal and interest on the
Debenture, on or after the respective due dates expressed in the Debenture, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.

Section 6.08. Collection Suit by Trustee.

If an Event of Default specified in Section 6.01(1) or (2) occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on the Debentures with respect to which
the Event of Default occurred.

Section 6.09. Trustee May File Proofs of Claim.

The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Certificateholders allowed in any judicial proceedings relative
to the Company, its creditors or its property.

Section 6.10. Priorities.

If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:

First: to the Trustee for amounts due under Section 7.07;

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Second: to holders of Senior Indebtedness to the extent required
by Article 10;

Third: to Holders of Debentures for amounts due and unpaid on
the Debentures for principal and interest, ratably,
without preference or priority of any kind, according to
the amounts due and payable on the Debentures for
principal and interest, respectively; and

Fourth: to the Company.

The Trustee may fix a record date and payment date for any
payment to Certificateholders.

Section 6.11. Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.07, or a suit by Holders of more than 10%
in principal amount of the then outstanding Debentures.

ARTICLE 7

TRUSTEE

Section 7.01. Duties of Trustee.

(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and power vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.

(b) Except during the continuance of an Event of Default:

(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.

(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.

(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:

(1) This paragraph does not limit the effect of paragraph
(b) of this Section.

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(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.

(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.

(d) Every provision of this Indenture that in any way relates to
the Trustee is subject to paragraphs (a), (b) and (c) of this Section.

(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.

(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company. Money held in
trust by the Trustee need not be segregated from the other funds except to the
extent required by law.

Section 7.02. Rights of Trustee.

(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on the Officers' Certificate or Opinion of Counsel.

(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.

(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers.

Section 7.03. Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become
the owner or pledgee of Debentures and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11.

Section 7.04. Trustee's Disclaimer.

The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Debentures, it shall not be accountable for
the Company's use of the proceeds from the Debentures, and it shall not be
responsible for any statement in the Debentures other than its authentication.

Section 7.05. Notice of Defaults.

If a Default or Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to Holders of the Debentures
a notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment on a Debenture,

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<PAGE> 22

the Trustee may withhold the notice if and so long as a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Holders of the Debentures.

Section 7.06. Reports by Trustee to Holders.

Within 60 days after the reporting date stated in Section 11.10,
the Trustee shall mail to Certificateholders a brief report dated as of such
reporting date that complies with TIA 313(a). The Trustee also shall comply
with TIA 313(b)(2).

A copy of each report at the time of its mailing to
Certificateholders shall be filed with the SEC and each stock exchange on which
the Debentures are listed. The Company shall notify the Trustee when the
Debentures are listed on any stock exchange.

Section 7.07. Compensation and Indemnity.

The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred by it. Such expenses shall include the reasonable compensation and
out-of-pocket expenses of the Trustee's agents and counsel.

The Company shall indemnify the Trustee against any loss or
liability incurred by it except as set forth in the next paragraph. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
The Company shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.

The Company need not reimburse any expense or indemnify against
any loss or liability incurred by the Trustee through negligence or bad faith.

To secure the Company's payment of obligations in this Section,
the Trustee shall have a lien prior to the Debentures on all money or property
held or collected by the Trustee, including that held in trust to pay principal
and interest on the Debentures.

When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(4) or (5) occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

Section 7.08. Replacement of Trustee.

A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.

The Trustee may resign by so notifying the Company. The Trustee
may be removed with respect to the Debentures by the Holders of a majority in
principal amount of the then outstanding Debentures by so notifying the Trustee
and the Company. The Company may remove the Trustee if:

(1) the Trustee fails to comply with Section 7.10;

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(2) the Trustee is adjudged a bankrupt or an insolvent or any
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;

(3) a Custodian or public officer takes charge of the Trustee or
its property;

(4) the Trustee becomes incapable of action; or

(5) in the judgment of the Company, comparable services are
available from another entity qualifying under Section 7.10 at a materially
lower cost to the Company.

If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, a
successor Trustee may be appointed by act of the Holders of a majority in
principal amount of the then outstanding Debentures to replace the successor
Trustee appointed by the Company.

If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding
Debentures may petition any court of competent jurisdiction for the appointment
of a successor Trustee.

If the Trustee fails to comply with Section 7.10, any Holder of
the Debentures may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders of Debentures. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, subject to
the lien provided for in Section 7.07.

Section 7.09. Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to another
corporation, the successor corporation without any further act shall be the
successor Trustee.

Section 7.10. Eligibility; Disqualification.

This Indenture shall always have a Trustee who satisfies the
requirements of TIA 310(a)(1). The Trustee shall always have a combined capital
and surplus as stated in Section 11.10. The Trustee is subject to TIA 310(b).
Section 11.10 lists any excluded indenture or trust agreement.

Section 7.11. Preferential Collection of Claims Against Company.

The Trustee is subject to TIA 311(a), excluding any creditor
relationship described in TIA 311(b). A Trustee who has resigned or been
removed shall be subject to TIA 311(a) to the extent indicated therein.

-17-
<PAGE> 24

ARTICLE 8

DISCHARGE OF INDENTURE

Section 8.01. Termination of Company's Obligations.

This Indenture shall cease to be of further effect (except that
the Company's obligations under Sections 7.07 and 8.03 shall survive) when all
outstanding Debentures theretofore authenticated and issued have been delivered
to the Trustee for cancellation. In addition, the Company may terminate its
obligations under this Indenture if:

(a) The Debentures then outstanding mature within one year or all
of the Debentures then outstanding are to be called for redemption within one
year under arrangements satisfactory to the Trustee for giving the notice of
redemption; and

(b) The Company irrevocably deposits in trust with the Trustee
money or U.S. Government Obligations sufficient to pay principal and interest on
the Debentures then outstanding to maturity or redemption, as the case may be.
The Company may make the deposit only during the one-year period and only if
Article 11 permits it.

However, the Company's obligations in Sections 2.04, 2.05, 2.06,
2.07, 2.08, 4.01, 6.07, 6.08 and 8.03, and in Article 10, shall survive until no
Debentures are outstanding. Thereafter, only the Company's obligations in
Sections 7.07 and 8.03 shall survive.

If a deposit is made pursuant to this Section 8.01, the Trustee
upon request shall acknowledge in writing the discharge of the Company's
obligations under this Indenture, except for those surviving obligations
specified above.

In order to have money available on a payment date to pay
principal or interest on the Debentures, the U.S. Government Obligations shall
be payable as to principal or interest on or before such payment date in such
amounts as will provide the necessary money. U.S. Government Obligations shall
not be callable at the issuer's option.

"U.S. Government Obligations" means direct obligations of the
United States of America for the payment of which the full faith and credit of
the United States of America is pledged.

Section 8.02. Application of Trust Money.

The Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.01. It shall apply the
deposited money and the money from U.S. Government Obligations through the
Paying Agent and in accordance with this Indenture to the payment of principal
and interest on the Debentures. Money and Debentures so held in trust are not
subject to Article 10.

Section 8.03. Repayment to the Company.

The Trustee and the Paying Agent shall promptly pay to the
Company upon request any money or Debentures held by them at any time in excess
of amounts required to be so held hereunder.

The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal or interest that
remains unclaimed for two years. After

-18-
<PAGE> 25

payment to the Company, Certificateholders entitled to the money must look to
the Company for payment as general creditors unless an applicable abandoned
property law designates another person.

ARTICLE 9

AMENDMENTS

Section 9.01. Without Consent of Holders.

The Company and the Trustee may amend this Indenture or the
Debentures without the consent of the Holders of the Debentures by Company
Order:

(1) to cure any ambiguity, defect or inconsistency;

(2) to comply with Section 5.01;

(3) to provide for uncertificated Debentures in addition to
certificated Debentures;

(4) to increase the aggregate principal amount of Debentures
which may be authenticated and delivered under this
Indenture.

(5) to make any change that does not adversely affect the legal
rights hereunder of the Holders of the Debentures.

Section 9.02. With Consent of Holders.

The Company and the Trustee may amend this Indenture or the
Debentures with the written consent of the Holders of at least a majority in
principal amount of the then outstanding Debentures. However, without the
consent of each Certificateholder affected, an amendment under this Section may
not:

(1) reduce the amount of Debentures whose Holders must consent to
an amendment;

(2) reduce the rate of or change the time for payment of
interest, including default interest, on any issued and
authenticated Debenture;

(3) reduce the principal of or change the fixed maturity of any
Debenture;

(4) make any Debenture payable in money other than that stated in
such Debenture;

(5) make any change in Section 6.04, 6.07 or 9.02 (second
sentence);

(6) make any change in Article 10 that adversely affects the
rights of any Certificateholder.

An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of an issue of
Senior Indebtedness unless the holders of the issue pursuant to its terms
consent to the change or the change is otherwise permissible.

-19-
<PAGE> 26

After an amendment under this Section becomes effective, the
Company shall mail to the Holders of the Debentures affected by such amendment a
notice briefly describing the amendment.

Section 9.03. Compliance with Trust Indenture Act.

Every amendment to this Indenture or the Debentures shall be set
forth in a supplemental indenture that complies with the TIA as then in effect.

Section 9.04. Revocation and Effect of Consents.

Until an amendment or waiver becomes effective, a consent to it
by a Holder of a Debenture is a continuing consent by the Holder and every
subsequent Holder of a Debenture or portion of a Debenture that evidences the
same debt as the consenting Holder's Debenture, even if notification of the
consent is not made on any Debenture. However, any such Holder or subsequent
Holder may revoke the consent as to his or her Debenture or portion of a
Debenture if the Trustee receives the notice of revocation before the date the
amendment or waiver becomes effective. An amendment or waiver becomes effective
in accordance with its terms and thereafter binds every Holder of the
Debentures.

Section 9.05. Notation on or Exchange of Debentures.

The Trustee may place an appropriate notation about an amendment
or waiver on any Debenture thereafter authenticated. The Company in exchange
for all Debentures may issue and the Trustee shall authenticate new Debentures
that reflect the amendment or waiver.

Section 9.06. Trustee Protected.

The Trustee shall sign all supplemental indentures, except that
the Trustee need not sign any supplemental indenture that adversely affects its
rights.

ARTICLE 10

SUBORDINATION

Section 10.01. Agreement to Subordinate

The Company agrees, and each Certificateholder by accepting a
Debenture agrees, that the indebtedness evidenced by the Debentures is
subordinated in right of payment, to the extent and in the manner provided in
this Article, to the prior payment in full of all Senior Indebtedness, and that
the subordination is for the benefit of the holders of Senior Indebtedness.

Section 10.02. Certain Definitions.

"Indebtedness" means any indebtedness, contingent or otherwise,
in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of the Company or only to a portion thereof), or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit, or representing the balance deferred and unpaid on the purchase price of
any property or interest therein, except any such balance that constitutes a
trade payable.

"Representative" means the indenture trustee or other trustee,
agent or representative for an issue of Senior Indebtedness.

-20-
<PAGE> 27

"Senior Indebtedness" means all Indebtedness (present or future)
created, incurred, assumed or guaranteed by the Company (and all renewals,
extensions or refundings thereof), except such Indebtedness that by its terms
expressly provides that such Indebtedness is not senior or superior in right of
payment to the Debentures. Senior Indebtedness shall include the indebtedness
of North Star Universal, Inc. under that certain Indenture dated December 1,
1986 (the "1986 Indenture") between North Star Universal, Inc. and the Trustee,
and that certain Indenture dated March 16, 1989 (the "1989 Indenture"), as
supplemented on March 16, 1992 and March 16, 1995, between North Star Universal,
Inc. and the Trustee, all of which indebtedness was assumed by the Company
pursuant to supplemental indentures, dated November ____, 1996, to the 1986
Indenture and the 1989 Indenture, respectively, among the Company, North Star
Universal, Inc. and the Trustee. Notwithstanding anything herein to the
contrary, Senior Indebtedness shall not include debt of the Company to any of
its subsidiaries.

A distribution may consist of cash, Debentures or other property.

Section 10.03. Liquidation; Dissolution; Bankruptcy.

Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property:

(1) holders of Senior Indebtedness shall be entitled to receive
payment in full in cash of the principal and interest (including interest
accruing after the commencement of any such proceeding) to the date of
payment, on the Senior Indebtedness before Certificateholders shall be
entitled to receive any payment of principal or interest on Debentures; and

(2) until the Senior Indebtedness is paid in full in cash, any
distribution to which Certificateholders would be entitled but for this
Article shall be made to holders of Senior Indebtedness as their interest
may appear, except that Holders of Debentures may receive Debentures that
are subordinated to Senior Indebtedness to at least the same extent as such
Debentures.

Section 10.04. Default on Senior Indebtedness.

Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration or otherwise, all such Senior Indebtedness shall first be paid in
full, or such payment duly provided for in cash or in a manner satisfactory to
the holders of such Senior Indebtedness, before any payment is made by the
Company or any person acting on behalf of the Company on account of the
principal or interest on the Debentures.

The Company may not pay principal or interest on the Debentures
and may not acquire Debentures for cash or property other than capital stock of
the Company if:

(1) a default on Senior Indebtedness occurs and is continuing
that permits holders of such Senior Indebtedness to accelerate its
maturity, and

(2) the default is the subject of judicial proceedings or the
Company receives a notice of the default from a person who may give it
pursuant to Section 10.12. If the Company receives any such notice, a
similar notice received within nine months thereafter relating to the same
default on the same issue of Senior Indebtedness shall not be effective for
purposes of this Section.

-21-
<PAGE> 28

The Company may resume payments on the Debentures and may acquire
them when:

(a) the default is cured or waived, or

(b) 120 days pass after the notice is given if the default is not
the subject of judicial proceedings, if this Article otherwise permits the
payment or acquisition at that time.

Section 10.05. Acceleration of Debentures.

If payment of the Debentures is accelerated because of an Event
of Default, the Company shall promptly notify holders of Senior Indebtedness of
the acceleration. The Company may pay Holders of the Debentures when 120 days
pass after the acceleration occurs if this Article permits the payment at that
time.

Section 10.06. When Distribution Must be Paid Over.

In the event that, notwithstanding the provisions of Section
10.04, the Company shall make any payment to the Trustee on account of the
principal or interest on the Debentures, after the happening of a default in
payment of the principal or interest on Senior Indebtedness, or after receipt by
the Company and the Trustee of written notice as provided in Sections 10.04 and
10.12 of an Event of Default or an event which, with the passage of time or the
giving of notice or both, would constitute an Event of Default with respect to
any Senior Indebtedness, then, unless and until such Default or Event of Default
shall have been cured or waived or shall have ceased to exist, such payment
shall be held by the Trustee, in trust for the benefit of, and shall be paid
forthwith over and delivered to, the holders of Senior Indebtedness (pro rata as
to each of such holders on the basis of the respective amounts of Senior
Indebtedness held by them) or their representative or the trustee under the
indenture or other agreement (if any) pursuant to which Senior Indebtedness may
have been issued, as their respective interests may appear, for application to
the payment of all Senior Indebtedness remaining unpaid to the extent necessary
to pay all Senior Indebtedness in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.

If a distribution is made to the Holders of Debentures that
because of this Article should not have been made to them, the Holders who
receive the distribution shall hold it in trust for holders of Senior
Indebtedness and pay it over to them as their interests may appear.

Section 10.07. Notice by Company.

The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of principal
or interest on the Debentures to violate this Article, but failure to give such
notice shall not affect the subordination of the Debentures to the Senior
Indebtedness provided in this Article. Nothing in this Article 10 shall apply
to claims of, or payments to, the Trustee under or pursuant to Section 6.07.

Section 10.08. Subrogation.

After all Senior Indebtedness is paid in full and until the
Debentures are paid in full, Holders of the then outstanding Debentures shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent distributions
otherwise payable to such Holders have been applied to the payment of Senior
Indebtedness. A distribution made under this Article to holders of Senior
Indebtedness which otherwise would have

-22-
<PAGE> 29

been made to Certificateholders is not, as between the Company and
Certificateholders, a payment by the Company on Senior Indebtedness.

Section 10.09. Relative Rights.

This Article defines the relative rights of Certificateholders
and holders of Senior Indebtedness. Nothing in this indenture shall:

(1) impair, as between the Company and Certificateholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Debentures in accordance with their terms;

(2) affect the relative rights of Certificateholders and
creditors of the Company other than holders of Senior Indebtedness; or

(3) prevent the Trustee or any Certificateholder from exercising
its available remedies upon a Default or Event of Default, subject to the
rights of holders of Senior Indebtedness to receive distributions otherwise
payable to Certificateholders.

If the Company fails because of this Article to pay principal or
interest on a Debenture on the due date, the failure is still a Default or Event
of Default.

Section 10.10. Subordination May Not Be Impaired by Company.

No right of any holder of Senior Indebtedness to enforce the
subordination of the indebtedness evidenced by the Debentures shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.

Section 10.11. Distribution or Notice to Representative.

Whenever a distribution is to be made or a notice given to
holders of Senior Indebtedness, the distribution may be made and the notice
given to their Representative.

Section 10.12. Rights of Trustee and Paying Agent.

The Trustee or Paying Agent may continue to make payments on the
Debentures until it receives notice of facts that would cause a payment of
principal or interest on the Debentures to violate this Article. Only the
Company, a Representative or a holder of an issue of Senior Indebtedness that
has no Representative may give the notice.

The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.

ARTICLE 11

MISCELLANEOUS

Section 11.01. Trust Indenture Act Controls.

If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.

-23-
<PAGE> 30

Section 11.02. Notices.

Any notice by the Company or the Trustee to the other is duly
given if in writing and delivered in person or mailed by first-class mail to the
other's address stated in Section 11.10. The Company or the Trustee by notice
to the other may designate additional or different addresses for subsequent
notices or communications.

Any notice to a Certificateholder shall be mailed by first-class
mail to the address shown on the register kept by the Registrar or such other
name and addresses as provided to Trustee pursuant to TIA 313(c)(2) and (3).
Failure to mail a notice or communication to a Certificateholder or any defect
in it shall not affect its sufficiency with respect to other Certificateholders.

If a notice is mailed in the manner provided above within the
time prescribed, it is duly given, whether or not the addressee receives it.

It the Company mails a notice to Certificateholders, it shall
mail a copy to the Trustee and each Agent at the same time.

All other notices shall be in writing.

Section 11.03. Communication by Holders with Other Holders.

Certificateholders may communicate pursuant to TIA 312(b) with
other Certificateholders with respect to their rights under this Indenture or
the Debentures. The Company, the Trustee, the Registrar and anyone else shall
have the protection of TIA 312(c).

Section 11.04. Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:

(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and

(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.

Section 11.05. Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:

(1) a statement that the person making such certificate or
opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;

-24-
<PAGE> 31

(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and

(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.

Section 11.06. Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or a meeting
of Certificateholders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.

Section 11.07. Legal Holidays.

A "Legal Holiday" is a Saturday, a Sunday or a day on which
banking institutions are not required to be open. If a payment date is a Legal
Holiday at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.

Section 11.08. No Recourse Against Others.

All liability described in the Debentures of any director,
officer, employee or stockholder, as such, of the Company is waived and
released.

Section 11.09. Duplicate Originals.

The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.

Section 11.10. Variable Provisions.

"Officer" means the President, any Vice President, the Treasurer,
the Secretary, any Assistant Treasurer or any Assistant Secretary of the
Company.

The Company initially appoints itself as Paying Agent and
Registrar.

The first certificate pursuant to Section 4.03 shall be for the
fiscal year ending on December 31, 1996.

The reporting date for Section 7.06 is May 15 of each year. The
first reporting date is May 15, 1997.

The trustee shall always have a combined capital and surplus of
at least $10,000,000 as set forth in its most recent published annual report of
conditions.

The Company's address is:

ENSTAR INC.
6479 City West Parkway
Eden Prairie, Minnesota 55344

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<PAGE> 32

The Trustee's address is:

651 Nicollet Mail
Minneapolis, Minnesota 55402
Attention: Corporate Trust Department

Section 11.11. Governing Law.

The internal laws of the State of Minnesota shall govern this
Indenture and the Debentures.

Section 11.12. No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or a subsidiary. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.

Section 11.13. Successors.

All agreements of the Company in this Indenture and the
Debentures shall bind its successor. All agreements of the Trustee in this
Indenture shall bind its successor.

Section 11.14. Severability.

In case any provision in this Indenture or the Debentures shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

-26-
<PAGE> 33

SIGNATURES

Dated: as of November 7, 1996 ENSTAR INC.

Its By:
--------------------------- ----------------------------

Dated: as of November 7, 1996 NATIONAL CITY BANK OF MINNEAPOLIS

Its By:
--------------------------- ----------------------------

Attest:

-------------------------
Trust Officer

-27-

<PAGE> 1
EXHIBIT 4.2

================================================================

ENSTAR INC.

Subordinated Debentures

---------------------------

FIRST SUPPLEMENTAL INDENTURE

Dated as of March ___, 1997

INDENTURE

Dated as of November 7, 1996

---------------------------

National City Bank of Minneapolis

Trustee

================================================================
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of March __, 1997, to Indenture,
dated as of November 7, 1996, by and between ENStar Inc., a corporation duly
organized and existing under the laws of the state of Minnesota having its
principal office at 6479 City West Parkway, Eden Prairie, Minnesota 55346
(herein called the "Company") and National City Bank of Minneapolis, a
corporation organized and existing under the laws of the state of Minnesota
having its principal office at 651 Nicollet Mall, Minneapolis, Minnesota
(herein called the "Trustee").

RECITAL.

The Company and the Trustee have heretofore executed and delivered that
certain Indenture, dated as of November 7, 1996 (herein referred the
"Indenture"), pursuant to which one or more series of subordinated debentures
(herein referred to as the "Debentures") have been and may be issued from time
to time. All terms used, but not otherwise defined, in this First Supplemental
Indenture shall have the meanings assigned to such terms in the Indenture.

The Company desires to amend the Indenture in order to increase the
aggregate principal amount of Debentures that may be issued pursuant to the
Indenture from $10,000,000 to $35,000,000.

Section 9.01 of the Indenture provides that Indenture may be amended
by the Company and the Trustee, without the consent of the Holders of
Debentures, to increase the aggregate principal amount of the Debentures that
may be authenticated and delivered under the Indenture.

All things necessary to make this First Supplemental Indenture a valid
and binding agreement of the Company and the Trustee and a valid amendment of
and supplement to the Indenture have been done.

NOW, THEREFORE, WITNESSETH:

For and in consideration of the premises and the purchase of the
Debentures by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Debentures, as follows:

ARTICLE ONE

Section 2.02 of the Indenture is hereby amended to increase the
aggregate principal amount of the Debentures that may be authenticated and
delivered under the Indenture from $10,000,000 to $35,000,000.

1
<PAGE> 3
ARTICLE TWO

Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect.

This First Supplemental Indenture shall form a part of the Indenture for
all purposes, and every Holder of Debentures heretofore or hereafter
authenticated and delivered shall be bound hereby.

ARTICLE THREE

The Trustee makes no representation as to the validity or sufficiency
of this First Supplemental Indenture.

ARTICLE FOUR

The internal laws of the State of Minnesota shall govern this First
Supplemental Indenture.

ARTICLE FIVE

The First Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
instrument.

IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.

ENSTAR INC.

By
------------------
Name:
Title:

ATTEST NATIONAL CITY BANK OF
MINNEAPOLIS

By By
------------------------------ -------------------------
Trust Officer Name:
Title:

-2-

<PAGE> 1
EXHIBIT 5.1

[Letterhead of Dorsey & Whitney LLP]

March 25, 1997

ENStar Inc.
6479 City West Parkway
Eden Prairie, Minnesota 55344

Ladies and Gentlemen:

We have acted as counsel to ENStar Inc. (the "Company") in connection with
the filing of a Registration Statement on Form S-1 (the "Registration
Statement") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, relating to $25 million aggregate principal amount of
the Company's Subordinated Debentures (the "Debentures") to be issued pursuant
to an Indenture, dated as of November 7, 1996, as amended (the "Indenture"),
between the Company and National City Bank of Minneapolis, a national banking
association, as trustee.

We have examined such documents and reviewed such questions of law as we
have considered necessary and appropriate for the purposes of this opinion.

In rendering our opinion set forth below, we have assumed the authenticity
of all documents submitted to us as originals, the genuineness of all
signatures and the conformity to the authentic originals of all documents
submitted to us as copies. We have also assumed the legal capacity for all
purposes relevant hereto of all natural persons and, with respect to all
parties to agreements or instruments relevant hereto other than the Company,
that such parties had the requisite power and authority (corporate or
otherwise) to execute, deliver and perform such agreements or instruments, that
such agreements or instruments have been duly authorized by all requisite
action (corporate or otherwise), executed and delivered by such parties and
that such agreements or instruments are the valid, binding and enforceable
obligations of such parties. As to questions of fact material to our opinion,
we have relied upon certificates of officers of the Company and of public
officials.

Based upon the foregoing, we are of the opinion that the Debentures, upon
issuance in accordance with the Indenture and payment in accordance with the
terms of the applicable subscription agreement, will constitute valid and
binding obligations of the Company, enforceable in accordance with their terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium

<PAGE> 2
ENStar Inc.
Page 2

and other laws relating to or affecting the enforcement of creditors' rights
generally or by general principles of equity.

Our opinion expressed above is limited to the laws of the State of
Minnesota.

We consent to your filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading
"Legal Matters" in the Prospectus included therein.

Very truly yours,

/S/ DORSEY & WHITNEY LLP

JAH

<PAGE> 1
EXHIBIT 10.9

AMERICABLE, INC.
1996 STOCK OPTION PLAN

1. PURPOSE OF PLAN

This Plan shall be known as the "AMERICABLE, INC. 1996 STOCK OPTION PLAN"
and is hereinafter referred to as the "Plan." The purpose of the Plan is to
aid in maintaining and developing personnel capable of assuring the future
success of Americable, Inc., a Minnesota corporation (the "Company") and
wholly-owned subsidiary of North Star Universal, Inc., a Minnesota corporation
("North Star"), to enhance the Company's ability to attract and retain the
services of experienced and knowledgeable key executives and other persons who
perform services for the Company from time to time, to offer such personnel
additional incentives to put forth maximum efforts for the success of the
business, and to afford them an opportunity to acquire a proprietary interest
in the Company through stock purchase options as provided herein. Options
granted under the Plan ("Stock Options") are not intended to be incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").

2. STOCK SUBJECT TO PLAN

Subject to Section 10 hereof, the stock to be subject to Stock Options
under the Plan shall be the Company's authorized shares of common stock, par
value $.01 per share (the "Common Stock"). Such shares may be either
authorized but unissued shares or issued shares that have been reacquired by
the Company. Subject to adjustment as provided in Section 10 hereof, the
maximum number of shares which may be issued under all Stock Options granted
pursuant to the Plan shall be equal to Six Hundred Thousand (600,000) shares.
If a Stock Option expires, or for any reason is terminated or unexercised with
respect to any shares, such shares shall again be available for Stock Options
thereafter granted during the term of the Plan.

3. ADMINISTRATION OF PLAN

(a) The Plan shall be administered by the Board of Directors of the
Company.

(b) The Board of Directors of the Company shall have plenary authority in
its discretion, but subject to the express provisions of the Plan: (i) to
determine the persons to whom and the time or times at which Stock Options
shall be granted and the number of shares to be subject to each, (ii) to
determine the terms
<PAGE> 2

and conditions of each Stock Option, (iii) to accelerate the time at which all
or any part of a Stock Option may or must be exercised, (iv) to amend or modify
the terms of any Stock Option with the consent of the optionee, (v) to
interpret the Plan, (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan, (vii) to exercise the Company's rights under the Plan,
(viii) to make all other determinations necessary or advisable for the
administration of the Plan and (ix) to amend or terminate the Plan pursuant to
Section 14 herein. The Board of Directors' determinations on the foregoing
matters shall be final and conclusive.

4. ELIGIBILITY FOR PARTICIPATION

Stock Options may only be granted under this Plan to full-time employees
and members of the Board of Directors of the Company (regardless of whether
such members of the Board of Directors are employees (full or part-time) of the
Company). In determining the persons to whom Stock Options shall be granted and
the number of shares subject to each, the Board of Directors may take into
account the nature of services rendered by such persons, their present and
potential contributions to the success of the Company and such other factors as
the Board of Directors in its discretion shall deem relevant. A person who has
been granted a Stock Option under the Plan may be granted additional Stock
Options under the Plan, if the Board of Directors shall so determine. Nothing
in the Plan or in any agreement thereunder shall confer on any employee any
right to continue in the employ of the Company or affect, in any way, the right
of the Company to terminate his or her employment at any time.

5. TERMS AND CONDITIONS OF OPTIONS

Stock Options granted pursuant to the Plan shall be authorized by action
of the Board of Directors and shall be evidenced by written stock option
agreements in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the terms and
conditions of the Plan. The grant of a Stock Option shall be effective only if
a written option agreement shall have been duly executed and delivered by and
on behalf of the Company following such grant. Nothing contained in the Plan
or in any resolution adopted or to be adopted by the Board of Directors or by
the shareholders of the Company, and no action taken by the Board of Directors
(other than the execution and delivery of an option agreement), shall
constitute the granting of a Stock Option hereunder.

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<PAGE> 3

6. OPTION PRICE

The option price per share for any Stock Option granted pursuant to the
Plan shall be not less than 100% of the fair value of a share of Common Stock
as determined by the Board of Directors or as set forth in the related option
agreement.

7. TERM AND VESTING

Each Stock Option granted hereunder shall expire on the date determined by
the Board of Directors and specified in the option agreement. The Board of
Directors shall be under no duty to provide terms of like duration for Stock
Options granted under the Plan, but the term of a Stock Option may not extend
more than ten (10) years from the date of grant of such option.

8. EXERCISE OF OPTION

(a) Except as otherwise provided for in the Plan, the Board of Directors
shall have full and complete authority to determine whether a Stock Option will
be exercisable in full at any time or from time to time during the term
thereof, or to provide for the exercise thereof in such installments, upon the
occurrence of such events (such as termination of employment for any reason)
and at such times during the term of the Stock Option as the Board of Directors
may determine and specify in the option agreement.

(b) The exercise of any Stock Option shall only be effective at such time
as counsel to the Company shall have determined that the issuance and delivery
of shares pursuant to such exercise will not violate any state or federal
securities or other laws and may otherwise be limited by the Company in order
to maintain compliance with state and federal securities laws.

9. MANNER OF EXERCISE OF OPTION

(a) A Stock Option may be exercised only by the optionee, or his or her
legal representative in the case of death or disability, by delivering written
notice to the Company at its principal office. The notice shall state the
number of whole shares as to which the Stock Option is being exercised and be
accompanied by payment in full of the option price for all shares designated by
the notice. Payment shall be in cash or certified check or in such other form
as is acceptable to the Company, including, but not limited to, a promissory
note issued by the optionee.

(b) No person shall have any rights as a shareholder with respect to any
shares of capital stock of the Company until a stock certificate evidencing
such shares shall have been issued to such optionee upon exercise of a Stock
Option.

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<PAGE> 4

10. DILUTION OR OTHER ADJUSTMENTS

If there shall be any change in the shares of the Company's Common Stock
through merger, consolidation, reorganization, recapitalization, stock dividend
(of whatever amount), stock split or other change in the corporate structure,
appropriate adjustments in the Plan and outstanding options shall be made by
the Board of Directors. In the event of any such changes, adjustments may
include, where appropriate, changes in the aggregate number of shares subject
to the Plan, and changes in the number of shares and the price per share
subject to outstanding options, in order to prevent dilution or enlargement of
option rights.

11. NO RESTRICTIONS ON DIVIDENDS, COMPANY'S ACCOUNTING OR BUSINESS OPERATIONS

(a) Except as otherwise provided for herein, neither the Plan nor any
Stock Option granted pursuant hereto shall be interpreted as imposing any
restrictions on the right of the Company to: (i) pay dividends, on such terms
as the Company's Board of Directors may determine, (ii) issue additional equity
or make other distributions with respect to its capital stock, (iii) borrow
money from or have business dealings with North Star, its affiliates and any
successors to North Star, or (iv) adopt or modify any accounting or business
practices.

(b) The Company shall be under no obligation to pay dividends at any time
or in any amount with respect to its capital stock.

12. ADDITIONAL RESTRICTIONS

The Board of Directors shall have full and complete authority to determine
whether all or any part of the shares acquired upon exercise of any of the
Stock Options granted under the Plan shall be subject to additional
restrictions not set forth herein on the transferability thereof or any other
restrictions affecting in any manner the optionee's or the Company's rights
with respect thereto, but any such restrictions shall be contained in the
option agreements relating to such Stock Options.

13. AVAILABLE SHARES

The Company shall at all times when any Stock Option remains outstanding
reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the terms of any and all outstanding Stock Options and
the related option agreements.

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<PAGE> 5

14. AMENDMENT OR DISCONTINUANCE OF PLAN

The Board of Directors of the Company may discontinue the Plan at any time
or from time to time may amend or modify any of the provisions of the Plan; and
the Board of Directors may make any administrative changes to the Plan
consistent therewith. The Board of Directors shall not alter or impair any
Stock Option theretofore granted under the Plan without the consent of the
holder of the Stock Option.

15. GOVERNING LAW

The internal law, and not the law of conflicts, of the State of Minnesota
will govern all questions concerning the construction, validity and
interpretation of the Plan and any agreements in connection with any Stock
Option granted under the Plan and the performance of any obligations imposed by
any such agreements.

16. EFFECTIVE DATE AND TERMINATION OF PLAN

(a) The Plan was adopted by the Board of Directors on September 30, 1996.

(b) Unless the Plan shall have been discontinued as provided in Section 14
hereof, the Plan shall expire ten years after the date set forth in paragraph
(a) above. No Stock Option may be granted after such expiration, but
expiration or termination of the Plan shall not, without the consent of the
optionee, alter or impair any rights or obligations under any Stock Option
theretofore granted.

17. REORGANIZATION

North Star is a party to that certain Reorganization Agreement, dated
December 21, 1995, among North Star, NSU Merger Co., a Delaware corporation
("Merger Co."), and Michael Foods, Inc., a Delaware corporation ("Michael"),
pursuant to which it is presently anticipated that (i) the currently
outstanding shares of Common Stock will be contributed to ENStar Inc., a
Minnesota corporation and a wholly owned subsidiary of North Star ("ENStar"),
(ii) Merger Co. will be merged with and into Michael and (iii) the outstanding
common stock of ENStar, all of which is currently owned by North Star, will be
distributed to the holders of the common stock of North Star (the
"Distribution"). After the contribution of the Company's Common Stock to
ENStar, the Company will be a subsidiary of ENStar. Following the
Distribution, EnStar will be a public company. All references herein to North
Star shall be deemed to refer to ENStar following the Distribution, if it is
effected.

-5-
<PAGE> 6

STOCK OPTION AND REPURCHASE AGREEMENT

This Stock Option Agreement (this "Agreement") is made as of the _____ day
of ________, 199__, by and between Americable, Inc., a Minnesota corporation
(the "Company"), and ______________ ("Employee"), a resident of ___________.

W I T N E S S E T H:

WHEREAS, as of the date hereof, all of the outstanding shares of the
Company's common stock, $.01 par value per share (the "Common Stock"), are held
by ENStar Inc. ("ENStar"), a Minnesota corporation and wholly owned subsidiary
of North Star Universal, Inc., a Minnesota corporation ("North Star");

WHEREAS, North Star is a party to that certain Reorganization Agreement,
dated December 21, 1995 (the "Reorganization Agreement"), among North Star, NSU
Merger Co., a Delaware corporation ("Merger Co."), and Michael Foods, Inc.
("Michael"), pursuant to which it is presently anticipated that (i) Merger Co.
will be merged with and into Michael and (ii) the outstanding common stock of
ENStar, all of which is currently owned by North Star, will be distributed to
the holders of the common stock of North Star (the "Distribution");

WHEREAS, following the Distribution, ENStar will be a public company (for
purposes of this Agreement, "Parent Company" shall refer to North Star, the
ultimate parent of the Company prior to the Distribution, and after the
Distribution shall refer to ENStar or any other entity that is the owner of a
majority of the Company's outstanding Common Stock);

WHEREAS, the Company currently owns all of the outstanding capital stock
of Transition Engineering, Inc. ("Transition") and, in connection with the
Distribution, North Star or Enstar may also contribute to the Company up to
1,225,000 shares of common stock of CorVel Corporation (the "CorVel Stock");

WHEREAS, the Company has adopted the Americable, Inc. 1996 Stock Option
Plan (the "Plan");

WHEREAS, Employee is a full-time employee of the Company;

WHEREAS, as an additional incentive to Employee, and in consideration of
the noncompete, nondisclosure and other covenants made by Employee in Sections
11 through 15 herein, the Company wishes to enter into this Agreement whereby
Employee is awarded an option to purchase shares of Common Stock pursuant to
the Plan; and

<PAGE> 7

WHEREAS, this Agreement is intended to advance the interests of the
Company and its Parent Company by encouraging and enabling Employee to acquire
and retain a proprietary interest in the Company by ownership of its Common
Stock.

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereto agree as follows.

1. Grant of Option. The Company hereby grants to Employee, on the date
set forth above (the "Date of Grant"), the right and option (hereinafter called
"the Option") to purchase up to _______________ (_______) shares of the
Company's Common Stock (the "Shares") at the option exercise price of
Eighty-Two Cents ($.82) per share (the "Option Exercise Price"), on the terms
and subject to the conditions set forth herein. The Option is not intended to
be an incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").

2. Duration and Exercisability.

(a) Exercise Dates. The Option shall in all events terminate at the close
of business on the tenth (10th) anniversary of the Date of Grant. Subject to
the other terms and conditions set forth herein, the Option may be exercised by
Employee in cumulative installments as follows:

<TABLE>
<CAPTION>
On or after each of Cumulative percentage
the following anniversaries of shares as to which
of the Date of Grant Option is exercisable
--------------------------- ---------------------
<S> <C>

First 20%
Second 40%
Third 60%
Fourth 80%
Fifth 100%
</TABLE>

(b) Full-time Employment Necessary. Except as provided in Section4(a),
Employee must be a full-time employee of the Company from the Date of Grant
through each of the exercise dates specified in subsection (a) above, in order
to exercise the Option with respect to the applicable Shares on each respective
exercise date.

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<PAGE> 8

(d) Vesting of Shareholder Rights. Neither Employee nor
the legal representative of the estate of Employee ("Employee's Successor")
shall have any of the rights of a shareholder of the Company until Employee or
Employee's Successor exercises the Option or portion thereof as provided herein
and pays the full consideration for all Shares purchased, and a stock
certificate evidencing the Shares purchased shall have been issued to Employee.

(e) Nontransferability of Option. The Option shall not be transferable or
assignable by Employee, otherwise than by will or by laws of descent and
distribution, and the Option and each portion thereof shall be exercisable,
during Employee's lifetime, only by Employee. The Option shall not be pledged
or hypothecated in any way, and the Option shall not be subject to execution,
attachment, or similar process.

3. Adjustments.

(a) In the event that following a recapitalization, reclassification,
stock split-up, combination of shares, or dividend or other distribution
payable in capital stock of the Company, the outstanding shares of Common Stock
of the Company are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares of other securities of the
Company or of another corporation, appropriate adjustment shall be made by the
Board of Directors of the Company in the number and kind of shares as to which
this Option, or portions thereof then unexercised, shall be exercisable, to the
end that the proportionate interest of the holder of the Option shall, to the
extent practicable, be maintained as before the occurrence of such event. Such
adjustment in outstanding options shall be made without change in the total
price applicable to the unexercised portion of the Option, but with a
corresponding adjustment in the Option Exercise Price per share. No adjustment
shall be made on account of any dividend or other distribution of some or all
of the shares of CorVel Stock or some or all of the shares, assets or business
of Transition or any of its subsidiaries.

(b) In the event of the dissolution or liquidation of the Company, the
Option granted under this Agreement shall terminate as of the effective date of
such dissolution or liquidation, as determined by the Board of Directors of the
Company.

(c) Upon the occurrence of a Corporate Transaction, as hereinafter
defined, in the sole and absolute discretion of the Board of Directors of the
Company, the vesting of all or a portion of the Option may be
accelerated and this Option may immediately be converted into the right to
receive from the Company or, at the Company's option, the Company's Parent
Company any of the various forms of consideration described in Section 8(d)
hereof in an amount equal to the product of the number of Shares that Employee
then has the right to purchase

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<PAGE> 9

pursuant to the exercise of this Option times the difference of (i) the "Fair
Value" per share, as hereinafter defined, minus (ii) the Option Exercise
Price per share.

(d) If the Company is a party to any merger or other business combination
where the Company is not the surviving corporation, then this Option, if
outstanding immediately after such merger or other business combination, shall
be appropriately adjusted, by the Board of Directors of the surviving entity,
to apply and pertain to the number and class of securities that would be
issuable to Employee in the consummation of such merger or business combination
if the Option were exercised immediately prior to such merger or business
combination, and appropriate adjustments shall also be made to the Option
Exercise Price per Share, provided the aggregate Option Exercise Price payable
hereunder shall remain the same.

(e) This Agreement shall not in any way affect the right of the Company to
adjust, reclassify, reorganize or otherwise make changes in its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

(f) "Corporate Transaction" shall mean a sale, exchange or other
disposition of all or substantially all of the shares of Common Stock or assets
of the Company (excluding its interest in the CorVel Stock and in Transition
and its subsidiaries) or other similar transaction whereby (i) Parent Company
receives cash, stock or other property with respect to its equity interest in
the Company and (ii) Parent Company's interest in the Common Stock or assets of
the Company (excluding its interest in the CorVel Stock and in Transition and
its subsidiaries) is reduced to less than fifty percent (50%) of the total
interest of all persons or entities in such Common Stock or assets. Corporate
Transactions shall not include any transaction or reorganization pursuant to
the Reorganization Agreement, or any sale or transaction involving an affiliate
of the Company or the Parent Company.

(g) "Fair Value" shall be determined by dividing (i) the product of (A)
the average of the pre-tax operating income of the Company for each of its last
three full fiscal years determined without taking into account the pre-tax
operating income (or loss) from the Company's interest, if any, in (x) the
CorVel Stock or (y) Transition and its subsidiaries (which shall be calculated
based on the financial statements of the Company used in the ordinary course of
its business and in accordance with the accounting practices and procedures
then employed by the Company, regardless of whether such accounting practices
are employed by the Company on the Date of Grant or are consistent with or
permitted by generally accepted accounting principles) times (B) six by (ii)
the total number of outstanding shares of Common Stock of the Company. If (i)
at the time of any determination of the Fair Value of the Company's Common
Stock, there are outstanding stock options, warrants or other rights to acquire
Common Stock that are currently

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<PAGE> 10

exercisable or that will become exercisable in connection with the transaction
under consideration and (ii) the consideration to be received by the Company
upon the exercise of such options, warrants or rights is less than the Fair
Value per share of the Common Stock, as determined above, then the Fair Value
shall be recalculated by adding to the product determined pursuant to (A)
above, the aggregate amount of the consideration that the Company would receive
upon the exercise of all such "in-the-money" options, warrants and rights and
by adding to the number of then outstanding shares of Common Stock of the
Company described in clause (B) above, the number of shares that would be
acquired upon the exercise of all such "in-the-money" options, warrants and
rights, and the "Fair Value" shall be equal to such recalculated amount.
Notwithstanding the foregoing, in the event that this Option is converted into
the right to receive certain consideration therefor pursuant to Section 3(c)
above, or the "Repurchase Option," as hereinafter defined, is exercised in
connection with a Corporate Transaction pursuant to Section 8(a), then the
Fair Value shall be the value per share attributable to the Company's Common
Stock, excluding the Company's interest, if any, in the CorVel Stock and in
Transition and its subsidiaries, as reasonably determined by the Board of
Directors of the Company based on the consideration received by, or to be
received by the Company's Parent Company in such Corporate Transaction.
Employee acknowledges and agrees that the purpose of this option is to allow
Employee to benefit from the increase in value of the business of the Company,
and not from any increase in the value of the CorVel Stock or the business of
Transition and its subsidiaries, which may be owned by the Company from time to
time in the future for reasons unrelated to the business of the Company.

4. Effect of Termination of Employment.

(a) In the event that Employee shall cease to be employed by the Company
for any reason including death or disability within the meaning of
Section 22(e)(3) of the Code ("Disability"), but other than "Termination for
Cause," as hereinafter defined, then the Company shall permit Employee, or
Employee's Successor to exercise at any time within ninety (90) days after the
date of termination that portion of the Option that was exercisable at the time
of such termination of employment; provided, however, that the Option may not
be exercised after the original expiration date thereof.

(b) In the event that Employee shall cease to be employed by the Company
by reason of Employee's Termination for Cause, any unexercised portions of any
Stock Options held by the Employee (whether or not otherwise currently
exercisable) shall be immediately terminated and any shares of the Company's
capital stock previously issued upon exercise of any Stock Options shall be
subject to immediate repurchase by the Company. Notwithstanding anything
herein to the contrary, the Company's sole obligation in such cases shall be to
pay the Employee a

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<PAGE> 11

price per share equal to the Option Exercise Price paid for such shares by
the Employee.

(c) Definition of Termination for Cause. "Termination for Cause" shall
mean termination of Employee's employment by the Company upon a determination
by the Board of Directors that Employee (i) has breached this Agreement in any
material respect, which breach is not cured by Employee or is not capable of
being cured by Employee within ten (10) days after written notice of such
breach is delivered to Employee, (ii) has engaged in willful and material
misconduct, including willful and material failure to perform Employee's duties
as an officer or employee of the Company and including illegal or dishonest
acts, or (iii) has breached Employee's duty of loyalty to the Company.

5. Method of Exercising Option.

(a) The Option can only be exercised by Employee or Employee's Successor,
by delivering a timely written notice to the Company at its principal office.
The notice shall state the number of whole shares as to which the Option is
being exercised and be accompanied by payment in full of the Option Exercise
Price for all shares designated by the notice. Payment shall be in cash or
certified check or in such other form as is acceptable to the Board of
Directors, in its discretion and subject to such terms and conditions as it may
adopt, including but not limited to, a promissory note issued by the Employee.

(b) In order to comply with all applicable federal or state income tax
laws or regulations, the Company may take such action as it deems appropriate
to ensure that all applicable federal or state payroll, withholding, income or
other taxes, which are the sole and absolute responsibility of Employee, are
withheld or collected from Employee. In order to assist Employee in paying all
or a portion of the federal and state taxes to be withheld or collected upon
exercise of the Option, the Board of Directors, in its discretion and subject
to such additional terms and conditions as it may adopt, may permit Employee to
satisfy such tax obligation by (i) electing to have the Company withhold a
portion of the shares otherwise to be delivered upon exercise of the Option
with a Fair Value equal to the amount of such taxes, (ii) delivering to the
Company shares of Common Stock other than the shares issuable upon such
exercise with a Fair Value equal to the amount of such taxes, or (iii) delivery
to the Company of a promissory note issued by the Employee in form and with
such terms as may be acceptable to the Company.

(c) The exercise of the Option and the issuance of Shares upon such
exercise shall be subject to compliance by the Company and Employee with all
applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange on which shares of the Company's Common Stock
may be listed at the time of such exercise and issuance.

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<PAGE> 12

6. Investment Representations.

(a) Employee hereby warrants and represents that, upon exercise of the
Option by Employee or Employee's Successor, Employee or Employee's Successor
will acquire the Shares for Employee's or Employee's Successor's own account
and not with a view to their resale or distribution and will be prepared to
hold the Shares for an indefinite period. Employee hereby acknowledges the
fact that the Shares have not been and, upon exercise of the Option, will not
be registered under the Securities Act of 1933, as amended (the "1933 Act"),
and that, upon exercise of the Option, the Company will issue the Shares to
Employee in reliance on the representations made by Employee herein.

(b) Employee hereby confirms that Employee has been informed that the
Shares may not be resold or transferred unless they are first registered under
the Federal securities laws or unless an exemption from such registration is
available. Accordingly, Employee hereby acknowledges that, upon exercise of
the Option, Employee will be prepared to hold the Shares for an indefinite
period. Employee further acknowledges that Employee is aware that Rule 144,
as promulgated under the 1933 Act is not presently available to exempt the sale
of the Shares from the registration requirements of the 1933 Act and may not be
available at the time that Employee exercises the Option. Should Rule 144
subsequently become available, Employee is aware that any sale of the Shares
effected pursuant to Rule 144 may, depending upon the status of Employee as an
"affiliate" or "non-affiliate" under the rule, be made only in limited
amounts in accordance with the provisions of Rule 144, and that in no event may
any Shares be sold pursuant to Rule 144 until Employee has held the Shares for
the requisite holding period following payment of the Exercise Price for the
Shares.

7. Restrictions on Sale or Transfer.

Until such time as the Company has successfully completed a public
offering of its Common Stock registered with the Securities and Exchange
Commission or the securities division of any state, or an offering made to the
public pursuant to an exemption from registration (an "Initial Public
Offering"), neither Employee nor Employee's Successor shall dispose of,
encumber, or transfer any of the Company's Shares now owned or in the future
acquired, without the Company's prior written consent, except upon the death of
Employee and then any such transfer shall be made solely to Employee's
Successor. Any purported transfer or disposition of Shares in violation of the
terms of this Agreement shall be void, and the Company shall not recognize or
give any effect to such transaction. Further, upon any attempted transfer or
disposition of any Shares in violation of this Agreement, the Company shall
thereafter have the right at any time to repurchase such Shares.
Notwithstanding anything herein to the contrary, the Company's sole obligation
in any such case shall be to pay the Employee or Employee' Successor a

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<PAGE> 13

price equal to the Option Exercise Price paid for such Shares by the Employee
or Employee's Successor.

8. Repurchase Option.

(a) As a condition to and in connection with the grant of this Stock
Option, Employee shall give and grant to the Company an irrevocable right and
option (the "Repurchase Option") to purchase all and not less than all of the
shares of capital stock of the Company of whatever class or series owned at any
time by the Employee. The Repurchase Option shall be exercisable by the
Company as hereinafter provided: (i) within one hundred and twenty (120) days
following Employee's termination of employment with the Company for any reason
whatsoever, (ii) upon the occurrence of a Corporate Transaction, or (iii)
within one hundred and twenty (120) days following discovery by the Company of
conduct giving rise to the remedy provided for in Section 13(f) hereof.

(b) To exercise the Repurchase Option, the Company shall provide written
notice thereof by registered mail to Employee, which notice shall specify the
number of shares of capital stock of the Company subject to purchase and a
request for the surrender of all certificate(s) evidencing such shares.
Within five (5) days after the receipt by Employee, Employee or his or her
legal representative shall deliver the certificate or certificates evidencing
the number of shares the Company has elected to purchase, duly endorsed in
blank or accompanied by an assignment, which is separate from the stock
certificate, duly endorsed in blank.

(c) The purchase price to be paid per share for shares acquired by the
Company pursuant to the Repurchase Option, other than shares surrendered
pursuant to Sections 4(b), 7 or 13(f), shall be the Fair Value thereof.

(d) The purchase price for any shares payable pursuant to the Repurchase
Option shall be paid by the Company within fifteen (15) business days from the
date of delivery by the Employee for his or her legal representative of the
certificate(s) evidencing the number of shares that the Company is to purchase.
At the discretion of the Board of Directors, the Company, or, at the option of
the Company, the Company's Parent Company may pay the purchase price by
delivering one or more of the following: (i) cash, (ii) a Company or Parent
Company check, (iii) a Company or Parent Company promissory note, the term of
which shall not exceed three (3) years, with annual payments of one-third of
the original principal amount thereof plus simple interest at six percent (6%)
per annum, or (iv) shares of Parent Company common stock, the per share value
of which pursuant to this Section 8(d) shall be the average closing price per
share for the ten (10) trading days prior to the date the Repurchase Option is
exercised. Any Parent Company common stock that forms part of the payment to
Employee or Employee's Successor shall be issued by Parent Company directly to
Employee or

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<PAGE> 14

Employee's Successor. Parent Company shall prepare and file a registration
statement on Form S-8 (or any successor or appropriate form) with respect to
such common stock and shall use reasonable efforts to maintain the
effectiveness of such registration statement.

(e) This Repurchase Option shall terminate immediately following the
consummation of an Initial Public Offering.

9. Specific Performance. The Company may institute and maintain a
proceeding to compel specific performance against any person who fails to
comply with the terms of this Agreement.

10. Endorsement on Certificates of Terms of this Agreement. Each
certificate for Shares now held or hereafter issued shall be endorsed as
follows:

"Any transfer or disposition of the Shares evidenced by this certificate
is subject to the restrictions and option stated in, and such Shares are
transferable only upon compliance with, the provisions of that
certain Stock Option and Repurchase Agreement, dated as of December 2,
1996. A copy of such agreement is on file at the office of the Company
and the provisions thereof are incorporated herein by reference."

"The shares represented by this certificate have not been registered under
the Securities Act of 1933. The shares have been acquired for investment
and may not be sold or offered for sale in the absence of (a) an
effective registration statement for the shares under such Act, (b) a 'no
action' letter of the Securities and Exchange Commission with respect to
such sale or offer, or (c) satisfactory assurances to the Company that
registration under such Act is not required with respect to such sale or
offer."

11. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during Employee's employment by the Company or at
any time thereafter Employee shall not divulge, furnish or make accessible to
anyone or use in any way (other than in the ordinary course of the business of
the Company) any confidential or secret knowledge or information of the Company
that Employee has acquired or become acquainted with or will acquire or become
acquainted with prior to the termination of Employee's employment with the
Company (including employment by the Company or any affiliates of the Company
prior to the date of this Agreement), whether developed by Employee or by
others, concerning any trade secrets, confidential or secret designs,
processes, formulae, plans, devices or material (whether or not patented or
patentable) directly or indirectly useful in any aspect of the business of the
Company, any customer or

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<PAGE> 15

supplier lists of the Company, any confidential or secret development or
research work of the Company, or any other confidential information or secret
aspects of the business of the Company. Employee acknowledges that the
above-described knowledge or information constitutes a unique and valuable
asset of the Company and represents a substantial investment of time and
expense by the Company and its predecessors, and that any disclosure or other
use of such knowledge or information other than for the sole benefit of the
Company would be wrongful and would cause irreparable harm to the Company.
Both during and after the term of this Agreement, Employee will refrain from
any acts or omissions that would reduce the value of such knowledge or
information to the Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information that is now published
or that subsequently becomes generally publicly known in the form in which it
was obtained from the Company, other than as a direct or indirect result of the
breach of this Agreement by Employee.

12. Ventures. If, during Employee's term of employment by the Company,
Employee is engaged in or associated with the planning or implementing of any
project, program or venture involving the Company and a third party or parties,
all rights in such project, program or venture shall belong to the Company.
Except as formally approved by the Company's Board of Directors, Employee shall
not be entitled to any interest in such project, program or venture or to any
commission, finder's fee or other compensation in connection therewith other
than the salary to be paid to Employee pursuant to Employee's employment by the
Company.

13. Noncompetition Covenant.

(a) Agreement Not to Compete. Employee agrees that, during Employee's
term of employment by the Company and for a period of (i) twelve months after
Termination for Cause or (ii) six months after any other termination of such
employment, if such termination is not Termination for Cause (including,
without limitation, voluntary termination by Employee of Employee's
employment), Employee shall not, directly or indirectly, engage in competition
with the Company in any manner or capacity (e.g., as an advisor, principal,
agent, partner, officer, director, stockholder, employee, member of any
association, or otherwise) in any phase of the business that the Company is
conducting during the term of Employee's employment by the Company, including
the design, development, manufacture or selling of devices or components
related to the products or services being sold by the Company or solicit from
the Company's customers any business that the Company is capable of performing
during the term of Employee's employment by the Company or at the time of
Employee's termination. For purposes of this Section 13, the business of the
Company shall be determined exclusive of the Company's interest in the CorVel
Stock and in Transition and its subsidiaries.

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<PAGE> 16

(b) Geographic Extent of Covenant. The obligations of Employee under this
Section 13 shall apply to any domestic or foreign city in which the Company
(i) has engaged in business during Employee's term of employment by the Company
through production, promotional, sales or marketing activity, or otherwise, or
(ii) has otherwise established its goodwill, business reputation, or any
customer or supplier relations.

(c) Limitation on Covenant. Ownership by Employee, as a passive
investment, of less than five percent (5%) of the outstanding shares of capital
stock of any corporation listed on a national securities exchange or publicly
traded in the over-the-counter market shall not constitute a breach of this
Section 13.

(d) Indirect Competition. Employee further agrees that, during the term
of his employment by the Company and the six- or twelve-month period thereafter
specified in Section 13(a) above, Employee will not, directly or indirectly,
assist or encourage any other person in carrying out, directly or indirectly,
any activity that would be prohibited by the above provisions of this
Section 13, if such activity were carried out by Employee, either directly or
indirectly; and in particular Employee agrees that Employee will not, directly
or indirectly, induce any employee of the Company to carry out, directly or
indirectly, any such activity.

(e) Other Employees. Employee further agrees that, both during the term
of Employee's employment by the Company and for a period of twelve months
following termination of Employee's employment, Employee will not attempt to
persuade officers or employees of the Company to leave the employ of the
Company.

(f) Company Remedies. Employee acknowledges that the remedy at law for
any breach of the foregoing covenants of this Section 13 will be inadequate,
and that the Company shall be entitled, in addition to any remedy at law, to
preliminary and permanent injunctive relief. Employee acknowledges that in
addition to any other remedies at law or in equity that may be available to the
Company for any breach of the foregoing covenants, the Company shall also be
entitled to immediately repurchase the Shares acquired pursuant to the exercise
of the Option granted hereunder for a purchase price equal to the Option
Exercise Price paid by the Employee for such Shares.

14. Patent and Related Matters.

(a) Disclosure and Assignment. Employee will promptly disclose in writing
to the Company complete information concerning each and every invention,
discovery, improvement, device, design, apparatus, practice, process, method or
product, whether patentable or not, made, developed, perfected, devised,
conceived or first reduced to practice by Employee, either solely or in
collaboration

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<PAGE> 17

with others, during Employee's term of employment by the Company, or within six
months thereafter, whether or not during regular working hours, relating either
directly or indirectly to the business, products, practices or techniques of
the Company (hereinafter referred to as "Developments"). Employee, to the
extent that Employee has the legal right to do so, hereby acknowledges that any
and all of said Developments are the property of the Company and hereby
assigns and agrees to assign to the Company any and all of Employee's right,
title and interest in and to any and all of such Developments.

(b) Future Developments. As to any future Developments made by Employee
which relate to the business, products or practices of the Company and which
are first conceived or reduced to practice during Employee's term of employment
by the Company, or within six months thereafter, but which are claimed for any
reason to belong to an entity or person other than the Company, Employee will
promptly disclose the same in writing to the Company and shall not disclose the
same to others if the Company, within twenty (20) days thereafter, shall claim
ownership of such Developments under the terms of this Agreement. If the
Company makes no such claim, Employee hereby acknowledges that the Company has
made no promise to receive and hold in confidence any such information
disclosed by Employee.

(c) Limitation on Section 14. The provisions of this Section 14 shall not
apply to any Development meeting the following conditions:

(i) such Development was developed entirely on Employee's own
time; and

(ii) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information; and

(iii) such Development does not relate (i) directly to the
business of the Company, or (ii) to the Company's actual or
demonstrably anticipated research or development; and

(iv) such Development does not result from any work performed
by Employee for the Company.

(d) Assistance of Employee. Upon request and without further compensation
therefor, but at no expense to Employee, and whether during the term of
Employee's employment by the Company or thereafter, Employee will do all lawful
acts, including, but not limited to, the execution of papers and lawful oaths
and the giving of testimony, that in the opinion of the Company, its successors
and assigns, may be necessary or desirable in obtaining, sustaining, reissuing,
extending and enforcing United States and foreign Letters Patent, including,
but not limited to,

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<PAGE> 18

design patents, on any and all of such Developments, and for perfecting,
affirming and recording the Company's complete ownership and title thereto, and
to cooperate otherwise in all proceedings and matters relating thereto.

(e) Records. Employee will keep complete, accurate and authentic
accounts, notes, data and records of all Developments in the manner and form
requested by the Company. Such accounts, notes, data and records shall be the
property of the Company, and, upon its request, Employee will promptly
surrender same to it or, if not previously surrendered upon its request or
otherwise, Employee will surrender the same, and all copies thereof, to the
Company upon the conclusion of Employee's employment.

(f) Obligations, Restrictions and Limitations. Employee understands that
the Company may enter into agreements or arrangements with agencies of the
United States Government, and that the Company may be subject to laws and
regulations that impose obligations, restrictions and limitations on it with
respect to inventions and patents that may be acquired by it or that may be
conceived or developed by employees, consultants or other agents rendering
services to it. Employee agrees to be bound by all such obligations,
restrictions and limitations applicable to any such invention conceived or
developed by Employee during Employee's term of employment by the Company and
shall take any and all further action that may be required to discharge such
obligations and to comply with such restrictions and limitations.

15. Disputes.

(a) If any dispute arises with respect to any violation by Employee of the
covenants contained in Section 11, 13 or 14, the Company may seek any available
remedy at law or in equity from a court of competent jurisdiction.

(b) If any dispute arises with respect to Fair Value of the Shares, the
Company's independent accountants shall calculate the "Fair Value" of the
Shares in accordance with the definition thereof. The written determination of
the Fair Value of the Shares made by the Company's independent accountants
shall be conclusive, final and binding on all parties. No optionee or other
holder of Shares shall have the right to challenge or object to such
determination of the Fair Value of the Shares.

(c) Except as provided in Sections 9, 13(f) and 15(a) and (b) above, any
controversy or claim arising between the parties in connection with the Plan,
this Option or any other matter concerning the employment of the Employee by
the Company shall be resolved by binding arbitration in accordance with the
terms and conditions of this Section 15.

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<PAGE> 19

(i) This agreement to arbitrate shall continue in full force
and effect despite the expiration, rescission, or termination of the
Option. All arbitration shall be undertaken pursuant to the Federal
Arbitration Act, and the decision of the arbitrator(s) shall be
enforceable in any court of competent jurisdiction. The parties knowingly
and voluntarily waive their rights to have their dispute tried and
adjudicated by a judge or jury. The arbitrator(s) shall apply the law of
the State of Minnesota, excluding its choice of law provisions, and the
arbitration shall be held in Minneapolis, Minnesota.

(ii) Any party may demand arbitration by sending written
notice to the other party. The arbitration and the selection of the
arbitrator(s) shall be conducted in accordance with such rules as may
be agreed upon by the parties, or, failing agreement within thirty (30)
days after arbitration is demanded, under the Commercial Arbitration Rules
of the American Arbitration Association ("AAA"), as such rules may be
modified by this Agreement.

(iii) The arbitrator(s) shall not have the authority to award
exemplary or punitive damages, and the parties expressly waive any claimed
right to such damages. The costs of arbitration, but not the costs and
expenses of the parties, shall be shared equally by the parties. If a
party fails to proceed with arbitration, unsuccessfully challenges the
arbitration award, or fails to comply with the arbitration award, the
other party is entitled to costs, including reasonable attorney's fees,
for having to compel arbitration or defend or enforce the award. Except
as otherwise required by law, the parties and the arbitrator(s) agree to
maintain as confidential all information or documents obtained during the
arbitration process, including the resolution of the dispute.

(iv) The parties hereto acknowledge that any controversy or
claim arising in connection with the determination of the Fair Value
of the shares will not be governed by or subject to the arbitration
provisions set forth in this Section 15(c).

(d) Any permitted legal action or proceeding with respect to this
Agreement and the Option and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the State of Minnesota or of
the United States of America for the District of Minnesota, and, by
execution and delivery of this Agreement, the parties hereby accept for
themselves and in respect of their property, generally and unconditionally, the
exclusive jurisdiction of the aforesaid courts and appellate courts.

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<PAGE> 20

16. Incorporation of Plan. This Agreement is subject to, and the Company
and the Employee agree to be bound by, all of the terms and conditions of the
Plan, as amended from time to time. A copy of the Plan as in effect on the
date hereof is attached hereto as Exhibit A, and all of the terms and
conditions of the Plan are incorporated herein by this reference. Unless
otherwise provided, all defined terms used in this Agreement shall have the
same meaning as such terms in the Plan.

17. Miscellaneous.

(a) Waivers and Amendments. No amendment to or waiver of any provision of
this Agreement shall be binding unless in writing and executed by the Company
and Employee. No failure or delay on the part of any party in exercising any
power or right under this Agreement or any instrument executed pursuant hereto
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise of any such
power or right.

(b) Notices. All communications and notices provided under this Agreement
or any instrument executed pursuant hereto shall be in writing and sent by
first class certified mail, and if to the Company, addressed and delivered to
it at:

Americable, Inc.
7450 Flying Cloud Drive
Eden Prairie, MN 55344
Attention: President

With a copy to:

North Star Universal, Inc.
6479 City West Parkway
Eden Prairie, MN 55344
Attention: President

or, if applicable, to:

ENStar Inc.
6479 City West Parkway
Eden Prairie, MN 55344
Attention: President

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<PAGE> 21

and if addressed or delivered to Employee, at:

___________________
___________________
___________________

or to any party at such other address as may be designated by such party in a
notice to the other parties. Any notice, if mailed properly addressed, shall
be deemed given on the third business day after mailing postage prepaid.

(c) Severability. To the extent any provisions of this Agreement shall be
determined to be invalid or unenforceable in any jurisdiction, such provision
shall be deemed to be deleted from this Agreement as to such jurisdiction only,
and the validity and enforceability of the remainder of such provision and of
this Agreement shall be unaffected. In furtherance of and not in limitation of
the foregoing, the Employee expressly agrees that should the duration of or
geographical extent of, or business activities covered by, any provision of
this Agreement be in excess of that which is valid or enforceable under
applicable law in a given jurisdiction, then such provision, as to such
jurisdiction only, shall be construed to cover only that duration, extent or
activities that may validly or enforceably be covered. The Employee
acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement shall be construed in a manner that renders its
provisions valid and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law in each applicable jurisdiction.

(d) Cross References. References in this Agreement or in any instrument
executed pursuant hereto to any section or article are, unless otherwise
specified, to such section or article of this Agreement or such instrument, as
the case may be.

(e) Headings. The various headings of this Agreement and of any
instrument executed pursuant hereto are inserted for convenience only and shall
not affect the meaning or interpretation of this Agreement or of such
instrument.

(f) Counterparts. This Agreement may be executed by the parties hereto in
counterparts, each of which shall be deemed to be an original.

(g) Governing Law. This Agreement and each other instrument executed
pursuant hereto shall each be governed by and construed in accordance with the
laws of the State of Minnesota, except its choice of law provisions, and
Employee submits to the personal jurisdiction of the federal and state courts
located in such state in connection with all actions, matters and disputes in
any way related hereto.

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<PAGE> 22

(h) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and assigns. Employee hereby expressly acknowledges that the
Company may assign any of its rights or obligations hereunder to its Parent
Company.

(i) Prior Agreements. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof and supersedes all prior
agreements and understandings, whether oral or written, with respect to any
right of Employee to acquire an interest in the Company that may or may not
have been executed by Employee and the Company, but which Employee and the
Company agree are hereby terminated, void and of no further force or effect.
The parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement that are not set forth herein.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above first written.

AMERICABLE, INC

_____________________________
Gary L. Eizenga
President and Chief Executive
Officer

_____________________________
________________- EMPLOYEE

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<PAGE> 1
EXHIBIT 10.10

TRANSITION NETWORKS, INC.
1996 STOCK OPTION PLAN

1. PURPOSE OF PLAN

This Plan shall be known as the "TRANSITION NETWORKS, INC. 1996 STOCK
OPTION PLAN" and is hereinafter referred to as the "Plan." The purpose of the
Plan is to aid in maintaining and developing personnel capable of assuring the
future success of Transition Networks, Inc., a Minnesota corporation (the
"Company") and an indirect wholly-owned subsidiary of North Star Universal,
Inc., a Minnesota corporation ("North Star"), to enhance the Company's ability
to attract and retain the services of experienced and knowledgeable key
executives and other persons who perform services for the Company from time to
time, to offer such personnel additional incentives to put forth maximum
efforts for the success of the business, and to afford them an opportunity to
acquire a proprietary interest in the Company through stock purchase options as
provided herein. Options granted under the Plan ("Stock Options") are not
intended to be incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").

2. STOCK SUBJECT TO PLAN

Subject to Section 10 hereof, the stock to be subject to Stock Options
under the Plan shall be the Company's authorized shares of common stock, par
value $.01 per share (the "Common Stock"). Such shares may be either
authorized but unissued shares or issued shares that have been reacquired by
the Company. Subject to adjustment as provided in Section 10 hereof, the
maximum number of shares which may be issued under all Stock Options granted
pursuant to the Plan shall be equal to Five Hundred and Sixty Thousand
(560,000) shares. If a Stock Option expires, or for any reason is terminated
or unexercised with respect to any shares, such shares shall again be available
for Stock Options thereafter granted during the term of the Plan.

3. ADMINISTRATION OF PLAN

(a) The Plan shall be administered by the Board of Directors of the
Company.

<PAGE> 2

part of a Stock Option may or must be exercised, (iv) to amend or modify the
terms of any Stock Option with the consent of the optionee, (v) to interpret
the Plan, (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan, (vii) to exercise the Company's rights under the Plan,
(viii) to make all other determinations necessary or advisable for the
administration of the Plan and (ix) to amend or terminate the Plan pursuant to
Section 14 herein. The Board of Directors' determinations on the foregoing
matters shall be final and conclusive.

4. ELIGIBILITY FOR PARTICIPATION

5. TERMS AND CONDITIONS OF OPTIONS

6. OPTION PRICE

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<PAGE> 3

7. TERM AND VESTING

8. EXERCISE OF OPTION

9. MANNER OF EXERCISE OF OPTION

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<PAGE> 4

10. DILUTION OR OTHER ADJUSTMENTS

11. NO RESTRICTIONS ON DIVIDENDS, COMPANY'S ACCOUNTING OR BUSINESS OPERATIONS

(b) The Company shall be under no obligation to pay dividends at any time
or in any amount with respect to its capital stock.

12. ADDITIONAL RESTRICTIONS

13. AVAILABLE SHARES

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<PAGE> 5

14. AMENDMENT OR DISCONTINUANCE OF PLAN

15. GOVERNING LAW

16. EFFECTIVE DATE AND TERMINATION OF PLAN

(a) The Plan was adopted by the Board of Directors on September 30, 1996.

17. REORGANIZATION

North Star is a party to that certain Reorganization Agreement, dated
December 21, 1995, among North Star, NSU Merger Co., a Delaware corporation
("Merger Co."), and Michael Foods, Inc., a Delaware corporation ("Michael"),
pursuant to which it is presently anticipated that (i) the currently
outstanding shares of the Company's Common Stock will be contributed to ENStar
Inc., a Minnesota corporation and a wholly owned subsidiary of North Star
("ENStar"), (ii) Merger Co. will be merged with and into Michael and (iii) the
outstanding common stock of ENStar, all of which is currently owned by North
Star, will be distributed to the holders of the common stock of North Star (the
"Distribution"). After the contribution of the Company's Common Stock to
ENStar, the Company will be a subsidiary of ENStar. Following the
Distribution, EnStar will be a public company. All references hereto to North
Star shall be deemed to refer to ENStar following the Distribution, if it is
effected.

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<PAGE> 6

STOCK OPTION AND REPURCHASE AGREEMENT

This Stock Option Agreement (this "Agreement") is made as of the ___ day
of _______, 199__, by and between Transition Networks, Inc., a Minnesota
corporation (the "Company"), and ____________ ("Employee"), a resident of
__________.

W I T N E S S E T H:

WHEREAS, as of the date hereof, the authorized capitalization of the
Company consists of 3,500,000 shares of the common stock, $.01 par value per
share (the "Common Stock"), and all of the outstanding shares of the Company's
Common Stock are currently issued to Americable, Inc., a Minnesota corporation
and a wholly owned subsidiary of North Star Universal, Inc., also a Minnesota
corporation ("North Star");

WHEREAS, North Star is a party to that certain Reorganization Agreement,
dated December21, 1995, among North Star, NSU Merger Co., a Delaware
corporation ("Merger Co."), and Michael Foods, Inc. ("Michael"), pursuant to
which it is presently anticipated that (i) the outstanding shares of the
Company's Common Stock will be contributed to ENStar Inc., a Minnesota
corporation and a wholly owned subsidiary of North Star ("ENStar"), (ii) Merger
Co. will be merged with and into Michael and (iii) the outstanding common stock
of ENStar, all of which is owned by North Star, will be distributed to the
holders of the common stock of North Star (the "Distribution");

WHEREAS, after the contribution of the Company's Common Stock to ENStar,
the Company will be a subsidiary of ENStar and, following the Distribution,
ENStar will be a public company. (For purposes of this Agreement, "Parent
Company" shall refer to North Star, the ultimate parent of the Company prior to
the Distribution, and after the Distribution shall refer to ENStar or any other
entity that is the owner of a majority of the Company's outstanding Common
Stock);

WHEREAS, the Company has adopted the 1996 Transition Networks, Inc. Stock
Option Plan (the "Plan");

WHEREAS, Employee is a full-time employee of the Company;

<PAGE> 7

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereto agree as follows.

1. Grant of Option. The Company hereby grants to Employee, on the date
set forth above (the "Date of Grant"), the right and option (hereinafter called
"the Option") to purchase up to _______________ (______) shares of the
Company's Common Stock (the "Shares") at the option exercise price of
__________________ Dollars ($_____) per share (the "Option Exercise Price"), on
the terms and subject to the conditions set forth herein. The Option is not
intended to be an incentive stock option within the meaning of Section422 of
the Internal Revenue Code of 1986, as amended (the "Code").

2. Duration and Exercisability.

(a) Exercise Dates. The Option shall in all events terminate at the
close of business on the tenth (10th) anniversary of the Date of Grant.
Subject to the other terms and conditions set forth herein, the Option may
be exercised by Employee in cumulative installments as follows:

First 20%
Second 40%
Third 60%
Fourth 80%
Fifth 100%
</TABLE>

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<PAGE> 8

3. Adjustments.

(a) In the event that following a recapitalization, reclassification,
stock split-up, combination of shares, or dividend or other distribution
payable in capital stock, the outstanding shares of Common Stock of the Company
are hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares of other securities of the Company or of
another corporation, appropriate adjustment shall be made by the Board of
Directors of the Company in the number and kind of shares as to which this
Option, or portions thereof then unexercised, shall be exercisable, to the end
that the proportionate interest of the holder of the Option shall, to the
extent practicable, be maintained as before the occurrence of such event. Such
adjustment in outstanding options shall be made without change in the total
price applicable to the unexercised portion of the Option, but with a
corresponding adjustment in the Option Exercise Price per share.

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<PAGE> 9

(c) Upon the occurrence of a Corporate Transaction, as hereinafter
defined, in the sole and absolute discretion of the Board of Directors of the
Company, the vesting of all or a portion of the Option may be accelerated and
this Option may immediately be converted into the right to receive from the
Company or, at the Company's option, the Company's Parent Company any of the
various forms of consideration described in Section 8(d) hereof in an amount
equal to the product of the number of Shares that Employee then has the right
to purchase pursuant to the exercise of this Option times the difference of (i)
the "Fair Value" per share, as hereinafter defined, minus (ii) the Option
Exercise Price per share.

(f) "Corporate Transaction" shall mean a sale, exchange or other
disposition of all or substantially all of the shares of Common Stock or assets
of the Company or other similar transaction whereby (i) Parent Company receives
cash, stock or other property with respect to its equity interest in the
Company and (ii) Parent Company's interest in the Common Stock or assets of the
Company is reduced to less than fifty percent (50%) of the total interest of
all persons or entities in such Common Stock or assets. Corporate Transactions
shall not include any transaction or reorganization pursuant to the
Reorganization Agreement, or any sale or transaction involving an affiliate of
the Company or the Parent Company.

(g) "Fair Value" shall be determined by dividing (i) the product of (A)
the average of the pre-tax operating income of the Company for each of its last
three full fiscal years (determined from the financial statements of the
Company used in the ordinary course of its business and in accordance with the
accounting practices and procedures then employed by the Company, regardless of
whether such accounting practices are employed by the Company on the Date of
Grant or are consistent with or permitted by generally accepted accounting

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<PAGE> 10

principles) times (B) six by (ii) the total number of outstanding shares of
Common Stock of the Company. If (i) at the time of any determination of the
Fair Value of the Company's Common Stock, there are outstanding stock options,
warrants or other rights to acquire Common Stock that are currently exercisable
or that will become exercisable in connection with the transaction under
consideration and (ii) the consideration to be received by the Company upon the
exercise of such options, warrants or rights is less than the Fair Value per
share of the Common Stock, as determined above, then the Fair Value shall be
recalculated by adding to the product determined pursuant to (A) above, the
aggregate amount of the consideration that the Company would receive upon the
exercise of all such "in-the-money" options, warrants and rights and by adding
to the number of then outstanding shares of Common Stock of the Company
described in clause (B) above, the number of shares that would be acquired upon
the exercise of all such "in-the-money" options, warrants and rights, and the
"Fair Value" shall be equal to such recalculated amount. Notwithstanding the
foregoing, in the event that this Option is converted into the right to receive
certain consideration therefor pursuant to Section 3(c) above, or the
"Repurchase Option," as hereinafter defined, is exercised in connection with a
Corporate Transaction pursuant to Section 8(a), then the Fair Value shall be
the value per share attributable to the Company's Common Stock, as reasonably
determined by the Board of Directors of the Company based on the consideration
received by, or to be received by the Company's Parent Company in such
Corporate Transaction.

4. Effect of Termination of Employment.

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<PAGE> 11

Employee.

5. Method of Exercising Option.

(b) In order to comply with all applicable federal or state income tax
laws or regulations, the Company may take such action as it deems appropriate
to ensure that all applicable federal or state payroll, withholding,
income or other taxes, which are the sole and absolute responsibility of
Employee, are withheld or collected from Employee. In order to assist Employee
in paying all or a portion of the federal and state taxes to be withheld or
collected upon exercise of the Option, the Board of Directors, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit Employee to satisfy such tax obligation by (i) electing to have the
Company withhold a portion of the shares otherwise to be delivered upon
exercise of the Option with a Fair Value equal to the amount of such taxes,
(ii) delivering to the Company shares of Common Stock other than the shares
issuable upon such exercise with a Fair Value equal to the amount of such
taxes, or (iii) delivery to the Company of a promissory note issued by the
Employee in form and with such terms as may be acceptable to the Company.

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<PAGE> 12

6. Investment Representations.

(b) Employee hereby confirms that Employee has been informed that the
Shares may not be resold or transferred unless they are first registered under
the Federal securities laws or unless an exemption from such registration is
available. Accordingly, Employee hereby acknowledges that, upon exercise of
the Option, Employee will be prepared to hold the Shares for an indefinite
period. Employee further acknowledges that Employee is aware that Rule 144,
as promulgated under the 1933 Act is not presently available to exempt the sale
of the Shares from the registration requirements of the 1933 Act and may not be
available at the time that Employee exercises the Option. Should Rule 144
subsequently become available, Employee is aware that any sale of the Shares
effected pursuant to Rule 144 may, depending upon the status of Employee as an
"affiliate" or "non-affiliate" under the rule, be made only in limited amounts
in accordance with the provisions of Rule 144, and that in no event may any
Shares be sold pursuant to Rule 144 until Employee has held the Shares for the
requisite holding period following payment of the Exercise Price for the
Shares.

7. Restrictions on Sale or Transfer.

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<PAGE> 13

obligation in any such case shall be to pay the Employee or Employee' Successor
a price equal to the Option Exercise Price paid for such Shares by the Employee
or Employee's Successor.

8. Repurchase Option.

(b) To exercise the Repurchase Option, the Company shall provide written
notice thereof by registered mail to Employee, which notice shall specify the
number of shares of capital stock of the Company subject to purchase and a
request for the surrender of all certificate(s) evidencing such shares. Within
five (5) days after the receipt by Employee, Employee or his or her legal
representative shall deliver the certificate or certificates evidencing the
number of shares the Company has elected to purchase, duly endorsed in blank or
accompanied by an assignment, which is separate from the stock certificate,
duly endorsed in blank.

-8-

<PAGE> 14

Parent Company common stock that forms part of the payment to Employee or
Employee's Successor shall be issued by Parent Company directly to Employee or
Employee's Successor. Parent Company shall prepare and file a registration
statement on Form S-8 (or any successor or appropriate form) with respect to
such common stock and shall use reasonable efforts to maintain the
effectiveness of such registration statement.

(e) This Repurchase Option shall terminate immediately following the
consummation of an Initial Public Offering.

9. Specific Performance. The Company may institute and maintain a
proceeding to compel specific performance against any person who fails to
comply with the terms of this Agreement.

10. Endorsement on Certificates of Terms of this Agreement. Each
certificate for Shares now held or hereafter issued shall be endorsed as
follows:

"Any transfer or disposition of the Shares evidenced by this certificate
is subject to the restrictions and option stated in, and such Shares are
transferable only upon compliance with, the provisions of that certain
Stock Option and Repurchase Agreement, dated as of __________. A copy of
such agreement is on file at the office of the Company and the provisions
thereof are incorporated herein by reference."

-9-

<PAGE> 15

concerning any trade secrets, confidential or secret designs, processes,
formulae, plans, devices or material (whether or not patented or patentable)
directly or indirectly useful in any aspect of the business of the Company, any
customer or supplier lists of the Company, any confidential or secret
development or research work of the Company, or any other confidential
information or secret aspects of the business of the Company. Employee
acknowledges that the above-described knowledge or information constitutes a
unique and valuable asset of the Company and represents a substantial
investment of time and expense by the Company and its predecessors, and that
any disclosure or other use of such knowledge or information other than for the
sole benefit of the Company would be wrongful and would cause irreparable harm
to the Company. Both during and after the term of this Agreement, Employee
will refrain from any acts or omissions that would reduce the value of such
knowledge or information to the Company. The foregoing obligations of
confidentiality, however, shall not apply to any knowledge or information that
is now published or that subsequently becomes generally publicly known in the
form in which it was obtained from the Company, other than as a direct or
indirect result of the breach of this Agreement by Employee.

13. Noncompetition Covenant.

-10-

<PAGE> 16

(b) Geographic Extent of Covenant. The obligations of Employee under this
Section 13 shall apply to any domestic or foreign city in which the Company
(i)has engaged in business during Employee's term of employment by the Company
through production, promotional, sales or marketing activity, or otherwise, or
(ii)has otherwise established its goodwill, business reputation, or any
customer or supplier relations.

(d) Indirect Competition. Employee further agrees that, during the term
of his employment by the Company and the six- or twelve-month period thereafter
specified in Section 13(a) above, Employee will not, directly or indirectly,
assist or encourage any other person in carrying out, directly or indirectly,
any activity that would be prohibited by the above provisions of this
Section13, if such activity were carried out by Employee, either directly or
indirectly; and in particular Employee agrees that Employee will not, directly
or indirectly, induce any employee of the Company to carry out, directly or
indirectly, any such activity.

14. Patent and Related Matters.

-11-

<PAGE> 17

conceived or first reduced to practice by Employee, either solely or in
collaboration with others, during Employee's term of employment by the Company,
or within six months thereafter, whether or not during regular working hours,
relating either directly or indirectly to the business, products, practices or
techniques of the Company (hereinafter referred to as "Developments").
Employee, to the extent that Employee has the legal right to do so, hereby
acknowledges that any and all of said Developments are the property of the
Company and hereby assigns and agrees to assign to the Company any and all of
Employee's right, title and interest in and to any and all of such
Developments.

(c) Limitation on Section 14. The provisions of this Section 14 shall not
apply to any Development meeting the following conditions:

(i) such Development was developed entirely on Employee's own
time; and

(ii) such Development was made without the use of any Company
equipment, supplies, facility or trade secret information; and

(iii) such Development does not relate (i) directly to the
business of the Company, or (ii) to the Company's actual or
demonstrably anticipated research or development; and

(iv) such Development does not result from any work performed
by Employee for the Company.

-12-

<PAGE> 18

assigns, may be necessary or desirable in obtaining, sustaining, reissuing,
extending and enforcing United States and foreign Letters Patent, including,
but not limited to, design patents, on any and all of such Developments, and
for perfecting, affirming and recording the Company's complete ownership and
title thereto, and to cooperate otherwise in all proceedings and matters
relating thereto.

15. Disputes.

-13-

<PAGE> 19

(iii) The arbitrator(s) shall not have the authority to award
exemplary or punitive damages, and the parties expressly waive any claimed
right to such damages. The costs of arbitration, but not the costs and
expenses of the parties, shall be shared equally by the parties.
If a party fails to proceed with arbitration, unsuccessfully challenges
the arbitration award, or fails to comply with the arbitration award, the
other party is entitled to costs, including reasonable attorney's fees,
for having to compel arbitration or defend or enforce the award. Except
as otherwise required by law, the parties and the arbitrator(s) agree to
maintain as confidential all information or documents obtained during the
arbitration process, including the resolution of the dispute.

(iv) The parties hereto acknowledge that any controversy or
claim arising in connection with the determination of the Fair Value of
the shares will not be governed by or subject to the arbitration
provisions set forth in this Section 15(c).

-14-

<PAGE> 20

(d) Any permitted legal action or proceeding with respect to this
Agreement and the Option and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the State of Minnesota or of
the United States of America for the District of Minnesota, and, by execution
and delivery of this Agreement, the parties hereby accept for themselves and in
respect of their property, generally and unconditionally, the exclusive
jurisdiction of the aforesaid courts and appellate courts.

17. Miscellaneous.

(a) Waivers and Amendments. No amendment to or waiver of any provision of
this Agreement shall be binding unless in writing and executed by the Company
(with the approval of the Board of Directors of the Company) and Employee. No
failure or delay on the part of any party in exercising any power or right
under this Agreement or any instrument executed pursuant hereto shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power
or right preclude any other or further exercise of any such power or right.

Transition Networks, Inc.
6475 City West Parkway
Eden Prairie, MN 55344
Attention: President

With a copy to:

North Star Universal, Inc.
6479 City West Parkway
Eden Prairie, MN 55344
Attention: President

-15-

<PAGE> 21

or, if applicable, to:

ENStar Inc.
6479 City West Parkway
Eden Prairie, MN 55344
Attention: President

and if addressed or delivered to Employee, at:

_____________________
_____________________

(c) Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the parties hereto.

(d) Severability. To the extent any provisions of this Agreement shall be
determined to be invalid or unenforceable in any jurisdiction, such provision
shall be deemed to be deleted from this Agreement as to such jurisdiction only,
and the validity and enforceability of the remainder of such provision
and of this Agreement shall be unaffected. In furtherance of and not in
limitation of the foregoing, the Employee expressly agrees that should the
duration of or geographical extent of, or business activities covered by, any
provision of this Agreement be in excess of that which is valid or enforceable
under applicable law in a given jurisdiction, then such provision, as to such
jurisdiction only, shall be construed to cover only that duration, extent or
activities that may validly or enforceably be covered. The Employee
acknowledges the uncertainty of the law in this respect and expressly
stipulates that this Agreement shall be construed in a manner that renders its
provisions valid and enforceable to the maximum extent (not exceeding its
express terms) possible under applicable law in each applicable jurisdiction.

(e) Cross References. References in this Agreement or in any instrument
executed pursuant hereto to any section or article are, unless otherwise
specified, to such section or article of this Agreement or such instrument, as
the case may be.

(f) Headings. The various headings of this Agreement and of any
instrument executed pursuant hereto are inserted for convenience only and shall
not affect the meaning or interpretation of this Agreement or of such
instrument.

-16-

<PAGE> 22

(g) Counterparts. This Agreement may be executed by the parties hereto in
counterparts, each of which shall be deemed to be an original.

(h) Governing Law. This Agreement and each other instrument executed
pursuant hereto shall each be governed by and construed in accordance with the
laws of the State of Minnesota, except its choice of law provisions, and
Employee submits to the personal jurisdiction of the federal and state courts
located in such state in connection with all actions, matters and disputes in
any way related hereto.

(i) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors, heirs and assigns. Employee hereby expressly acknowledges that the
Company may assign any of its rights or obligations hereunder to its Parent
Company.

(j) Prior Agreements. This Agreement contains the entire agreement of the
parties relating to the subject matter hereof and supersedes all prior
agreements and understandings, whether oral or written, with respect to any
right of Employee to acquire an interest in the Company that may or may not
have been executed by Employee and the Company, but which Employee and the
Company agree are hereby terminated, void and of no further force or effect.
The parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement that are not set forth herein.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above first written.

TRANSITION NETWORKS, INC.

By: ____________________________
Its:____________________________

________________________________
_______________ - EMPLOYEE

-17-

<PAGE> 1
EXHIBIT 12

ENSTAR INC.

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Earnings:

Income (loss) from continuing
operations before income taxes
and equity in earnings .......................... $(257) $ 786 $ (1,050) $ (2,339) $(1,524)

Fixed charges ........................................... 511 512 609 636 620
----- ------ -------- -------- -------
Income from continuing operations
before income taxes, equity in
earnings and fixed charges ...................... $ 254 $1,298 $ (441) $ (1,703) $ (904)
===== ====== ======== ======== =======

Fixed Charges:
Interest expense ................................ $ 204 $ 247 $ 348 $ 361 $ 373
Interest portion of rentals ..................... 307 265 261 275 247
Amortization of debt expense .................... 0 0 0 0 0
----- ------ -------- -------- -------

$ 511 $ 512 $ 609 $ 636 $ 620
===== ====== ======== ======== =======

Ratio of earnings to fixed charges ...................... (.50) 2.54 (0.72) (2.68) (1.46)

Earnings coverage deficit below
1:1 ratio ....................................... 257 -- 1,050 2,339 1,524
</TABLE>

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We have issued our reports dated February 19, 1997 (except for Note 1, as to
which the date is February 28, 1997) accompanying the consolidated financial
statements and schedule of ENStar Inc. included in the Registration Statement
of ENStar Inc. on Form S-1. We hereby consent to the use of the aforementioned
reports in the Registration Statement of ENStar Inc. and to the use of our name
as it appears under the caption "Experts."

/s/ Grant Thornton LLP

Minneapolis, Minnesota

March 18, 1997

<PAGE> 1

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated May 8, 1996 with respect to the consolidated
financial statements and schedule of Corvel Corporation included in the
Registration Statement (Form S-1) and related Prospectus of ENStar for the
registration of $25,000,000 in subordinated debentures.

/s/ ERNST & YOUNG LLP

Orange County, California
March 25, 1997

<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE BELOW CONTAINS SUMMARY FINANCIAL IINFORMATION
EXTRACTED FROM THE AUDITED FINANCIAL STATEMENTS OF ENSTAR INC. AND THE NOTES
THERETO, AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 824
<SECURITIES> 0
<RECEIVABLES> 9,225
<ALLOWANCES> (440)
<INVENTORY> 5,706
<CURRENT-ASSETS> 15,796
<PP&E> 3,673
<DEPRECIATION> (1,931)
<TOTAL-ASSETS> 36,015
<CURRENT-LIABILITIES> 10,269
<BONDS> 1,150
0
0
<COMMON> 33
<OTHER-SE> 20,914
<TOTAL-LIABILITY-AND-EQUITY> 36,015
<SALES> 64,123
<TOTAL-REVENUES> 64,123
<CGS> 47,286
<TOTAL-COSTS> 47,286
<OTHER-EXPENSES> 16,890
<LOSS-PROVISION> 132
<INTEREST-EXPENSE> 204
<INCOME-PRETAX> (257)
<INCOME-TAX> (25)
<INCOME-CONTINUING> 1,072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,072
<EPS-PRIMARY> .32
<EPS-DILUTED> .32

</TABLE>