<PAGE>
As filed with the Securities and Exchange Commission on March 21, 1995.
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NORTH STAR UNIVERSAL, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0498850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
610 PARK NATIONAL BANK BUILDING
5353 WAYZATA BOULEVARD
MINNEAPOLIS, MINNESOTA 55416
(612) 546-7500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
PETER E. FLYNN
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND SECRETARY
NORTH STAR UNIVERSAL, INC.
610 PARK NATIONAL BANK BUILDING
5353 WAYZATA BOULEVARD
MINNEAPOLIS, MINNESOTA 55416
(612) 546-7500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
J. ANDREW HERRING, ESQ.
DORSEY & WHITNEY P.L.L.P.
220 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402
(612) 340-5683
Approximate date of commencement of sales of the securities to the public:
As soon as practicable after this Registration Statement becomes effective.
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 the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to
Item 11(a)(1) of this form, check the following box. /X/
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Proposed Proposed
Title of each class Maximum Maximum
of Securities to Amount to be offering price offering Amount of
be registered registered per unit(1) price(1) registration fee
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Subordinated Extendible
and Fixed-Term Time $40,000,000.00 100% $40,000,000.00 $13,792.00
Certificates
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
<FN>
(1) Estimated solely for purposes of calculating the amount of the registration
fee.
</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>
North Star Universal, Inc.
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Item Number and Caption Heading in Prospectus
- --------------------------------------------------------------------
1. Forepart of the Registration Forepart of the Registration
Statement and Outside Front Statement and Outside Front
Cover Page of Prospectus. Cover Page of Prospectus.
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus. Cover Pages of Prospectus.
3. Summary Information, Risk Prospectus Summary, Special
Factors and Ratio of Earnings Factors.
to Fixed Charges.
4. Use of Proceeds. Special Factors and Use of
Proceeds.
5. Determination of Offering Price. *
6. Dilution. *
7. Selling Security Holders. *
8. Plan of Distribution. Plan of Distribution.
9. Description of Securities to Description of Time Certificates.
be Registered.
10. Interests of Named Experts and *
Counsel.
11. Information with Respect to the Outside Front Cover Page,
Registrant. Prospectus Summary and Special
Factors.
12. Incorporation of Certain Incorporation of Certain
Information by Reference. Information by Reference.
13. Disclosure of Commission *
Position on Indemnification
for Securities Act Liabilities.
_________________________
*Not applicable.
<PAGE>
$40,000,000
NORTH STAR UNIVERSAL, INC.
<TABLE>
<CAPTION>
SUBORDINATED EXTENDIBLE TIME CERTIFICATES SUBORDINATED FIXED-TERM TIME CERTIFICATES
<S> <C>
4.50% Six Month 8.75% Two Year
5.00% Twelve Month 10.00% Five Year
11.00% Ten Year
<FN>
Minimum Investment of $1,000
____________________________
</TABLE>
The Time Certificates offered hereby are unsecured obligations of North
Star Universal, Inc. (the "Company") and subordinated to all Senior Indebtedness
(as defined in the Indenture) of the Company.
The interest rates of the Time Certificates are expected to change 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 Time
Certificates purchased prior to the effective date of such change. Any changes
in interest rates of the Time Certificates will be made by post-effective
amendment to this Prospectus setting forth such changes to the interest rates.
See "Plan of Distribution."
Interest rates on Extendible Time Certificates will be adjusted (upon
notice to the holder) each six or twelve months from the date of issuance
thereof, as applicable (each such date is herein called a "Roll-Over Date"). On
any Roll-Over Date or within ten business days thereafter, Extendible Time
Certificates are redeemable at the option of the Time Certificate holder. Both
the Extendible and Fixed-Term Time Certificates may be redeemed at any time, in
whole or in part, at the election of the Company. See "Description of Time
Certificates."
The Time Certificates are offered by officers and employees of the Company
directly without an underwriter and on a continuous basis without an expected
termination date. There is no assurance that all or any portion of the offered
Time Certificates will be sold and, even if all of the Time Certificates offered
hereby are sold, it is not expected that there will be a trading market for the
Time Certificates. The Company reserves the right to reject any subscription,
in whole or in part.
THE TIME CERTIFICATES 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. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET
FORTH UNDER "SPECIAL FACTORS."
This Prospectus is accompanied by the Company's 1994 Annual Report to
Shareholders, portions of which are incorporated herein by reference. See
"Incorporation of Certain Information by Reference."
_______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Underwriting
Price to Discount and Proceeds to
Public Other Commissions Company(1)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Time Certificate 100% None 100%
Total $40,000,000 None $40,000,000
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
<FN>
(1) Before deducting expenses estimated at $150,000.
</TABLE>
The Date of this Prospectus is March 17, 1995
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information can be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C., and its regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10007
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can also be obtained from the
Public Reference Section of the Commission, Washington, D.C. 20549, at
prescribed rates. The common stock of the Company is listed on the Pacific
Stock Exchange, and reports, proxy statements and other information filed by the
Company with the Commission may be inspected at the offices of the Pacific Stock
Exchange, 301 Pine Street, San Francisco, California 94104.
The Company furnishes to its shareholders annual reports containing audited
financial statements and quarterly reports containing unaudited financial
information for the first three quarters of each year. Copies of such reports
are available upon written request.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference in the Prospectus the
following documents filed with the Commission (File No. 0-15638):
(1) The Company's Annual Report on Form 10-K for the year ended December
31, 1994.
(2) The following portions of the Company's 1994 Annual Report to
Shareholders:
(a) Description of the Company's business furnished in accordance
with Rule 14a-3(b)(6) under the Exchange Act on the inside front
cover; all of the information found on page 1 under the heading
"Financial Highlights" and the text under the heading "To Our
Shareholders" on pages 2 and 3 are specifically excluded from
incorporation herein.
(b) Audited consolidated financial statements of the Company and the
report of independent certified public accountants furnished in
accordance with Rule 14a-3(b)(1) under the Exchange Act on pages
10 through 20.
(c) Selected financial data relating to the Company furnished as
required by Item 301 of Regulation S-K on page 20.
(d) Information relating to industry segments, classes of similar
products or services, foreign and domestic operations, and export
sales furnished as required by paragraphs (b), (c)(l)(i) and (d)
of Item 101 of Regulation S-K on page 19.
(e) Supplementary financial information furnished as required by Item
302 of Regulation S-K on page 21.
(f) Management's discussion and analysis of results of operations and
financial condition furnished as required by Item 303 of
Regulation S-K on pages 4 through 9.
Any statement contained in any document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as modified or superseded, to constitute part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the request of such person, a copy of any document
incorporated by reference in this Prospectus, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference into
such documents). Written or telephone requests should be directed to Investment
Department, North Star Universal, Inc., 610 Park National Bank Building, 5353
Wayzata Boulevard, Minneapolis, Minnesota 55416, Telephone (612) 546-7500.
-2-
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
North Star Universal, Inc. ("North Star" or the "Company"), is a holding
company. North Star's direct and indirect wholly owned subsidiaries include
Americable, Inc. ("Americable"), Transition Engineering, Inc. ("Transition
Engineering") and C.E. Services, Inc. and its United Kingdom subsidiary, C.E.
Services (Europe) Limited (together, "C.E. Services"). Americable is a provider
of connectivity and networking products and services. Transition Engineering is
a manufacturer of connectivity devices and equipment used in local area network
("LAN") applications. C.E. Services is a third-party provider of systems, parts
and services for mainframe computers and peripherals.
Additionally, at March 1, 1995, the Company owned approximately 38% of the
outstanding common stock of Michael Foods, Inc. ("Michael Foods"). Michael
Foods is a food processing and distribution company, which the Company brought
public in 1987. In June of 1991, the Company's health care services subsidiary,
CorVel Corporation (formerly FORTIS Corporation) ("CorVel"), completed an
initial public offering of its common stock. As of March 1, 1995, the Company's
ownership in CorVel was approximately 37%. The Company directly employs six
management and administrative employees.
Americable provides products and services in the field of voice and data
communication networking. Americable seeks to be a single-source provider for
all of its customers' needs. As a value-added reseller and distributor,
Americable supplies cables and connectors, network products, patch panels and
fiber optics to various customers in the voice and data communications
aftermarket, including resellers, other distributors installers and end-users.
Americable also manufactures a wide variety of cable assemblies, sub-assemblies
and specialty products for its customers. While some of the products are
manufactured to standard specifications for sale by Americable as part of its
product inventory, most are custom designed and manufactured to its customers'
specifications. Additionally, Americable designs and supervises the
implementation of the physical layer of LAN systems for its customers. In
connection with such projects, the company offers products and services for all
levels of computing, including mainframe, mini- and micro-workstations and
personal computer based LAN systems.
Transition Engineering designs, manufactures and markets hardware equipment
that provides physical connectivity for LAN's and mini- and mainframe networks.
Physical connectivity devices enable computing and other electronic devices to
communicate over a network. These devices include transceivers, hubs,
concentrators, adapters and related communications modules.
C.E. Services is a third-party provider of systems, parts and services for
mainframe computers and peripherals. Many of the company's services are
especially valuable to computer leasing and credit companies that acquire large
quantities of computer components and supply many different configurations of
computer equipment to their end-user customers.
Michael Foods is a diversified producer and distributor of food products
operating in four basic areas--eggs and egg products, distribution of
refrigerated grocery products, refrigerated and frozen potato products and dairy
products. Michael Foods, through its eggs and egg products division, is one of
the largest producers, processors and distributors of shell eggs, extended
shelf-life liquid eggs and dried, hard-cooked and frozen egg products in the
United States. The refrigerated distribution division also distributes a broad
line of refrigerated grocery products directly to supermarkets, including
cheese, shell eggs, bagels, butter, margarine, muffins, potato products, juices
and ethnic foods. The potato products division processes and distributes
refrigerated and frozen potato products for foodservice and retail markets
throughout the United States. The dairy products division processes and
distributes soft serve mix, ice cream mix, frozen yogurt mix and extended shelf-
life, ultrapasteurized milk and
-3-
<PAGE>
specialty dairy products to fast food businesses and other foodservice outlets,
independent retailers, ice cream manufacturers and others.
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 Company's principal executive offices are located at 610 Park National
Bank Building, 5353 Wayzata Boulevard, Minneapolis, Minnesota 55416. Telephone:
(612) 546-7500.
THE OFFERING
SECURITIES OFFERED . . . . . . The Company is offering up to $40,000,000
principal amount Subordinated Time Certificates
(the "Time Certificates"). The Six and Twelve
Month Subordinated Extendible Time Certificates
(together, the "Extendible Time Certificates"),
unless earlier redeemed by the holder thereof
on or within ten business days after their
respective Roll-Over Dates, mature four years
from the date of issuance. The Two, Five and
Ten Year Subordinated Fixed-Term Time
Certificates (collectively, the "Fixed-Term
Time Certificates") 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 Time
Certificates-General."
INTEREST RATE AND PAYMENT. . . Interest on the Time Certificates will accrue
from the date of issuance. Interest will be
payable with respect to Extendible Time
Certificates semi-annually and with respect to
the Fixed-Term Time Certificates, quarterly or
at maturity at the option of the Certificate
holder. If the interest is paid at maturity
only, it will be compounded quarterly.
Additionally, holders of Fixed-Term Time
Certificates in denominations of $5,000 or
more, may elect to receive interest payments
monthly. The interest rate applicable to each
Six and Twelve Month Extendible Time
Certificate will automatically adjust each six
and twelve months, respectively, on each Roll-
Over Date, unless redeemed by the Time
Certificate holder. Not less than ten business
days prior to the Roll-Over Date, the Company
will mail to holders of Extendible Time
Certificates a notice of the upcoming Roll-Over
Date and the new interest rate that will be
payable with respect to the Extendible Time
Certificates until the next Roll-Over Date.
See "Description of Time Certificates-
Extendible Time Certificates." Once issued,
the interest rate applicable to a Fixed-Term
Time Certificate will not adjust prior to
maturity. See "Description of Time
Certificates-Fixed-Term Time Certificates."
REDEMPTION . . . . . . . . . . The Extendible Time Certificates are redeemable
in whole or in part at the option of the holder
on or within ten business days after any Roll-
Over Date. See "Description of Time
Certificates-Extendible Time Certificates-
Interest Rate Adjustment and Roll-Over." Both
the Extendible Time Certificates and the Fixed-
Term Certificates are redeemable at the
Company's option, in whole or in part, at any
time. See "Description of Time Certificates-
Provisions Relating to All Time Certificates-
Redemption at the Option of the Company."
-4-
<PAGE>
REPAYMENT UPON DEATH
OR DISABILITY. . . . . . . . . Under certain circumstances, the Company will
repay up to $25,000 in aggregate principal
amount of Time Certificates at par upon the
death or disability of a Time Certificate
holder. See "Description of Time Certificates-
Provisions Relating to All Time Certificates-
Redemption by the Holder Upon Death or
Disability."
SUBORDINATION. . . . . . . . . The Time Certificates are unsecured obligations
of the Company and subordinated to all present
and future Senior Indebtedness of the Company,
as defined in the Indenture. There are no
restrictions in the Indenture on incurring
additional Senior Indebtedness or other
indebtedness. See "Description of the Time
Certificates-Provisions Relating to All Time
Certificates-Subordination."
-5-
<PAGE>
SPECIAL FACTORS
Prospective investors should consider, together with the other matters set
forth in this Prospectus, the following factors in evaluating an investment in
the Time Certificates:
ABSENCE OF INSURANCE AND GUARANTEES. The Time Certificates 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 Time Certificates are
similar to the subordinated debt securities of other commercial entities, but
are unlike certificates of deposits or other similar accounts offered by banks
and savings institutions.
HIGH LEVERAGE AND CASH FLOW DEFICITS. Historically, the Company has had a
high debt to equity ratio and, since the formation of Michael Foods in May 1987,
the Company (exclusive of Michael Foods) has experienced operating cash flow
deficits. The Company and its consolidated subsidiaries had long term debt
(including current maturities) and short-term notes payable of approximately
$45.7 million as of December 31, 1994, and the Company's debt-to-equity ratio at
December 31, 1994, was 1.33 to 1. Also, the Company had cash flow deficits from
operations of approximately $4.6 million in 1994, $3.1 million in 1993 and
approximately $3.9 million in 1992, and operating cash flow deficits are
expected to continue. The Company intends to fund such operating cash flow
deficits through its available cash and cash equivalents, proceeds from the sale
of Time Certificates pursuant to this offering, amounts available under the
credit facilities of the Company and its consolidated subsidiaries, and
dividends from Michael Foods. The Company's ratio of earnings to fixed charges
for each of the five years ended December 31, 1990, 1991, 1992, 1993 and 1994
was 2.46, 1.53, .02, .28 and (.51), respectively. Because the Company remains
leveraged, however, a significant decline in the earnings of the Company's
operating subsidiaries, a prolonged interruption or significant reduction in
sales of Time Certificates pursuant to this offering, or a significant reduction
in the cash dividends the Company receives from Michael Foods, could have a
material adverse effect on the Company's ability to make scheduled payments of
interest and principal on its indebtedness, including the Time Certificates
offered hereby. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition-Capital Resources and Liquidity" contained in
the copy of the Company's 1994 Annual Report to Shareholders, which accompanies
this Prospectus.
RELIANCE UPON SALES OF NEW TIME CERTIFICATES. The Company relies upon the
sale of new Time Certificates to retire maturing debentures (under the Company's
earlier debenture programs) and Time Certificates and, to a much lesser extent,
to finance operations. Aggregate sales of new Time Certificates include the
reinvestment of proceeds from maturing Time Certificates or debentures into new
Time Certificates and the sale of Time Certificates unrelated to maturing Time
Certificates or debentures. During 1994, 1993 and 1992, approximately 63%, 54%
and 52%, respectively, of the proceeds from maturing Time Certificates or
debentures was reinvested in new Time Certificates. During 1994, 1993 and 1992,
total new sales of Time Certificates (including the reinvestment of compounded
interest) exceeded redeemed Time Certificates and debentures, resulting in net
cash proceeds of approximately $1.8 million, $680,000 and $1.3 million,
respectively, to the Company. In 1991 and 1990, however, maturing Time
Certificates and debentures exceeded total new sales of Time Certificates
(including the reinvestment of compounded interest), resulting in net cash
deficits of approximately $313,000 and $2.6 million, respectively. While the
Company intends to offer Time Certificates at competitive rates relative to
other comparable investment products, no assurance can be made that future sales
of Time Certificates (including reinvested proceeds) will equal or exceed
maturing Time Certificates and debentures. Approximately $12.1 million and
$11.2 million principal amount of Time Certificates and debentures mature in
1995 and 1996, respectively. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition-Capital Resources and Liquidity"
contained in the copy of the Company's 1994 Annual Report to Shareholders, which
accompanies this Prospectus.
MICHAEL FOODS AND CORVEL. Because Michael Foods and CorVel are not wholly
owned subsidiaries, the Company does not have the ability to utilize cash flow
from Michael Foods or CorVel in connection with its wholly owned operating
subsidiaries or to repay its indebtedness. The only cash the Company can obtain
from Michael Foods and CorVel are cash dividend payments made to all
-6-
<PAGE>
Michael Foods or CorVel shareholders. During 1994, the Company received cash
dividends equal to $1,471,000, with respect to its shares of Michael Foods
common stock. 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. There can be no assurance that Michael Foods will continue
to declare quarterly cash dividends. Any reduction in the amount of such
quarterly cash dividends could have an adverse effect on the ability of the
Company to make scheduled payments of principal and interest on its
indebtedness, including the Time Certificates offered hereby. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition-Capital
Resources and Liquidity" contained in the copy of the Company's 1994 Annual
Report to Shareholders, which accompanies this Prospectus.
SUBORDINATION OF TIME CERTIFICATES. The Time Certificates are subordinate
and junior to any and all Senior Indebtedness of the Company, as defined in the
Indenture. Also, with respect to certain of the Company's Senior Indebtedness,
the Company has pledged its shares of Michael Foods stock to secure such
indebtedness. There are no restrictions in the Indenture regarding the amount
of Senior 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
Time Certificates. The Time Certificates are in parity with all of the
subordinated debentures and Time Certificates that have previously been offered
by the Company. As of December 31, 1994, the outstanding Senior Indebtedness of
the Company was $4.2 million and there was $41.4 million principal amount of
subordinated indebtedness of the Company outstanding (subordinated debentures
and Time Certificates), which rank in parity with the Time Certificates. See
"Description of the Time Certificates--Provisions Relating to All Time
Certificates-Subordination."
NO SECURITY FOR PAYMENT. The Time Certificates offered hereby are
unsecured and do not have the benefit of a sinking fund or other similar
provision providing for retirement of the Time Certificates at their maturity.
The Company's ability to repay the Time Certificates could be adversely affected
if the Company were unable to raise additional funds through the issuance of new
debt or equity securities or the sale of Company assets. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition-Capital
Resources and Liquidity" contained in the copy of the Company's 1994 Annual
Report to Shareholders, which accompanies this Prospectus.
REDEMPTION. The Company, at its option, may at any time redeem any or all
of the outstanding Extendible or Fixed-Term Time Certificates of any type
selected by interest rate or maturity. If the Company redeems less than all of
the outstanding Time Certificates selected for redemption, the Company will
redeem the Time Certificates ratably or by lot. The Time Certificates will be
redeemed at 100% of the principal amount plus accrued but unpaid interest. See
"Description of Time Certificates-Provisions Relating to all Time Certificates-
Redemption at the Option of the Company."
NO PUBLIC TRADING MARKET FOR THE TIME CERTIFICATES. It is unlikely that
any trading market for the Time Certificates offered hereby will develop, or, if
developed, will be sustained, or that the Time Certificates offered hereunder
may be resold at any price. In addition, the Time Certificates offered
hereunder may be issued in uneven amounts which could further restrict the
ability to trade the Time Certificates.
NO FIRM UNDERWRITING COMMITMENT. The Time Certificates are being offered
by officers and employees of the Company without a firm underwriting commitment.
No assurance can be given as to the principal amount of Time Certificates that
will be sold or whether the proceeds received by the Company from the sale of
Time Certificates will be sufficient for the uses required by the Company. See
"Use of Proceeds."
-7-
<PAGE>
USE OF PROCEEDS
The Company anticipates applying net proceeds from the sale of the Time
Certificates first to retire outstanding subordinated debentures and Time
Certificates and related accrued interest, as such subordinated debentures and
Time Certificates mature. As of December 31, 1994, $41.4 million principal
amount of subordinated debentures and Time Certificates were outstanding.
During 1995 and 1996, approximately $12.1 million and $11.2 million principal
amount of subordinated debentures and Time Certificates, respectively, will
mature. The Company's maturing subordinated debentures and Time Certificates
during 1995 and 1996 will have a weighted average to maturity interest rate of
approximately 9.25% and 9.6% respectively. In the event that proceeds from the
sale of the Time Certificates exceed the amount necessary to repay maturing
subordinated debentures and Time Certificates and prior to the maturity of such
subordinated debentures and Time Certificates, the Company will include such
proceeds in the general funds of the Company, which the Company expects to use
for corporate costs, working capital and other operating purposes.
PLAN OF DISTRIBUTION
The Company is offering hereby an aggregate of up to $40,000,000 principal
amount of Time Certificates, which will be offered by authorized officers and
employees of the Company directly without an underwriter and on a continuous
basis without an expected termination date. 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 Time Certificates must be sold in
order for the Company to accept and deposit the proceeds of this offering.
The Time Certificates only may be purchased by means of the offer to
purchase Time Certificates contained in the form of Subscription Agreement
provided by the Company (the "Subscription Agreement"). The Company will not
accept an offer to purchase Time Certificates or negotiate checks delivered for
payment on the sale of Time Certificates unless the prospective purchaser has
previously received this Prospectus and a current post-effective amendment
thereto, if any, setting forth changes to the initial interest rates for each
series of Time Certificates set forth on the cover page hereof.
In the event that the Company receives a properly executed Subscription
Agreement and payment for the purchase of Time Certificates 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 Time Certificates may revoke his or her offer,
orally or in writing, and the Company will promptly return any checks or funds
previously delivered to it. Once the Company accepts an offer, however, orders
to purchase Time Certificates 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 Time Certificates may revoke their offer by
writing the Company at 610 Park National Bank Building, 5353 Wayzata Boulevard,
Minneapolis, Minnesota 55416. Attention: Investment Department, or by calling
(612) 546-7500. Investors seeking information as to the current interest rates
for the Time Certificates may contact the Company at 1-800-247-1246 to receive a
current quote as to such rates.
-8-
<PAGE>
DESCRIPTION OF TIME CERTIFICATES
GENERAL
The Time Certificates will be issued under an Indenture, dated as of
April 26, 1989, as amended by that certain First Supplemental Indenture, dated
as of March 16, 1992 and by that certain Second Supplemental Indenture, dated as
of March 16, 1995 (as amended, 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 First Supplemental Indenture increased the principal amount of Time
Certificates that may be issued under the Indenture from $40 million to $80
million. The Second Supplemental Indenture increased the principal amount of
Time Certificates that may be issued under the Indenture from $80 million to
$120 million. As of March 1, 1995, approximately $73.9 million principal amount
of Time Certificates had been issued under the Indenture and approximately
$33.3 million principal amount of Time Certificates was outstanding under the
Indenture. There is no limitation on the respective principal amount of any
type of Time Certificates that may be outstanding at any time. The Extendible
Time Certificates will mature four years after their date of issue, unless
previously redeemed at the option of the Company or, as described below, at the
option of the holder. The Fixed-Term Time Certificates 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.
The Time Certificates are unsecured obligations of the Company and rank on
a parity with other outstanding subordinated debt of the Company, including
previously issued debentures of the Company issued under its debenture programs,
previously issued Time Certificates issued under the Indenture and, except as
stated below, general creditors of the Company. See "Provisions Relating to All
Time Certificates- Subordination." There is no sinking fund or similar
provision for payment of the Time Certificates at maturity. Maturing Time
Certificates will be paid from general funds of the Company or from the sale of
new Time Certificates.
The initial interest rates payable on any unsold Time Certificates 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 Time Certificate purchased prior to the effective date of
such change. The interest rate applicable to each type of Time Certificate 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 issuance of such Time
Certificate. Interest payable on the Time Certificates will be calculated based
on a 365 day year.
The Time Certificates will be issued only in registered form, without
coupons, in any amount of $1,000 or more. (Section 2.02(a)).
EXTENDIBLE TIME CERTIFICATES
INTEREST. Interest on each Extendible Time Certificate will accrue from
its date of issuance and will be payable semi-annually beginning on the day
before the same calendar day of the sixth month following the date of issuance
of such certificate. If, however, the date of issuance was the 29th, 30th or
31st day of any calendar month and the calendar month six months following the
date of issuance does not include the actual calendar day of the date of
issuance, then such interest shall be payable on the last calendar day of the
sixth month following the date of issuance. Interest on each Extendible Time
Certificate will be payable to the person in whose name the Extendible Time
Certificate is registered at the close of business on the 15th day before
interest is payable.
INTEREST RATE ADJUSTMENT AND ROLL-OVER. The interest rate applicable to
each Six Month Extendible Subordinated Time Certificate will be adjusted every
six months. The first adjustment will
-9-
<PAGE>
occur on the same calendar day of the sixth month following the date of issuance
of such certificate. If, however, the date of issuance was the 29th, 30th or
31st day of any calendar month and the calendar month six months following the
date of issuance does not include the actual calendar day of the date of
issuance, then the interest rate will be adjusted on the last calendar day of
the sixth month following the date of issuance. Thereafter, the interest rate
will continue to adjust every six months on the anniversary date of the date of
issuance and on the anniversary date of the date of the first interest rate
adjustment until maturity, unless earlier redeemed. The interest rate
applicable to each Twelve Month Extendible Subordinated Time Certificate will be
adjusted on each anniversary date of the date of issuance of the certificate.
Each such date, whereupon the interest rate applicable to such Extendible
Time Certificates is adjusted, is referred to as a "Roll-Over Date." From and
after the Roll-Over Date, the new interest rate will be paid by the Company with
respect to such Extendible Time Certificates until the next Roll-Over Date.
The Company will give each registered holder of an Extendible Time
Certificate written notice at least ten business days prior to a Roll-Over Date
(such date is herein referred to as the "Notice Date") reminding the holder of
such date and notifying the holder of the interest rate applicable to such
Extendible Time Certificate as of the Notice Date. A holder of an Extendible
Time Certificate may elect to hold such Extendible Time Certificate at the so
announced interest rate until the next Roll-Over Date or present the Extendible
Time Certificate to the Company within ten days after the Roll-Over Date for
redemption at 100 percent of the certificate's principal amount or a portion
thereof. However, if the interest rate applicable to such Extendible Time
Certificate on the Roll-Over Date is different from the interest rate as of the
Notice Date, the holder will be notified of the change in interest rate and be
given ten business days from the date of such notice of the change in interest
rates to present the Extendible Time Certificate to the Company for redemption.
Failure by a holder to so present an Extendible Time Certificate for redemption
will be deemed an election to hold such Extendible Time Certificate until the
following Roll-Over Date. If a holder submits an Extendible Time Certificate
for redemption, no interest will be paid during the period from the Roll-Over
Date to the date of redemption. Registered holders of the Extendible Time
Certificates will be determined at the close of business on the 15th day prior
to the Roll-Over Date.
FIXED-TERM TIME CERTIFICATES
INTEREST. Interest on each Fixed-Term Time Certificate will accrue from
the date of issuance and will be payable, at the election of the initial
purchaser, quarterly, at maturity, or if the Fixed-Term Time Certificate 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 Fixed-Term Time
Certificate and simple interest will be paid thereafter on the new principal
amount. To change the payment option a holder of a Fixed-Term Time Certificate
must: (a) furnish the Company with a written notice of such election;
(b) forward the actual certificate evidencing the Fixed-Term Time Certificate 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.
PROVISIONS RELATING TO ALL TIME CERTIFICATES
SUBORDINATION. Payment of principal and interest on the Time Certificates
is subordinated and subject to the prior payment in full of all Senior
Indebtedness. 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 Time Certificates are entitled to
receive any payment. (Article 10).
-10-
<PAGE>
Under the Indenture, "Senior Indebtedness" means all Indebtedness (other
than the Time Certificates and other subordinated debentures of the Company),
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 Time
Certificates. "Indebtedness" means any indebtedness, contingent or otherwise, in
respect of borrowed money, or evidenced 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.
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 Time Certificates may recover less ratably than holders of Senior
Indebtedness of the Company, in the event of insolvency. As of December 31,
1994, the outstanding Senior Indebtedness of the Company was $4.2 million.
Also, as of December 31, 1994, there was $41.4 million principal amount of
subordinated debentures and Time Certificates of the Company outstanding. The
Time Certificates currently outstanding and those to be sold pursuant to this
offering rank in parity with each other and with the outstanding subordinated
debentures.
INTEREST ACCRUAL DATE. Interest on the Time Certificates 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 non-business 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).
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 rulings, all of which
may be retroactively subject to change. Each prospective purchaser of Time
Certificates is advised to consult his or her own tax advisor. Interest on the
Time Certificates is taxable as it accrues, including interest on Fixed-Term
Time Certificates which is payable only at maturity. As a consequence, a holder
of a Fixed-Term Time Certificate who elects payment of interest at maturity is
required to recognize the interest income on such Time Certificate 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 Time Certificates 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 ("Additional Interest") on such of the Time Certificates, in
such amounts, in such form, on such terms and at such times as shall be
determined from time to time by the Company. Such Additional Interest payments
may be modified or discontinued at any time. 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 Time Certificates.
Also, such Additional Interest payments may be limited to current or new
investors residing in a particular geographic area. (Section 2.02).
REDEMPTION AT THE OPTION OF THE COMPANY. The Company may, at its option,
redeem any or all of the Time Certificates on at least 30 days notice to each
holder of Time Certificates to be redeemed at his or her registered address at a
price of 100 percent of the principal amount of the Time Certificates, plus
accrued interest on a daily basis to the redemption date. The Company may
select for redemption of the Time Certificates a single class, interest rate or
maturity. In the event of redemption of less than all of a series or class of
Time Certificates selected for redemption by the Company, the Time Certificates
will be chosen for redemption by the Trustee as provided in the Indenture,
generally pro rata or by lot. On and after the redemption date, interest ceases
to accrue on Time Certificates or portions of them called for redemption.
(Article 3).
-11-
<PAGE>
REDEMPTION BY THE HOLDER UPON DEATH OR DISABILITY. A maximum principal
amount of $25,000 in one or more Time Certificates may be redeemed at the
election of the original owner (if such person is still the holder) following
such person's total permanent disability or by such person's estate, following
the holder's death, as established to the satisfaction of the Company. The
redemption price, in the event of such a death or disability, will be the
principal amount of the Time Certificate, plus interest accrued and not
previously paid, to the date of redemption. If two or more persons are joint
record owners of a Time Certificate, the election to redeem will not apply until
all record owners are either deceased or disabled, except that, if the joint
owners are husband and wife, the election may be made after the death or total
permanent disability of either spouse. (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 Time Certificates 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 Time Certificate, without
the consent of the holder thereof, or reduce the percentage of Time Certificate
holders whose consent to modification is required. Without action by the Time
Certificate holders, the Company and the Trustee may enter into supplemental
indentures adding covenants or agreements of the Company for the protection of
the Time Certificate holders, clarifying any ambiguity or correcting any defect
in the Indenture, consistent with its terms, or making any change to the
Indenture that does not adversely affect the legal rights of the Time
Certificate holders. (Article 9). The Company and the Trustee have entered
into that certain First Supplemental Indenture dated as of March 16, 1992, which
amended the Indenture dated as of April 26, 1989, to increase the principal
amount of Time Certificates that may be issued thereunder from $40,000,000 to
$80,000,000. In addition, the Company and the Trustee have entered into that
certain Second Supplemental Indenture, dated as of March 16, 1995, which amended
the Indenture dated as of April 26, 1989, to increase the principal amount of
the Time Certificates that may be issued thereunder from $80,000,000 to
$120,000,000.
PLACE, METHOD AND TIME OF PAYMENT. Principal and interest on the Time
Certificates 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. 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. (Sections 2.03 and
11.07).
EVENTS OF DEFAULT. An Event of Default is defined in the Indenture as
being a default in payment of principal on the Time Certificates which has not
been cured; a default for 30 days in payment of any installment of interest on
the Time Certificates; 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
25% in principal amount of the outstanding Time Certificates. 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. The Indenture
provides that the holders of 51% in aggregate principal amount of the Time
Certificates 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 Time Certificates. (Article 6).
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 Time Certificate
holders, unless such Time Certificate holders shall have offered to the Trustee
reasonable indemnity. Subject to such provisions for the indemnification of the
Trustee, the holders of a majority in principal amount of the Time Certificates
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. The Indenture contains certain limitations
on the right of an individual Time Certificate holder to institute legal
proceedings in the event of the Company's default. (Section 6.06).
-12-
<PAGE>
SATISFACTION AND DISCHARGE OF INDENTURE. The Indenture may be discharged
upon the payment of all Time Certificates outstanding thereunder or upon deposit
in trust of funds sufficient therefor, plus compliance with certain formal
procedures. (Article 8).
REPORTS. The Company publishes 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 Time Certificate holder upon written request.
SERVICE CHARGES. The Company reserves the right to assess service charges
for issuing Certificates to replace lost or stolen Time Certificates, changing
the registration of a Certificate 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 Time Certificate
by the holder to another holder. (Sections 2.05, 2.07 and 2.08).
TRANSFER AND EXCHANGE. A holder may transfer or exchange Time Certificates
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 Fixed-Term Time Certificates selected for redemption. Also, the
Company is not required to transfer or exchange any Time Certificate for a
period of fifteen business days before the maturity of such Time Certificates.
(Section 2.07).
CONCERNING THE TRUSTEE. The Trustee acts as the trustee under that certain
Indenture, dated as of December 1, 1986, pursuant to which the Company's
Subordinated Debentures, Series 87/88 were previously issued. The Time
Certificates rank in parity with outstanding Subordinated Debentures, Series
87/88, of the Company. Also, 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 Time
Certificates 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. 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 man in the conduct
of his own affairs. 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 Time Certificates issued thereunder, unless
they shall have offered to the Trustee security and indemnity satisfactory to
it.
EXPERTS
The consolidated financial statements of North Star Universal, Inc. and
Subsidiaries have been audited by Grant Thornton LLP, independent certified
public accountants, to the extent and for the periods indicated in their report
appearing in the copy of the Company's 1994 Annual Report to Shareholders, which
accompanies this Prospectus.
Such financial statements are included in the copy of the Company's 1994
Annual Report to Shareholders, which accompanies this Prospectus, and
incorporated by reference herein in reliance upon such report of such firm given
upon their authority as an expert in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Time
Certificates will be passed upon for the Company by the law firm of Dorsey &
Whitney P.L.L.P., Minneapolis, Minnesota.
-13-
<PAGE>
TABLE OF CONTENTS $40,000,000
Available Information . . . . . . . . . . . . 2 SIX AND TWELVE MONTH
Incorporation of Certain Information SUBORDINATED EXTENDIBLE
by Reference . . . . . . . . . . . . . . . . 2 TIME CERTIFICATES
Prospectus Summary . . . . . . . . . . . . . . 3
Special Factors. . . . . . . . . . . . . . . . 6 TWO, FIVE AND TEN
Use of Proceeds. . . . . . . . . . . . . . . . 8 YEAR SUBORDINATED
Plan of Distribution . . . . . . . . . . . . . 8 FIXED-TERM TIME
Description of Time Certificates . . . . . . . 9 CERTIFICATES
Experts. . . . . . . . . . . . . . . . . . . . 13
Legal Matters. . . . . . . . . . . . . . . . . 13
No person has been authorized in connection with _______________________
the offering to give any information or to make
any representations not contained in this PROSPECTUS
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 or
solicitation by anyone in any state in which such
offer or solicitation is not authorized, or in NORTH STAR
which the person making such offer or solicitation UNIVERSAL, INC.
is not qualified to do so, or to any person to 610 Park National Bank
whom it is unlawful to make such offer or Building
solicitation. Neither the delivery of this 5353 Wayzata Boulevard
Prospectus nor any sales made hereunder shall, Minneapolis, MN 55416
under any circumstances, create any implication
that there has been no change in the affairs of The date of this
the Company since the date of this Prospectus Prospectus is
March 17, 1995
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
With the exception of the SEC registration fee, the following expenses
to be paid by the Registrant in connection with the distribution of
the Time Certificates being registered have been estimated.
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . $ 13,792
Printing. . . . . . . . . . . . . . . 30,000
Legal fees and expenses . . . . . . . 50,000
Accounting fees . . . . . . . . . . . 35,000
Trustee's fee . . . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . 11,208
-------
Total . . . . . . . . . . . . . . . $150,000
-------
-------
</TABLE>
ITEM 15. 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 IX of the Amended
and Restated 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.
II-1
<PAGE>
ITEM 16. EXHIBITS.
4.1 Form of Indenture, dated as of April 26, 1989, between the Company and
National City Bank of Minneapolis, as trustee (filed as Exhibit 4.1 to
Registration No. 33-26176 and incorporated herein by reference).
4.2 Form of First Supplemental Indenture, dated as of March 16, 1992,
amending the Indenture described in Exhibit 4.1 above (filed as
Exhibit 4.2 to Registration No. 33-40629 and incorporated herein by
reference).
*4.3 Form of Second Supplemental Indenture, dated as of March 16, 1995,
amending the Indenture described in Exhibit 4.1 above.
*4.4 Proposed form of Six and Twelve Month Subordinated Extendible Time
Certificates (included as part of Exhibit 4.3 above).
*4.5 Proposed form of Two, Five and Ten Year Subordinated Fixed-Term Time
Certificates (included as part of Exhibit 4.3 above).
4.6 Form of Subscription Agreement for use in connection with offers to
purchase the Time Certificates by prospective purchasers (filed as
Exhibit 4.4 to Registration No. 33-26176 and incorporated herein by
reference).
*5.1 Opinion and consent of counsel to the Registrant with respect to the
legality of the Time Certificates.
10.1 Severance Agreement, dated December 31, 1990, between the Company and
Miles E. Efron (filed as Exhibit 10.1(a) to Registration No. 33-26176
and incorporated herein by reference).
10.2 North Star Universal, Inc. Incentive Stock Option Plan, including the
form of Stock Option Agreement related thereto (filed as Exhibit 10.19
to Registration No. 33-10558 and incorporated herein by reference).
10.3 North Star Universal, Inc. Non-Qualified Stock Option Plan, including
the form of Stock Option Agreement related thereto (filed as Exhibit
10.19 to Registration No. 33-10558 and incorporated herein by
reference).
10.4 Letter Agreement, dated March 25, 1987, between North Star Universal,
Inc. and Michael Foods, Inc., pursuant to which the Company agreed not
to acquire any additional food related businesses as long as it owns
25% of the capital stock of Michael Foods, Inc. (filed as Exhibit
10.34 to Registration No. 33-10558 and incorporated herein by
reference).
10.5 Indenture, dated as of December 1, 1986, between the Company and
National City Bank of Minneapolis, as Trustee, relating to $25,000,000
principal amount of Subordinated Debentures Series 87/88 (filed as
Exhibit 4.1 to Registration No. 33-10558 and incorporated herein by
reference).
10.6 Indenture, dated as of September 1985, between the Company and
American National Bank and Trust Company, as Trustee, relating to
$14,000,000 principal amount of Subordinated Debentures, Series 1985
(filed as Exhibit 4 to Registration No. 2-99100 and incorporated
herein by reference).
II-2
<PAGE>
10.7 Restated and Amended Credit Loan Agreement, dated May 17, 1990,
between the Company and First Bank National Association ("First Bank")
(filed as Exhibit 19.1 to the Company's quarterly report on Form 10-Q
for the quarter ended June 30, 1990, and incorporated herein by
reference).
10.8 Amendment to Restated and Amended Revolving Credit Loan Agreement,
dated January 11, 1991, between the Company and First Bank, amending
the Restated and Amended Revolving Credit Loan Agreement described in
Exhibit 10.9 above (filed as Exhibit 10.11(d) to Registration
Statement No. 33-26176 and incorporated herein by reference).
10.9 Letter Agreement, dated February 28, 1991, amending the terms of the
Amendment to Restated and Amended Revolving Credit Loan Agreement
described in 10.10 above (filed as Exhibit 10.11(e) to Registration
No. 33-26176 and incorporated herein by reference).
10.10 Second Amendment to Restated and Amended Revolving Credit Loan
Agreement, dated January 2, 1992, between the Company and First Bank,
amending the Restated and Amended Revolving Credit Loan Agreement
described in Exhibit 10.9 above, including a promissory note executed
in connection therewith (filed as Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the year ending December 31, 1991 and
incorporated herein by reference).
10.11 Third Amendment to Restated and Amended Revolving Credit Loan
Agreement, dated November 18, 1992, between the Company and First
Bank, amending the terms of the Restated and Amended Revolving Credit
Loan Agreement described in 10.9 above (filed as Exhibit 10.12(a) to
Registration Statement No. 33-40629 and incorporated herein by
reference).
*10.12 Fourth Amendment to Restated and Amended Revolving Credit Loan
Amendment, dated January 3, 1994, between the Company and First Bank
National Association, amending the terms of the Restated and Amended
Revolving Credit Loan Agreement described in 10.6 above.
*10.13 Waiver and Fifth Amendment to Restated and Amended Revolving Credit
Loan Amendment, dated March 16, 1994, between the Company and First
Bank National Association, amending the terms of the Restated and
Amended Revolving Credit Loan Agreement described in 10.6 above.
*10.14 Sixth Amendment to Restated and Amended Revolving Credit Loan
Amendment, dated January 31, 1995, between the Company and First Bank
National Association, amending the terms of the Restated and Amended
Revolving Credit Loan Agreement described in 10.6 above.
10.15 Loan Agreement, dated as of May 1, 1989, between the City of Welcome,
Minnesota and Eagle Engineering and Manufacturing Company, Inc., a
subsidiary of the Company ("Eagle Engineering") relating to $1,470,000
Industrial Development Revenue Bonds, Series 1989 (Eagle Engineering
and Manufacturing Company, Inc. Project, (filed as Exhibit 10.15 to
Registration No. 33-26176 and incorporated herein by reference).
10.16 Mortgage and Security Agreement, dated as of May 1, 1989, securing the
obligations of Eagle Engineering under the Loan Agreement described in
Exhibit 10.20 above, pursuant to which Eagle Engineering granted a
mortgage to American National Bank and Trust Company, St. Paul,
Minnesota, as trustee under that certain Indenture, dated as of May 1,
1989, relating to its facility in Welcome, Minnesota (filed as Exhibit
10.16 to Registration No. 33-26176 and incorporated herein by
reference).
II-3
<PAGE>
10.17 Guaranty Agreement, dated as of May 1, 1989, executed by the Company
as guarantor, pursuant to which the Company guaranties the obligations
of Eagle Engineering under the Loan Agreement described in Exhibit
10.20 above (filed as Exhibit 10.17 to Registration No. 33-26176 and
incorporated herein by reference).
10.18 North Star Universal, Inc. 1988 Nonqualified Stock Option Plan, as
amended April 26, 1989 and May 15, 1989, including form of Stock
Option Agreement related thereto (filed as Exhibit 10.18 to
Registration No. 33-26176 and incorporated herein by reference).
10.19 Employment Agreement, dated April 1, 1993, between the Company,
Transition Engineering, Inc. and Peter E. Flynn (filed as Exhibit 10.
22 to the Company's Annual Report on Form 10-K for the year ending
December 31, 1993 and incorporated herein by reference).
10.20 Lease, dated July 12, 1990, between C.E. Services Inc. and Kingsland
Properties Ltd., relating to the leased facility in Batavia, Illinois
(filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the year ending December 31, 1991 and incorporated herein by
reference).
10.21 Commercial Lease Agreement, dated January 31, 1990, between C.E.
Services, Inc. and Post and Paddock Associates, relating to the leased
facility in Grand Prairie, Texas (filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year ending December 31,
1991 and incorporated herein by reference).
10.22 Registration Rights Agreement, dated May 16, 1991, between the Company
and FORTIS Corporation (filed as Exhibit 10.17 to Registration No. 33-
40629 and incorporated herein by reference).
10.23 Form of North Star Indemnification Agreement, dated May , 1991,
between the Company and FORTIS Corporation (filed as Exhibit 10.20 to
Registration No. 33-40629 and incorporated herein by reference).
10.24 Promissory Note, dated June 1, 1991, executed in favor of the Company
by James H. Michael (filed as Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the year ending December 31, 1991 and
incorporated herein by reference).
10.25 Purchase and Sale Agreement by and among Leslie C. Malmquist,
Universal Press and Label, Inc. and the Company, dated December 22,
1992, relating to the sale of Universal Press and Label, Inc.
10.26 Amended and Restated Loan and Security Agreement dated June 1, 1993
among Americable, Transition Engineering, Inc., Cable Distribution
Systems, Inc. and First Bank (filed as Exhibit 10.31 to the Company's
quarterly report on Form 10-Q for the quarter ended June 30, 1993, and
incorporated herein by reference.)
10.27 Subordination Agreement executed by the Company and Americable for the
benefit of First Bank in connection with the loans described in
Exhibit 10.26 above (filed as Exhibit 10.25(b) to Registration No. 33-
26176 and incorporated herein by reference).
II-4
<PAGE>
*10.28 First Amendment to Amended and Restated Loan and Security Agreement,
dated November 29, 1993, among Americable, Inc., Transition
Engineering, Inc., Cable Distributions Systems, Inc. and First Bank
National Association, amending the terms of the Amended and
Restated Loan and Security Agreement described in 10.26 above.
*10.29 Waiver and Second Amendment to Amended and Restated Loan and Security
Agreement, dated as of March 3, 1995, among Americable, Inc.,
Transition Engineering, Inc., Cable Distributions Systems, Inc. and
First Bank National Association, amending the terms of the Amended and
Restated Loan and Security Agreement described in 10.26 above.
*10.30 Supplement A to Amended and Restated Loan and Security Agreement,
dated June 1, 1993, among Americable, Inc., Transition Engineering,
Inc., Cable Distributions Systems, Inc. and First Bank National
Association, supplementing the terms of the Amended and Restated Loan
and Security Agreement described in 10.26 above.
*10.31 Amended, Restated and Consolidated Credit Agreement, dated as of
August 1, 1994, by and between C.E. Services, Inc. and Texas Commerce
Bank National Association.
*10.32 First Amendment to Amended, Restated and Consolidated Credit
Agreement, dated as of December 27, 1994, by and between C.E.
Services, Inc. and Texas Commerce Bank National Association, amending
the Amended and Restated Consolidated Credit Agreement described in
10.31 above.
*10.33 Continuing Guaranty by North Star Universal, Inc., dated December
1994, to Texas Commerce Bank National Association, for indebtedness of
C.E. Services, Inc., relating to the Amended and Restated Consolidated
Credit Agreement described in 10.31 above.
12.1 Computation of Ratio of Earnings to Fixed Charges for North Star
Universal, Inc. for the year ended December 31, 1991 (filed as Exhibit
12.1 to the Company's Annual Report on Form 10-K for the year ending
December 31, 1991 and incorporated herein by reference).
12.2 Computation of Ratio of Earnings to Fixed Charges for North Star
Universal, Inc. for the years ended December 31, 1988, 1989 and 1990
(filed as Exhibit 12.1 to the Company's Annual Report on Form 10-K for
the year ending December 31, 1990 and incorporated herein by
reference).
12.3 Computation of Ratio of Earnings to Fixed Charges for North Star
Universal, Inc. for the year ended December 31, 1992 (filed as Exhibit
12.3 to the Company's Annual Report on Form 10-K for the year ending
December 31, 1992 and incorporated herein by reference).
12.4 Computation of Ratio of Earnings to Fixed Charges for North Star
Universal, Inc. for the year ended December 31, 1993 (filed as Exhibit
12.4 to the Company's Annual Report on Form 10-K for the year ending
December 31, 1993 and incorporated herein by reference).
*12.5 Computation of Ratio of Earnings to Fixed Charges for North Star
Universal, Inc. for the year ended December 31, 1994.
*13.4 1994 Annual Report to Shareholders of North Star Universal, Inc.
*23.1 Consent of Independent Certified Public Accountants - Grant Thornton
LLP.
*24.1 A power of attorney, pursuant to which amendments to this Registration
Statement may be filed, is included on the signature page contained in
Part II of this Registration Statement.
*25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of National City Bank of
Minneapolis.
*27.1 Financial Data Schedule
___________
* Filed with this Registration Statement.
II-5
<PAGE>
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 hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to
and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X is
not set forth in the prospectus, to deliver, or cause to be delivered
to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis, State of Minnesota, this 15th day of
March, 1995.
NORTH STAR UNIVERSAL, INC.
By /s/Jeffrey J. Michael
-----------------------------------
Jeffrey J. Michael, President and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jeffrey J. Michael and Peter E. Flynn,
and each of them, as his true and lawful attorneys-in-fact and agents, each with
full powers of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1933, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Miles E. Efron Chairman of the Board March 15, 1995
- -------------------------
Miles E. Efron
/s/James H. Michael Director March 15, 1995
- -------------------------
James H. Michael
/s/Jeffrey J. Michael President, Chief Executive March 15, 1995
- ------------------------- Officer and Director
Jeffrey J. Michael (principal executive officer)
/s/Peter E. Flynn Executive Vice President, March 15, 1995
- ------------------------- Chief Financial Officer
Peter E. Flynn (principal financial and
accounting officer), Secretary
and Director
Director
- -------------------------
Fred E. Stout
/s/Richard J. Braun Director March 15, 1995
- -------------------------
Richard J. Braun
II-7
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Number
- ------- ------
4.3 Form of Second Supplemental Indenture, dated as of March 16,
1995, amending the Indenture described in Exhibit 4.1.
4.4 Proposed form of Six- and Twelve-Month Subordinated
Extendible Time Certificates (included as part of
Exhibit 4.3 above).
4.5 Proposed form of Two-, Five- and Ten-Year Subordinated
Fixed-Term Time Certificates (included as part of
Exhibit 4.3 above).
5.1 Opinion and consent of counsel to Registrant with respect to
the legality of the Time Certificates.
10.12 Fourth Amendment to Restated and Amended Revolving Credit
Loan Amendment, dated January 3, 1994, between the Company
and First Bank National Association
10.13 Waiver and Fifth Amendment to Restated and Amended Revolving
Credit Loan Amendment, dated March 16, 1994, between the
Company and First Bank National Association
10.14 Sixth Amendment to Restated and Amended Revolving Credit
Loan Amendment, dated January 31, 1995, between the Company
and First Bank National Association
10.28 First Amendment to Amended and Restated Loan and Security
Agreement, dated November 29, 1993, among Americable, Inc.,
Transition Engineering, Inc., Cable Distributions Systems,
Inc. and First Bank National Association
10.29 Waiver and Second Amendment to Amended and Restated Loan and
Security Agreement, dated as of March 3, 1995, among
Americable, Inc., Transition Engineering, Inc., Cable
Distributions Systems, Inc. and First Bank National
Association
10.30 Supplement A to Amended and Restated Loan and Security
Agreement, dated June 1, 1993, among Americable, Inc.,
Transition Engineering, Inc., Cable Distributions Systems,
Inc. and First Bank National Association
10.31 Amended, Restated and Consolidated Credit Agreement, dated
as of August 1, 1994, by and between C.E. Services, Inc. and
Texas Commerce Bank National Association.
10.32 First Amendment to Amended, Restated and Consolidated Credit
Agreement, dated as of December 27, 1994, by and between
C.E. Services, Inc. and Texas Commerce Bank National
Association
10.33 Continuing Guaranty by North Star Universal, Inc., dated
December 1994, to Texas Commerce Bank National Association,
for indebtedness of C.E. Services, Inc.
12.5 Computation of Ratio of Earnings to Fixed Charges for North
Star Universal, Inc. for the year ended December 31, 1994.
13.4 1994 Annual Report to Shareholders of North Star Universal,
Inc.
<PAGE>
23.1 Consent of Independent Certified Public Accountants - Grant
Thornton LLP
25.1 Form T-1 Statement of Eligibility and Qualification under
the Trust Indenture Act of 1939, as amended, of National
City Bank of Minneapolis.
27.1 Financial Data Schedule
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECOND SUPPLEMENTAL INDENTURE
BETWEEN
NORTH STAR UNIVERSAL, INC.
AND
NATIONAL CITY BANK OF MINNEAPOLIS
AS
TRUSTEE
____________________
SUBORDINATED TIME CERTIFICATES
____________________
Dated
as of
March 16, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
Pertaining to
North Star Universal, Inc.
Subordinated Time Certificates
This Second Supplemental Indenture, dated as of the 16th day of March,
1995 (the "Second Supplemental Indenture"), is made by and between North Star
Universal, Inc., a Minnesota corporation (the "Company"), and National City Bank
of Minneapolis, a National Banking Association (the "Trustee").
WHEREAS, the Company has heretofore entered into a trust indenture,
dated as of April 26, 1989 (the "Trust Indenture"), with the Trustee, which
Trust Indenture provides in Section 9.01 that the Company and Trustee may make
certain amendments to the Trust Indenture;
WHEREAS, the Company has heretofore entered into a first supplemental
indenture, dated as of March 16, 1992 (the "First Supplement"), with the
Trustee, which provided for the issuance of an additional $40,000,000 in
aggregate principal amount of Time Certificates under the Trust Indenture;
WHEREAS, the Company desires to amend the Trust Indenture to allow for
the authentication and issuance of an additional $40,000,000 in aggregate
principal amount of Time Certificates under the Trust Indenture;
WHEREAS, such amendment to the Trust Indenture may be effected without
the consent of the Certificateholders pursuant to Section 9.01(4) of the Trust
Indenture;
WHEREAS, in connection with the above described amendment to the Trust
Indenture, the Company and the Trustee desire to modify the Time Certificates,
in substantially the form of Exhibit E and Exhibit F attached hereto, to reflect
the execution and delivery of this Second Supplemental Indenture;
WHEREAS, a resolution duly adopted by the Board of Directors of the
Company on March 15, 1995 authorizes and provides for the execution,
acknowledgment and delivery of this Second Supplemental Indenture; and
WHEREAS, the Company and the Trustee have in all respects complied
with the provisions of the Trust Indenture.
NOW, THEREFORE, the Company and the Trustee, in consideration of the
mutual premises and covenants herein contained, agree as follows:
-1-
<PAGE>
SECTION 1. DEFINITIONS. In addition to the words and terms
otherwise defined in this Second Supplemental Indenture, capitalized words and
terms not otherwise defined herein shall have the same meanings as set forth in
the Trust Indenture, unless the context or use indicates another or different
meaning or intent.
SECTION 2. AMENDMENTS TO TRUST INDENTURE.
AMENDMENT I
The references to Exhibit A and Exhibit B in Section 2.01 to the Trust
Indenture shall hereinafter be deemed to refer to Exhibit E and Exhibit F,
respectively, which are attached hereto.
AMENDMENT II
Paragraph (a) of Section 2.02 of the Trust Indenture is hereby amended
to state in its entirety as follows:
(a) GENERAL PROVISIONS. The aggregate principal amount of Time
Certificates which may be authenticated and delivered under this Indenture
is limited to $120,000,000.00 (except for Time Certificates authenticated
upon transfer of, in exchange for, or in lieu of other Time Certificates
pursuant to Sections 2.07 and 2.08) and may be issued in one or more
series.
SECTION 3. COUNTERPARTS. This Second Supplemental Indenture may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
SECTION 4. RELATION TO TRUST INDENTURE. This Second Supplemental
Indenture shall be construed in connection with and as a part of the Trust
Indenture. As amended hereby, the Trust Indenture shall be read, taken and
construed as one and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed and attested, all as of the day and
year first above written.
Attest: NORTH STAR UNIVERSAL, INC.
/s/ Jeffrey J. Michael /s/ Peter E. Flynn
- ----------------------------------- By----------------------------------------
Jeffrey J. Michael Peter E. Flynn
President and Chief Executive Executive Vice President and Chief
Officer Financial Officer
Attest: NATIONAL CITY BANK OF
MINNEAPOLIS
/s/ Linda S. Sowers /s/ Karen Omtvedt
- ----------------------------------- By----------------------------------------
Linda S. Sowers Karen Omtvedt
Corporate Trust Administrator Vice President
-3-
<PAGE>
Exhibit E
[FORM OF FACE OF EXTENDIBLE TIME CERTIFICATE]
NORTH STAR UNIVERSAL, INC.
Subordinated Extendible Time Certificates
No. ________________________________ $__________________________
Certificate:
[ ] Six Month Subordinated Extendible Time Certificate
[ ] Twelve Month Subordinated Extendible Time Certificate
DATE OF ISSUE: ________________________ STATED MATURITY: _____________
INITIAL INTEREST RATE: ________________ INTEREST PAYMENT DATES:
INTEREST RATE ADJUSTMENT: _______________________________
[ ] Six Months [ ] Twelve Months
HOLDER: _______________________________ PRINCIPAL AMOUNT: ____________
NORTH STAR UNIVERSAL, INC., a Minnesota corporation (herein called the
"Company"), for value received, hereby promises to pay to the Holder, or
registered assigns, the Principal Amount on the Stated Maturity and to pay
interest thereon from the Date of Issue, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semiannually
on each Interest Payment Date, at the rate per annum as adjusted and in effect
from time to time while this Extendible Time Certificate is outstanding as
provided below and on the reverse hereof, until the principal hereof is paid or
made available for payment. Interest will be calculated based on a 360-day
year. The interest so payable, on any Interest Payment Date will, except as
provided in the Indenture referred to below and on the reverse hereof, be paid
to the person in whose name this Extendible Time Certificate is registered at
the close of business on the 15th calendar day prior to such interest payment
date whether or not such day is a business day.
Reference is made to the further provisions of this Extendible Time
Certificate set forth below and on the reverse hereof. Such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
<PAGE>
Dated:______________________________ NORTH STAR UNIVERSAL, INC.
By:_____________________________________
President
Authenticated:
National City Bank of
Minneapolis, as Trustee
By:_________________________________
Authorized Signature
-2-
<PAGE>
NORTH STAR UNIVERSAL, INC.
Subordinated Extendible Time Certificates
1. INDENTURE. This Extendible Time Certificate is one certificate in
a series of Time Certificates issued under an Indenture dated as of April 26,
1989, as amended as of March 16, 1992 and March 16, 1995 ("Indenture") between
the Company and National City Bank of Minneapolis, as trustee (the "Trustee").
The terms of the Time Certificates include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, (15 U.S. Code
77aaa-77bbbb) as in effect on the date of the Indenture. The Time Certificates
are subject to all such terms, and Holders of the Time Certificates are referred
to the Indenture and the Act for a statement of such terms. The Time
Certificates are unsecured general obligations of the Company currently limited
to $120,000,000 in aggregate principal amount.
2. INTEREST RATE ADJUSTMENT AND ROLL-OVER. If the interest rate
applicable to this Extendible Time Certificate shall adjust every six months,
the first adjustment shall occur on the same calendar day as the sixth month
following the Date of Issue of such certificate. If, however, the Date of Issue
was the 29th, 30th or 3lst day of any calendar month and the calendar month six
months following the Date of Issue does not include the actual calendar day of
the Date of Issue, then the interest rate shall be adjusted on the last calendar
day of the sixth month following the Date of Issue. Thereafter, the interest
rate will continue to adjust every six months on the anniversary date of the
Date of Issue and on the anniversary date of the date of the first interest rate
adjustment until the maturity, unless earlier redeemed. If the interest rate
applicable to the Extendible Time Certificate shall adjust every twelve months,
the interest rate applicable to this Extendible Time Certificate shall adjust on
the anniversary date of the Date of Issue. Each date on which the interest rate
applicable to this Extendible Time Certificate is adjusted, is referred to as a
"Roll-Over Date." From and after the Roll-Over Date, the new interest rate will
be paid by the Company with respect to this Extendible Time Certificate until
the next Roll-Over Date.
The Company will give the Holder of this Extendible Time Certificate
written notice at least ten business days prior to a Roll-Over Date (a "Notice
Date") which shall set forth the Roll-Over Date and the interest rate applicable
to this series of Extendible Time Certificate as of the Notice Date. The
Holders of Record of this Extendible Time Certificate for the purpose of sending
such written notice shall be determined at the close of business on the 15th
calendar day prior to the Roll-Over Date. The Holder of this Extendible Time
Certificate may elect to hold this Extendible Time Certificate at the announced
interest rate until the next Roll-Over Date or present this Extendible Time
Certificate to the Company within ten business
-3-
<PAGE>
days after a Roll-Over Date for redemption; provided, however, in the event that
the interest rate applicable to this series of Extendible Time Certificates has
been changed by Company Order since the Notice Date, the Company shall notify
the Holder of this Extendible Time Certificate of the change in interest rates
within five days of the Roll-Over Date and the Holder hereof may elect to hold
the Extendible Time Certificate at the interest rate as of the Roll-Over Date or
to present this Extendible Time Certificate to the Company for redemption within
ten business days from the date of such notice of the change in interest rates.
Subject to the requirement that Time Certificates be issued in denominations of
$1,000 or greater, the Holder of this Extendible Time Certificate may elect,
with respect to any Roll-Over Date, to redeem 100 percent of the certificate's
principal amount or any portion thereof. Failure by a Holder to present this
Extendible Time Certificate for redemption within ten business days of a
Roll-Over Date or the date of notice of change in interest rates will be deemed
an election to hold this Extendible Time Certificate until the following
Roll-Over Date at the interest rate specified in the written notice.
If a Holder, in connection with a Roll-Over Date, submits this
Extendible Time Certificate for redemption, principal and any accrued but unpaid
interest with respect to this Extendible Time Certificate shall be payable on
the later of (i) the Roll-Over Date or (ii) the business day next following the
Date of Presentment; PROVIDED, HOWEVER, that no interest will be paid by the
Company with respect to an Extendible Time Certificate during the period from
the Roll-Over Date to the Date of Presentment. If a Holder elects not to redeem
this Extendible Time Certificate as of the Roll-Over Date, the adjusted interest
rate for this Extendible Time Certificate will be the rate set forth in the
notice to the Holder.
3. METHOD OF PAYMENT. The Company will pay interest on the Time
Certificates (except defaulted interest) to the persons who are registered
holders of Time Certificates at the close of business on the record date for the
next interest payment date even though Time Certificates are canceled after the
record date and on or before the interest payment date. Holders must surrender
Time Certificates to the Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal and interest by check payable in such
money. It may mail an interest check to a Holder's registered address.
4. PAYING AGENT, REGISTRAR. The Company will act as Paying Agent and
Registrar. The Company may change any Paying Agent and Registrar, or
co-registrar without notice.
-4-
<PAGE>
5. OPTIONAL REDEMPTION. The Company may redeem all the Time
Certificates at any time or some of them from time to time at a price of 100% of
the principal amount of the Time Certificates plus accrued interest to the
redemption date.
6. REDEMPTION BY THE HOLDER ON DEATH OR DISABILITY. Under certain
circumstances as provided in the Indenture and upon request, the Company will,
upon the death or total permanent disability of the Holder of a Time
Certificate, repay the principal amount of the Time Certificate, together with
interest accrued to the redemption date, within 30 days following a request
therefor from the Holder or the Holder's authorized representative, in
accordance with the provisions of the Indenture, if (i) the Time Certificate has
been registered in the Holder's name since the Date of Issue, (ii) the principal
amount of all Time Certificates to be repaid does not exceed $25,000, and (iii)
the Company or the Trustee has been notified in writing of the request for
repayment within 180 days after the Holder's death or total permanent
disability. If two or more persons are joint record holders of a Time
Certificate, the election to redeem will not apply until all record holders are
either deceased or disabled, except that, if the joint holders are husband and
wife, the election may be made after the death or total permanent disability of
either spouse.
7. NOTICE OF REDEMPTION. Notice of Redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
holder of Time Certificates to be redeemed at his registered address. On and
after the redemption date, interest ceases to accrue on Time Certificates or
portions of them called for redemption.
8. SUBORDINATION. The Time Certificates are subordinated to Senior
Indebtedness, which is any Indebtedness of the Company outstanding on the date
of the Indenture or Indebtedness thereafter created, incurred, assumed or
guaranteed by the Company and all renewals, extensions and refundings thereof,
except (a) such Indebtedness that by its terms expressly provides that such
Indebtedness is not senior or superior in right of payment to the Time
Certificates, (b) for the Company's Subordinated Debentures, Series 87/88 issued
pursuant to an Indenture, dated as of December 1, 1986, between the Company and
National City Bank of Minneapolis and (c) for the Company's Subordinated
Debentures, Series 1985, issued pursuant to an Indenture, dated as of September
1985, between the Company and American National Bank and Trust Company, as
Trustee. Indebtedness is 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 any subsidiary 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 of the purchase price of
any property or interest therein, except any such balance that constitutes a
trade payable. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Time Certificates may be paid. The
-5-
<PAGE>
Company agrees, and each Certificateholder by accepting a Time Certificate
agrees, to the subordination and authorizes the Trustee to give it effect.
9. TRANSFER OR EXCHANGE. The Time Certificates are in registered
form. The transfer of Time Certificates may be registered and Time Certificates
may be exchanged as provided in the Indenture. The Registrar 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 Registrar need not exchange or register the transfer of any Time
Certificate or portion of a Time Certificate selected for redemption. Also, it
need not exchange or register the transfer of any Time Certificates for a period
of 15 days before a selection of Time Certificates to be redeemed.
10. PERSONS DEEMED OWNERS. The registered holder of a Time
Certificate may be treated as its owner for all purposes.
11. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Time Certificates may be amended with the consent of the
Holders of at least 51% in principal amount of the then outstanding Time
Certificates, and any existing default may be waived with the consent of the
holders of 51% in principal amount of the then outstanding Time Certificates,
except that no amendment may alter or impair the obligation of the Company to
pay principal of and interest on this Time Certificate at the times, place and
rate, and in the coin or currency, or reduce the principal amount of Time
Certificates the Holders of which must consent to an amendment, without the
consent of the Holder hereof. Without the consent of any Certificateholder, the
Indenture or the Time Certificates may be amended to cure any ambiguity, defect
or inconsistency, to provide for assumption of Company obligations to
Certificateholders or to make any change that does not adversely affect the
rights of any Certificateholder.
12. DEFAULTS AND REMEDIES. An Event of Default is: a default in
payment of principal on the Time Certificates which has not been cured; a
default for 30 days in payment of any installment of interest on the Time
Certificates; 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 event 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 25% in
principal amount of the outstanding Time Certificates. If an Event of Default
occurs and is continuing, the Trustee or the holders of at least 25% in
principal amount of the then outstanding Time Certificates may declare all the
Time Certificates to be due and payable immediately.
-6-
<PAGE>
Certificateholders may not enforce the Indenture or the Time Certificates except
as provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture or the Time Certificates. Subject to
certain limitations, holders of a majority in principal amount of the then
outstanding Time Certificates may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Certificateholders notice of any
continuing default (except a default in payment of principal or interest) if it
determines that withholding notice is in their interests. The Company must
furnish an annual compliance certificate to the Trustee.
13. TRUSTEE DEALINGS WITH THE COMPANY. The National City Bank of
Minneapolis, the Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Time Certificates or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Certificateholder by accepting a Time Certificate waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Time Certificates.
15. AUTHENTICATION. This Extendible Time Certificate shall not be
valid until authenticated by the manual signature of the Trustee or an
authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Certificateholder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
The Company will furnish to any Certificateholder upon written request
and without charge a copy of the Indenture, which has in it the text of this
Extendible Time Certificate in larger type. Request may be made to: Investment
Department, North Star Universal, Inc., 610 Park National Bank Building, 5353
Wayzata Boulevard, Minneapolis, Minnesota 55416.
-7-
<PAGE>
ASSIGNMENT FORM
To assign this Extendible Time Certificate, fill in the form below:
I or we assign and transfer this Extendible Time Certificate to
_____________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
(Print or type assignee's name, address and zip code)
and irrevocable appoint ________________________________________ agent to
transfer this Extendible Time Certificate on the books of the Company. The
agent may substitute another to act for him.
_____________________________________________
Date:_______________________ Your Signature:______________________________
_____________________________________________
(Sign exactly as your name appears on the
other side of this Extendible Time
Certificate.)
MATURITY FORM
To present this Extendible Time Certificate at maturity, fill in form below:
_____________________________________________
Date:_______________________ Your Signature:______________________________
_____________________________________________
(Sign exactly as your name appears on the
other side of this Extendible Time
Certificate.)
-8-
<PAGE>
Exhibit F
[FORM OF FACE OF FIXED-TERM TIME CERTIFICATE]
NORTH STAR UNIVERSAL, INC.
Subordinated Fixed-Term Time Certificates
No. _______________________________ $__________________
Certificate:
[ ] Two Year Subordinated Fixed-Term Time Certificate
[ ] Five Year Subordinated Fixed-Term Time Certificate
[ ] Ten Year Subordinated Fixed-Term Time Certificate
DATE OF ISSUE: STATED MATURITY:
INTEREST RATE:
INTEREST PAYMENT DATES:
[ ] Quarterly [ ] Monthly [ ] At Stated Maturity
HOLDER:______________________________ PRINCIPAL AMOUNT:________________
NORTH STAR UNIVERSAL, INC., a Minnesota corporation (herein called the
"Company"), for value received, hereby promises to pay to the Holder or
registered assigns, the Principal Amount on the Stated Maturity and to pay
interest thereon from the Date of Issue, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, on each
Interest Payment Date at the Interest Rate, until the principal hereof is paid
or made available for payment. Interest will be calculated based on a 360-day
year. The interest so payable, on any Interest Payment Date will, except as
provided in the Indenture referred to below and on the reverse hereof, be paid
to the person in whose name this Fixed-Term Time Certificate is registered at
the close of business on the 15th calendar day prior to such interest payment
date whether or not such day is a business day.
Reference is made to the further provisions of this Fixed-Term Time
Certificate set forth below and on the reverse hereof. Such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
<PAGE>
Dated:______________________________ NORTH STAR UNIVERSAL, INC.
By:__________________________________
President
Authenticated:
National City Bank of
Minneapolis, as Trustee
By:_________________________________
Authorized Signature
-2-
<PAGE>
NORTH STAR UNIVERSAL, INC.
Subordinated Fixed-Term Time Certificates
1. INDENTURE. This Fixed-Term Time Certificate is one certificate in
a series of Time Certificates issued under an Indenture dated as of April 26,
1989, as amended as of March 16, 1992 and March 16, 1995 ("Indenture"),
between the Company and National City Bank of Minneapolis, as trustee (the
"Trustee"). The terms of the Time Certificates include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990,
(15 U.S. Code 77aaa-77bbbb) as in effect on the date of the Indenture. The Time
Certificates are subject to all such terms, and Holders of the Time Certificates
are referred to the Indenture and the Act for a statement of such terms. The
Time Certificates are unsecured general obligations of the Company currently
limited to $120,000,000 in aggregate principal amount.
2. METHOD OF PAYMENT. The Company will pay interest on the Time
Certificates (except defaulted interest) to the persons who are registered
holders of Time Certificates at the close of business on the record date for the
next interest payment date even though Time Certificates are canceled after the
record date and on or before the interest payment date. Holders must surrender
Time Certificates to the Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal and interest by check payable in such
money. It may mail an interest check to a Holder's registered address.
3. PAYING AGENT, REGISTRAR. The Company will act as Paying Agent and
Registrar. The Company may change any Paying Agent and Registrar, or
co-registrar without notice.
4. OPTIONAL REDEMPTION. The Company may redeem all the Time
Certificates at any time or some of them from time to time at a price of 100% of
the principal amount of the Time Certificates plus accrued interest to the
redemption date.
5. REDEMPTION BY THE HOLDER ON DEATH OR DISABILITY. Under certain
circumstances as provided in the Indenture and upon request, the Company will,
upon the death or total permanent disability of the Holder of a Time
Certificate, repay the principal amount of the Time Certificate, together with
interest accrued to the redemption date, within 30 days following a request
therefor from the Holder or the Holder's authorized representative, in
accordance with the provisions of the Indenture, if (i) the Time Certificate has
been registered in the Holder's name since the Date of Issue, (ii) the principal
amount of all Time Certificates to be repaid does
-3-
<PAGE>
not exceed $25,000, and (iii) the Company or the Trustee has been notified in
writing of the request for repayment within 180 days after the Holder's death or
total permanent disability. If two or more persons are joint record holders of
a Time Certificate, the election to redeem will not apply until all record
holders are either deceased or disabled, except that, if the joint holders are
husband and wife, the election may be made after the death or total permanent
disability of either spouse.
6. NOTICE OF REDEMPTION. Notice of Redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
holder of Time Certificates to be redeemed at his registered address. On and
after the redemption date, interest ceases to accrue on Time Certificates or
portions of them called for redemption.
7. SUBORDINATION. The Time Certificates are subordinated to Senior
Indebtedness, which is any Indebtedness of the Company outstanding on the date
of the Indenture or Indebtedness thereafter created, incurred, assumed or
guaranteed by the Company and all renewals, extensions and refundings thereof,
except (a) such Indebtedness that by its terms expressly provides that such
Indebtedness is not senior or superior in right of payment to the Time
Certificates, (b) for the Company's Subordinated Debentures, Series 87/88 issued
pursuant to an Indenture, dated as of December 1, 1986, between the Company and
National City Bank of Minneapolis and (c) for the Company's Subordinated
Debentures, Series 1985, issued pursuant to an Indenture, dated as of September
1985, between the Company and American National Bank and Trust Company, as
Trustee. Indebtedness is 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 any subsidiary 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 of the purchase price of
any property or interest therein, except any such balance that constitutes a
trade payable. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Time Certificates may be paid. The Company agrees, and
each Certificateholder by accepting a Time Certificate agrees, to the
subordination and authorizes the Trustee to give it effect.
8. TRANSFER OR EXCHANGE. The Time Certificates are in registered
form. The transfer of Time Certificates may be registered and Time Certificates
may be exchanged as provided in the Indenture. The Registrar 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 Registrar need not exchange or register the transfer of any Time
Certificate or portion of a Time Certificate selected for redemption. Also, it
need not exchange or register the transfer of any Time Certificates for a period
of 15 days before a selection of Time Certificates to be redeemed.
-4-
<PAGE>
9. PERSONS DEEMED OWNERS. The registered holder of a Time
Certificate may be treated as its owner for all purposes.
10. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture or the Time Certificates may be amended with the consent of the
Holders of at least 51% in principal amount of the then outstanding Time
Certificates, and any existing default may be waived with the consent of the
holders of 51% in principal amount of the then outstanding Time Certificates,
except that no amendment may alter or impair the obligation of the Company to
pay principal of and interest on this Time Certificate at the times, place and
rate, and in the coin or currency, or reduce the principal amount of Time
Certificates the Holders of which must consent to an amendment, without the
consent of the Holder hereof. Without the consent of any Certificateholder, the
Indenture or the Time Certificates may be amended to cure any ambiguity, defect
or inconsistency, to provide for assumption of Company obligations to
Certificateholders or to make any change that does not adversely affect the
rights of any Certificateholder.
11. DEFAULTS AND REMEDIES. An Event of Default is: a default in
payment of principal on the Time Certificates which has not been cured; a
default for 30 days in payment of any installment of interest on the Time
Certificates; 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 event 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 25% in
principal amount of the outstanding Time Certificates. If an Event of Default
occurs and is continuing, the Trustee or the holders of at least 25% in
principal amount of the then outstanding Time Certificates may declare all the
Time Certificates to be due and payable immediately. Certificateholders may not
enforce the Indenture or the Time Certificates except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Time Certificates. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Time Certificates may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Certificateholders notice of any continuing
default (except a default in payment of principal or interest) if it determines
that withholding notice is in their interests. The Company must furnish an
annual compliance certificate to the Trustee.
12. TRUSTEE DEALINGS WITH THE COMPANY. The National City Bank of
Minneapolis, the Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
-5-
<PAGE>
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
13. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Time Certificates or the Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. Each Certificateholder by accepting a Time Certificate waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Time Certificates.
14. AUTHENTICATION. This Fixed-Term Time Certificate shall not be
valid until authenticated by the manual signature of the Trustee or an
authenticating agent.
15. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Certificateholder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
The Company will furnish to any Certificateholder upon written request
and without charge a copy of the Indenture, which has in it the text of this
Fixed-Term Time Certificate in larger type. Request may be made to: Investment
Department, North Star Universal, Inc., 610 Park National Bank Building, 5353
Wayzata Boulevard, Minneapolis, Minnesota 55416.
-6-
<PAGE>
ASSIGNMENT FORM
To assign this Fixed-Term Time Certificate, fill in the form below:
I or we assign and transfer this Fixed-Term Time Certificate to
_____________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
(Print or type assignee's name, address and zip code)
and irrevocable appoint _________________________________________________ agent
to transfer this Fixed-Term Time Certificate on the books of the Company. The
agent may substitute another to act for him.
_____________________________________________
Date:_________________________ Your Signature:______________________________
_____________________________________________
(Sign exactly as your name appears on the
other side of this Fixed-Term Time
Certificate.)
MATURITY FORM
To present this Fixed-Term Time Certificate at maturity, fill in form below:
_____________________________________________
Date:________________________ Your Signature:
_____________________________________________
(Sign exactly as your name appears on the
other side of this Fixed-Term Time
Certificate.)
-7-
<PAGE>
Dorsey & Whitney
Professional Limited Liability Partnership
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498
North Star Universal, Inc.
610 Park National Bank Building
5353 Wayzata Boulevard
Minneapolis, Minnesota 55416
Ladies and Gentlemen:
We have acted as counsel to North Star Universal, Inc. (the "Company") in
connection with the registration pursuant to a Registration Statement on Form S-
2 (the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of $40,000,000
principal amount of Subordinated Time Certificates (the "Time Certificates"), to
be issued pursuant to an Indenture, dated as of April 26, 1989, as amended (the
"Indenture"), between the Company and National City Bank of Minneapolis, a
national banking association, as trustee. All capitalized terms used herein and
not defined herein have the meanings assigned to them in the Indenture.
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 Time Certificates,
once issued in accordance with the Indenture and paid for in accordance with the
applicable subscription agreement, will constitute valid and binding obligations
of the Company, enforceable in accordance with their terms, except as
enforcement
<PAGE>
North Star Universal, Inc.
Page 2
may be limited by bankruptcy, insolvency, reorganization, moratorium 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.
Dated: March 21, 1995 Very truly yours,
/s/ DORSEY & WHITNEY P.L.L.P.
JAH
<PAGE>
FOURTH AMENDMENT TO RESTATED AND AMENDED
REVOLVING CREDIT LOAN AGREEMENT
THIS FOURTH AMENDMENT, dated as of January 3, 1994, amends and modifies
that certain Restated and Amended Revolving Credit Loan Agreement, dated as of
May 17, 1990, as amended by Letters dated August 3, 1990, September 25, 1990,
October 29, 1990, and November 29, 1990, an Amendment dated January 11, 1991, a
Letter dated February 28, 1991, a Second Amendment, dated January 2, 1992 and a
Third Amendment, dated November 18, 1992 (as so amended, the "Credit
Agreement"), between NORTH STAR UNIVERSAL, INC., a Minnesota corporation (the
"Borrower") and FIRST BANK NATIONAL ASSOCIATION, a national banking association
(the "Bank"). Terms not otherwise expressly defined herein shall have the
meanings set forth in the Credit Agreement.
PRELIMINARY STATEMENT
The Borrower and the Bank desire to amend the Credit Agreement to extend
the maturity date and amend the Net Worth covenant as hereinafter set forth.
NOW THEREFORE, for value received, the Borrower and the Bank agree as
follows.
ARTICLE I - AMENDMENTS TO THE CREDIT AGREEMENT
1.1 DEFINITION. The definition of "Maturity" in Article I of the Credit
Agreement is amended by deleting the date "January 3, 1994" and substituting
therefor the date "January 2, 1995."
1.2 AMENDMENT. Section 7.9 of the Credit Agreement is amended by deleting
"Fifty Five Million Dollars ($55,000,000.00)" and substituting therefor "Fifty
Million Dollars ($50,000,000.00)."
1.3 CONSTRUCTION. All references in the Credit Agreement to "this
Agreement," "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Amendment and to make and maintain
the Advances and issue Letters of Credit under the Credit Agreement as amended
hereby, the Borrower hereby warrants and represents to the Bank that it is duly
authorized to execute and deliver this Amendment, and to perform its obligations
under the Credit Agreement as amended hereby, and that this Amendment
constitutes the legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms.
1
<PAGE>
ARTICLE III - CONDITIONS PRECEDENT
This Amendment shall become effective on the date first set forth above,
PROVIDED, HOWEVER, that the effectiveness of this Amendment is subject to the
satisfaction of each of the following conditions precedent:
3.1 WARRANTIES. Before and after giving effect to this Amendment, the
representations and warranties in Article VI of the Credit Agreement shall be
true and correct as though made on the date hereof, except for changes that are
permitted by the terms of the Credit Agreement. The execution by the Borrower
of this Amendment shall be deemed a representation that the Borrower has
complied with the foregoing condition.
3.2 DEFAULTS. After giving effect to this Amendment, no Default or Event
of Default shall have occurred and be continuing under the Credit Agreement.
The execution by the Borrower of this Amendment shall be deemed a representation
that the Borrower has compiled with the foregoing condition.
3.3 DOCUMENTS. The following shall have been delivered to the Bank, each
duly executed and dated or certified as of the date hereof:
(a) RESOLUTIONS. Certified copies of the resolutions of the
Board of Directors of the Borrower authorizing or ratifying the
execution, delivery and performance, respectively, of this Amendment
and other documents provided for in this Amendment.
(b) CONSENTS. Certified copies of all documents evidencing any
necessary corporate action, consent or governmental or regulatory
approval (if any) with respect to this Amendment.
(c) INCUMBENCY AND SIGNATURES. A certificate of the Secretary
or an Assistant Secretary of the Borrower certifying the names of the
officer or officers of the Borrower authorized to sign this Amendment
and any other documents provided for in this Amendment, together with
a sample of the true signature of each such officer.
ARTICLE IV - GENERAL
4.1 EXPENSES. The Borrower agrees to reimburse the Bank upon demand for
all reasonable expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Bank in the preparation, negotiation and execution of
this Amendment and any other document required to be furnished herewith, and in
enforcing the obligations of the Borrower hereunder, and to pay and save the
Bank harmless from all liability for any stamp or other taxes which may be
payable with
2
<PAGE>
respect to the execution or delivery of this Amendment, which obligations of the
Borrower shall survive termination of the Credit Agreement.
4.2 COUNTERPARTS. This Amendment may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different parties hereto or
separate counterparts, each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
instrument.
4.3 SEVERABILITY. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
4.4 LAW. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
4.5 SUCCESSORS; ENFORCEABILITY. This Amendment shall be binding upon the
Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank and the successors and assigns
of the Bank. Except as hereby amended, the Credit Agreement shall remain in
full force and effect and is hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed at Minneapolis, Minnesota by their respective officers thereunto duly
authorized as of the date first above written.
NORTH STAR UNIVERSAL, INC.
a Minnesota corporation
By:/s/ Peter E. Flynn
----------------------------------------------
Its:EVP/CFO
---------------------------------------------
FIRST BANK NATIONAL ASSOCIATION,
a national banking association
By:/s/ Michael J. Staloch
----------------------------------------------
Its:VICE PRESIDENT
3
<PAGE>
WAIVER AND FIFTH AMENDMENT TO
RESTATED AND AMENDED REVOLVING CREDIT LOAN AGREEMENT
THIS WAIVER AND FIFTH AMENDMENT, dated as of March 16, 1994, amends and
modifies that certain Restated and Amended Revolving Credit Loan Agreement,
dated as of May 17, 1990, as amended by Letters dated August 3, 1990, September
25, 1990, October 29, 1990, and November 29, 1990, an Amendment dated
January 11, 1991, a Letter dated February 28, 1991, a Second Amendment, dated
January 2, 1992, a Third Amendment dated November 18, 1992 and a Fourth
Amendment, dated January 3, 1994 (as so amended, the "Credit Agreement"),
between NORTH STAR UNIVERSAL, INC., a Minnesota corporation (the "Borrower") and
FIRST BANK NATIONAL ASSOCIATION, a national banking association (the "Bank").
Terms not otherwise expressly defined herein shall have the meanings set forth
in the Credit Agreement.
PRELIMINARY STATEMENT
The Bank has agreed to waive certain defaults under the Credit Agreement
and to amend certain provisions of the Credit Agreement as hereinafter set
forth.
NOW THEREFORE, for value received, the Borrower and the Bank agree as
follows.
ARTICLE I - WAIVER
1.1 Pursuant to Section 7.9 of the Credit Agreement, the Borrower is
required to maintain a Tangible Net Worth at the end of each fiscal quarter of
not less than $50,000,000 at any time. As of December 31, 1993, the Borrower
had a Tangible Net Worth of approximately $34,675,000.
1.2 Pursuant to Section 8.5 of the Credit Agreement, the Borrower will not
permit the ratio of Liabilities to Tangible Net Worth to be greater than 1.25 to
1. As of December 31, 1993, the ratio of Liabilities to Tangible Net Worth was
2.13 to 1.
1.3 Pursuant to Section 8.9 of the Credit Agreement, the Borrower will not
at any time permit the ratio of Liabilities to Capital Base to be greater than
1.0 to 1. As of December 31, 1993, the ratio of Liabilities to Capital Base was
1.57 to 1.
1.4 The Borrower has requested that the Bank waive any and all Events of
Default arising as a result of the above violations. The Bank hereby waives any
Event of Default arising from the Borrower's failure to comply with Sections
7.9, 8.5 and 8.9, PROVIDED, HOWEVER, that the Borrower shall be in compliance
with the requirements under Sections 7.9, 8.5 and 8.9 as amended by this
Amendment. Such waiver is limited specifically to the violations referred to
herein and shall not be construed or interpreted to be a waiver of any other
existing or future Events of Default or of compliance with any other existing
terms.
<PAGE>
ARTICLE II - AMENDMENTS TO THE CREDIT AGREEMENT
2.1 AMENDMENTS.
(a) Section 7.9 of the Credit Agreement is amended by deleting "Fifty
Million Dollars ($50,000,000.00)" and substituting therefor "Thirty-Two
Million Dollars ($32,000,000.00)".
(b) Section 8.5 of the Credit Agreement is amended by deleting "1.25
to 1" and substituting therefor "2.25 to 1".
(c) Section 8.9 of the Credit Agreement is amended by deleting "1.0
to 1" and substituting therefor 1.75 to 1".
2.2 CONSTRUCTION. All references in the Credit Agreement to "this
Agreement", "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make and maintain
the Advances and issue Letters of Credit under the Credit Agreement as amended
hereby, the Borrower hereby warrants and represents to the Bank that it is duly
authorized to execute and deliver this Amendment, and to perform its obligations
under the Credit Agreement as amended hereby, and that this Amendment
constitutes the legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms.
ARTICLE IV - CONDITIONS PRECEDENT
This Amendment shall become effective on the date first set forth above,
PROVIDED, HOWEVER, that the effectiveness of this Amendment is subject to the
satisfaction of each of the following conditions precedent:
4.1 WARRANTIES. Before and after giving effect to this Amendment, the
representations and warranties in Article VI of the Credit Agreement shall be
true and correct as though made on the date hereof, except for changes that are
permitted by the terms of the Credit Agreement. The execution by the Borrower
of this Amendment shall be deemed a representation that the Borrower has
complied with the foregoing condition.
4.2 DEFAULTS. After giving effect to this Amendment, no Default or Event
of Default shall have occurred and be continuing under the Credit Agreement.
The
- 2 -
<PAGE>
execution by the Borrower of this Amendment shall be deemed a representation
that the Borrower has complied with the foregoing condition.
4.3 DOCUMENTS. The following shall have been delivered to the Bank, each
duly executed and dated or certified as of the date hereof:
(a) RESOLUTIONS. Certified copies of resolutions of the Board of
Directors of the Borrower authorizing or ratifying the execution, delivery
and performance, respectively, of this Amendment and other documents
provided for in this Amendment.
(b) CONSENTS. Certified copies of all documents evidencing any
necessary corporate action, consent or governmental or regulatory approval
(if any) with respect to this Amendment.
(c) INCUMBENCY AND SIGNATURES. A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the names of the officer or
officers of the Borrower authorized to sign this Amendment and any other
documents provided for in this Amendment, together with a sample of the
true signature of each such officer.
ARTICLE V - GENERAL
5.1 EXPENSES. The Borrower agrees to reimburse the Bank upon demand for
all reasonable expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Bank in the preparation, negotiation and execution of
this Amendment and any other document required to be furnished herewith, and in
enforcing the obligations of the Borrower hereunder, and to pay and save the
Bank harmless from all liability for any stamp or other taxes which may be
payable with respect to the execution or delivery of this Amendment, which
obligations of the Borrower shall survive any termination of the Credit
Agreement.
5.2 CONFIRMATION OF PLEDGE AGREEMENT. The Borrower hereby ratifies and
confirms that its Pledge Agreement, dated as of May 17, 1990, in favor of the
Bank, remains in full force and effect after giving effect to this Amendment and
is enforceable against the Borrower in accordance with its terms. The Borrower
agrees and acknowledges that this Agreement shall in no way impair or limit the
right of the Bank under the Pledge Agreement, and confirms that the Pledge
Agreement continues to secure payment and performance of the obligations of the
Borrower to the Bank, including, without limitation, obligations under the
Credit Agreement as amended by this Amendment.
5.3 COUNTERPARTS. This Amendment may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different parties
- 3 -
<PAGE>
hereto on separate counterparts, each of which, when so executed, shall be
deemed an original but all such counterparts shall constitute but one and the
same instrument.
5.4 SEVERABILITY. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
5.5 LAW. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
5.6 SUCCESSORS; ENFORCEABILITY. This Amendment shall be binding upon the
Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank and the successors and assigns
of the Bank. Except as hereby amended, the Credit Agreement shall remain in
full force and effect and is hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed at Minneapolis, Minnesota by their respective officers thereunto duly
authorized as of the date first written above.
NORTH STAR UNIVERSAL, INC.,
a Minnesota corporation
By: /s/ Peter E. Flynn
-----------------------------------------------
Its: EVP/CFO
----------------------------------------------
FIRST BANK NATIONAL ASSOCIATION,
a national banking association
By: /s/ Michael J. Staloch
----------------------------------------------
Its: VICE PRESIDENT
----------------------------------------------
- 4 -
<PAGE>
C:\A-PAM\BIERKAMP\NORTHSTAR\6AMEND\AMEND.6
SIXTH AMENDMENT TO
RESTATED AND AMENDED REVOLVING CREDIT LOAN AGREEMENT
THIS SIXTH AMENDMENT, dated as of January 31, 1995, amends and modifies
that certain Restated and Amended Revolving Credit Loan Agreement, dated as of
May 17, 1990, as amended by Letters dated August 3, 1990, September 25, 1990,
October 29, 1990, and November 29, 1990, an Amendment dated January 11, 1991, a
Letter dated February 28, 1991, a Second Amendment, dated January 2, 1992, a
Third Amendment, dated November 18, 1992, a Fourth Amendment, dated January 3,
1994 and a Waiver and Fifth Amendment, dated March 16, 1994 (as so amended, the
"Credit Agreement"), between NORTH STAR UNIVERSAL, INC., a Minnesota corporation
(the "Borrower") and FIRST BANK NATIONAL ASSOCIATION, a national banking
association (the "Bank"). Terms not otherwise expressly defined herein shall
have the meanings set forth in the Credit Agreement.
PRELIMINARY STATEMENT
The Bank has agreed to extend the maturity date of the Credit Agreement as
hereinafter set forth.
NOW THEREFORE, for value received, the Borrower and the Bank agree as
follows.
ARTICLE I - AMENDMENT TO THE CREDIT AGREEMENT
1.1 DEFINITION. The definition of "maturity" in Article I of the Credit
Agreement is amended by deleting the date "January 2, 1995" and substituting
therefor the date "January 2, 1996".
1.2 CONSTRUCTION. All references in the Credit Agreement to "this
agreement", "herein" and similar references shall be deemed to refer to the
Credit Agreement as amended by this Amendment.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Amendment and to make and maintain
the Advances and issue Letters of Credit under the Credit Agreement as amended
hereby, the Borrower hereby warrants and represents to the Bank that it is duly
authorized to execute and deliver this Amendment, and to perform its obligations
under the Credit Agreement as amended hereby, and that this Amendment
constitutes the legal, valid and binding obligation of the Borrower, enforceable
in accordance with its terms.
<PAGE>
ARTICLE III - CONDITIONS PRECEDENT
This Amendment shall become effective on the date first set forth above,
PROVIDED, HOWEVER, that the effectiveness of this Amendment is subject to the
satisfaction of each of the following conditions precedent:
3.1 WARRANTIES. Before and after giving effect to this Amendment, the
representations and warranties in ARTICLE VI of the Credit Agreement shall be
true and correct as though made on the date hereof, except for changes that are
permitted by the terms of the Credit Agreement. The execution by the Borrower
of this Amendment shall be deemed a representation that the Borrower has
complied with the foregoing condition.
3.2 DEFAULTS. Before and after giving effect to this Amendment, no
Default or Event of Default shall have occurred and be continuing under the
Credit Agreement. The execution by the Borrower of this Amendment shall be
deemed a representation that the Borrower has complied with the foregoing
condition.
3.3 DOCUMENTS. The following shall have been delivered to the Bank, each
duly executed and dated or certified, as the case may be:
(a) RESOLUTIONS. Certified copies of resolutions of the Board of
Directors of the Borrower authorizing or ratifying the execution, delivery
and performance, respectively, of this Amendment and other documents
provided for in this Amendment.
(b) INCUMBENCY AND SIGNATURES. A certificate of the Secretary or an
Assistant Secretary of the Borrower certifying the names of the officer or
officers of the Borrower authorized to sign this Amendment and any other
documents provided for in this Amendment, together with a sample of the
true signature of each such officer.
ARTICLE IV - GENERAL
4.1 EXPENSES. The Borrower agrees to reimburse the Bank upon demand for
all reasonable expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Bank in the preparation, negotiation and execution of
this Amendment and any other document required to be furnished herewith, and in
enforcing the obligations of the Borrower hereunder, and to pay and save the
Bank harmless from all liability for any stamp or other taxes which may be
payable with respect to the execution or delivery of this Amendment, which
obligations of the Borrower shall survive any termination of the Credit
Agreement.
4.2 CONFIRMATION OF PLEDGE AGREEMENT. The Borrower hereby ratifies and
confirms that its Pledge Agreement, dated as of May 17, 1990, in favor of the
Bank, remains in full force and effect after giving effect to this Amendment and
is enforceable against the Borrower in accordance with its terms. The Borrower
agrees and acknowledges that this Agreement shall in no way impair or limit the
right of the Bank under the Pledge Agreement, and confirms that the Pledge
Agreement continues to secure payment and performance of the obligations of the
Borrower to the Bank, including, without limitation, obligations under the
Credit Agreement as amended by this Amendment.
4.3 COUNTERPARTS. This Amendment may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different parties hereto on
separate counterparts,
<PAGE>
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same instrument.
4.4 SEVERABILITY. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
4.5 LAW. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
4.6 SUCCESSORS; ENFORCEABILITY. This Amendment shall be binding upon the
Borrower and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrower and the Bank and the successors and assigns
of the Bank. Except as hereby amended, the Credit Agreement shall remain in
full force and effect and is hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed at Minneapolis, Minnesota by their respective officers thereunto duly
authorized as of the date first written above.
NORTH STAR UNIVERSAL, INC.,
a Minnesota corporation
By: /s/ Peter E. Flynn
-----------------------------------------
Its: EVP/CFO
----------------------------------
FIRST BANK NATIONAL ASSOCIATION,
a national banking association
By: /s/ Michael Staloch
-----------------------------------------
Its: Vice Pres.
----------------------------------
<PAGE>
AMERICABLE.AMD.PJS
FIRST AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
(the "AMENDMENT") is dated as of November 29, 1993, and is by and between
AMERICABLE, INC., a Minnesota corporation, TRANSITION ENGINEERING, INC., a
Minnesota corporation and CABLE DISTRIBUTION SYSTEMS, INC., a Georgia
corporation (hereinafter collectively referred to as the "BORROWERS") and FIRST
BANK NATIONAL ASSOCIATION, a national banking association (the "BANK"). Terms
not otherwise expressly defined herein shall have the meanings set forth in the
Loan Agreement (hereinafter described).
RECITALS
WHEREAS, the Borrowers and the Bank have executed and delivered an Amended
and Restated Loan and Security Agreement, dated as of June 1, 1993 (the "LOAN
AGREEMENT"), pursuant to which the Bank agreed, subject to the terms and
conditions contained therein, to extend certain financial accommodations to the
Borrowers; and
WHEREAS, the Borrowers and the Bank desire to further amend the terms of
the Loan Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I - AMENDMENTS TO THE LOAN AGREEMENT
1.1 AMENDMENT. Supplement A to the Loan Agreement is hereby amended to
read in its entirety as set forth in Supplement A attached hereto. All
references in the Loan Agreement to "Supplement A" shall be deemed to refer to
Supplement A attached hereto.
1.2 CONSTRUCTION. All references in the Loan Agreement to "this
Agreement," "herein" and similar references shall be deemed to refer to the Loan
Agreement as amended by this Amendment.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Amendment and to make and maintain
the Advances under the Loan Agreement as amended hereby, the Borrowers hereby
warrant and represent to the Bank that they are duly authorized to execute and
deliver this Amendment, and to perform their obligations under the Loan
Agreement as amended hereby, and that this Amendment constitutes the legal,
valid and
<PAGE>
binding obligation of the Borrowers, enforceable in accordance with its terms.
ARTICLE III - CONDITIONS AND EFFECTIVENESS
This Amendment shall become effective on the date first set forth above,
PROVIDED, HOWEVER, that the effectiveness of this Amendment is subject to the
satisfaction of each of the following conditions:
3.1 Before and after giving effect to this Amendment, the representations
and warranties in ARTICLE IV of the Loan Agreement shall be true and correct as
though made on the date hereof, except for changes that are permitted by the
terms of the Loan Agreement and this Amendment. The execution by the Borrowers
of this Amendment shall be deemed a representation that the Borrowers have
complied with the foregoing condition.
3.2 After giving effect to this Amendment, no Event of Default or event
which would constitute an Event of Default but for the requirement that notice
be given or time elapse or both, shall have occurred and be continuing under the
Loan Agreement. The execution by the Borrowers of this Amendment shall be
deemed a representation that the Borrowers have complied with the foregoing
condition.
3.3 The Bank shall have received this Amendment appropriately completed
and duly executed by the Borrowers.
3.4 The Bank shall have received a certified copy of resolutions of the
Board of Directors of each of the Borrowers authorizing or ratifying the
execution, delivery and performance, respectively, of this Amendment and other
documents provided for in this Amendment.
3.5 The Bank shall have received a certificate of the Secretary or an
Assistant Secretary of each of the Borrowers certifying that the names of the
officer or officers of the Borrowers authorized to sign this Amendment and other
documents provided for in this Amendment, together with a sample of the true
signature of each such officer.
3.6 The Bank shall have received a certificate of the Secretary or an
Assistant Secretary of each of the Borrowers certifying that there has been no
amendment or restatement of the Certificate, Articles of Incorporation or the
By-Laws of such Borrower since June 1, 1993.
3.7 The Bank shall have received an Acknowledgement of Adanac Cable Ltd.
and North Star Universal, Inc. each appropriately completed and duly executed,
substantially in the form of EXHIBIT A AND B, respectively, to this Amendment.
2
<PAGE>
ARTICLE IV - GENERAL
4.1 EXPENSES. The Borrowers agree to reimburse the Bank upon demand for
all reasonable expenses, including reasonable fees of attorneys (who may be
employees of the Bank) and legal expenses incurred by the Bank in the
preparation, negotiation and execution of this Amendment and any other document
required to be furnished herewith, and in enforcing the obligations of the
Borrowers hereunder, and to pay and save the Bank harmless from all liability
for any stamp or other taxes which may be payable with respect to the execution
or delivery of this Amendment, which obligations of the Borrowers shall survive
any termination of the Loan Agreement.
4.2 COUNTERPARTS. This Amendment may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
instrument.
4.3 SEVERABILITY. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
4.4 LAW. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
4.5 SUCCESSORS; ENFORCEABILITY. This Amendment shall be binding upon the
Borrowers and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrowers and the Bank and the successors and
assigns of the Bank. Except as hereby amended, the Loan Agreement shall remain
in full force and effect and is hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
AMERICABLE, INC.,
a Minnesota corporation
By: /s/ Peter E. Flynn
----------------------------------------------
Title: Secretary
-------------------------------------------
3
<PAGE>
TRANSITION ENGINEERING, INC.,
a Minnesota corporation
By: /s/ Peter E. Flynn
----------------------------------------------
Title: President
-------------------------------------------
CABLE DISTRIBUTION SYSTEMS, INC.,
a Georgia corporation
By: /s/ Peter E. Flynn
----------------------------------------------
Title: Assistant Secretary
-------------------------------------------
FIRST BANK NATIONAL ASSOCIATION,
a national banking association,
By: /s/ William C. Phelps
----------------------------------------------
Title: Vice President
-------------------------------------------
4
<PAGE>
F:\CLD\FBSBFC\AMERICABLE\2AMEND\AMENDMENT
WAIVER AND SECOND AMENDMENT TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS WAIVER AND SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (the "Amendment") is dated as of March 3, 1995, and is by and between
AMERICABLE, INC., a Minnesota corporation, TRANSITION ENGINEERING, INC., a
Minnesota corporation, and CABLE DISTRIBUTION SYSTEMS, INC., a Georgia
corporation (hereinafter collectively referred to as the "Borrowers") and FIRST
BANK NATIONAL ASSOCIATION, a national banking association (the "Bank"). Terms
not otherwise expressly defined herein shall have the meanings set forth in the
Loan Agreement (hereinafter described).
RECITALS
WHEREAS, the Borrowers and the Bank have executed and delivered an Amended
and Restated Loan and Security Agreement, dated as of June 1, 1993, as amended
by First Amendment to Amended and Restated Loan and Security Agreement, dated as
of November 29, 1993 (as so amended, the "Loan Agreement"), pursuant to which
the Bank agreed, subject to the terms and conditions contained therein, to
extend certain financial accommodations to the Borrowers; and
WHEREAS, the Borrowers and the Bank desire to further amend the terms of
the Loan Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I - WAIVER
1.1 Pursuant to SECTION 5.1 of Supplement A to the Loan Agreement, the
Borrower agreed not to permit its Tangible Capital Base to be less than
$6,200,000 for the period commencing December 31, 1994 through and including
June 29, 1995. The Borrower has notified the Bank that as of December 31, 1994,
its Tangible Capital Base was $5,675,000, and that as of January 31, 1995, its
Tangible Capital Base was $5,708,000; and therefore, the Borrower is in default
under the terms of the Loan Agreement.
1.2 The Borrower has requested that the Bank waive the Events of Default
described in Section 1.1 above, and the Bank hereby waives such Events of
Default; PROVIDED THAT the Borrower complies with the requirements of SECTION
5.1 of Supplement A as amended by this Amendment. Such waiver is limited
specifically to the Events of Default described in Section 1.1 above and shall
not be construed or interpreted to be a waiver of any other existing or future
Events of Default or of compliance with any other existing terms.
1
<PAGE>
ARTICLE II - AMENDMENTS TO THE LOAN AGREEMENT
2.1 AMENDMENT. Supplement A to the Loan Agreement is hereby amended to
read in its entirety as set forth in Supplement A attached hereto. All
references in the Loan Agreement to "Supplement A" shall be deemed to refer to
Supplement A attached hereto.
2.2 CONSTRUCTION. All references in the Loan Agreement to "this
Agreement," "herein" and similar references shall be deemed to refer to the Loan
Agreement as amended by this Amendment.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Amendment and to make and maintain
the Advances under the Loan Agreement as amended hereby, the Borrowers hereby
warrant and represent to the Bank that they are duly authorized to execute and
deliver this Amendment, and to perform their obligations under the Loan
Agreement as amended hereby, and that this Amendment constitutes the legal,
valid and binding obligation of the Borrowers, enforceable in accordance with
its terms.
ARTICLE IV - CONDITIONS AND EFFECTIVENESS
This Amendment shall become effective on the date first set forth above;
PROVIDED, HOWEVER, that the effectiveness of this Amendment is subject to the
satisfaction of each of the following conditions:
4.1 Before and after giving effect to this Amendment, the representations
and warranties in ARTICLE IV of the Loan Agreement shall be true and correct as
though made on the date hereof, except for changes that are permitted by the
terms of the Loan Agreement and this Amendment. The execution by the Borrowers
of this Amendment shall be deemed a representation that the Borrowers have
complied with the foregoing condition.
4.2 After giving effect to this Amendment, no Event of Default or event
which would constitute an Event of Default but for the requirement that notice
be given or time elapse or both, shall have occurred and be continuing under the
Loan Agreement. The execution by the Borrowers of this Amendment shall be
deemed a representation that the Borrowers have complied with the foregoing
condition.
4.3 The Bank shall have received this Amendment appropriately completed
and duly executed by the Borrowers.
4.4 The Bank shall have received a certified copy of resolutions of the
Board of Directors of each of the Borrowers authorizing or ratifying the
execution, delivery and performance, respectively, of this Amendment and other
documents provided for in this Amendment.
4.5 The Bank shall have received a certificate of the Secretary or an
Assistant Secretary of each of the Borrowers certifying that the names of the
officer or officers of the Borrowers authorized to sign this Amendment and other
documents provided for in this Amendment, together with a sample of the true
signature of each such officer.
2
<PAGE>
4.6 The Bank shall have received a certificate of the Secretary or an
Assistant Secretary of each of the Borrowers certifying that there has been no
amendment or restatement of the Certificate, Articles of Incorporation or the
By-Laws of such Borrower since June 1, 1993.
4.7 The Bank shall have received an Acknowledgment of Adanac Cable Ltd.
and North Star Universal, Inc. each appropriately completed and duly executed,
substantially in the form of EXHIBIT A AND B, respectively, to this Amendment.
ARTICLE V - GENERAL
5.1 EXPENSES. The Borrowers agree to reimburse the Bank upon demand for
all reasonable expenses, including reasonable fees of attorneys (who may be
employees of the Bank) and legal expenses incurred by the Bank in the
preparation, negotiation and execution of this Amendment and any other document
required to be furnished herewith, and in enforcing the obligations of the
Borrowers hereunder, and to pay and save the Bank harmless from all liability
for any stamp or other taxes which may be payable with respect to the execution
or delivery of this Amendment, which obligations of the Borrowers shall survive
any termination of the Loan Agreement.
5.2 COUNTERPARTS. This Amendment may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
instrument.
5.3 SEVERABILITY. Any provision of this Amendment which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provisions in any other jurisdiction.
5.4 LAW. This Amendment shall be a contract made under the laws of the
State of Minnesota, which laws shall govern all the rights and duties hereunder.
5.5 SUCCESSORS; ENFORCEABILITY. This Amendment shall be binding upon the
Borrowers and the Bank and their respective successors and assigns, and shall
inure to the benefit of the Borrowers and the Bank and the successors and
assigns of the Bank. Except as hereby amended, the Loan Agreement shall remain
in full force and effect and is hereby ratified and confirmed in all respects.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first written above.
AMERICABLE, INC.,
a Minnesota corporation
By:
Title:
TRANSITION ENGINEERING, INC.,
a Minnesota corporation
By:
Title:
CABLE DISTRIBUTION SYSTEMS, INC.,
a Georgia corporation
By:
Title:
FIRST BANK NATIONAL ASSOCIATION,
a national banking association,
By:
Title:
<PAGE>
F:\CLD\FBSBFC\AMERICABLE\2AMEND\SUPPLEMENT
SUPPLEMENT A
to
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of JUNE 1, 1993 Among
FIRST BANK NATIONAL ASSOCIATION (the "Bank") and
AMERICABLE INC., TRANSITION ENGINEERING, INC.
and CABLE DISTRIBUTION SYSTEMS, INC.
(collectively, the "Borrowers")
1. LOAN AGREEMENT REFERENCE. This Supplement A, as it may be amended or
modified from time to time, is a part of the Amended and Restated Loan and
Security Agreement, dated as of June 1, 1993, among the Borrowers and the Bank
(together with all amendments, modifications and supplements thereto, the "Loan
Agreement"). Terms used herein which are defined in the Loan Agreement shall
have the meanings given such terms in the Loan Agreement unless the context
otherwise requires.
2. CREDIT AMOUNT; BORROWING BASE.
2.1 CREDIT AMOUNT. The maximum amount of Loans which the Bank will make
available to the Borrowers shall not exceed FIVE MILLION FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($5,500,000) (such amount is herein called the
"Credit Amount") (unless such amount is increased by the Bank in its sole
and absolute discretion); PROVIDED, HOWEVER, that the aggregate outstanding
principal balance of the Loans plus the Letter of Credit Obligations shall
not exceed the Credit Amount.
2.2 BORROWING BASE. The term "Borrowing Base," as used herein, shall
mean:
(a) an amount of up to 75% of the net amount (as determined by the
Bank after deduction of such reserves and allowances as the Bank deems
proper and necessary) of the Borrowers' Eligible Accounts Receivable;
PLUS
(b) an amount of up to the lesser of (i) 30% of the net value (the
lower of the cost or market value of such Inventory as determined by the
Bank on a first in first out basis and after deduction of such reserves
and allowances as the Bank deems proper and necessary ) of the Borrowers'
Eligible Inventory, or (ii) $2,000,000.
2.3 BANK'S RIGHTS. The Borrowers agree that nothing contained in this
Supplement A (a) shall be construed as the Bank's agreement to resort or
look to a particular type or item of Collateral as security for any
specific Loan or advance or in any way limit the Bank's right to resort to
any or all of the Collateral as security for any of the Obligations, (b)
shall be deemed to limit or reduce any lien on or any security interest in
or upon any portion of the Collateral or other security for the
Obligations, or (c) shall supersede SECTION 2.10 of the Loan Agreement.
3. INTEREST.
3.1 REVOLVING LOANS. The unpaid balance of the Revolving Loans shall bear
interest to maturity at the Reference Rate in effect from time to time plus
one and one-half percent (1 1/2%) per annum.
<PAGE>
3.2 TERM LOAN. The unpaid principal balance of the Term Loan shall bear
interest to maturity at a fixed rate per annum equal to 10.665%.
3.3 DEFAULT RATE. If any amount of the Loans is not paid when due,
whether by acceleration or otherwise, the entire unpaid principal balance
of the Loans (other than Overdraft Loans and Over Advances) shall bear
interest until paid at a rate per annum equal to the greater of (i) the
Reference Rate from time to time in effect plus four percent (4%), or (ii)
two percent (2%) above the rate in effect at the time such amount became
due for such past due amount.
3.4 OVERDRAFT LOANS; OVER ADVANCES. Overdraft Loans and Over Advances
shall bear interest at the rate(s) determined pursuant to SECTION 2.8 or
SECTION 2.9 of the Credit Agreement, as applicable.
4. ELIGIBLE ACCOUNT RECEIVABLE DATA.
(a) The Account Receivable must not be unpaid on the date that is 90 days
after the date of the invoice evidencing such Account Receivable.
(b) If invoices representing 10% or more of the unpaid net amount of all
Accounts Receivable from any one Account Debtor are unpaid more than 90
days after the dates of the invoices evidencing such Accounts Receivable,
then all Accounts Receivable relating to such Account Debtor shall cease to
be Eligible Accounts Receivable.
5. ADDITIONAL COVENANTS. From the date of the Loan Agreement and thereafter
until all of the Borrowers' Obligations under the Loan Agreement are paid in
full, the Borrowers agree that, unless the Bank shall otherwise consent in
writing, it will not, and will not permit any Subsidiary to, do any of the
following:
5.1 TANGIBLE CAPITAL BASE. During each of the periods set forth below,
permit the Tangible Capital Base to be less than the amount set forth below
opposite such period at any time:
Period Tangible Capital Base
------ ---------------------
June 30, 1993 through and
including September 29, 1993 $5,300,000
September 30, 1993 through and
including October 31, 1993 $5,500,000
November 1, 1993 through and
including June 29, 1994 $5,000,000
June 30, 1994 through and
including December 30, 1994 $5,400,000
December 31, 1994 through and
including June 29, 1995 $5,400,000
<PAGE>
June 30, 1995 through and
including December 30, 1995 $5,600,000
December 31, 1995 and thereafter $5,800,000
5.2 LEVERAGE RATIO. During each of the periods set forth below, permit
the ratio of (a) the total of (i) Americable's consolidated Indebtedness,
MINUS (ii) Subordinated Debt, MINUS (iii) the aggregate unpaid accrued
interest on all Subordinated Debt of Americable owing to NSU, to (b)
Tangible Capital Base to be greater than the ratio set forth below opposite
such period at any time:
Period Leverage Ratio
------ --------------
June 1, 1993 through and
including September 29, 1993 2.0 to 1.0
September 30, 1993 and thereafter 2.2 to 1.0
5.3 INTEREST COVERAGE RATIO. Permit the ratio, as of the last day of any
fiscal quarter for the period commencing on the first day of Americable's
fiscal year through and including such day, of (a) Americable's EBITDA to
(b) the total of (i) Americable's consolidated interest expense (including,
without limitation, imputed interest expense on Capitalized Leases) MINUS
(ii) the aggregate unpaid accrued interest on all Subordinated Debt of
Americable owing to NSU, to be less than (w) 1.25 to 1.0 for the fiscal
quarter ending on September 30, 1993, (x) 2.0 to 1.0 for the fiscal quarter
ending December 31, 1993 and each fiscal quarter through the fiscal quarter
ending December 31, 1994, (y) 1.5 to 1.0 for fiscal quarter ending
March 31, 1995, and (z) 2.0 to 1.0 for each fiscal quarter thereafter.
5.4 CAPITAL EXPENDITURES. Make Capital Expenditures in an amount
exceeding $1,400,000 on a consolidated basis during Americable's fiscal
year ending December 31, 1993, and $750,000 during any fiscal year
thereafter.
Borrowers' Initials
Bank's Initials
DATE: AS OF MARCH 3, 1995
<PAGE>
Amended and Restated Credit Agreement
C.E. Services Inc.
August 1, 1994
AMENDED, RESTATED AND CONSOLIDATED CREDIT AGREEMENT
THIS AMENDED, RESTATED AND CONSOLIDATED CREDIT AGREEMENT (as further
amended, modified and/or supplemented from time to time, the "Agreement") dated
as of August 1, 1994 (the "Effective Date"), is by and between C. E. SERVICES,
INC., a Texas corporation, ("Borrower") and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association, (the "Bank") and is effective as of
the Effective Date.
WHEREAS, effective September 30, 1992, Borrower and Bank entered into a
Credit Agreement (as amended, the "Original Agreement"), under the terms of
which the Bank agreed to make a loan or loans to Borrower from time to time
before the Termination Date as defined therein, not to exceed at any one time
outstanding the lesser of a borrowing base or $1,500,000.00. The Original
Agreement was amended by First Amendment to Credit Agreement dated as of October
1, 1993, Second Amendment to Credit Agreement dated as of November 15, 1993,
Third Amendment to Credit Agreement dated as of March 15, 1994, and Fourth
Amendment to Credit Agreement dated as of May 2, 1994; and
WHEREAS, effective July 1, 1993, Borrower and Bank entered into a Credit
Agreement for Discretionary Loans (as amended, the "Original Agreement for
Discretionary Loans"), under the terms of which the Bank agreed to make a loan
or loans to Borrower from time to time before the Termination Date as defined
therein, not to exceed at any one time outstanding $2,000,000.00. The Original
Agreement for Discretionary Loans was amended by First Amendment to Credit
Agreement dated as of October 1, 1993, Second Amendment to Credit Agreement
dated as of November 15, 1993, Third Amendment to Credit Agreement dated as of
March 15, 1994, Fourth Amendment to Credit Agreement dated as of May 7, 1994,
and Fifth Amendment to Credit Agreement dated as of May 7, 1994 (the Original
Agreement and the Original Agreement for Discretionary Loans are sometimes
hereinafter referred to collectively as the "Original Agreements"); and
WHEREAS, Borrower and Bank wish to amend, restate and consolidate the
Original Agreements in their entirety.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower and Bank hereby agree as follows:
1. LOANS UNDER THE COMMITMENT.
REVOLVING CREDIT NOTE 1.1 Subject to the terms and conditions hereof, the Bank
agrees to make a loan or loans (the "Commitment Loans" or "Commitment Loan") to
Borrower from time to time before the Termination Date (as defined herein), not
to exceed at any one time outstanding the lesser of the Borrowing Base (as
defined herein) or $1,500,000.00 (the "Commitment"), Borrower having the right
to borrow, repay and reborrow. The Bank and the Borrower agree that Chapter 15
of the Texas Credit Code shall not apply to this Agreement, the Commitment Note
or any Commitment Loan. The Commitment Loans shall be evidenced by and shall
bear interest and be payable as provided in the promissory note of Borrower
dated the Effective Date (together with any and all renewals, extensions,
modifications, replacements, and rearrangements thereof and substitutions
therefor, the "Commitment Note") which is given in renewal, modification and
extension of that certain promissory note dated May 2, 1994, in the original
principal amount of $1,500,000.00 (the "Existing Committed Note"). The parties
hereto agree that there is as of July 21, 1994, an outstanding principal balance
of $ - 0 - under the Existing Committed Note. The purpose of the Commitment
Loans is to support accounts receivables and the purchase of inventory.
BORROWING BASE REPORT 1.2 Within 25 days after the end of every month, the
Borrower shall furnish the Bank a Borrowing Base report and Compliance
Certificate substantially in
<PAGE>
the form of EXHIBIT A and EXHIBIT B (respectively, "Borrowing Base Report" and
"Compliance Certificate"). Unless specifically waived in writing by the Bank,
each Borrowing Base Report shall be accompanied by accounts receivable agings
and listings, listings of invoices relating to customer prepayments or deposits
which have not been applied as credits, listings of accounts receivable which
represent 12 month maintenance contracts, and listings of accounts receivable-
future billings, and, if requested by Bank, inventory listings.
BORROWING BASE 1.3 The Borrowing Base shall be the Amount Available for
Borrowing on each Borrowing Base Report, subject to verification by the Bank.
The calculation of the Borrowing Base shall utilize the eligibility criteria,
borrowing base factors and dollar ceilings for various components as are
specified in the attached EXHIBIT A, incorporated herein by reference.
REQUIRED PAYDOWNS 1.4 If the unpaid amount of the Commitment Loans at any time
exceeds the Borrowing Base then in effect, the Borrower shall make a paydown on
the Commitment Note in an amount sufficient to reduce the total unpaid balance
of the Commitment Note to an amount no greater than the Borrowing Base. Such
paydown shall be accompanied by: (a) all accrued and unpaid interest on the
amount prepaid; and (b) any prepayment charge required by the note on which a
prepayment is made and shall be due concurrently with the Borrowing Base Report.
COMMITMENT FEE 1.5 The Commitment is not subject to a commitment fee.
LOAN DOCUMENTS 1.6 The Commitment Loans and all other obligations and
indebtedness of the Borrower to the Bank are entitled to the benefit of the Loan
Documents.
PAST DUE AMOUNTS 1.7 Each amount due to the Bank in connection with the Loan
Documents shall bear interest from its due date until paid at the Past Due Rate
(as defined in the Commitment Note).
2. LOANS UNDER THE DISCRETIONARY LINE.
REVOLVING CREDIT NOTE 2.1 Subject to the terms and conditions hereof, the Bank
agrees to make a loan or loans (the "Discretionary Loans" or "Discretionary
Loan") to Borrower from time to time before the Termination Date (as defined
herein), not to exceed at any one time outstanding $2,000,000.00 (the
"Discretionary Line"), Borrower having the right to borrow, repay and reborrow.
Each Discretionary Loan will be in a maximum amount of 70% of the amount of the
contract for the purchase of Borrower's inventory of computer hardware. Each
Discretionary Loan will be outstanding for not more than 60 days. The
Discretionary Loans shall be for the purpose of the support of short term cash
needs for the purchase of computer hardware. The Bank and the Borrower agree
that Chapter 15 of the Texas Credit Code shall not apply to the Discretionary
Note or any Discretionary Loan. The Discretionary Loans shall be evidenced by
and shall bear interest and be payable as provided in the promissory note of
Borrower dated the Effective Date (together with any and all renewals,
extensions, modifications, replacements, and rearrangements thereof and
substitutions therefor, the "Discretionary Note") which is given in renewal,
modification and extension of that certain promissory note dated May 7, 1994, in
the original principal amount of $2,000,000.00 (the "Existing Discretionary
Note"). The parties hereto agree that there is as of July 21, 1994, an
outstanding principal balance of $ - 0 - under the Existing Discretionary Note.
THE BANK IS NOT OBLIGATED IN ANY WAY TO MAKE ANY DISCRETIONARY LOANS UNDER THIS
SECTION 2 AND NOTHING HEREIN OR IN ANY OTHER AGREEMENTS, DOCUMENTS, INSTRUMENTS,
CERTIFICATES OR OTHER WRITINGS EXECUTED OR DELIVERED IN CONNECTION WITH OR
PURSUANT TO THE TERMS OF ANY OF THE FOREGOING, OR THE DISCRETIONARY LINE IS
INTENDED OR TO BE CONSTRUED AS A COMMITMENT ON THE PART OF THE BANK OR ANY
SUBSEQUENT OWNER OR HOLDER OF THE DISCRETIONARY NOTE TO MAKE ANY LOAN UNDER THIS
SECTION 2 OR UNDER THE DISCRETIONARY LINE OR UNDER THE DISCRETIONARY NOTE. ALL
DISCRETIONARY LOANS HEREUNDER OR UNDER THE DISCRETIONARY LINE OR UNDER THE
DISCRETIONARY NOTE SHALL BE AT THE SOLE AND ABSOLUTE DISCRETION OF THE BANK OR
ANY SUBSEQUENT OWNER OR HOLDER OF THE DISCRETIONARY NOTE AND THE BANK OR ANY
SUBSEQUENT OWNER OR HOLDER OF THE DISCRETIONARY NOTE MAY, FOR ANY REASON OR NO
REASON AT ALL, REFUSE TO MAKE ANY DISCRETIONARY LOAN TO THE MAKER HEREUNDER OR
UNDER THE DISCRETIONARY LINE OR UNDER THE DISCRETIONARY NOTE.
<PAGE>
FEE 2.2 Each Discretionary Loan made by Bank to Borrower hereunder shall be
subject to a fee equal to the greater of (i) one quarter of one percent (.25%)
of the amount of each such Discretionary Loan or (ii) $1,000.00.
LOAN DOCUMENTS 3.2 The Discretionary Loans and all other obligations and
indebtedness of the Borrower to the Bank are entitled to the benefit of the Loan
Documents.
PAST DUE AMOUNTS 3.3 Each amount due to the Bank in connection with the Loan
Documents shall bear interest from its due date until paid at the Past Due Rate
(as defined in the Discretionary Note).
(The Commitment Line and the Discretionary Line may hereinafter be referred to
collectively as the "Line"; the Commitment Note and the Discretionary Note may
hereinafter be referred to collectively as the "Note" or "Notes"; the Commitment
Loan or Commitment Loans and the Discretionary Loan or Discretionary Loans may
hereinafter be referred to collectively as the "Loan" or "Loans".)
3. CONDITIONS PRECEDENT TO COMMITMENT LOANS.
COMMITMENT LOANS 3.1 The obligation of the Bank to make any Commitment Loan is
subject to satisfaction of the following conditions precedent: (a) the Bank
shall have received the following, all of which shall be duly executed and in
Proper Form: (1) if requested by Bank, a Request for Loan, substantially in the
form of EXHIBIT C, not later than noon of the Business Day of the proposed
Commitment Loan; (2) a Borrowing Base Report within the time provided by SECTION
1.2 of this Agreement; and (3) such other documents as the Bank may reasonably
require; (b) no Event of Default shall have occurred and be continuing and no
grace period shall be running; and (c) the making of the Commitment Loan shall
not be prohibited by, or subject the Bank to any penalty or onerous condition
under, any Legal Requirement. "BUSINESS DAY" means a day when the main office
of the Bank is open for the conduct of commercial lending business.
FIRST LOAN 3.2 In addition to the matters described in the preceding section,
the obligation, if any, of the Bank to make the first Commitment Loan is subject
to the receipt by the Bank of all of the Loan Documents specified on ANNEX I,
all of which shall be in Proper Form.
4. CONDITIONS PRECEDENT TO DISCRETIONARY LOANS.
DISCRETIONARY LOANS 4.1 The Bank shall consider making Discretionary Loans
upon the satisfaction of the following conditions precedent: (a) the Bank shall
have received the following, all of which shall be duly executed and in Proper
Form: (1) if requested by Bank, a Request for Loan, substantially in the form
of EXHIBIT C, not later than noon of the Business Day of the proposed
Discretionary Loan; (2) the contract for the purchase of the computer hardware
being purchased by Borrower; (3) the contract for the sale of the computer
hardware being purchased by Borrower; and (4) such other documents as the Bank
may reasonably require; (b) no Event of Default shall have occurred and be
continuing and no grace period shall be running; and (c) the making of the
Discretionary Loan shall not be prohibited by, or subject the Bank to any
penalty or onerous condition under, any Legal Requirement.
FIRST LOAN 4.2 In addition to the matters described in the preceding section,
the Bank shall not consider making Discretionary Loans until the receipt by the
Bank of all of the Loan Documents specified on ANNEX I, all of which shall be in
Proper Form.
5. REPRESENTATIONS AND WARRANTIES.
To induce the Bank to enter into this Agreement and to make the Commitment Loans
and to consider making the Discretionary Loans, the Borrower represents and
warrants as of the Effective Date and as of the date of each Request for Loan:
<PAGE>
ORGANIZATION AND STATUS 5.1 Borrower and each Subsidiary of Borrower is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; has all power and authority to conduct its
business as presently conducted; and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification desirable. Borrower has no Subsidiary other than
C. E. Services (Europe) Limited, a U.K. Company, which is wholly-owned by
Borrower.
FINANCIAL STATEMENTS 5.2 All financial statements delivered to the Bank are
complete and correct and fairly present, in accordance with generally accepted
accounting principles, consistently applied ("GAAP"), the financial condition
and the results of operations of Borrower and each Subsidiary of Borrower as at
the dates and for the periods indicated. No material adverse change has
occurred in the assets, liabilities, financial condition, business or affairs of
Borrower or any Subsidiary of Borrower since the dates of such financial
statements. Borrower is not, and no Subsidiary of Borrower is, subject to any
instrument or agreement materially and adversely affecting its financial
condition, business or affairs.
ENFORCEABILITY 5.3 The Loan Documents are legal, valid and binding obligations
of the Parties enforceable in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency and other similar laws affecting
creditors' rights generally. The execution, delivery and performance of the
Loan Documents have all been duly authorized by all necessary action; are within
the power and authority of the Parties; do not and will not contravene or
violate any Legal Requirement or the Organizational Documents of the Parties;
and do not and will not result in the breach of, or constitute a default under,
any agreement or instrument by which the Parties or any of their respective
Property may be bound or affected.
COMPLIANCE 5.4 Borrower and each Subsidiary of Borrower has filed and paid all
taxes shown thereon to be due, except those for which extensions have been
obtained and those which are being contested in good faith. Borrower and each
Subsidiary of Borrower is in compliance with all applicable Legal Requirements
and manages and operates (and will continue to manage and operate) its business
in accordance with good industry practices. Neither Borrower nor any Subsidiary
of Borrower is in default in the payment of any other indebtedness or under any
agreement to which it is a party. All consents, permissions and registrations
of or with any Governmental Authority or other Person required in connection
with the execution, delivery and performance of the Loan Documents have been
obtained.
LITIGATION 5.5 Except as heretofore disclosed to the Bank in writing, there is
no litigation or administrative proceeding pending or, to the knowledge of
Borrower, threatened against, nor any outstanding judgment, order or decree
affecting, Borrower or any Subsidiary of Borrower before or by any Governmental
Authority. Neither Borrower nor any Subsidiary of Borrower is in default with
respect to any judgment, order or decree of any Governmental Authority.
TITLE AND RIGHTS 5.6 Borrower and each Subsidiary of Borrower has good and
marketable title to its Property, free and clear of any Lien except for Liens
permitted by this Agreement and the other Loan Documents. Except as otherwise
expressly stated in the Loan Documents or permitted by this Agreement, the Liens
of the Loan Documents will constitute valid and perfected first and prior Liens
on the Property described therein, subject to no other Liens whatsoever.
Borrower and each Subsidiary of Borrower possesses all permits, licenses,
patents, trademarks and copyrights required to conduct its business. All
easements, rights-of-way and other rights necessary to the maintenance and
operation of the Property of the Borrower and each Subsidiary of Borrower have
been obtained and are in full force and effect.
REGULATION U 5.7 None of the proceeds of any Loan or Note has been or will be
used for the purpose of purchasing or carrying, directly or indirectly, any
margin stock or for any other purpose which would make this credit a "purpose
credit" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System.
<PAGE>
ENVIRONMENT 5.8 Neither Borrower nor any Subsidiary of Borrower has generated,
handled, used, stored or disposed of any hazardous or toxic waste or substance,
on or off its premises (whether or not owned by it), other than in accordance
with applicable Legal Requirements. Neither Borrower nor any Subsidiary of
Borrower has material contingent liability with respect to noncompliance with
environmental or hazardous waste laws or has not received any notice that it or
any of its Property or operations is not in compliance with, or that any
Governmental Authority is investigating its compliance with, any environmental
or hazardous waste laws.
STATEMENTS BY OTHERS 5.9 All statements made by or on behalf of Borrower or
any Subsidiary of Borrower or any other of the Parties in connection with any
Loan Document shall constitute the representations and warranties of the
Borrower hereunder.
PARENT 5.10 Borrower is a wholly owned Subsidiary of North Star Universal,
Inc. ("Parent").
6. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees with the Bank that prior to the termination of
this Agreement, Borrower will do, and, if necessary, cause to be done, and cause
its Subsidiaries to do, each and all of the following:
CORPORATE FUNDAMENTALS 6.1 At all times: (a) pay when due all taxes and
governmental charges of every kind upon it or against its income, profits or
Property, unless and only to the extent that the same shall be contested in good
faith and adequate reserves have been established therefor; (b) renew and keep
in full force and effect all of its licenses, permits and franchises; (c) do all
things necessary to preserve its corporate existence and its qualifications and
rights in all jurisdictions where such qualification is necessary or desirable;
(d) comply with all applicable Legal Requirements in respect of the conduct of
its business and the ownership of its Property; and (e) cause its Property to be
protected, maintained and kept in good repair and make all replacements and
additions to its Property as may be reasonably necessary to conduct its business
properly and efficiently.
INSURANCE 6.2 Maintain insurance with such reputable insurers, on such of its
Property and personnel, in such amounts and against such risks as is customary
with similar Persons or as may be reasonably required by the Bank, and furnish
the Bank satisfactory evidence thereof promptly upon request. These insurance
provisions are cumulative of the insurance provisions of the other Loan
Documents. The Bank shall be named as a beneficiary of such insurance as its
interest may appear and the Borrower shall provide the Bank with copies of the
policies of insurance and a certificate of the insurer that the insurance
required by this section may not be canceled, reduced or affected in any manner
without 30 days' prior written notice to the Bank.
FINANCIAL INFORMATION 6.3 Furnish to the Bank one copy of each of the
following: (i)(a) as soon as available and in any event within 90 days after
the end of each fiscal year of Borrower, Borrower's audited annual financial
statements, prepared in conformity with GAAP, accompanied by a report and
opinion of independent certified public accountants satisfactory to Bank; (b) as
soon as available and in any event within 25 days after the end of each month,
the monthly income statement and balance sheet of Borrower for such period, and
for the year to date, prepared in conformity with GAAP accompanied by
computations and work papers to establish compliance or noncompliance with the
financial covenants set forth in SECTION 7.3; (c) as soon as available and in
any event within 25 days after the end of each month, the monthly borrowing base
calculation, a listing of accounts receivable agings and a Compliance
Certificate; (d) copies of special audits, studies, reports and analysis
prepared for the management of Borrower by outside parties; and (e) promptly
after such request is submitted to the appropriate Governmental Authority, any
request for waiver of funding standards or extension of amortization periods
with respect to any employee benefit plan; (ii) as soon as available and in any
event within 120 days of the end of each fiscal year of Parent, Parent's annual
financial statements, prepared in conformity with GAAP,
<PAGE>
accompanied by a report and opinion of independent certified public accountants
satisfactory to Bank; and (iii) for Borrower and Parent, such other information
relating to the financial condition and affairs of the Borrower and Parent as
from time to time may be requested by the Bank in its discretion.
MATTERS REQUIRING NOTICE 6.4 Notify the Bank immediately upon acquiring
knowledge of (a) the institution or threatened institution of any lawsuit or
administrative proceeding which, if adversely determined, might adversely affect
Borrower; (b) the occurrence of any material adverse change in the assets,
liabilities, financial condition, business or affairs of Borrower or Parent; (c)
the occurrence of any Event of Default; or (d) any reportable event or any
prohibited transaction in connection with any employee benefit plan.
INSPECTION 6.5 Permit the Bank and its affiliates to inspect and photograph
its Property, to examine its files, books and records and make and take away
copies thereof, and to discuss its affairs with its officers and accountants,
all at such times and intervals and to such extent as the Bank may reasonably
desire, including, but not limited to, semi-annual audits of Borrower by Bank,
the cost of which shall not exceed $2,000.00 per audit and which shall be paid
on demand by Borrower.
ASSURANCES 6.6 Promptly execute and deliver any and all other and further
agreements, documents, instruments, and other writings which may be requested by
the Bank to cure any defect in the execution and delivery of any Loan Document
or more fully to describe particular aspects of the agreements set forth in the
Loan Documents or intended to be set forth.
CERTAIN CHANGES 6.7 Notify the Bank at least 30 days prior to the date that
any Party changes its name or the location of its chief executive office or
principal place of business or the place where it keeps its books and records or
the location of any of the Collateral.
7. NEGATIVE COVENANTS.
The Borrower covenants and agrees with the Bank that prior to the termination of
this Agreement, no Borrower and no Subsidiary of Borrower will:
INDEBTEDNESS 7.1 Create, incur, suffer or permit to exist, or assume or
guarantee, directly or indirectly, or become or remain liable with respect to
any Indebtedness, contingent or otherwise, EXCEPT:
(a) Indebtedness to the Bank, or secured by Liens permitted by this Agreement,
or otherwise approved in writing by the Bank, and all renewals and extensions
(but not increases) thereof; and
(b) current accounts payable and unsecured current liabilities, not the result
of borrowing, to vendors, suppliers and persons providing services, for
expenditures for goods and services normally required by it in the ordinary
course of business and on ordinary trade terms; and
(c) Subordinated Debt to Parent made after the Effective Date, the proceeds of
which are used exclusively for the purchase of Borrower's inventory and to
support Borrower's accounts receivable.
LIENS 7.2 Create or suffer to exist any Lien upon any of its Property now owned
or hereafter acquired, or acquire any Property upon any conditional sale or
other title retention device or arrangement or any purchase money security
agreement; or in any manner directly or indirectly sell, assign, pledge or
otherwise transfer any of its accounts or other Property, EXCEPT:
(a) Liens for taxes not delinquent or being contested in good faith, by
appropriate proceedings;
<PAGE>
(b) Liens in effect on the date hereof and disclosed to the Bank in writing,
PROVIDED that neither the indebtedness secured thereby nor the Property covered
thereby shall increase; and
(c) Liens in favor of the Bank.
FINANCIAL COVENANTS 7.3 Fail to comply with the requirements set forth below.
Unless otherwise provided herein, all such amounts and ratios shall be
calculated (a) on the basis of GAAP, and (b) on a consolidated basis, and shall
be applicable only to the parent corporation which is a Borrower if there is a
Borrower which is a Subsidiary of another Borrower. Compliance with the
requirements set forth below shall be determined as of the dates of the
financial statements to be provided to the Bank, and Borrower shall deliver
schedules reflecting the calculation of such amounts and ratios concurrently
with each set of financial statements.
1. TANGIBLE NET WORTH. Maintain a Tangible Net Worth of at least the amount
shown below during the corresponding period indicated below:
Period Minimum Tangible Net Worth
------ --------------------------
At each month end $5,500,000.00
2. CURRENT RATIO. Maintain a Current Ratio of at least the ratio shown below
during the corresponding period indicated below:
Period Minimum Current Ratio
------ ---------------------
At each month end 1.25 : 1.0
3. SUBORDINATED DEBT TO PARENT. Maintain at least $3,057,000 of Subordinated
Debt to Parent.
4. ROLLING NET LOSS. Not permit a Net Loss in excess of $200,000 to occur
during any consecutive three-month period from and after June 1, 1994.
5. CUMULATIVE NET LOSS. Not permit a cumulative Net Loss in excess of
$300,000 to occur from and after June 1, 1994.
The list of financial covenants above does not exhaust the financial
concepts which may be important or useful in any analysis of the financial
condition of the Borrower.
CORPORATE CHANGES 7.4 In any single transaction or series of transactions,
directly or indirectly: (i) liquidate or dissolve; (ii) be a party to any
merger or consolidation; (iii) sell or dispose of any interest in any of
its Subsidiaries, or permit any of its Subsidiaries to issue any additional
equity other than to a Borrower; or (iv) sell, convey or lease all or any
substantial part of its assets, EXCEPT for sale of inventory in the
ordinary course of business.
RESTRICTED PAYMENTS 7.5 At any time: (a) redeem, retire or otherwise acquire,
directly or indirectly, any shares of its capital stock or other equity
interest; (b) declare or pay any dividend (EXCEPT stock dividends); (c)
make any other payment or distribution of any Property or cash to owners of
an equity interest in their capacity as such or to any affiliate of
Borrower (including, but not limited to, reimbursement of taxes to Parent);
or (d) make any loan, advance, or investment to or in any officer, agent,
employee, shareholder, affiliate or any other Person, provided that the
foregoing shall not limit repayment of Indebtedness allowed by SECTION
7.1(C).
NATURE OF BUSINESS; MANAGEMENT 7.6 Change the nature of its business or enter
into any business which is substantially different from the business in
which it is presently engaged, or permit any material change in its
management (and any change in the management of Borrower as of the
Effective Date, including, without limitation, any change affecting C. B.
Russey and/or Douglas T. McLeod, shall be deemed a material
<PAGE>
change in Borrower's management), or enter into any investments outside of
current lines of business.
AFFILIATE TRANSACTIONS 7.7 Enter into any transaction or agreement with any
officer, director or holder of any outstanding capital stock of Borrower
(or any member of the family of any such Person, or any Person controlling,
controlled by or under common control with Borrower) unless the same is
upon terms substantially similar to those obtainable from wholly unrelated
sources.
SUBSIDIARIES 7.8 Form, create or acquire any Subsidiary, other than C. E.
Services (Europe) Limited.
USE OF PROCEEDS 7.9 Use proceeds of any Loan for any purpose other than as
specified in Sections 1.1 and 2.1.
8. EVENTS OF DEFAULT AND REMEDIES.
EVENTS OF DEFAULT 8.1 If any of the following events ("EVENTS OF DEFAULT") shall
occur, then the Bank may do any or all of the following: (1) declare any
or all of the Notes to be, and thereupon the Notes shall forthwith become,
immediately due and payable, together with all accrued and unpaid interest
thereon and all other obligations and indebtedness of the Borrower under
the Loan Documents, without notice of acceleration or of intention to
accelerate, presentment and demand or protest, all of which are hereby
expressly waived; (2) without notice to Borrower, terminate the Commitment
and/or the Discretionary Line and accelerate the Termination Date; (3) set
off, in any order, against the indebtedness of the Borrower under the Loan
Documents any debt owing by the Bank to Borrower, including, but not
limited to, any deposit account, which right is hereby granted by Borrower
to the Bank; and (4) exercise any and all other rights pursuant to the Loan
Documents, at law, in equity or otherwise:
(a) Borrower shall fail to pay any principal of or interest on the Note or any
Loan as and when due, or any other obligation under any Loan Document as
and when due; or
(b) Borrower shall fail to pay at maturity, or within any applicable period of
grace, any principal of or interest on any other borrowed money obligations
or shall fail to observe or perform any term, covenant or agreement
contained in any agreement or obligation by which it is bound; or
(c) Any representation or warranty made in connection with any of the Loan
Documents shall prove to have been incorrect, false or misleading; or
(d) Default shall occur in the punctual and complete performance of any
covenant of any of the Parties contained in any Loan Document; or
(e) The occurrence of an Event of Default under any of the Loan Documents; or
(f) Final judgment for the payment of money shall be rendered against Borrower
and the same shall remain undischarged for a period of 30 days during which
execution shall not be effectively stayed, or
(g) The sale, encumbrance or abandonment (except as otherwise expressly
permitted by this Agreement) of any of the Collateral or the making of any
levy, seizure or attachment thereof or thereon; or the loss, theft,
substantial damage, or destruction of any material portion of such
Property; or
(h) Any order shall be entered in any proceeding against Borrower or any
Subsidiary of Borrower decreeing the dissolution, liquidation or split-up
thereof, and such order shall remain in effect for 30 days; or
<PAGE>
(i) Borrower or any Subsidiary of Borrower shall make a general assignment for
the benefit of creditors or shall petition or apply to any tribunal for the
appointment of a trustee, custodian, receiver or liquidator of all or any
substantial part of its business, estate or assets or shall commence any
proceeding under any bankruptcy, insolvency, dissolution or liquidation law
of any jurisdiction, whether now or hereafter in effect; or any such
petition or application shall be filed or any such proceeding shall be
commenced against Borrower or any Subsidiary of Borrower and Borrower or
such Subsidiary by any act or omission shall indicate approval thereof,
consent thereto or acquiescence therein, or an order shall be entered
appointing a trustee, custodian, receiver or liquidator of all of any
substantial part of the assets of Borrower or any Subsidiary of Borrower or
granting relief to Borrower or any Subsidiary of Borrower or approving the
petition in any such proceeding, and such order shall remain in effect for
more than 30 days; or Borrower or any Subsidiary of Borrower shall fail
generally to pay its debts as they become due or suffer any writ of
attachment or execution or any similar process to be issued or levied
against it or any substantial part of its Property which is not released,
stayed, bonded or vacated within 30 days after its issue or levy; or
(j) Borrower and each Subsidiary of Borrower shall have concealed, removed, or
permitted to be concealed or removed, any part of its Property, with intent
to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its Property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or shall have made
any transfer of its Property to or for the benefit of a creditor at a time
when other creditors similarly situated have not been paid; or
(k) A material adverse change shall occur in the assets, liabilities, financial
condition, business or affairs of Borrower or any Subsidiary of Borrower;
or
<PAGE>
(l) Any change shall occur in the ownership of Borrower (other than a one-time
transfer by Parent of all of Parent's ownership of Borrower to a new
wholly-owned subsidiary of Parent ("New Parent"), with New Parent becoming
a guarantor of Borrower's indebtedness to Bank under a guaranty agreement
acceptable to Bank, and thereafter the "Parent" under this Agreement shall
be the New Parent);
provided that for a period of five (5) days following any Event of Default
pursuant to SECTION 8.1(A) hereof, Bank agrees not to exercise the remedies
set forth in SECTION 8.1(1) AND (2) hereof.
REMEDIES CUMULATIVE 8.2 No remedy, right or power of the Bank is intended to
be exclusive of any other remedy, right or power now or hereafter existing
by contract, at law, in equity, or otherwise, and all such remedies, rights
and powers shall be cumulative. Nothing herein shall imply any obligation
of Borrower to maintain any deposit with the Bank.
9. MISCELLANEOUS.
NO WAIVER 9.1 No waiver of any Event of Default shall be deemed to be a waiver
of any other Event of Default. No failure to exercise or delay in
exercising any right or power under any of the Loan Documents shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
right or power preclude any further or other exercise thereof or the
exercise of any other right or power. No amendment, modification or waiver
of any of the Loan Documents shall be effective unless the same is in
writing and signed by the Person against whom such amendment, modification
or waiver is sought to be enforced. No notice to or demand on any Person
shall entitle any Person to any other or further notice or demand in
similar or other circumstances.
NOTICES 9.2 All notices under the Loan Documents shall be in writing and
either delivered against receipt therefor, or mailed by registered or
certified mail, return receipt requested, in each case addressed to the
address shown on the signature page hereof or to such other address as a
party may designate. Except for the notices required by SECTION 2.1 and
SECTION 3.1 which shall be given only upon actual receipt by the Bank,
notices shall be deemed to have been given (whether actually received or
not) when delivered (or, if mailed, on the second following Business Day).
GOVERNING LAW/ARBITRATION 9.3 (a) UNLESS OTHERWISE SPECIFIED THEREIN, EACH
LOAN DOCUMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS AND AS APPLICABLE, THE UNITED STATES OF AMERICA.
To the maximum extent not prohibited by law, any controversy or claim
arising out of or relating to the Loan or any Loan Document or any
transaction provided for therein, including but not limited to any claim
based on or arising from an alleged tort or an alleged breach of any
agreement contained in any of the Loan Documents, shall, at the request of
any party to the Loan or Loan Documents (either before or after the
commencement of judicial proceedings), be settled by mandatory and binding
arbitration pursuant to Title 9 of the United States Code and in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA"). It Title 9 of the United States Code is
inapplicable to any such claim or controversy for any reason, such
arbitration shall be conducted pursuant to the Texas General Arbitration
Act and in accordance with the Commercial Arbitration Rules of the AAA. In
any such arbitration proceeding: (i) all statutes of limitations which
would otherwise be applicable shall apply, and (ii) the proceeding shall
conducted in the city in which the principal office of the Bank is located
in Texas, by a single arbitrator, if the amount in controversy is $1
million or less or by a panel of three arbitrators if the amount in
controversy is over $1 million. All arbitrators shall be selected by the
process of appointment from a panel, pursuant to Section 13 of the AAA
Commercial Arbitration Rules. Any award rendered in any such arbitration
proceeding shall be final and binding, and judgment upon any such award may
be entered in any court having jurisdiction.
(b) If any party to the Loans or Loan Documents files a proceeding in any court
to resolve any such controversy or claim, such action shall not constitute
a waiver of the right of such party or a bar to the right of any other
party to seek arbitration under the provisions of this Section of that or
any other claim or controversy, and the court
<PAGE>
shall, upon motion of any party to the proceeding, direct that such
controversy or claim be arbitrated in accordance with this Section.
(c) No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to the Loan Documents before, during
or after any arbitration proceeding to: (i) exercise self-help remedies
such as setoff or repossession; (ii) foreclose (judicially or otherwise)
any lien on or security interest in any real or personal property
Collateral; or (iii) obtain emergency relief from a court of competent
jurisdiction to prevent the dissipation, damage, destruction, transfer,
hypothecation, pledging or concealment of assets or of Collateral securing
any indebtedness, obligation or guaranty referenced in the Loan Documents.
Such emergency relief may be in the nature of, but is not limited to: pre-
judgment attachments, garnishments, sequestration, appointments or
receivers, or other emergency injunctive relief to preserve the status quo.
(d) To the extent arbitration is prohibited by law or in the event of judicial
proceedings for whatever reason, Borrower hereby irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to the Loan or the Loan Documents brought in the
district courts of the county in Texas in which the principal office of the
Bank is located, or in the United States District Court for the District of
Texas in which the Bank's principal office is located, (collectively, the
"COURTS"), or any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum. Borrower hereby
irrevocably agrees that any judicial proceeding against the Bank arising
out of or in connection with the Loan Documents shall be brought in the
Courts. Nothing contained herein, however, shall be construed as a waiver
of Borrower's or the Bank's right to compel arbitration of disputes
pursuant to subparagraphs (a) and (b), above.
SURVIVAL; PARTIES BOUND; ASSIGNMENT 9.4 All representations, warranties,
covenants and agreements made by or on behalf of Borrower in connection
with the Loan Documents shall survive the execution and delivery of the
Loan Documents; shall not be affected by any investigation made by any
Person, and shall bind Borrower and the heirs, devisees, executors,
administrators, personal representatives, successors, trustees, receivers
and assigns of Borrower and inure to the benefit of the successors and
assigns of the Bank; PROVIDED that the undertaking of the Bank hereunder to
make Loans to the Borrower shall not inure to the benefit of any successor
or assign of Borrower. Except as otherwise provided herein, the term of
this Agreement shall be until the final maturity of the Notes and the full
and final payment of all amounts due under the Loan Documents. This
Agreement and the Loans may be transferred or assigned by Bank in Bank's
sole discretion, and any transferee or assignee shall be entitled to the
benefits hereof.
<PAGE>
DOCUMENTARY MATTERS 9.5 This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
instrument,and all such separate counterparts shall constitute but one and
the same instrument. The headings and captions appearing in the Loan
Documents have been included solely for convenience and shall not be
considered in construing the Loan Documents. The Loan Documents embody the
entire agreement between the Borrower and the Bank and supersede all prior
proposals, agreements and undertakings. If any provision of any Loan
Document shall be invalid, illegal or unenforceable in any respect under
any applicable law, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby.
EXPENSES 9.6 Any provisions to the contrary notwithstanding, and whether or
not the transactions contemplated by this Agreement shall be consummated,
the Borrower agrees to pay on demand all out-of-pocket expenses (including,
without limitation, the fees and expenses of counsel for the Bank) in
connection with the negotiation, preparation, execution, filing, recording,
modification, supplementing and waiver of the Loan Documents and the
making, servicing and collection of the Loans. Such fees for the
negotiation, preparation and execution only of the Loan Documents shall not
exceed $1,500.00. The obligations of the Borrower under this and the
following section shall survive the termination of this Agreement.
INDEMNIFICATION 9.7 The Borrower agrees to indemnify, defend and hold the Bank
harmless from and against any and all loss, liability, obligation, damage,
penalty, judgment, claim, deficiency and expense (including interest,
penalties, attorneys' fees and amounts paid in settlement) to which the
Bank may become subject arising out of or based upon the Loan Documents or
any Loan, including that resulting from the Bank's own negligence, EXCEPT
and to the extent caused by the gross negligence or willful misconduct of
the Bank.
NATURE OF OBLIGATIONS 9.8 If more than one Borrower executes this Agreement,
all of the representations, warranties, covenants and agreements of the
Borrower shall be joint and several obligations of the Borrower.
CONSOLIDATION 9.9 All financial statements for Borrower shall be prepared on
both a consolidated and consolidating basis and all financial amounts and
ratios with respect to Borrower shall be computed on a consolidated basis.
USURY NOT INTENDED 9.10 It is the intent of Borrower and of Bank in the
execution and performance of this Agreement and any other Loan Document to
contract in strict compliance with the usury laws of the State of Texas and
as applicable, the United States of America. Borrower and Bank agree that
none of the terms and provisions contained in this Agreement or any other
Loan Document shall ever be construed to create a contract to pay for the
use, forbearance or detention of money with interest at a rate in excess of
the maximum nonusurious rate of interest permitted to be charged by
applicable Federal or Texas law (whichever shall permit the higher lawful
rate) from time to time in effect ("Highest Lawful Rate"). At all times,
if any, that Chapter One of the Texas Credit Code shall establish the
Highest Lawful Rate, the Highest Lawful Rate shall be the "indicated rate
ceiling" as defined in that Chapter. The provisions of this paragraph
shall control over all other provisions of this Agreement and all other
Loan Documents which may be in apparent conflict herewith. In the event
Bank shall collect moneys which are deemed in constitute interest in excess
of the legal rate, such moneys shall be immediately returned to the payor
thereof (or, at the option of Bank, credited against the unpaid principal
of the Note or Notes) upon such determination.
CONFLICT 9.11 In the event of a conflict or an inconsistency between the terms
of this Agreement and the terms of the Original Credit Agreements, this
Agreement shall prevail.
<PAGE>
10. DEFINITIONS.
Unless the context otherwise requires, capitalized terms used in Loan Documents
have these meanings:
AUTHORITY DOCUMENTS shall mean certificates of authority to transact business,
Certificates of Good Standing, borrowing resolutions (with secretary's
certificate), Secretary's Certificates of Incumbency, and other documents
which empower and enable Borrower or its representatives to enter into
agreements evidenced by Loan Documents or evidence such authority.
CASH FLOW shall mean net income (after interest and tax expense) plus
amortization of intangibles and depreciation.
COLLATERAL shall mean all Property, tangible or intangible, real, personal or
mixed, now or hereafter subject to the Security Agreements, or intended so
to be.
CORPORATION shall mean corporations, partnerships, joint ventures, joint stock
associations, business trusts and other business entities.
CURRENT ASSETS shall mean all cash, customers' accounts and other receivables
due within one year from statement date, inventory, deposits, marketable
securities, and prepaid expenses to be consumed within one year from
statement date.
CURRENT LIABILITIES shall mean all amounts due or to become due for payment
within twelve (12) months of statement date.
CURRENT RATIO shall mean the ratio of Current Assets to Current Liabilities.
GOVERNMENT AUTHORITY shall mean foreign governmental authority, the United
States of America, any State of the United States and any political
subdivision of any of the foregoing, and any agency, department,
commission, board, bureau, court or other tribunal having jurisdiction over
the Bank or Borrower, any Subsidiary of Borrower or any guarantor of any
indebtedness hereunder or their respective Property.
INDEBTEDNESS shall mean and include (a) all items which in accordance with GAAP
would be included on the liability side of a balance sheet on the date as
of which Indebtedness is to be determined (excluding capital stock,
surplus, surplus reserves and deferred credits); (b) all guaranties,
endorsements and other contingent obligations in respect of, or any
obligations to purchase or otherwise acquire, Indebtedness of others;
(c) all Indebtedness secured by any Lien existing on any interest of the
Person with respect to which Indebtedness is being determined in Property
owned subject to such Lien whether or not the Indebtedness secured thereby
shall have been assumed; and (d) all amounts due or owing to Parent.
LEGAL REQUIREMENT shall mean any law, ordinance, decree, requirement, order,
judgment, rule, regulation (or interpretation of any of the foregoing) of,
and the terms of any license or permit issued by, any Governmental
Authority.
LIEN shall mean any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether
based on common law, constitutional provision, statute or contract.
LOAN DOCUMENTS shall mean this Agreement, the Notes, Security Agreements, the
Original Agreements, the agreements, documents, instruments and other
writings contemplated by this Agreement or listed on Annex I, all other
assignments, deeds, guaranties, pledges, instruments, certificates and
agreements now or hereafter executed or delivered to the Bank pursuant to
any of the foregoing, and all amendments, modifications, renewals,
extensions, increases and rearrangements of, and substitutions for, any of
the foregoing.
<PAGE>
NET LOSS shall mean the net loss (before income taxes) of Borrower and
Subsidiary on a consolidated basis, determined in accordance with GAAP.
ORGANIZATION DOCUMENTS shall mean, with respect to a corporation, the
certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, joint venture, or trust, the
agreement or instrument establishing such entity; in each case including
any and all modifications thereof as of the date of the Loan Document
referring to such Organizational Document and any and all future
modifications thereof which are consented to by the Bank.
PARTIES shall mean all Persons other than the Bank executing any Loan Document.
PERSON shall mean any individual, Corporation, trust, unincorporated
organization, Governmental Authority or any other form of entity.
PROPER FORM shall mean in form and substance satisfactory to the Bank.
PROPERTY shall mean any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.
SECURITY AGREEMENTS shall mean any security agreement, deed of trust,
assignment or other security document which secures repayment of any of the
Notes.
SUBORDINATED DEBT shall mean any Indebtedness subordinated to Indebtedness due
Bank on terms satisfactory to Bank.
SUBSIDIARY shall mean, as to a particular parent Corporation, any Corporation of
which 50% or more of the indicia of equity rights is at the time directly
or indirectly owned by such parent Corporation or by one or more Persons
controlled by, controlling or under common control with such parent
Corporation.
TANGIBLE NET WORTH shall mean as at any date: (1) the aggregate amount at which
all assets of Borrower would be shown on a balance sheet at such date after
deducting loans and advances to officers and employees, any amounts due
Borrower's parent Corporation, capitalized research and development costs,
capitalized interest, debt discount and expense, goodwill, patents,
trademarks, copyrights, franchises, licenses and such other assets as are
properly classified as "intangible assets", less; (2) the aggregate amount
of all Indebtedness, liabilities (including tax and other proper accruals)
and reserves of Borrower excluding Subordinated Debt.
TERMINATION DATE shall mean the earlier of (a) June 30, 1995; or (b) the date
specified by the Bank pursuant to SECTION 8.1 hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth above.
<PAGE>
THIS WRITTEN LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN BANK AND THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF BANK
AND THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANK AND
THE PARTIES.
BORROWER:
C. E. SERVICES, INC.
By: /s/ C.B. Russey
Name: C.B. Russey
Title: President
Address: 2895 113th Street
Grand Prairie, Texas 75050
BANK:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ Ray Kingsbury
Name: Ray Kingsbury
Title: Senior Vice President
Address: 201 Main Street
Fort Worth, Texas 76102
LIST OF EXHIBIT
A: Borrowing Base Report
B: Compliance Certificate
C: Request for Loan
Annex I: List of Loan Documents
<PAGE>
FIRST AMENDMENT TO AMENDED,
RESTATED AND CONSOLIDATED
CREDIT AGREEMENT
This First Amendment to Amended, Restated and Consolidated Credit Agreement
(the "First Amendment") is dated as of December 27, 1994, and is by and between
C. E. SERVICES, INC., a Texas corporation ("Borrower"), and TEXAS COMMERCE BANK
NATIONAL ASSOCIATION (the "Bank").
WHEREAS, Borrower and Bank entered into that certain Amended, Restated and
Consolidated Credit Agreement dated as of August 1, 1994 (the "Amended
Agreement") with respect to certain loans which Bank agreed to make to Borrower;
and
WHEREAS, as a result of certain defaults by Borrower under the Amended
Agreement, Borrower and Bank wish to amend the Amended Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Bank hereby agree as
follows:
1. Certain Events of Default currently exist under the Amended Agreement.
As a result of such Events of Default, Bank has the right, among other rights,
to accelerate payment of all Loans made thereunder and to terminate any
Commitment to lend thereunder. In consideration of Bank's agreement hereby to
not immediately exercise its rights under the Amended Agreement (Bank does not
hereby waive any Event of Default, but instead hereby reserves the right to
exercise its rights under the Amended Agreement at any time hereafter, as a
result of existing Events of Default or future Events of Default), Borrower
hereby agrees to cause all of its indebtedness to Bank to be guaranteed by North
Star Universal, Inc. and Dalworth Holdings, Inc., each an affiliate of Borrower,
pursuant to guarantee agreements in form and substance acceptable to Bank.
2. Section 1.1 of the Amended Agreement is hereby amended such that the
first sentence thereof shall be as follows:
Subject to the terms and conditions hereof, the Bank agrees to make a
loan or loans (the "Commitment Loans" or "Commitment Loan") to
Borrower from time to time before the Termination Date (as defined
herein), not to exceed at any one time outstanding the lesser of the
Borrowing Base (as defined herein) or $700,000.00 (the "Commitment"),
Borrower having the right to borrow, repay and reborrow.
<PAGE>
3. The term "Termination Date," as defined in Section 10 of the Amended
Agreement, is hereby amended to mean "the earlier of (a) March 31, 1995; or (b)
the date specified by the Bank pursuant to Section 8.1 hereof."
4. Bank has notified Borrower, and Borrower hereby acknowledges, that
Bank is not obligated in any way to make any Discretionary Loans under the
Amended Agreement and nothing therein, herein or in any other agreements,
documents, instruments, certificates or other writings, executed or delivered in
connection with or pursuant to the terms of the Amended Agreement, this First
Amendment or any such other agreement, document, instrument, certificate or
other writing or the Discretionary Line is intended or to be construed as a
commitment on the part of the Bank or any subsequent owner or holder of the
Discretionary Note to make any loan thereunder or hereunder or under the
Discretionary Line or under the Discretionary Note. All Discretionary Loans
thereunder or under the Discretionary Line or under the Discretionary Note shall
be at the sole and absolute discretion of the Bank or any subsequent owner or
holder of the Discretionary Note, and the Bank or any subsequent owner or holder
of the Discretionary Note may, for any reason, or no reason at all, refuse to
make any Discretionary Loan to Borrower hereunder or under the Discretionary
Line or under the Discretionary Note. As a result of the existing Events of
Default under the Amended Agreement, Borrower acknowledges that Bank has
informed it that any request by Borrower for a Discretionary Loan will be very
carefully analyzed by Bank, and it is unlikely that any Discretionary Loan will
be approved by Bank.
5. Except as amended by this First Amendment, the Amended Agreement shall
remain in full force and effect as therein written. Borrower hereby
acknowledges and agrees that there are no offsets, defenses or claims against
any part of the indebtedness evidenced by the Discretionary Note or the
Commitment Note or otherwise arising pursuant to the Amended Agreement and, to
the extent any such offsets, defenses or claims exist, Borrower hereby
irrevocably waives same. Borrower hereby releases, acquits and forever
discharges Bank, and each of its officers, directors, shareholders, agents,
employees, successors and assigns, from any and all claims, demands, liens,
damages, actions or suits, of whatsoever nature or character, in contract or in
tort, known or unknown, which has accrued or may accrue to Borrower arising out
of or in any way connected to any extension of credit by Bank to Borrower on or
prior to the date hereof or any other matter or thing done, omitted or suffered
to be done by any party being released hereby on or prior to the date hereof.
<PAGE>
6. Each capitalized term not otherwise defined in this First Amendment
shall have the meaning ascribed to such term in the Amended Agreement.
7. This First Amendment may be executed in one or more counterparts, and
each counterpart shall constitute an original instrument and all such
counterparts shall constitute one and the same instrument.
8. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the day and year first above written.
C. E. SERVICES, INC.
By: /s/ C.B. Russey
Name: C.B. Russey
Title: President
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ Matt Reynolds
Name: D. Matt Reynolds
Title: Senior Vice President
<PAGE>
CONTINUING GUARANTY
WHEREAS, C.E. SERVICES, INC., hereinafter called "Borrower," may from time
to time become indebted to TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking association of Fort Worth, Tarrant County, Texas, hereinafter called
"Lender."
For good and valuable consideration, receipt of which is hereby
acknowledged, and to induce Lender, at its option, at any time or from time to
time to lend money to Borrower, the undersigned (individually and collectively
called "Guarantor") hereby (jointly and severally if more than one)
unconditionally guarantees unto Lender the prompt and complete payment of the
Guaranteed Indebtedness (as herein defined) when due (whether at its stated
maturity, by acceleration or otherwise) in accordance with the terms of the Loan
Documents (as herein defined).
The term "Guaranteed Indebtedness" as used herein, means all indebtedness
of every kind and character, whether now existing or hereafter arising, of
Borrower to Lender, whether direct or indirect, primary or secondary, joint or
several, fixed or contingent and whether evidenced by note, draft, open account,
acceptance, overdraft, line of credit, endorsement, guaranty, security
agreement, loan agreement, application for letter of credit or otherwise, and
without limit as to amount, together with all interest thereon, and all
penalties, costs, fees and expenses (including, but not limited to attorneys'
fees) as provided for under any of the Loan Documents and as incurred by Lender
in connection with any of the foregoing indebtedness, including, but not limited
to, collecting or attempting to collect any of the foregoing indebtedness from
Borrower or incurred by Lender in connection with this Guaranty (including, but
not limited to, attorneys' fees and costs of collection). The term "Other
Indebtedness," as used herein, means all indebtedness, if any, of Borrower to
Lender that is not Guaranteed Indebtedness. "Loan Documents" as used herein
shall include each and every note, draft, line of credit, loan agreement,
application for letter of credit, guaranty or other similar document or
instrument (if any) from time to time executed in connection with the Guaranteed
Indebtedness, all amendments, modifications, restatements, supplements,
endorsements, renewals, extensions and rearrangements thereof and substitutions
therefor, and each and every deed of trust, mortgage, security agreement,
pledge, assignment or other similar instrument (if any), from time to time
securing, in whole or part, the Guaranteed Indebtedness. "Collateral Proceeds"
shall mean any proceeds, credits or recoveries from any source, including,
without limitation, all proceeds, credits and amounts received from the exercise
of any Non-Exclusive Remedy. "Non-Exclusive Remedies" shall mean the right,
power and privilege of Lender, following the occurrence of a default or an event
of default hereunder or under any of the other Loan Documents (a) to receive and
obtain payment of all or a portion of the Guaranteed Indebtedness and (b) to
seek and obtain performance of the obligations, covenants and agreements of
Borrower and each Guarantor to and with Lender, through pursuit of, among other
remedies, rights and privileges, one or more of the following remedies, rights
and privileges:
(i) foreclosure of any liens and security interests relating to the
Loan Documents to the full extent of the value of the collateral securing
the Guaranteed Indebtedness;
(ii) enforcement of Borrower's monetary obligations to Lender under
the Loan Documents;
(iii) enforcement of any Guarantor's monetary obligations to Lender
under this Guaranty;
(iv) enforcement of all other obligations, covenants and agreements
of Borrower, any of its joint venturers or partners, and any Guarantor
under the Loan Documents, whether through any judicial or non-judicial
foreclosure, self-help or other repossession of
<PAGE>
collateral or security, institution or suit, settlement, compromise,
enforcement of specific performance or any other means which Lender may
elect in its sole discretion;
(v) recovery against Borrower, any of its joint venturers or
partners, for appropriation by the Borrower, any of its joint venturers or
partners, to its own use of any rents, revenues, insurance proceeds,
deposits, distributions or other property of a similar nature after Lender
shall have become entitled thereto; and
(vi) enforcement of all other rights, remedies, powers and privileges
of Lender under the Loan Documents or allowed by law.
This Guaranty is unconditional and absolute, and if for any reason all or
any portion of the Guaranteed Indebtedness shall not be paid promptly when due,
Guarantor will immediately (jointly and severally if more than one) pay the same
to Lender or any other person or entity entitled thereto, regardless of any
defense, right of setoff or counterclaim which Borrower may have or assert, and
regardless of whether Lender or any other person or entity shall have taken any
steps to enforce any rights against Borrower or any other entity to collect such
sum, and regardless of any other condition or contingency. This Guaranty shall
also cover interest on the Guaranteed Indebtedness (as provided for in the Loan
Documents) and all reasonable expenses incurred by Lender in enforcing any of
the Loan Documents, this Guaranty, or both.
The obligations, covenants, agreements and duties of Guarantor under this
Guaranty shall in no way be affected or impaired by reason of the happening from
time to time of any of the following with respect to the Loan Documents, without
the necessity of any notice to, or further consent of any Guarantor: (a) the
release or waiver, by operation of law or otherwise, of the performance or
observance by Borrower or any co-guarantor, surety, endorser or other obligor of
any express or implied agreement, covenant, term or condition in any of the Loan
Documents to be performed or observed by such party; (b) the extension of the
time for the payment of all or any portion of the Guaranteed Indebtedness or any
other sums payable under the Loan Documents or the extension of time for the
performance of any other obligation under, arising out of or in connection with
the Loan Documents; (c) the supplementing, modification or amendment (whether
material or otherwise) of any of the Loan Documents or of the obligations of
Borrower, any Guarantor or any surety for Borrower set forth in the Loan
Documents or otherwise; (d) any failure, omission, delay or lack of diligence on
the part of Lender, or any other person or entity, to enforce, assert or
exercise any right, privilege, power or remedy conferred on Lender or any other
person or entity in any of the Loan Documents, or any action on the part of
Lender or such other person or entity in any of the Loan Documents, or any
action on the part of Lender or such other person or entity granting indulgence
or extension of any kind; (e) the release of any security under any deed of
trust, mortgage, security agreement, pledge, assignment or other Loan Document,
or the release, modification, waiver or failure to enforce any pledge, security
device, insurance agreement, bond or other guaranty, surety or indemnity
agreement whatsoever; (f) the release, modification, waiver or failure to
enforce any right, benefit, privilege or interest under any contract or
agreement, under which the rights of Borrower or any other obligor have been
collaterally or absolutely assigned, or in which a security interest has been
granted to Lender as direct or indirect security for payment of the Guaranteed
Indebtedness or performance of any obligations to Lender; (g) the voluntary or
involuntary liquidation, dissolution, sale of any collateral, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, Borrower or any other surety
for Borrower or any of the assets of Borrower; (h) any invalidity of or defect
or deficiency in any of the Loan Documents or failure to acquire, perfect or to
maintain perfection of any lien on or security interest in any collateral
securing payment of the Guaranteed Indebtedness or any portion thereof or
performance of Borrower's or any other person's obligations under the Loan
Documents or securing this Guaranty; (i) the settlement, compromise or
subordination of any obligation
<PAGE>
guaranteed hereby or hereby incurred; (j) the insanity, minority or other
disability or bankruptcy, insolvency, death or corporate dissolution of Borrower
(even though the same shall render the Guaranteed Indebtedness void or
unenforceable or uncollectible, in whole or in part, as against Borrower); (k)
the receipt of any Collateral Proceeds by Lender from whatever source, each
Guarantor hereby expressly agreeing that, unless otherwise agreed to by Lender
in writing, Collateral Proceeds shall not be applied to reduce the Guaranteed
Indebtedness unless and until Lender has determined, in its sole discretion,
that all Other Indebtedness has been fully paid and satisfied and that all
obligations, if any, of Lender to advance monies to or on behalf of Borrower
pursuant to the Loan Documents have terminated.
Each Guarantor hereby WAIVES marshalling of assets and liabilities, sale in
inverse order of alienation, notice of acceptance of this Guaranty and of any
liability to which it applies or may apply, presentment, demand for payment,
protest, notice of nonpayment, notice of dishonor, notice of acceleration,
notice of intent to accelerate and all other notices and demands, collection
suit or the taking of any other action by Lender. Further, each Guarantor
expressly waives each and every right to which it may be entitled by virtue of
the suretyship law of the State of Texas, including, without limitation, any
rights it may have pursuant to Rule 31, Texas Rules of Civil Procedure, Chapter
34 of the Texas Business and Commerce Code and Section 17.001, Texas Civil
Practice and Remedies Code.
This is an absolute guaranty of payment and not of collection, and each
Guarantor WAIVES any right to require that any action be brought against
Borrower or any other person or entity. Should Lender seek to enforce the
obligations of Guarantor by action in any court, such Guarantor WAIVES any
necessity, substantive or procedural, that a judgment previously be rendered
against Borrower or any other person or entity or that Borrower or any other
person or entity be joined in such cause or that a separate action be brought
against Borrower or any other person or entity; the obligations of each
Guarantor hereunder are several from those of Borrower or any other person or
entity (including any other surety for Borrower), and are primary obligations
concerning which each Guarantor is the principal obligor. All waivers herein
contained shall be without prejudice to Lender at its option to proceed against
Borrower or any other person or entity, whether by separate action or by
joinder. Notwithstanding any payment or payments made by any Guarantor
hereunder or any setoff or application of funds of any Guarantor by Lender, no
Guarantor shall be entitled to be subrogated to any of the rights of Lender
against Borrower or any collateral security or rights of offset held by Lender
for the payment of the Guaranteed Indebtedness until all of the Guaranteed
Indebtedness is paid in full and all obligations (if any) to Lender to extend
credit to Borrower in connection with the Loan Documents shall have terminated.
This is a continuing guaranty, and all extensions of credit and financial
accommodations heretofore, concurrently herewith or hereafter made by Lender to
Borrower shall be conclusively presumed to have been made in acceptance of and
reliance on this Guaranty.
This Guaranty is an absolute and unconditional guaranty of the Guaranteed
Indebtedness, is irrevocable (except as stated elsewhere in this paragraph) and
shall continue in full force and effect until payment in full of the Guaranteed
Indebtedness. Any Guarantor may at any time terminate its obligations hereunder
as to any portion of the Guaranteed Indebtedness not theretofore arising in the
following manner. Any Guarantor may deliver written notice to any Vice
President of Lender or the President of Lender against written receipt therefor,
such notice to state that such Guarantor will not be liable hereunder for any
obligations incurred to Lender after a day five business days after the date of
such delivery, provided that such notice shall not in any wise affect, impair or
limit the liability and responsibility of such Guarantor or any other Guarantor
hereunder with respect to any obligations theretofore existing or the liability
of any other Guarantor hereunder with respect to any obligation thereafter
arising. In the event of the death of any Guarantor, the obligations of the
deceased shall continue in full force and effect as to all indebtedness
guaranteed hereby prior to the day of five business days after the day on which
Lender shall have received notice in writing of the termination of this Guaranty
as hereinabove set forth. Each Guarantor shall remain fully liable hereunder in
accordance with
<PAGE>
the terms set forth herein notwithstanding a revocation by, or the death of, or
complete or partial release for any cause of, any one or more of the remainder
of the undersigned, or of Borrower or of anyone liable in any manner for the
liabilities (including those hereunder) incurred directly or indirectly in
respect thereof or hereof, and notwithstanding the dissolution, termination or
change in personnel of any one or more of the undersigned. No revocation or
termination hereof shall affect in any manner rights arising under this Guaranty
with respect to liabilities arising prior to the effective date of such written
notice, and the sole effect of revocation or termination shall be to exclude
from this Guaranty liabilities more than five business days after the delivery
of such notice which are unconnected with liabilities theretofore arising or
transactions theretofore entered into.
Guarantor (jointly and severally if more than one) represents and warrants
to Lender that: (a) as to any Guarantor which is a corporation, it is duly
organized and validly existing and in good standing under the laws of its
jurisdiction of incorporation, is duly qualified and in good standing in each
other jurisdiction in which the conduct of its business or the maintenance of
its property so requires, and has full power and authority to carry on its
business as presently conducted and to execute, deliver and perform this
Guaranty; (b) this Guaranty has been duly authorized, executed and delivered by
such Guarantor and constitutes a legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms; (c) the execution, delivery
and performance of this Guaranty (i) do not and will not violate any of
Guarantor's articles of incorporation, certificate of incorporation, bylaws or
any other restriction by which any Guarantor or any of its properties may be
bound, (ii) do not and will not violate or conflict with any law, governmental
rule or regulation or any judgment, writ, order, injunction, award or decree of
any court, arbitrator, administrative agency or other governmental authority
applicable to any Guarantor or any indenture, mortgage, contract, agreement or
other undertaking to which any Guarantor is a party or by which any Guarantor or
any of its property may be bound or affected, and (iii) do not and will not
require any consent of any other person or any consent, license, permit,
authorization or other approval of, registration with, any giving of notice to
or any exemption by, any court, arbitrator, administrative agency or other
governmental authority; (d) there is no action, suit, or proceeding pending or,
to the knowledge of Guarantor, threatened against or affecting any Guarantor
before any court or administrative agency which might result in any material
adverse change in the business or financial condition of any Guarantor; (e) each
Guarantor has filed all federal and state income tax returns which are required
to be filed, and has paid all taxes as shown on said returns and all assessments
against the property of such Guarantor to the extent that such taxes and
assessments have become due and payable; (f) no Guarantor is a party to any
contract or agreement which materially and adversely affects the business,
property or assets, or financial condition of such Guarantor; (g) all
information supplied and statements made to Lender by or on behalf of any
Guarantor prior to, contemporaneously with or subsequent to the execution of
this Guaranty are and shall be true, correct, complete, valid and genuine; (h)
all financial statements and applications for credit furnished to Lender by or
on behalf of any Guarantor fully and accurately present the financial condition
of the subject thereof as of the dates thereof and for the periods then ended;
(i) no material adverse change has occurred in the financial condition reflected
in such financial statement and applications for credit since the respective
dates thereof; (j) no Guarantor is in default with respect to any order, writ,
injunction, decree or demand of any court or other governmental authority, or in
the payment of any indebtedness for borrowed money or under the terms or
provisions of any agreement or instrument evidencing or securing any such
indebtedness; (k) as to any Guarantor which is a corporation, the execution and
delivery of this Guaranty to Lender will benefit directly or indirectly such
Guarantor; (l) no representation or warranty contained in this Guaranty and no
statement contained in any certificate, schedule, list, financial statement or
other instrument furnished to Lender contains, or will contain, any untrue
statement of material fact or omits, or will omit, to state a material fact
necessary to make the statement contained herein or therein not misleading.
<PAGE>
Each Guarantor shall furnish to Lender all such financial statements and
other information relating to the financial condition, properties and affairs of
such Guarantor as Lender may from time to time request.
No Guarantor will change its address, name or identity without notifying
Lender of such change in writing at least thirty (30) days prior to the
effective date of such change.
Upon the occurrence of any of the following events: (a) Borrower's failure
to pay any Guaranteed Indebtedness when due or any other default or event of
default under any terms of the Loan Documents; or (b) any representation or
warranty made by or on behalf of any Guarantor herein or in any writing
furnished in connection with or pursuant to this Guaranty shall be incorrect,
false or misleading on the date as of which made; or (c) any Guarantor shall
default in the punctual and complete performance or observance of any agreement,
covenant, term or condition contained herein or in any instrument given to
secure Guarantor's obligations hereunder; or (d) any Guarantor shall fail to pay
at maturity, or within any applicable period of grace, any obligation for
borrowed monies or advances, or fail to observe or perform any term, covenant or
agreement contained in any agreement or obligation by which it is bound
evidencing or securing borrowed money for such period of time as would
accelerate, or would permit the holder thereof or of any obligation issued
thereunder, to accelerate, the maturity thereof, or of any such obligation; or
(e) final judgment or judgments in the aggregate for the payment of money in
excess of $10,000.00 shall be rendered against any Guarantor and the same shall
remain undischarged for a period of thirty (30) days during which execution
shall not effectively be stayed; or (f) any Guarantor or any other person shall
claim, or any court shall find or rule, that Lender does not have a valid lien
on any security which may have been provided by any Guarantor or such other
person for the Guaranteed Indebtedness; or (g) any Guarantor shall make a
general assignment for the benefit of creditors or shall petition or apply to
any tribunal for the appointment of a custodian, liquidator, trustee or receiver
of all or any substantial part of the business, estate or assets of any
Guarantor or shall commence any proceeding relating to such Guarantor or its
property under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect; or (h) any such petition or application
shall be filed or any such proceeding shall be commenced against any Guarantor,
and such Guarantor by any act or omission shall indicate approval thereof,
consent thereto or acquiescence therein, or an order shall be entered appointing
any such custodian, liquidator, trustee or receiver of all or any substantial
part of the assets of any Guarantor, or granting relief to any Guarantor or
approving the petition in any such proceeding, and such order shall remain in
effect for more than thirty (30) days; or (i) any Guarantor shall fail generally
to pay its debts as they become due, or suffer any writ of attachment or
execution or any similar process to be issued or levied against it or any
substantial part of its property which is not released, stayed, bonded or
vacated within thirty (30) days after its issue or levy; or (j) any Guarantor
shall have concealed, removed, or permitted to be concealed or removed, any part
of its property, with intent to hinder, delay or defraud its creditors or any of
them, or made or suffered a transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of its property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid or shall have
suffered or permitted, while insolvent, any creditor to obtain a lien upon any
of its property through legal proceedings or distraint which is not vacated
within thirty (30) days from the date thereof; or (k) as to any Guarantor who is
an individual, such Guarantor shall die and his estate or a substantial part of
such estate shall be distributed by the executor or administrator thereof to his
heirs or in accordance with such Guarantor's will prior to all the distributees
of such estate or part thereof (by an instrument approved in form and substance
by Lender) either (i) jointly and severally assuming all of such deceased
Guarantor's obligation hereunder or (ii) to secure the payment of the Guaranteed
Indebtedness effectively pledging, mortgaging or otherwise creating a first lien
(but without any personal liability on such distributee's part) on a portion of
the assets of such estate valued by a qualified appraiser approved by Lender at
not less than the principal amount of the
<PAGE>
Guaranteed Indebtedness then outstanding; or (l) as to any Guarantor which is a
corporation, partnership or joint venture, the dissolution, liquidation or
termination of existence of such Guarantor or the sale, conveyance, lease or
other disposition of a substantial part of the assets of such Guarantor; or (m)
any adverse material change shall occur in the assets, liabilities, financial
condition, business, operations, affairs or circumstances of any Guarantor; then
an event of default under this Guaranty shall have occurred and the holder or
holders of the Guaranteed Indebtedness may, at its or their option, declare the
unpaid balance of the Guaranteed Indebtedness, together with all interest then
accrued thereon, to be immediately due and payable, and thereupon the Guaranteed
Indebtedness shall immediately be due and payable without presentation, notice
of protest, other notice of dishonor, notice of intent to accelerate, or notice
of acceleration, all of which are hereby expressly WAIVED by each Guarantor.
If, at any time, there be Other Indebtedness, (a) Lender, without in any
manner impairing its rights hereunder, may, at its option, exercise rights of
offset by applying, first, to the Other Indebtedness, any deposit balances to
the credit of Borrower and (b) except as stated in the last sentence of this
paragraph, Lender may apply, first, to the Other Indebtedness all amounts by
Borrower and all amounts realized by Lender from collateral or security held by
Lender for the payment of Borrower's indebtedness. If a particular security
instrument expressly requires an application different from that permitted under
the preceding sentence, proceeds realized by Lender from such security
instrument shall be applied as provided in such instrument.
If more than one person executes this Guaranty, their obligations under
this Guaranty shall be joint and several. Suit may be brought against such
person jointly and severally or against any one or more but less than all of
them, without impairing or releasing the rights of Lender against any other such
person.
No delay on the part of Lender in exercising any right hereunder or failure
to exercise the same shall operate as a waiver of such right, nor shall any
single or partial exercise of any right, power or privilege bar any further or
subsequent exercise of the same or any other right, power or privilege.
This Guaranty shall not be changed orally, but shall be changed only by
agreement in writing signed by the person against whom enforcement of such
change is sought.
Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor or (except as otherwise expressly provided herein) by depositing the
same in the United States Postal Service, postage prepaid, registered or
certified mail, return receipt requested, addressed to the respective parties at
the address shown below or to such other address as the intended recipient may
have specified in a prior written notice received by the sender (and if so
given, shall be deemed given on the business day following the day on which such
communication was mailed).
The masculine and neuter genders used herein shall each include the
masculine, feminine and neuter genders and the singular number used herein shall
include the plural number. The words "person" and "entity" shall include
individuals, corporations, partnerships, joint ventures, associations, joint
stock companies, trusts, unincorporated organizations, and governments and any
agency or political subdivision thereof.
This Guaranty shall be binding upon each Guarantor, his heirs, devisees,
executors, administrators, personal representatives, trustees, receivers,
successors and assigns and shall inure to the benefit of, and be enforceable by,
Lender and its successors and assigns and each and every other person who shall
from time to time be or become the owner or holder of any of the Guaranteed
Indebtedness, and each and every reference herein to "Lender" shall also include
each and every successor or holder. No Guarantor shall assign its obligations
<PAGE>
hereunder without the prior written consent of Lender. This Guaranty may be
executed in multiple counterparts, and each counterpart executed by any party
shall be deemed an original and shall be binding upon the person or entity
executing the same, irrespective of whether any other Guarantor has executed
that or any other counterpart of this Guaranty. Production of any counterpart
other than the one to be enforced shall not be required.
This Guaranty shall be governed by and construed and interpreted in
accordance with the laws of the United States of America and the State of Texas.
The county in which Lender has its principal place of business in Texas shall be
the proper place of venue to enforce payment or performance of this Guaranty.
Each Guarantor irrevocably agrees that any legal proceeding arising out of or in
connection with this Guaranty shall be brought in the state district courts of
the county in which Lender has its principal place of business in Texas, or in
the United States District Court for the district in which such county is
located.
Notwithstanding anything to the contrary contained herein, with respect to
any portion of the Guaranteed Indebtedness which is a "consumer credit
obligation" (hereinafter called a "consumer credit obligation") as defined in 12
C.F.R., 227, Regulation AA, promulgated by the Federal Reserve Board
(hereinafter called "Regulation AA"), this Guaranty shall be construed as to
comply with Regulation AA. In the event any provision hereof, including,
without limitation, any waiver provisions, shall be found by either the Lender
or a court of competent jurisdiction to be in violation of Regulation AA, then
such provision only shall automatically become a nullity as to such consumer
credit obligation and shall have no further force and effect with respect
thereto, without, however, rendering such provision unenforceable as to any
portion of this Guaranty which is not a consumer credit obligation and without
hereby rendering any other provision of this Guaranty unenforceable as to any of
the Guaranteed Indebtedness or rendering this entire Guaranty unenforceable and
without in any other manner cancelling, amending, discharging or limiting this
Guaranty.
If any other person or entity shall with respect to any of the Guaranteed
Indebtedness at any time execute and deliver any guaranty, or any other
agreement or document with substantially the same effect as a guaranty, or grant
any collateral security, the obligations of each Guarantor hereunder shall be
joint and several with the obligations of such other person or entity pursuant
to such agreement or document and the agreement or document granting such
collateral security.
Nothing herein shall be construed to cancel, amend, discharge or limit any
other guaranty or similar obligation executed by any Guarantor in favor of
Lender. If any Guarantor shall have previously executed any other guaranty in
favor of Lender which has not been cancelled, terminated, or revoked, then the
aggregate amount of the Guaranteed Indebtedness shall be in addition to the
aggregate of the debt guaranteed by all such previous uncancelled, unrevoked and
unterminated guaranties.
THIS GUARANTY is executed as of the ____ day of December 1994.
NOTICE OF GUARANTOR
THIS NOTICE IS BEING SUPPLIED IN COMPLIANCE WITH 12 C.F.R. 227, REGULATION
AA, PROMULGATED BY THE FEDERAL RESERVE BOARD AND APPLIES TO ANY GUARANTEED
INDEBTEDNESS WHICH MAY BE A CONSUMER CREDIT OBLIGATION AS DEFINED IN SUCH
REGULATION AA.
YOU ARE BEING ASKED TO GUARANTEE THE DEBT OF BORROWER NOW EXISTING OR
HEREAFTER ARISING. THERE IS NO LIMIT AS TO THE AMOUNT UNLESS THIS GUARANTY
EXPRESSLY PROVIDES FOR SUCH LIMITATION. THINK CAREFULLY BEFORE YOU GUARANTEE
<PAGE>
THE EXISTING AND FUTURE DEBTS OF BORROWER. IF THE BORROWER DOES NOT PAY ANY OF
SUCH DEBTS, YOU WILL HAVE TO. BE SURE THAT YOU CAN AFFORD TO PAY ALL SUCH DEBTS
IF YOU HAVE TO AND THAT YOU WANT TO ACCEPT THIS RESPONSIBILITY. YOU MAY HAVE TO
PAY UP TO THE FULL AMOUNT OF ALL BORROWER'S DEBTS IF THE BORROWER DOES NOT PAY.
YOU MAY ALSO HAVE TO PAY LATE FEES OR COLLECTION COSTS, WHICH INCREASE THIS
AMOUNT. LENDER CAN COLLECT SUCH DEBTS FROM YOU WITHOUT FIRST TRYING TO COLLECT
FROM THE BORROWER. LENDER CAN USE THE SAME COLLECTION METHODS AGAINST YOU THAT
CAN BE USED AGAINST THE BORROWER, SUCH AS SUING YOU, ETC. IF ANY OF SUCH DEBTS
IS EVER IN DEFAULT, THAT FACT MAY BECOME PART OF YOUR CREDIT RECORD.
THIS NOTICE IS NOT THE CONTRACT THAT MAKES YOU LIABLE FOR THE BORROWER'S
DEBTS. THE GUARANTY SET FORTH ABOVE IS, HOWEVER, A CONTRACT THAT MAKES YOU
LIABLE FOR THE BORROWER'S DEBTS.
By signing below, each Guarantor acknowledges (1) that such Guarantor has
received, read and understood (a) the Guaranty and (b) the NOTICE TO EACH
GUARANTOR and (2) that all information provided to Lender is true, correct and
sufficiently complete so as not to be misleading and that the Lender has relied
on such information in extending financial accommodations to the Borrower.
<PAGE>
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
GUARANTOR:
NORTH STAR UNIVERSAL, INC., a Minnesota
corporation
By: /s/ Peter E. Flynn
Name: Peter E. Flynn
Title: EVP and CFO
Address: 5353 Wayzata Blvd
Minneapolis, MN 55416
LENDER: (Lender's signature is provided
as its acknowledgement of the above as
the final written agreement between the
parties.)
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
By: /s/ Matt Reynolds
Name: D. Matt Reynolds
Title: Senior Vice President
<PAGE>
<TABLE>
<CAPTION>
North Star Universal, Inc.
Computation of ratio of earnings to fixed charges
For the Twelve Months ended December 31, 1994
(in thousands, except ratios)
<S> <C>
Earnings:
Loss from continuing operations before
income taxes and minority interest (7,642)
Fixed charges 5,051
-------
Income from continuing operations before
income taxes, minority interest and fixed charges (2,591)
-------
-------
Fixed Charges:
Interest expense 4,232
Interest portion of rentals 819
Amortization of debt expense 0
-------
5,051
-------
-------
Ratio of earnings to fixed charges (0.51)
</TABLE>
<PAGE>
NORTH STAR UNIVERSAL, INC.
1994 ANNUAL REPORT
<PAGE>
COMPANY PROFILE
As a parent company, North Star Universal, Inc. provides management and
financial resources for the development and growth of its operating businesses.
North Star's direct and indirect wholly owned subsidiaries include Americable,
Transition Engineering and C.E. Services. Americable is a provider of
connectivity and networking products and services. Transition Engineering
designs and manufactures connectivity devices used in local area network
applications. C.E. Services is a third-party provider of systems, parts and
services for mainframe computers and peripherals. As of December 31, 1994,
North Star also owned a 38 percent interest in Michael Foods, Inc.
(NASDAQ:MIKL), and a 37 percent interest in CorVel Corporation (NASDAQ:CRVL).
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1994 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Revenues $ 92,307 $107,485 $ 86,363
Operating income (loss) (3,410) 651 (585)
Net loss (674) (11,872) (1,637)
--------------------------------------
--------------------------------------
Loss per share $ (.07) $ (1.26) $ (.17)
--------------------------------------
--------------------------------------
FINANCIAL POSITION:
Long-term debt $ 45,061 $ 43,194 $ 41,849
Shareholders' equity 34,196 34,675 61,083
--------------------------------------
--------------------------------------
</TABLE>
North Star believes that a significant portion of its shareholder value will
ultimately be derived from the value of its subsidiaries and holdings in Michael
Foods and CorVel. The following summarizes the net book value of the Company as
of the end of the past three years along with the market value of its
investments in Michael Foods and CorVel. The market value of the Company's
Michael Foods and CorVel investments is based on the closing market price and
share holdings as of the respective dates.
<TABLE>
<CAPTION>
As of December 31,
(In thousands) 1994 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BOOK VALUE
Assets -
Michael Foods $ 63,274 $ 59,025 $ 66,654
CorVel 12,389 10,083 8,159
Computer group 16,863 18,352 17,117
Cash and other, net 4,317 7,059 9,657
--------------------------------------
96,843 94,519 101,587
Liabilities -
Subordinated debentures (41,422) (39,579) (38,899)
Deferred income taxes(1) (21,225) (20,265) (1,605)
--------------------------------------
Net book value $ 34,196 $ 34,675 $ 61,083
--------------------------------------
--------------------------------------
MARKET VALUE(2)
Michael Foods $ 72,630 $ 58,840 $ 74,469
CorVel 43,706 41,344 21,656
--------------------------------------
--------------------------------------
<FN>
_________________________
(1) At December 31, 1993, the company recorded an $18.7 million deferred income
tax liability relating to temporary differences between the financial and tax
reporting of its investment in Michael Foods. (See Note 8 to Consolidated
Financial Statements.)
(2) The market value of the Company's holdings in Michael Foods and CorVel does
not take into account any income tax consequences that may be realized upon a
taxable disposition of such shares.
</TABLE>
-1-
<PAGE>
TO OUR SHAREHOLDERS
North Star experienced a year of mixed results in 1994. Strong
earnings contributions from our equity holdings in Michael Foods and CorVel were
offset by operating losses within our computer group. While we enjoyed positive
growth within our equity holdings, the losses in the computer group were
disappointing.
Our primary focus at North Star is to achieve growth in the long term
value of our holdings. We are working to build value by investing in the
development of our computer companies through the expansion of their products
and services. Going forward, the computer group will seek to restore
profitability by adapting its sales and technical operations to changing
customer and technological needs. Our equity holdings and stable financial
position support our efforts to further develop these businesses.
Americable increased its revenues last year by 10 percent following
the closure of its Canadian operations in December 1993. This was driven by
increased sales of network technology products and services together with the
development of new vendor relationships. However, margins decreased during the
year due to fierce price competition in its traditional distribution business.
The company responded by implementing expense reductions and reorganizing key
operating segments, including the creation of its national distribution group.
In 1995, Americable is focusing on stabilizing its margins and expanding its
offerings of value-added networking products and services. We also expect
Americable to fully implement an ISO 9002 program underlining its commitment to
quality and customer orientation.
C.E. Services incurred losses in 1994 due to lower demand for used IBM
mainframe systems and a significant decrease in equipment market values. The
decline in its remarketing business was in sharp contrast with the previous
years strong results, indicative of the high degree of volatility in the
secondary market as new systems are introduced. To counter the effect of
slowing revenues, C.E. Services cut costs and introduced new services intended
to take advantage of its technical capabilities. In addition, Bridging
Solutions Corporation was formed to provide businesses with interim solutions
for their hardware capacity needs. This service gives customers the flexibility
to access short-term computing resources while they test new software or
evaluate longer-term hardware alternatives.
Revenues at Transition Engineering grew by 18 percent in 1994 as the
company continued to broaden its product line of local area network (LAN)
components. Operating profits were lower due to planned increases in personnel
and new product development expenses. Transition's international business
outpaced its growth in the domestic market as demand from foreign distributors
increased. During 1994, the company introduced switch technology and modular
products with high performance/value characteristics. Further expansion of its
product line and sales organization are anticipated in the coming year.
The market value of our largest equity holding, a 38 percent interest
in Michael Foods, appreciated 23 percent during 1994. Overall operating results
improved following the disposal of the company's reduced cholesterol liquid egg
joint venture in 1993. Michael Food's core business units each posted earnings
increases, with particularly strong results from value-added egg products
including Easy Eggs[REGISTERED TRADEMARK] and refrigerated potatoes. Unit
sales gains at both the dairy and refrigerated distribution divisions also
contributed to the positive earnings picture. The company continues to reduce
its exposure to commodity price swings in the shell egg market and generate
greater sales of value-added products through its national distribution sales
force.
-2-
<PAGE>
North Star's other equity investment is CorVel, which sustained its
string of consecutive record earnings reports through 1994. CorVel continues to
benefit from the strong demand for managed care solutions to rising healthcare
costs. During the year, additional investments were made to expand the
company's preferred provider organization (PPO) network and enhance its
information processing capabilities. Systems development has led to integration
of its service offerings from early intervention in a healthcare episode to the
reporting of savings produced. CorVel's national scope of coverage, its PPO
network and patient management programs have attracted large employers with
multiple service sites. As new legislation is introduced by states to reform
healthcare, opportunities for CorVel to expand its presence in the managed care
market are being identified. We are pleased with CorVel's progress and expect
good things to come.
Moving forward in 1995, North Star continues to strive to maximize
value for our shareholders. This goal requires a continuous assessment of the
strategies at each company together with their relative risks and rewards. We
continue to encourage innovation by our many valued employees, who are primarily
responsible for our past success. It is with their initiatives and your support
as shareholders that we look forward to the future.
Sincerely,
/s/ Jeffrey J. Michael
Jeffrey J. Michael
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MARCH 17, 1995
-3-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL
North Star Universal, Inc. ("North Star" or "the Company") is a holding company.
The Company's three key holdings consist of Michael Foods, Inc. ("Michael
Foods"), CorVel Corporation ("CorVel") and its computer businesses. Michael
Foods is a food processing and distribution company founded by North Star in
1987. The Company owned a 38 percent interest in Michael Foods at December 31,
1994. CorVel is a provider of managed care services founded by North Star in
1988. The Company's ownership interest in CorVel was approximately 37 percent
at December 31, 1994. The Company's investments in Michael Foods and CorVel are
accounted for as unconsolidated subsidiaries using the equity method of
accounting.
The Company's operations consist of Americable, Inc., Transition Engineering,
Inc., and C.E. Services, Inc., (including its United Kingdom subsidiary, C.E.
Services (Europe) Limited). Americable is a provider of connectivity and
networking products and services. Transition Engineering designs and
manufactures connectivity devices used in local area network ("LAN")
applications. C.E. Services is a third-party provider of systems, parts and
services for mainframe computers and peripherals.
The following are summarized operating results for each of the Company's
operations for the three years ended December 31, 1994 (in thousands).
<TABLE>
<CAPTION>
Years ended December 31, 1994 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
C.E. Services $ 45,114 $ 60,729 $ 44,338
Americable 36,940 38,266 35,885
Transition Engineering 11,779 10,025 7,062
Eliminations (1,526) (1,535) (922)
--------------------------------------
$ 92,307 $107,485 $ 86,363
--------------------------------------
--------------------------------------
Gross Profit
C.E. Services $ 6,161 $ 12,269 $ 9,216
Americable 8,262 10,254 9,648
Transition Engineering 4,603 3,903 2,701
--------------------------------------
$ 19,026 $ 26,426 $ 21,565
--------------------------------------
--------------------------------------
Operating Income (Loss)
C.E. Services $ (2,626) $ 2,794 $ 1,024
Americable 42 179 (466)
Transition Engineering 351 918 533
Restructuring charges -- (1,953) --
Corporate expenses (1,177) (1,287) (1,676)
--------------------------------------
$ (3,410) $ 651 $ (585)
--------------------------------------
--------------------------------------
</TABLE>
-4-
<PAGE>
RESULTS OF OPERATIONS --
1994 VERSUS 1993
Consolidated revenues decreased $15.2 million or 14.1% to $92.3
million from $107.5 million in 1993. The $15.6 million, or 26%, decrease in
revenues at C.E. Services includes approximately $14.1 million of decreased
revenues from the resale of used mainframe systems and features and
approximately $1.7 million of lower technical service and warehousing revenues.
Offsetting these decreases was approximately $250,000 of revenue from the
startup of a new computer service bureau business which commenced operations in
the fourth quarter of 1994. Sales from the remarketing of used mainframes and
peripherals consisted of 83% and 84% of C.E. Services' revenues in 1994 and
1993, respectively. Sales from C.E. Services' European operations decreased
approximately $5.2 million, or 40%, to $8.0 million for the year. The decline
in revenues at C.E. Services is attributable to a dramatic reduction in the
domestic and international demand for used mainframe and peripherals along with
a significant decline in the market value of certain used equipment. C.E.
Services does not expect demand for its products and services to measurably
improve in 1995.
Revenues at Americable, excluding approximately $4.6 million of
revenue in 1993 from its Canadian operations, which were closed in December
1993, increased $3.3 million, or 9.8%, to $36.9 million. This includes
increased revenues of $5 million resulting from higher demand for value-added
networking products and services offset by decreased sales of bulk cable and
other connectivity products of $1.2 million due primarily to lower volume of
sales to contractors and resellers. In addition, sales of cable assemblies
decreased by approximately $500,000 as a result of reduced pricing within
modular assembly applications due to technological changes.
Revenues at Transition Engineering increased approximately $1.8
million, or 18% which includes increased sales of approximately $1.1 million, or
33%, to international customers and approximately $700,000, or 10% higher sales
to domestic customers. Sales to international customers consisted of 35% and
31% of Transition Engineering's revenues in 1994 and 1993, respectively.
Overall, these increases are primarily a result of new product introductions
during the end of 1993 and throughout 1994. During 1994, new product
introductions and enhancements accounted for approximately $3.3 million, or 28%,
of net sales. Transition Engineering'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 percentage of revenues, decreased to
20.6% in 1994 as compared to 24.6% in 1993. This is primarily a result of lower
margins at C.E. Services, which were attributable to a significant price decline
in the secondary market of IBM equipment, increased cost of services associated
with a new IBM service contract and reduced pricing of technical services due to
increased competition and the maturing product life cycle of certain IBM
mainframes. Margins at Americable decreased due to overall lower pricing
resulting from increased competition. North Star does not expect consolidated
gross profit margins to measurably improve in 1995.
The Company's selling, general and administrative expenses decreased
$1.4 million, or 5.8% to $22.4 million from $23.8 million in 1993. C.E.
Services had lower selling, general and administrative expenses of approximately
$688,000 due primarily to staff reductions implemented during the third quarter
of 1994. Operating expenses at Americable decreased approximately $1.9
million, which reflects approximately $1.2 million of expenses eliminated
through the closure of its Canadian facilities effected in December 1993, and
$700,000 of other savings realized through a reorganization effected within its
U.S. operations in the third
-5-
<PAGE>
quarter. These decreases were offset by increased expenses of $1.3 million at
Transition Engineering due to the addition of sales and engineering personnel
and increased research and development expenses related to new product
introductions and additional administrative and support personnel needed to
support overall growth.
In 1994, C.E. Services had an operating loss of $2.6 million versus
operating income of $2.8 million in 1993. These amounts include an operating
loss of $1.1 million in 1994 and operating income of $169,000 in 1993 from its
United Kingdom subsidiary. This significant decline in operating results is
attributable to the overall decline in revenues and gross margins discussed
above. In addition, 1994 results include approximately $400,000 of losses
incurred by C.E. Services in the startup and development of a new computer
service bureau business. Despite favorable effects of expense reductions
implemented in 1994 and additional revenues anticipated from its new computer
service bureau business and other new business developments, C.E. Services
expects its operating losses to continue throughout 1995.
Foreign currency transactions were not significant in 1994 or 1993.
The Company does not believe future effects of changes in currency exchange
rates will have a significant impact on its results of operations or financial
position.
Net interest expense was relatively unchanged between 1994 and 1993.
The Company's effective consolidated income tax rate was (29.2)% in
1994 and (19.6)% in 1993. See Note 8 to the Consolidated Financial Statements.
Equity in earnings (loss) of unconsolidated subsidiaries increased
$13.7 million to $4.7 million in 1994 from a loss of $9 million in 1993. This
includes an increase of $13.4 million and $300,000 in the equity in earnings of
Michael Foods and CorVel, respectively, which is a result of higher earnings at
each of these companies. Michael Foods' net earnings for 1994 were
approximately $15.2 million, an increase of approximately $31.5 million from the
previous year. CorVel's net earnings for 1994 were approximately $5.5 million,
an increase of approximately $1.7 million or 43% from the previous year.
At December 31, 1994, the Company has recorded a deferred tax
liability of approximately $21 million related to the accounting for temporary
differences between financial and tax reporting of its investment in Michael
Foods. While a tax-free disposition of its Michael Foods holdings continues to
be the Company's preferred course of action, North Star has recorded the
deferred tax liability since it may have taxable dispositions of its Michael
Foods holdings in future periods. Depending on market conditions, North Star's
strategic objectives and other factors, the Company may from time-to-time sell
all or a portion of its Michael Foods holdings.
RESULTS OF OPERATIONS --
1993 VERSUS 1992
Consolidated revenues increased $21.1 million or 24.5% to $107.5
million from $86.4 million in 1992. The $16.4 million, or 37%, net increase in
revenues at C.E. Services includes approximately $19.2 million of higher sales
resulting from its expanded selling efforts and higher demand for used mainframe
systems and features, particularly IBM 4381 and 3090 product lines. Sales from
the remarketing of used mainframes and peripherals consisted of 84% and 72% of
C.E. Services' revenues in 1993 and 1992, respectively. This increase was
offset by decreased sales of approximately $2.8 million in technical service and
warehousing revenues due primarily to reduced pricing resulting from the
maturing product life cycle of certain
-6-
<PAGE>
IBM mainframes. Sales from C.E. Services' European operations increased
approximately $5.1 million or 64% to $13.2 million for the year.
Revenues at Americable's U.S. operations increased $3.7 million, or
12.4%, to $33.6 million due primarily to higher demand for networking products
and services. This was offset by decreased sales of approximately $1.3 million
in its Canadian operations. Sales from Canadian operations consisted of 12% and
17% of Americable's revenues in 1993 and 1992, respectively.
Revenues at Transition Engineering increased approximately $3 million,
or 42%. This includes approximately $1.3 million of sales resulting from new
product introductions and approximately $500,000 of sales from new customers.
Sales to international customers were approximately $3.1 million in 1993, an
increase of $1.3 million, or 71%, from the previous year.
Consolidated gross profit, as a percent of revenues, decreased to
24.6% in 1993 as compared to 25% in 1992. The 1992 amount reflects charges of
$490,000 related to inventory writedowns at Americable and Transition
Engineering. Margins at Americable, exclusive of these charges, decreased to
26.8% in 1993, from 28% in 1992, due primarily to increased competition
particularly within its Canadian operations. In addition, margins at C.E.
Services decreased slightly due primarily to reduced pricing of technical
services resulting from increased competition and maturing product life cycle
of certain IBM mainframes.
The Company's selling, general and administrative expenses increased
$1.7 million, or 8%, to $23.8 million from $22.1 million in 1992. This includes
increased expenses of approximately $800,000 at Transition Engineering due
primarily to the addition of sales and engineering personnel and increased
research and development expenses related to new product introductions and
additional administrative and support personnel needed to support overall
growth. In addition, general and administrative expenses at C.E. Services
increased approximately $1.3 million due primarily to higher selling expenses
associated with the expanded remarketing efforts of used mainframe systems and
higher facility costs related to its expanded United Kingdom operation. These
increases were offset by a decrease in corporate costs of approximately
$400,000.
Selling, general and administrative expenses at Americable's U.S.
operations increased approximately $600,000 due primarily to the addition of
sales and technical personnel. This was offset by decreased expenses of
approximately $650,000 at its Canadian operations which was primarily a result
of the downsizing of administrative and support staff and to a lesser extent,
savings incurred from the closure of its Canadian facilities during the year.
The consolidation of Americable's Canadian operations resulted in a
restructuring charge of approximately $1.9 million. This charge includes
approximately $600,000 for the write-off of goodwill and other noncurrent
assets, $700,000 for the reassessment of carrying values of inventory and
receivables and $600,000 for lease and severance obligations and other related
expenses.
During 1992, C.E. Services recorded foreign currency gains of
approximately $100,000. Foreign currency transactions were not significant in
1993.
Net interest expense was relatively unchanged between 1993 and 1992.
The Company's effective consolidated income tax rate was (19.6)% in
1993 and (23.4)% in 1992. See Note 8 to the Consolidated Financial Statements.
-7-
<PAGE>
Equity in earnings (loss) of unconsolidated subsidiaries was a loss of
$8,967,000 in 1993 versus income of $2,055,000 in 1992. Included in the 1993
amount is a loss of $6.2 million for the Company's share of Michael Foods' net
loss for the year and a $3.7 million net deferred tax provision. For 1993,
Michael Foods recorded a net loss of $16.3 million which included charges for
the disposal of its reduced cholesterol liquid whole egg product line and other
restructuring charges. This loss was offset by an increase in the Company's
equity in earnings of CorVel of approximately $350,000 due to increased profits
at that company.
In the fourth quarter of 1993, the Company recorded a deferred tax
liability of approximately $18.7 million related to the accounting for temporary
differences between financial and tax reporting of its investment in Michael
Foods. The portion of this liability related to the Company's share of Michael
Foods public offering proceeds and other equity transactions of $15 million, was
charged to additional paid-in capital and the portion related to Michael Foods
unremitted earnings of $3.7 million, was charged to equity in earnings (loss) of
unconsolidated subsidiaries.
CAPITAL RESOURCES AND LIQUIDITY
Historically, the Company has experienced cash flow deficits from
operations. Cash used in operations was $4.6 million in 1994 and $3.1 million
in 1993. The Company expects such operating cash flow deficits to continue.
The Company does not have the use of cash flow generated by Michael Foods other
than proceeds from quarterly dividends. In each of 1994 and 1993, the Company
received dividends of $1,471,000. There can be no assurance that Michael Foods
will continue to declare such dividends.
Likewise, since CorVel's initial public offering in July 1991, the
Company has not had the use of cash generated by CorVel and its subsidiaries.
Since its initial public offering, CorVel has not declared any dividends, and
has indicated that it does not anticipate doing so for the foreseeable future.
The Company maintains a program 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. Historically, a substantial
portion of maturing debentures have been reinvested in new debentures as
indicated in the table below. At December 31, 1994 and 1993, the Company had
$41.4 million and $39.6 million principal amount of subordinated debentures
outstanding. The weighted average interest of 10.0% and 10.4% at December 31,
1994 and 1993, respectively, accrues annually and is payable monthly, quarterly,
or at maturity. The Company's experience with its debenture program for the
three years ended December 31, 1994, is as follows (dollars in thousands):
<TABLE>
<CAPTION>
New Net
Debentures Debentures Debentures Debentures
Redeemed Reinvested Sold Sold*
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 $ 4,653 37% $ 7,914 63% $ 6,496 $ 1,843
1993 5,758 46 6,689 54 6,438 680
1992 5,917 48 6,422 52 7,249 1,332
<FN>
*Represents the difference between new debentures sold and debentures redeemed.
</TABLE>
-8-
<PAGE>
The Company is highly dependent on the continued sales of debentures
under its debenture program. In the event that redemptions substantially exceed
reinvested and newly sold debentures or the program is interrupted for an
extended period, the Company would be required to fund maturities through its
existing cash on hand, bank borrowings and asset sales. The Company believes
that the balance of outstanding debentures will remain relatively unchanged
during 1995. However, there can be no assurance that future reinvested and
newly sold debentures will equal or exceed redemptions. Approximately $12
million of debentures are scheduled to mature during 1995.
Long-term debt repayments for the year ended December 31, 1994,
include approximately $4.7 million of redemptions of subordinated debentures and
$569,000 of other debt repayments of Americable and C.E. Services. Proceeds
from long-term debt for the year ended December 31, 1994, include
$4.4 million of new debentures sold along with $2.1 million of compounded
interest on debentures.
During 1994, North Star provided $1 million in cash to C.E. Services
of which $700,000 was used for capital expenditures in connection with its new
computer service bureau business and $300,000 was used to fund a portion of its
operating losses and working capital requirements. Additional cash investments
from North Star may be required in 1995 to fund anticipated operating losses.
North Star maintains a $6.5 million revolving credit facility with its
principal bank that bears interest at the bank's reference rate (8.5% at
December 31, 1994). At December 31, 1994 and 1993, the Company had no
borrowings outstanding under this facility. In addition, at December 31, 1994,
North Star had approximately $4 million of cash and cash equivalents, excluding
cash of its operating subsidiaries.
The Company believes that its available cash and cash equivalents
along with its debenture program and amounts available under its revolving
credit facility and the credit facilities of its operating companies, will be
adequate to meet expected cash requirements, including capital expenditures and
potential acquisitions. During 1995, the Company's operating plans call for
approximately $1 million in capital expenditures.
-9-
<PAGE>
Consolidated Statements of Operations
NORTH STAR UNIVERSAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands, except per share amounts) 1994 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 92,307 $107,485 $ 86,363
Operating and Product Costs 73,281 81,059 64,798
--------------------------------------
Gross profit 19,026 26,426 21,565
Selling, General and Administrative Expenses 22,436 23,822 22,150
Restructuring Charges -- 1,953 --
--------------------------------------
Operating income (loss) (3,410) 651 (585)
Other Income (Expense)
Interest expense (4,477) (4,472) (4,738)
Interest income 245 206 501
--------------------------------------
(4,232) (4,266) (4,237)
--------------------------------------
Loss before taxes and equity in earnings (loss)
of unconsolidated subsidiaries (7,642) (3,615) (4,822)
Income Tax Benefit (2,230) (710) (1,130)
--------------------------------------
Loss before equity in earnings (loss) of
unconsolidated subsidiaries (5,412) (2,905) (3,692)
Equity in Earnings (Loss) of
Unconsolidated Subsidiaries 4,738 (8,967) 2,055
--------------------------------------
Net Loss $ (674) $(11,872) $ (1,637)
--------------------------------------
--------------------------------------
Net Loss Per Share $ (.07) $ (1.26) $ (.17)
--------------------------------------
--------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
-10-
<PAGE>
Consolidated Balance Sheets
NORTH STAR UNIVERSAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands) 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 5,102 $ 6,981
Accounts receivable, net of allowances 8,980 7,617
Inventories 7,994 10,800
Prepaid expenses and other 579 452
Net assets held for sale 714 857
---------- ----------
Total current assets 23,369 26,707
Property and Equipment, net 3,747 3,150
Other Assets
Goodwill 6,816 7,275
Investment in unconsolidated subsidiaries 75,663 69,108
Other 1,498 1,967
---------- ----------
$ 111,093 $ 108,207
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to bank $ 600 $ --
Current maturities of long-term debt 12,547 12,799
Accounts payable 5,116 5,315
Accrued expenses
Payroll related 762 1,186
Other 3,800 3,292
Income taxes payable 333 280
---------- ----------
Total current liabilities 23,158 22,872
Long-Term Debt, less current maturities 32,514 30,395
Deferred Income Taxes 21,225 20,265
Commitments -- --
Shareholders' Equity
Common stock, authorized 100,000,000 shares of $.25
par value; issued and outstanding 9,438,000 shares in
1994 and 1993 2,360 2,360
Additional paid-in capital 31,015 30,937
Foreign currency translation adjustment (128) (245)
Retained earnings 949 1,623
---------- ----------
Total shareholders' equity 34,196 34,675
---------- ----------
$ 111,093 $ 108,207
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
-11-
<PAGE>
Consolidated Statements of Shareholders' Equity
NORTH STAR UNIVERSAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock Foreign
------------------------ Additional Currency
Years ended December 31, 1994, 1993 and 1992 Shares Paid-In Translation Retained
(Dollars in thousands) Issued Amount Capital Adjustment Earnings
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1991 9,438,000 $ 2,360 $ 45,528 $ 226 $ 15,132
Effect of equity transactions of
unconsolidated subsidiaries -- -- 65 -- --
Translation adjustment -- -- -- (591) --
Net loss -- -- -- -- (1,637)
------------------------------------------------------------------------
Balance at December 31, 1992 9,438,000 2,360 45,593 (365) 13,495
Effect of equity transactions of
unconsolidated subsidiaries -- -- 344 -- --
Deferred income tax adjustment -- -- (15,000) -- --
Translation adjustment -- -- -- (198) --
Effect of restructuring charges -- -- -- 318 --
Net loss -- -- -- -- (11,872)
------------------------------------------------------------------------
Balance at December 31, 1993 9,438,000 2,360 30,937 (245) 1,623
Effect of equity transactions of
unconsolidated subsidiaries -- -- 78 -- --
Translation adjustment -- -- -- 117 --
Net loss -- -- -- -- (674)
------------------------------------------------------------------------
Balance at December 31, 1994 9,438,000 $ 2,360 $ 31,015 $ (128) $ 949
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
-12-
<PAGE>
Consolidated Statements of Cash Flows
NORTH STAR UNIVERSAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands) 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (674) $ (11,872) $ (1,637)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in (earnings) loss of unconsolidated subsidiaries (4,738) 8,967 (2,055)
Non-cash restructuring charges -- 1,596 --
Depreciation and amortization 1,707 1,646 1,811
Deferred income taxes (2,250) (730) (1,150)
Foreign currency translation adjustment 117 (198) (591)
Changes in operating assets and liabilities,
net of effects of restructuring charges
Accounts receivable (1,363) 482 295
Inventories 2,806 (2,863) (1,245)
Accounts payable, accruals and other (193) (131) 711
---------------------------------------
Net Cash used in operating activities (4,588) (3,103) (3,861)
---------------------------------------
Cash Flows From Investing Activities
Capital expenditures (1,841) (1,641) (617)
Other 612 829 186
---------------------------------------
Net Cash used in financing activities (1,229) (812) (431)
---------------------------------------
Cash Flows From Financing Activities
Proceeds from long-term debt 55,365 29,704 7,249
Payments on long-term debt (53,498) (29,659) (6,851)
Proceeds from notes payable 4,553 4,750 5,745
Payments on notes payable (3,953) (4,750) (4,445)
Cash dividends received from Michael Foods 1,471 1,471 1,471
---------------------------------------
Net Cash provided by financing activities 3,938 1,516 3,169
---------------------------------------
Net Decrease in cash and cash equivalents (1,879) (2,399) (1,123)
---------------------------------------
Cash and Cash Equivalents at beginning of year 6,981 9,380 10,503
---------------------------------------
Cash and Cash Equivalents at end of year $ 5,102 $ 6,981 $ 9,380
---------------------------------------
---------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
-13-
<PAGE>
Notes to Consolidated Financial Statements
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
North Star Universal, Inc. ("North Star" or "the Company") is a holding company.
The Company's operations consist of Americable, Inc., Transition Engineering,
Inc. and C.E. Services, Inc. (including its United Kingdom subsidiary, C.E.
Services (Europe) Limited). Americable is a provider of connectivity and
networking products and services. Transition Engineering designs and
manufactures connectivity devices used in local area network ("LAN")
applications. C.E. Services is a third-party provider of systems, parts and
services for mainframe computers and peripherals. In 1994, C.E. Services
established a new computer services business to provide mainframe computer
access and processing services to its customers. This business consists of
Bridging Solutions Corporation ("Bridging"), an entity formed in 1994, and
Commercial Computer Services, Inc. ("CCS"), an entity acquired by C.E. Services
in 1994. In connection with the organizaiton of this new business, Dalworth
Holdings, Inc., was formed as a holding company which is now the parent of C.E.
Services, Bridging and CCS.
In March 1987, the Company founded Michael Foods to consolidate and focus
development of the Company's food businesses. Michael Foods is engaged
principally in the food processing and distribution business. At the time
Michael Foods was organized, the Company was issued 9,000,000 shares of Michael
Foods common stock. In September 1990 and January 1991, the Company sold
472,500 and 1,172,550 shares of its Michael Foods stock, respectively. As a
result of these transactions and other equity transactions of Michael Foods, the
Company's ownership interest in Michael Foods was approximately 38% at December
31, 1994. The Company's investment in Michael Foods is accounted for as an
unconsolidated subsidiary using the equity method of accounting.
In January 1988, the Company founded CorVel to integrate and develop the
operations of a number of healthcare service companies previously acquired by
North Star. In June 1991, CorVel completed an initial public offering of
1,600,000 shares of its common stock. The Company owned a 37% minority ownership
in CorVel Corporation ("CorVel", formerly FORTIS Corporation) as of December 31,
1994. The Company's investment in CorVel is accounted for as an unconsolidated
subsidiary using the equity method of accounting.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The Company consolidates the accounts of its
majority-owned subsidiaries. All significant intercompany transactions have
been eliminated. Certain of the 1993 and 1992 amounts have been reclassified to
conform with the financial statement presentation used in 1994.
CASH AND CASH EQUIVALENTS The Company considers its highly liquid temporary
investments with original maturities of three months or less to be cash
equivalents.
INVENTORIES Inventories are stated at the lower of average cost (determined
on a first-in, first-out basis) or market. At December 31, inventories consist
of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
- ---------------------------------------------------------------
<S> <C> <C>
Work in process and finished goods $ 4,775 $ 8,741
Purchased parts 3,219 2,059
-----------------------
$ 7,994 $ 10,800
-----------------------
-----------------------
</TABLE>
-14-
<PAGE>
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES (continued)
PROPERTY AND EQUIPMENT Property and equipment are stated at cost.
Depreciation and amortization for financial reporting purposes are provided on
the straight-line method over the estimated useful lives of the respective
assets which are generally three to five years. Major repairs and improvements
are capitalized and depreciated. Maintenance and repairs are charged to expense
as incurred.
At December 31, property and equipment consist of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Leasehold improvements $ 1,201 $ 1,025
Machinery and equipment 7,033 6,051
------- -------
8,234 7,076
Less-accumulated depreciation and amortization 4,487 3,926
------- -------
$ 3,747 $ 3,150
------- -------
------- -------
</TABLE>
GOODWILL Goodwill is amortized on a straight-line basis over periods not
exceeding 40 years. Accumulated amortization was $2,969,000 at December 31,
1994 and $2,506,000 at December 31, 1993. 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. See Note 3 for an impairment identified during 1993.
INCOME TAXES The consolidated financial statements reflect the implementation
of Statement of Financial Accounting Standards No. 109--Accounting for Income
Taxes ("SFAS 109"), as of January 1, 1993. See Note 8.
EARNINGS (LOSS) PER SHARE Earnings (loss) per share are based upon the
weighted average number of shares outstanding during each period (9,438,000 in
1994, 1993 and 1992) after giving effect to the assumed exercise of outstanding
stock options, except where the effects are antidilutive.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION The Company increased its
investment in unconsolidated subsidiaries by $129,000, $396,000 and $467,000 and
additional paid-in capital by $78,000, $344,000 and $65,000 during 1994, 1993
and 1992, respectively, as a result of equity transactions of Michael Foods and
CorVel.
Additional disclosures of cash flow information is as follows:
<TABLE>
<CAPTION>
Years ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid (received) during the year for:
Interest $ 4,591 $ 4,506 $ 4,806
Income taxes (32) -- (574)
</TABLE>
NOTE 3 - RESTRUCTURING CHARGES
In December 1993, Americable implemented a restructuring plan involving the
closure of its Canadian facilities, operated by Adanac Cable, Ltd., and
consolidation of its Canadian sales and customer support activities within its
U.S. operations. This plan was completed in 1994. In connection with this
consolidation, Americable recorded a restructuring charge of approximately
$1.9 million in 1993. This charge includes approximately $600,000 for the
write-off of goodwill and other non-current assets, $700,000 for the
reassessment of the carrying value of inventory and receivables, and $600,000
for lease and severance obligations and other related expenses.
NOTE 4 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES
The Company's unconsolidated subsidiaries consist of its investments in Michael
Foods and CorVel. The following is summarized balance sheet information of the
Company's unconsolidated subsidiaries as of December 31, 1994. The summarized
income statement information for Michael Foods is for the year ended December
31, 1994. CorVel has a fiscal year end of March 31. The summarized income
statement information for CorVel is for the twelve month period ended December
31, 1994 (in thousands):
-15-
<PAGE>
<TABLE>
<CAPTION>
Michael Foods CorVel
- -----------------------------------------------------------------
<S> <C> <C>
Current assets $ 93,985 $ 27,935
Noncurrent assets 242,660 12,697
Current liabilities 60,396 7,209
Noncurrent liabilities 110,220 340
Revenues 505,965 91,262
Gross profit 75,048 15,862
Net income 15,189 5,536
</TABLE>
At December 31, 1994, CorVel had stock options outstanding to purchase
approximately 836,000 shares of its common stock at various exercise prices.
Assuming the exercise of all these options, the Company's ownership would be
reduced to approximately 31%. If the exercise of these options had occurred at
December 31, 1994, it would have decreased the Company's investment in
unconsolidated subsidiaries, deferred income taxes and additional paid-in
capital by approximately $2,054,000, $801,000 and $1,253,000, respectively.
At December 31, 1994, consolidated retained earnings includes approximately
$10.8 million of unremitted earnings related to the Company's investment in
unconsolidated subsidiaries.
NOTE 5 - NET ASSETS HELD FOR SALE
In March 1991, the Company announced its intention to sell its remaining non-
computer related manufacturing company, Eagle Engineering and Manufacturing,
Inc. The Company has recorded the net assets related to this subsidiary in the
balance sheet under the caption "Net Assets Held For Sale". Operating results
of this subsidiary are not material.
NOTE 6 - NOTES PAYABLE
The Company has a revolving credit agreement with its principal bank which
provides for borrowings up to $6.5 million due in January 1996. Borrowings
under the revolving line of credit bear interest at the bank's reference rate
(8.5% at December 31, 1994), and are collateralized by the Company's shares of
Michael Foods common stock. The credit agreement also includes certain
restrictive covenants including limitations on senior indebtedness and business
acquisitions and prohibits cash dividends to common shareholders. The Company
had no borrowings under its line of credit during the year ended December 31,
1994.
C.E. Services maintains revolving credit facilities with its principal bank
which provide for borrowings up to $2.7 million, with $700,000 due March 31,
1995 and $2.0 million due July 31, 1995, based on available eligible accounts
receivable and inventory. Borrowings under these revolving credit facilities
bear interest at 1/2% and 1% over the bank's reference rate (9% and 9.5% at
December 31, 1994) and are used to finance the working capital requirements of
C.E. Services. At December 31, 1994, there was $600,000 outstanding under these
facilities due March 31, 1995. In connection with C.E. Services' noncompliance
with certain financial covenants under these facilities, the agreement was
amended in December 1994, the effect of which was to make the indebtedness
thereunder payable on demand. In addition, the amendment provided for a
guarantee of the indebtedness by North Star.
NOTE 7 - LONG-TERM DEBT
At December 31, long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
Subordinated debentures $ 41,422 $ 39,579
Revolving line of credit 2,107 1,408
Term note payable 1,500 1,893
Notes payable for business acquisitions -- 173
Other 32 141
-------------------------
45,061 43,194
Less current maturities 12,547 12,799
-------------------------
$ 32,514 $ 30,395
-------------------------
-------------------------
</TABLE>
-16-
<PAGE>
Aggregate minimum annual principal payments of long-term debt at December 31,
1994, are as follows (in thousands):
<TABLE>
<CAPTION>
Years ending December 31,
- -------------------------------------------------
<S> <C>
1995 $ 12,547
1996 14,406
1997 3,916
1998 4,688
1999 4,879
2000 and thereafter 4,625
---------
$ 45,061
---------
---------
</TABLE>
Subordinated debentures are unsecured and due in varying monthly installments
through 2004. Weighted average interest of 10% and 10.4% at December 31, 1994
and 1993, respectively, is payable monthly, quarterly or at maturity.
Americable maintains a revolving line of credit and term loan facility
which provides borrowings up to $5.5 million due in May 1996. Borrowings under
this facility are based on eligible accounts receivable and inventory with
interest at prime plus 1.5% (10% at December 31, 1994). The term loan bears
interest at 10.665% and is payable in monthly principal installments of $36,000
with a final installment of $893,000 due in May 1996. The credit agreement
includes certain restrictive covenants including minimum net worth requirements,
limitations on additional indebtedness and minimum interest coverage. In March
1995, Americable obtained the necessary waivers from its bank to waive its
compliance with certain financial covenants.
NOTE 8 - INCOME TAXES
The Company and its consolidated subsidiaries file a consolidated federal income
tax return and separate state income tax returns, where legally required. The
provision (benefit) for consolidated income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ -- $ -- $ --
State 20 20 20
----------------------------------
20 20 20
----------------------------------
Deferred
Federal (1,870) (625) (912)
State (380) (105) (238)
----------------------------------
(2,250) (730) (1,150)
----------------------------------
$(2,230) $ (710) $(1,130)
----------------------------------
----------------------------------
</TABLE>
The following is a reconciliation of income taxes at the federal statutory rate
to the effective rate:
<TABLE>
<CAPTION>
Years ended December 31, 1994 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate (34.0)% (34.0)% (34.0)%
State income taxes,
net of federal tax benefit (4.7) (1.6) (3.0)
Losses producing no current benefit 4.8 17.1 10.9
Prior year overaccruals -- (3.5) --
Goodwill amortization .9 2.0 1.5
Other 3.8 .4 1.2
----------------------------------
(29.2)% (19.6)% (23.4)%
----------------------------------
----------------------------------
</TABLE>
Effective January 1, 1993, the Company was required under SFAS 109 to
record deferred income taxes related to the current years' unremitted earnings
or loss from Michael Foods. Deferred income taxes are not required to be
recorded for unremitted earnings and equity transactions which arose prior to
1993 and are expected to be realized in a tax-free manner. In the fourth
quarter of 1993, the Company determined that all future dispositions of Michael
Foods holdings may not be completed in a tax-free manner. Accordingly, the
Company recorded a deferred tax liability of approximately $18.7 million related
to the accounting for temporary differences between financial and tax reporting
of its investment in Michael Foods. At December 31, 1994, the deferred tax
liability includes temporary differences related to the Company's share of
Michael Foods public offering proceeds and other equity transactions of $15
million, and income taxes recorded on equity in earnings of Michael Foods of
$2.3 million in 1994 and $3.7 million in 1993.
-17-
<PAGE>
In addition, at December 31, 1994, the deferred tax liability includes the
initial tax effect of $2.7 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
$845,000 in 1994, $690,000 in 1993, $402,000 in 1992, respectively.
The tax effects of the cumulative temporary differences resulting in the
net deferred tax liability at December 31, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
Investment in Michael Foods $ (21,014) $ (18,700)
Investment in CorVel (4,868) (3,945)
Depreciation (291) (99)
Accrued expenses not
deductible until paid 2,092 1,826
Other (1,175) (346)
Net operating loss carryforwards 4,651 1,664
State taxes (100) 125
-------------------------
(20,705) (19,475)
Valuation allowance (520) (790)
-------------------------
$ (21,225) $ (20,265)
-------------------------
-------------------------
</TABLE>
At December 31, 1994, the valuation allowance represents a reserve for
foreign net operating loss carryforwards which are not expected to be realized
in the future. In addition, at December 31, 1994, the Company had federal net
operating loss carryforwards for income tax purposes of approximately $10.8
million. This amount has been recognized for financial reporting purposes.
NOTE 9 - STOCK OPTION PLANS
In 1986, the Company established an incentive stock option plan and a non-
qualified stock option plan for various executive officers (none of whom are
presently officers of the Company). The Company also maintains a non-qualified
stock option plan for other officers, directors and key employees.
Activity under the stock option plans for the years ended December 31, is
as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding, beginning of year 656,600 656,600 615,400
Granted:
$4.63/share -- -- 48,700
Cancelled:
$8.75/share (22,400) -- --
$10.25/share -- -- (7,500)
-------------------------------------
Outstanding, end of year 634,200 656,600 656,600
-------------------------------------
-------------------------------------
Exercisable, end of year:
Number of shares 625,880 634,140 631,900
Exercise price per share $.94 $.94 $.94
to $10.12 to $10.12 to $10.12
</TABLE>
NOTE 10 - COMMITMENTS
The Company and its subsidiaries lease certain equipment and facilities under
operating leases. Minimum rental payments under such leases which expire at
various dates through 2008 are as follows (in thousands):
<TABLE>
<CAPTION>
Years ending December 31,
- ------------------------------------------------------------
<S> <C>
1995 $ 2,198
1996 1,915
1997 1,841
1998 1,855
1999 2,044
2000 and thereafter 4,551
---------
$ 14,404
---------
---------
</TABLE>
Certain of the leases provide for payment of taxes and other expenses.
Total rent expense on all leases including month-to-month leases was $2,653,000
in 1994, $2,517,000 in 1993, and $2,542,000 in 1992.
-18-
<PAGE>
NOTE 11 - EMPLOYEE RETIREMENT PLAN
The Company maintains an incentive savings plan for its employees and employees
of its wholly owned subsidiaries. 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 $271,000, $267,000, $239,000, were charged to operations in
the years ended December 31, 1994, 1993 and 1992, respectively.
NOTE 12 - RELATED PARTY TRANSACTION
The Company has an unsecured note receivable from its majority shareholder and
former chairman of the board of $407,872 at December 31, 1994. The note bears
interest at the Company's principal bank's reference rate plus 1% (9.5% at
December 31, 1994). A principal payment of $50,000 was made in December 1994.
NOTE 13 - FOURTH QUARTER RESULTS
In the fourth quarter of 1993, the Company recorded losses of approximately
$7.7 million along with a net deferred tax provision of approximately
$3.1 million related to its investment in Michael Foods and $1.9 million of
restructuring charges in connection with the consolidation of Americable's
Canadian operations. In the fourth quarter of 1992, the Company recorded non-
recurring charges of $490,000 related to inventory write-offs and an income tax
benefit adjustment of $570,000 to adjust to the Company's annual effective tax
rate. The net effect of these adjustments in the fourth quarter was to increase
the net loss in 1993 by $12.8 million, or $1.36 per share and increase net
income in 1992 by $80,000 or $.01 per share.
NOTE 14 - BUSINESS SEGMENT INFORMATION
The Company's foreign operations consist of C.E. Services' United Kingdom
subsidiary, C.E. Services (Europe) Limited . Prior to 1994, the Company's
foreign operations also included Americable's Canadian subsidiary, Adanac Cable,
Ltd. which was closed in December 1993 as discussed in Note 3. Summary
financial information by geographic area is as follows:
<TABLE>
<CAPTION>
Years ended December 31, (in thousands) 1994 1993 1992
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
United States $ 84,347 $ 89,662 $ 72,334
Canada -- 4,616 5,957
United Kingdom 7,960 13,207 8,072
Operating income (loss)
United States (2,307) 677 (80)
Canada -- (195) (219)
United Kingdom (1,103) 169 (286)
Identifiable assets
United States 109,109 106,212 111,937
Canada -- 137 2,409
United Kingdom 1,984 1,858 1,527
</TABLE>
-19-
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Shareholders of North Star Universal, Inc.
We have audited the accompanying consolidated balance sheets of North Star
Universal, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1994. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of North Star
Universal, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements effective
January 1, 1993, the Company changed its method of accounting for income taxes.
/s/ Grant Thornton LLP
Minneapolis, Minnesota
February 21, 1995
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands, except per share amounts and ratios) 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA(1), (2)
Revenues $ 92,307 $ 107,485 $ 86,363 $ 71,575 $ 553,022
Operating income (loss) (3,410) 651 (585) (1,356) 41,038
Interest expense, net (4,232) (4,266) (4,237) (4,442) (16,022)
Income (loss) from continuing operations before
income taxes, minority interest, and equity in
earnings (loss) of unconsolidated subsidiaries (7,642) (3,615) (4,822) 2,766 27,109
Income (loss) from continuing operations (674) (11,872) (1,637) 10,899 5,643
Loss from discontinued operations -- -- -- (598) (1,832)
-------------------------------------------------------------
Net income (loss) $ (674) $ (11,872) $ (1,637) $ 10,301 $ 3,811
-------------------------------------------------------------
-------------------------------------------------------------
Income (loss) per common and
common equivalent share:
Income (loss) from continuing operations $ (.07) $ (1.26) $ (.17) $ 1.07 $ .54
Discontinued operations -- -- -- (.06) (.19)
-------------------------------------------------------------
Net income (loss) $ (.07) $ (1.26) $ (.17) $ 1.01 $ .35
-------------------------------------------------------------
-------------------------------------------------------------
Ratio of earnings to fixed charges (.51)x .28x .02x 1.53x 2.46x
BALANCE SHEET DATA(1), (2)
Total assets $ 111,093 $ 108,207 $ 115,873 $ 116,355 $ 354,473
Long-term debt, including current maturities 45,061 43,194 41,849 41,451 149,353
Shareholders' equity 34,196 34,675 61,083 63,246 39,223
-------------------------------------------------------------
-------------------------------------------------------------
<FN>
_________________________
(1) AMOUNTS IN 1991 AND 1990 HAVE BEEN RECLASSIFIED TO GIVE EFFECT TO
DISCONTINUED OPERATIONS IN THOSE YEARS.
(2) 1990 INCLUDES THE CONSOLIDATED RESULTS AND BALANCES OF MICHAEL FOODS AND
CORVEL. BEGINNING IN 1991, THESE INVESTMENTS WERE ACCOUNTED FOR UNDER THE
EQUITY METHOD OF ACCOUNTING AS DISCUSSED IN NOTE 1.
</TABLE>
-20-
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
(Unaudited, in thousands,
except per share amounts) First Second Third Fourth(1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
Revenues $ 23,989 $ 24,001 $ 24,147 $ 20,170
Operating loss (235) (852) (431) (1,892)
Interest expense, net (1,036) (1,044) (1,105) (1,047)
Net income (loss) $ 146 $ (88) $ 57 $ (789)
--------- --------- --------- ---------
--------- --------- --------- ---------
Income (loss) per share $ (.01) $ (.01) $ .01 $ (.08)
--------- --------- --------- ---------
--------- --------- --------- ---------
1993
Revenues $ 26,354 $ 29,774 $ 24,047 $ 27,310
Operating income (loss) (156) 774 662 (629)
Interest expense, net (1,032) (1,084) (1,096) (1,054)
Net income (loss) $ (497) $ 573 $ 288 $ (12,236)
--------- --------- --------- ---------
--------- --------- --------- ---------
Income (loss) per share $ (.05) $ .06 $ .03 $ (1.30)
--------- --------- --------- ---------
--------- --------- --------- ---------
<FN>
(1) See Note 13 to the Consolidated Financial Statements.
</TABLE>
STOCK INFORMATION
North Star Universal, Inc.'s common stock is traded on the Pacific Stock
Exchange under the symbol NSU and on the National Market System of NASDAQ under
the symbol NSRU since June 19, 1987. The following stock prices were obtained
from NASDAQ reports:
<TABLE>
<CAPTION>
(By Quarter)
1994 Low High
- ------------------------------------------------------------
<S> <C> <C>
First 4 5/8 5 5/8
Second 4 3/8 6
Third 4 7/8 6 3/8
Fourth 4 3/8 5 3/4
<CAPTION>
1993 Low High
- ------------------------------------------------------------
<S> <C> <C>
First 4 1/2 7 1/8
Second 3 7/8 5 1/2
Third 4 3/4 6 1/2
Fourth 4 1/2 6 7/8
</TABLE>
The number of common shareholders of record as of December 31, 1994, was 242.
In addition, the Company estimates that an additional 1,000 shareholders own
stock held for their accounts at brokerage firms and financial institutions.
There were no cash dividends paid in 1994 or 1993 on North Star's common stock.
Management does not anticipate that cash dividends will be paid in the
foreseeable future.
-21-
<PAGE>
Corporate Information
CORPORATE ADDRESS
North Star Universal, Inc./610 Park National Bank Building/5353 Wayzata
Boulevard/Minneapolis, Minnesota 55416/(612) 546-7500
BOARD OF DIRECTORS
MILES E. EFRON/Chairman of the Board of the Company
JAMES H. MICHAEL/Retired Chairman of the Board of the Company
JEFFREY J. MICHAEL/President and Chief Executive Officer of the Company
RICHARD J. BRAUN/Managing Director of Headwaters Capital Management L.L.C.
FRED E. STOUT/Retired Chief Executive Officer Superior Water Light & Power
Company
PETER E. FLYNN/Executive Vice President, Chief Financial Officer and Secretary
of the Company
CORPORATE OFFICERS
JEFFREY J. MICHAEL/President and Chief Executive Officer
PETER E. FLYNN/Executive Vice President, Chief Financial Officer and Secretary
SHAREHOLDER INFORMATION
TRANSFER AGENT AND REGISTRAR/Norwest Bank Minneapolis, N.A./161 North Concord
Exchange/P.O. Box 738/South St. Paul, Minnesota 55075
INVESTOR INQUIRIES/Attention:Investor Relations/North Star Universal, Inc./610
Park National Bank Building/5353 Wayzata Boulevard/Minneapolis, Minnesota
55416/(612) 546-7500
FORM 10-K/North Star's Form 10-K report is filed with the Securities and
Exchange Commission and is available to shareholders without charge by writing
to the Company.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated February 21, 1995 accompanying the
consolidated financial statements and schedule of North Star Universal, Inc. and
Subsidiaries incorporated by reference in the Registration Statement on Form S-
2. We consent to the use of the aforementioned reports in the Registration
Statement and to the use of our name as it appears under the caption "Experts".
We have issued our reports dated February 15, 1995 accompanying the
consolidated financial statements and schedule of Michael Foods, Inc. and
Subsidiaries included in the Annual Report on Form 10-K of North Star Universal,
Inc. for the year ended December 31, 1994, incorporated by reference in the
Registration Statement on Form S-2. We consent to the use of the aforementioned
reports in the Registration Statement.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
February 21, 1995
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a
Trustee pursuant to Section 305(b)(2) ____
____________________
NATIONAL CITY BANK OF MINNEAPOLIS
(Exact name of trustee as specified in its charter)
NOT APPLICABLE 41-0872838
(Jurisdiction of incorporation or (I.R.S. employer
organization if not a U.S. national bank) Identification No.)
75 SOUTH FIFTH STREET 55402
MINNEAPOLIS, MINNESOTA (Zip Code)
(Address of principal executive office)
TIMOTHY M. MURPHY
NATIONAL CITY BANK OF MINNEAPOLIS
75 SOUTH FIFTH STREET
MINNEAPOLIS, MN 55408
(612) 340-3000
(Name, address and telephone number of agent for service)
____________________
NORTH STAR UNIVERSAL INC.
(Exact name of obligor as specified in its charter)
MINNESOTA 41-0498850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5353 WAYZATA BLVD
MINNEAPOLIS, MINNESOTA 55416
(Address of principal executive office) (Zip Code)
SUBORDINATED EXTENDIBLE TIME CERTIFICATES
(Title of the indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency Washington, D.C.
Federal Deposit Insurance Corporation Washington, D.C.
The Board of Governors of the Federal Reserve System Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe such
affiliation.
None.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
(a) Furnish the following information as to each class of voting
securities of the trustee.
<TABLE>
<CAPTION>
As of FEBRUARY 28, 1995
(within 31 days)
Col. A Col. B
Title of Class Amount Outstanding
-------------- ------------------
<S> <C>
Common Stock 6,097,320 shares
</TABLE>
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, furnish the following
information:
(a) The Title of the securities outstanding under each such other
indenture.
$25,000,000 Subordinated Debentures Series 87/88 dated as of
December 1, 1986..
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of Section
310(b)(1) of the Act arises as a result of the trusteeship under any
such other indentures, including a statement as to how the indenture
securities will rank as compared with the securities under such other
indentures.
The Indenture to be qualified contains a provision excluding from
the operation of paragraph (1) of Section 310 (b) of the Trust
Indenture Act of 1939. The Indenture to be qualified and the Indenture
referred to in Item 4 (a) are wholly unsecured, and the Indenture
referred to in Item 4(a) is specifically described in the Indenture to
be qualified. The Time Certificates to be issued under the Indenture
to be qualified are not subordinated to and will rank pari passu with
the subordinated debentures issued under the Indenture referred to in
Item 4(a).
2
<PAGE>
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
If the trustee of any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or of any underwriter for the obligor,
identify each such person having any such connection and state the
nature of each such connection.
Not applicable.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner
and executive officer of the obligor:
<TABLE>
<CAPTION>
As of FEBRUARY 28, 1995
(within 31 days)
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Percentage of Voting
Amount Owned Securities Represented
Name of Owner Title of Class Beneficially by Amount Given in Col. C
------------- -------------- ------------ -------------------------
<S> <C> <C> <C>
Not Applicable.
</TABLE>
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE UNDERWRITERS OR THEIR
OFFICIALS.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner, and executive officer of each such underwriter:
<TABLE>
<CAPTION>
As of FEBRUARY 28, 1995
(within 31 days)
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Percentage of Voting
Amount Owned Securities Represented
Name of Owner Title of Class Beneficially by Amount Given in Col. C
------------- -------------- ------------ -------------------------
<S> <C> <C> <C>
Not Applicable.
</TABLE>
3
<PAGE>
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default
by the trustee:
<TABLE>
<CAPTION>
As of February 28, 1995
(within 31 days)
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Whether the Amount Owned Beneficially Percentage of
Securities are Voting or Held as Collateral Securities Represented
Name of Issuer and or Non-Voting Security for by Amount Given
Title of Class Securities Obligations in Default in Col. C
-------------- ---------- ---------------------- ---------
<S> <C> <C> <C>
Not Applicable.
</TABLE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of
securities of such underwriter, any of which are so owned or held by
the trustee:
<TABLE>
<CAPTION>
As of FEBRUARY 28, 1995
(within 31 days)
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Amount Owned Beneficially Percentage of Class
or Held as Collateral Represented by
Name of Issuer and Security for Obligations Amount Given
Title of Class Amount Outstanding in Default by Trustee in Col. C
-------------- ------------------ --------------------- ---------
<S> <C> <C> <C>
Not Applicable.
</TABLE>
4
<PAGE>
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to the
voting securities of such person:
<TABLE>
<CAPTION>
As of FEBRUARY 28, 1995
(within 31 days)
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Amount Owned Beneficially Percentage of Class
or Held as Collateral Represented by
Name of Issuer and Security for Obligations Amount Given
Title of Class Amount Outstanding in Default by Trustee in Col. C
-------------- ------------------ --------------------- ---------
<S> <C> <C> <C>
Not Applicable.
</TABLE>
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge
of the trustee, owns 50 percent or more of the voting securities of the
obligor, furnish the following information as to each class of
securities of such person, any of which are so owned or held by the
trustee:
<TABLE>
<CAPTION>
As of FEBRUARY 28, 1995
(within 31 days)
Col. A Col. B Col. C Col. D
------ ------ ------ ------
Amount Owned Beneficially Percentage of
or Held as Collateral Securities Represented
Name of Issuer and Security for Obligations by Amount Given
Title of Class Amount Outstanding in Default by Trustee in Col. C
-------------- ------------------ --------------------- ---------
<S> <C> <C> <C>
Not Applicable.
</TABLE>
5
<PAGE>
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
<TABLE>
<CAPTION>
Col. A Col. B Col. C
Nature of Indebtedness Amount Outstanding Date Due
---------------------- ------------------ --------
<S> <C> <C>
Not Applicable.
</TABLE>
ITEM 13. DEFAULTS BY OBLIGOR.
(A) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such
default.
None.
(B) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, or is trustee for
more than one outstanding series of securities under the indenture,
state whether there has been a default under any such indenture or
series, identify the indenture or series affected, and explain the
nature of any such default.
None.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not Applicable.
ITEM 15. FOREIGN TRUSTEE
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified under the Act.
Not Applicable.
6
<PAGE>
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as a part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in effect.
2. A copy of the certificate of authority of the trustee to commence business,
if not contained in the articles of association.
3. A copy of the certificate of authority of the trustee to exercise corporate
trust powers, if such authorization is not contained in the documents
specified in paragraph (1) or (2) above.
4. A copy of the existing bylaws of the trustee, or instruments corresponding
thereto.
5. The consents of United States institutional trustees required by
Section 321 (b) of the Act.
6. A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.
7
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
National City Bank of Minneapolis, organized and existing under the laws of the
United States of America, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto authorized, all in the City
of Minneapolis, and State of Minnesota on the 14th day of March, 1995.
NATIONAL CITY BANK OF MINNEAPOLIS
By: /s/ DEWAYNE A. HOIUM
------------------------------
DeWayne A. Hoium
Vice President
8
<PAGE>
June 10, 1980
NATIONAL CITY BANK OF MINNEAPOLIS
CHARTER NO. 15295
REVISED ARTICLES OF ASSOCIATION
FIRST. The title of this Association shall be, "National City Bank of
Minneapolis."
SECOND. The main office shall be in the City of Minneapolis, the County of
Hennepin, the State of Minnesota. The general business of the Association shall
be conducted at its main office and its legally established branches.
THIRD. The Board of Directors of this Association shall consist of not less
than five (5) nor more than twenty-five (25) shareholders. At any meeting of
the shareholders held for the purpose of electing Directors, or changing the
number thereof, the number of Directors may be determined by a majority of the
votes cast by the shareholders in person or by proxy. A majority of the full
Board of Directors is authorized to increase the number of Directors between the
regular annual meeting of the shareholders of the Association and appoint
persons to fill the vacancies created thereby; provided, however, such increase
in the number of directors shall be limited to not more than two (2) in any one
(1) year. A majority of the Board of Directors shall be necessary to constitute
a quorum for the transaction of business at any Directors' meeting.
FOURTH. (as amended January 7, 1964). The regular annual meeting of the
shareholders of this Association shall be held at its main banking house, or
other convenient place duly authorized by the Board of Directors, on such day of
each year as is specified therefor in the By-Laws.
FIFTH. (as amended March 28, 1979). The amount of authorized capital stock
of this Association shall be Twelve Million Five Hundred Thousand and no/100
Dollars ($12,500,000), divided into 2,500,000 shares of common stock of par
value of Five and no/100 ($5.00) Dollars each, said capital stock may be stock
of par value of Five and no/100 ($5.00) Dollars
Page One of Five
<PAGE>
each; said capital stock may be increased or decreased from time to time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the corporation
shall have any preemptive or preferential right of subscription to any shares of
any class of stock of the corporation, whether now or hereafter authorized or to
any obligations convertible into stock of the corporation, issued or sold, nor
any right of subscription to any thereof other than such, if any, as the Board
of Directors, in its discretion, may from time to time determine and at such
price as the Board of Directors may from time to time fix.
(Amended February 5, 1971) "The Association at any time, and from time to
time, may authorize and issue debt obligations whether or not subordinated,
without approval of Shareholders."
SIXTH. (As amended March 19, 1980). The Board of Directors shall appoint one
of its members as Chairman of the Board and one of its members as President of
this Association. The President shall be authorized, in the absense of the
Chairman of the Board, to perform all acts and duties pertinent to the office of
Chairman of the Board. The Board of Directors shall have the power to appoint
one or more Executive Vice Presidents, Senior Vice Presidents, or Vice
Presidents, Cashier, Secretary, Treasurer, and such other employees as may be
required to transact the business of this Association, to fix the salaries to be
paid to such officers and employees of this Association; and to dismiss any
officers and employees and appoint others to take their place.
The Board of Directors shall have the power to define the duties of
officers and employees of this Association and to require adequate bonds from
them for the faithful performance of their duties; to make all By-Laws that may
be lawful for the general regulation of the business of this Association and the
management of its affairs, and generally to do and
Page Two of Five
<PAGE>
perform all acts that may be lawful for a Board of Directors to do and perform.
Any person may be indemnified or reimbursed by the Association for
reasonable expenses actually incurred by him in connection with any action,
suit, or proceeding to which he is made a party by reason of his being or having
been a Director, officer, or employee of this Association: PROVIDED, HOWEVER,
that no person shall be so indemnified or reimbursed in relation to any action
suit, or proceeding in which he shall finally be adjudged to have been negligent
in the performance of his duties or to have committed an act or failed to
perform a duty for which there is a common-law or a statutory liability: AND,
PROVIDED, FURTHER, that no person shall be so indemnified or reimbursed in
relation to any action, suit, or proceeding which has been made the subject of a
compromise settlement, except with the approval of the holders of record of a
majority of the outstanding shares of this Association. The foregoing right of
indemnification or reimbursement shall not be exclusive of other rights to which
such person may be entitled as a matter of law.
The Board of Directors shall have the power to change the location of the
main office of this Association to any other place within the limits of the City
of Minneapolis, the State of Minnesota, without the approval of the shareholders
of this Association but subject to the approval of the Comptroller of the
Currency; and shall have the power to change the location of any branch or
branches of this Association to any other location, without the approval of the
shareholders of this Association but subject to the approval of the Comptroller
of the Currency.
SEVENTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
Page Three of Five
<PAGE>
EIGHTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum (10%) of the
stock of this Association, may call a special meeting of shareholders at any
time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place, and purpose of every regular annual, and every special meeting of
the shareholders shall be given by first-class mail, postage prepaid, mailed at
lease ten (10) days prior to the date of such meeting to each shareholder of
record at his address as shown upon the books of this Association.
Page Four of Five
<PAGE>
Subject to the provisions of the laws of the United States, these Articles
of Association may be amended at any meeting of the shareholders for which
adequate notice has been given, by the affirmative vote of the owners of a
majority of the stock of this Association, voting in person or by proxy.
IN WITNESS WHEREOF, we have hereunto set our hands on this 18th day of
June, 1980.
/s/ Lowell W. Andreas /s/ Frederick L. Deming
- ----------------------------------- -----------------------------------
Lowell W. Andreas Frederick L. Deming
/s/ Sister Mary Madonna Ashton /s/ James B. Goetz
- ----------------------------------- -----------------------------------
Sister Mary Madonna Ashton James B. Goetz
/s/ Howard E. Barnhill /s/ James H. Hearon, III
- ----------------------------------- -----------------------------------
Howard E. Barnhill James H. Hearon, III
/s/ Marvin Borman /s/ Walter W. Heller
- ----------------------------------- -----------------------------------
Marvin Borman Walter W. Heller
/s/ Edward C. Brown, Jr. /s/ C. Bernard Jacobs
- ----------------------------------- -----------------------------------
Edward C. Brown, Jr. C. Bernard Jacobs
/s/ Kenneth H. Dahlberg /s/ C. Wilbur Peters
- ----------------------------------- -----------------------------------
Kenneth H. Dahlberg C. Wilbur Peters
/s/ John H. Daniels /s/ Ralph C. Turnquist
- ----------------------------------- -----------------------------------
John H. Daniels Ralph C. Turnquist
Directors
Page Five of Five
<PAGE>
COMPTROLLER OF THE CURRENCY
[IMAGE DEPICTING TREASURY DEPARTMENT OFFICE BUILDING]
TREASURY DEPARTMENT OF THE UNITED STATES
WHEREAS, NATIONAL CITY BANK OF MINNEAPOLIS, LOCATED IN MINNEAPOLIS, STATE
OF MINNESOTA, BEING A NATIONAL BANKING ASSOCIATION, ORGANIZED UNDER THE STATUTES
OF THE UNITED STATES, HAS MADE APPLICATION FOR AUTHORITY TO ACT AS FIDUCIARY
AND WHEREAS, APPLICABLE PROVISIONS FOR THE STATUTES OF THE UNITED STATES
AUTHORIZE THE GRANT OF SUCH AUTHORITY;
NOW THEREFORE, I HEREBY CERTIFY THAT THE NECESSARY APPROVAL HAS BEEN GIVEN
AND THAT THE SAID ASSOCIATION IS AUTHORIZED TO ACT IN ALL FIDUCIARY CAPACITIES
PERMITTED BY SUCH STATUTES.
IN TESTIMONY WHEREOF, WITNESS MY
[IMAGE OF THE SEAL OF SIGNATURE AND SEAL OF OFFICE THIS
TREASURY DEPARTMENT] TENTH DAY OF MAY, 1984
/s/ C.T. CONNER
COMPTROLLER OF THE CURRENCY
CHARTER NO. 15295 EXHIBIT 2
<PAGE>
EXHIBIT B
April 21, 1982
BY-LAWS
OF
NATIONAL CITY BANK OF MINNEAPOLIS
(Organized Under the National Banking Laws of the United States)
___________________________________________
SECTION 1. The regular annual meeting of the shareholders of this
Association, for the election of directors and for the transaction of such other
business as properly may come before the meeting, shall be held at its main
banking house in the City of Minneapolis, the State of Minnesota, or any other
convenient place duly authorized by the Board of Directors, on the third
Wednesday in March of each year commencing with the year 1978, or on the next
succeeding business day, if the day fixed falls on a legal holiday, in
accordance with the provisions of its Articles of Association and the laws of
the United States, at which meeting a Board of Directors shall be elected; but
if no such election is held on that day as provided, it may be held at any
regular adjournment of the annual meeting or at a subsequent special meeting
held within sixty days, in accordance with the provisions of the laws of the
United States. The holders of a majority of the outstanding shares entitled to
vote and represented at any meeting of the shareholders may choose persons to
act as Chairman and as Secretary of the meeting. The Chairman of the Board
shall then make a report to the shareholders regarding the condition of the
Association and shall review the business of the preceding year.
Page One of Thirteen
<PAGE>
The Board of Directors of this Association, or any three or more
stockholders owning, in the aggregate, not less than ten per centum of the stock
of this Association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, or by the Articles
of Association, a notice of the time, place and purpose of every regular annual
meeting and every special meeting of the shareholders shall be given by first-
class mail, postage prepaid, mailed at least ten days prior to the date of such
meeting to each shareholder of record at his address as shown upon the books of
this Association.
SECTION 2. Shareholders may vote at any meeting of the shareholders
by proxies duly authorize in writing, but no director, officer, employee or
attorney of this Association shall act as proxy. Proxies shall be valid only
for one meeting, to be specified therein, and any adjournments of such meeting.
Proxies shall be dated and shall be filed with the records of the meeting.
In deciding on questions at meetings of shareholders, except in the
election of directors, each shareholder shall be entitled to one vote for each
share of stock held. A majority of votes cast shall decide each matter
submitted to the shareholders at the meeting except in cases where by law a
larger vote is required.
In all elections of directors, each shareholder shall have the right
to vote the number of shares owned by him for as many persons as there are
directors to be elected, or to cumulate such shares and give one candidate as
many votes as the number of directors multiplied by the number of shares shall
equal, or to distribute them on the same principle among as many candidates as
he shall think fit.
Page Two of Thirteen
<PAGE>
In the case of any meeting of the shareholders, a record showing the
names of the shareholders present and the number of shares of stock held by
each, and the names of the proxies shall be made. This record also shall show
the number of shares voted on each action taken, including the number of shares
voted for each candidate for director. This record shall be included in the
minute book of the Association.
After each meeting of the shareholders, there shall be forwarded to
the Comptroller of the Currency, a report thereof, in the form prescribed by the
Comptroller of the Currency.
DIRECTORS
SECTION 3. The Board of Directors shall consist of not less than five
(5) nor more than twenty-five (25) shareholders. The number of directors to be
elected shall be determined at the annual meeting of shareholders by a majority
of the votes cast by the shareholders in person or by proxy, or by a similar
vote at any special meeting called for the purpose, upon due notice having been
given according to law.
The directors of this Association shall hold office for one year and
until their successors are elected and have qualified.
Each person elected or appointed a director of this Association must
take the oath of such office in the form prescribed by the Comptroller of the
Currency. No person elected or appointed a director of this Association shall
exercise the functions of such office until he has taken such oath and the same
has been transmitted to the Comptroller of the Currency.
Any vacancies occurring in the Board of Directors shall be filed, in
accordance with the laws of the United States, by
Page Three of Thirteen
<PAGE>
appointment by the remaining directors, and any director so appointed shall hold
office until the next election.
Following the annual meeting of the shareholders, the Chairman or the
Secretary of the meeting shall notify promptly the Directors-Elect of their
election, and they shall meet promptly for the purpose of talking their oaths,
organizing the new Board, appointing officers and fixing salaries for the
ensuing year, and for transacting such other business as properly may come
before the meeting.
The Regular Meetings of the Board of Directors shall be held, without
notice, at 10:00 o clock in the forenoon on the third Wednesday of each month at
the Main Banking House. When any regular meeting of the Board falls upon a
holiday, the meeting shall be held on the next banking business day unless the
Board shall designate some other day.
Special meetings of the Board of Directors may be called by the
Chairman of the Board of Directors or by the President of the Association, or at
the request of three (3) or more directors. Each member of the Board of
Directors shall be given notice stating the time and place, by telegram, letter,
or in person, of each such special meeting, excepting the Organization Meeting
following the election of directors.
A majority of the members of the Board of Directors shall constitute a
quorum for the transaction of business. If, at the time fixed for the meeting,
including the meeting to organize the new Board following the Annual Meeting of
Shareholders, a quorum is not present, the directors in attendance may adjourn
the meeting from time to time until a quorum is obtained.
Except as otherwise provided herein, a majority of those
Page Four of Thirteen
<PAGE>
directors present and voting at any meeting of the Board of Directors, shall
decide each matter considered. A director cannot vote by proxy or otherwise act
by proxy at a meeting of the Board of Directors.
OFFICERS AND EMPLOYEES
SECTION 4. The officers of this Association shall be a Chairman of
the Board, a President, one or more Vice Presidents, a Cashier, and such other
officers as may be appointed by the Board of Directors. The Chairman of the
Board and the President shall be members of the Board of Directors. In the
absence of the Chairman of the Board, the President will act in that capacity.
The Chairman of the Board and the President shall hold their offices
for the current year for which the Board of which they shall be members was
elected, unless either shall resign, become disqualified, or be removed; and any
vacancy occurring in the office of either the Chairman of the Board or the
President shall be promptly filled by the Board of Directors.
The Cashier and the subordinate officers and clerks shall be appointed
to hold their offices, respectively, during the pleasure of the Board of
Directors.
Each officer and employee of the Association shall give bond of
suitable amount with security to be approved by the Board of Directors,
conditioned for the honest and faithful discharge of his duties as such officer
or employee. At the discretion of the Board, such bonds may be scheduled or
blanket form and the premiums shall be paid by the Association. The amount of
such bonds, the form of coverage, and the name of the company providing the
surety therefor shall be reviewed by the Board of Directors each year at
Page Five of Thirteen
<PAGE>
the first regular meeting of the Board following the Organization Meeting of the
new Board. Action shall be taken by the Board at that time approving the amount
of the bond to be provided by each officer and employee of the Association for
the ensuring year.
The Chairman of the Board shall preside at all meetings. Either the
Chairman of the Board or the President shall be Chief Executive Officer of the
Association. The Chairman of the Board and the President shall be ex officio
members of all Committees of the Association except the Examining Committee.
The Cashier of this Association shall be responsible for all assets
and documents of this Association, and shall keep proper records of all the
transactions of the Association.
Each Vice President shall have such power and duties as may be
assigned to him by the Board of Directors. A Vice President shall be designated
as the Secretary of the Association, in which he shall maintain and preserve the
organization papers of the Association, the Articles of Association, the returns
of elections, the By-Laws, the proceedings of regular and special meetings of
the Board of Directors and of the shareholders and the reports of the Committees
and Board of Directors. The minutes of each meeting shall be signed by the
Chairman of the Board and attested by the Secretary.
There shall be a Trust officer of this Association whose duties shall
be to manage, supervise and direct all the activities of the Trust Department.
He shall do and perform all acts and things necessary or proper to be done or
performed in carrying on the business of the Trust Department in accordance with
provisions of law and regulations of the Comptroller of the Currency.
He shall act pursuant to opinion of counsel where such
Page Six of Thirteen
<PAGE>
opinion is deemed necessary. Opinions of counsel shall be retained on file in
connection with all important matters pertaining to trusts, both individual and
corporate.
The Trust officer shall be responsible for all assets and documents
held by the Association in connection with trust matters.
COMMITTEES
SECTION 5. There shall be a standing committee of this Association
appointed by the Board, to be known as the Discount Committee, consisting of the
Chairman of the Board, the President, one or more Vice Presidents and two
directors, each to serve a six-month term. This Committee shall have power to
discount and purchase bills, notes and other evidences of debt, to buy and sell
bills of exchange, to examine and approve loans and discounts, to exercise
authority regarding loans and discounts held by the Association, and to direct
and transact all other business of the Association, which properly might come
before the Board of Directors, except such as the Board only, by law, is
authorized to perform. The Discount Committee shall report its actions in
writing at each regular meeting of the Board of Directors, which shall approve
or disapprove the report and record such action in the minutes of the meeting.
There shall be a standing committee of this Association known as the
Examining Committee, appointed annually by the Board of Directors. Each member
of this Committee shall serve until his successor is appointed and the Committee
shall consist of three members of the Board of Directors, none of whom shall be
active officers of the Association. The duties of this Committee shall be to
make suitable examinations every six months of the affairs of the Association.
The result of such examination shall be reported,
Page Seven of Thirteen
<PAGE>
in writing, to the Board at the next regular meeting thereafter, stating whether
the Association is in a sound and solvent condition, whether adequate internal
audit controls and procedures are being maintained and recommending to the Board
such changes in the manner of doing business, etc., as shall be deemed suitable.
The Examining Committee, upon its own recommendation and with the
approval of the Board of Directors, may employ a qualified firm of Certified
Public Accountants to make an examination and audit of the Association. If such
a procedure is followed, the one annual examination and audit of such firm of
Accountants and the presentation of its report to the Board of Directors will be
deemed sufficient to comply with the requirements of this section of these By-
Laws.
There shall be a Trust Investment Committee of this Association
composed of at least three members of the Association who shall be capable and
experienced officers or directors of the Association. All investments of trust
funds shall be made, retained or disposed of only with the approval of the Trust
Investment Committee; and the Committee shall keep minutes of all its meetings,
showing the disposition of all matters considered and passed upon by it. The
Committee shall, at least once during each period of twelve months, review all
the assets held in or for each fiduciary account to determine their safety and
current value and the advisability of retaining or disposing of them; and a
report of all such reviews, together with the action taken as a result thereof,
shall be noted in the minutes of the Committee.
As prescribed by Regulation 9 of the Comptroller of the Currency, the
Board of Directors shall appoint a committee of three
Page Eight of Thirteen
<PAGE>
directors, exclusive of any active officers of the Association, which shall at
least once during each period of twelve months make suitable audits to be made,
by auditors responsible only to the Board of Directors, and shall like wise at
least once during each period of twelve months ascertain by thorough examination
made, or caused to be made, by such Committee, whether a review of all of the
assets in each trust as to their safety and current value and the advisability
of retaining or disposing of them has been made, and whether trust funds
awaiting investment or distribution have been held uninvested or undistributed
any longer than was reasonably necessary. Such Committee shall promptly make a
full report of such audits and examination in writing to the Board of Directors
of the Association, together with a recommendation as to the action, if any,
which may be necessary to correct any unsatisfactory conditions. A report of
the audits and examination required, together with the action taken thereon,
shall be noted in the minutes of the Board of Directors and such report shall be
made a part of the records of the Association.
The Board of Directors may appoint, from time to time, other temporary
committees, for such purposes and with such powers as the Board may determine.
SEAL
SECTION 6. The following is an impression of the Seal adopted by the
Board of Directors of this Association.
IMPRESSION
OF
SEAL
The Chairman of the Board, the President, each Vice President, the
Cashier, the Secretary, the Trust Officer, each Assistant Trust Officer, each
Assistant Cashier and each Loan Officer
Page Nine of Thirteen
<PAGE>
shall have authority to affix the Corporate Seal of this Association and attest
the same.
STOCK
SECTION 7. The stock of this Association shall be assignable and
transferable only on the books of this Association. A stock certificate book
shall be maintained in which all assignments and transfers of stock shall be
made.
Certificates of stock, signed by the Chairman of the Board, the
President or Vice President, and the Cashier or Assistant Cashier, shall be
issued to shareholders, and when stock is transferred, the certificates thereof
shall be returned to the Association and new certificates issued. The returned
certificates shall be canceled and preserved for record purposes. Certificates
of stock shall meet the requirements of Section 5139 of the Revised Statutes and
shall state upon the face thereof that the stock is transferable only upon the
books of the Association.
BANKING HOURS
SECTION 8. This Association will be open for business during the
following hours:
NATIONAL CITY BANK BUILDING - 5TH AND MARQUETTE
Lobby Monday thru Friday 8:00 a.m. - 6:00 p.m.
Skyway Monday thru friday 7:45 a.m. - 4:00 p.m.
SHERATON RITZ OFFICE - 4TH AND NICOLLET
Lobby Monday thru Friday 9:00 a.m. - 4:00 p.m.
Walk-up Windows Monday thru Friday 8:00 a.m. - 9:00 a.m.
4:00 p.m. - 6:00 p.m.
T.V. Drive-up Windows Monday thru Friday 8:00 a.m. - 6:00 p.m.
SOUTHDALE OFFICE - 69TH STREET WEST OF FRANCE AVENUE
Lobby Monday thru Thursday 9:00 a.m. - 6:00 p.m.
Friday 9:00 a.m. - 7:00 p.m.
Drive-up Tellers Monday thru Thursday 7:00 a.m. - 6:00 p.m.
Friday 7:00 a.m. - 7:00 p.m.
Saturday 9:00 a.m. - 12:00 p.m.
Page Ten of Thirteen
<PAGE>
Transactions made after 4:00 p.m. and on Saturday are processed the next
business day. This Association shall not be open for business on Saturdays
(except the Southdale Office) and Sundays and days recognized by the laws of the
State of Minnesota as legal holidays. The hours referred to herein shall mean
Standard Time, except when Daylight Savings Time is in effect, when such stated
hours shall mean Daylight Saving Time.
CONVEYANCE OF REAL ESTATE
SECTION 9. All transfers and conveyance of real estate, title to
which is vested in this Association, including real estate held as fiduciary,
shall be by written instrument under the seal of this Association, made pursuant
to order of the Board of Directors and signed by the Chairman of the Board, the
President, Vice President or Cashier.
CONTRACTS
SECTION 10. All contracts, checks, drafts shall be signed by the
Chairman of the Board, the President or Vice President, or such other officers
as may be designated by the Board of Directors.
TRUSTS
SECTION 11. There shall be maintained in the Trust Department a file
containing (a) original instruments creating each trust, or properly
authenticated copies thereof, (b) properly receipted vouchers evidencing payment
and distributions under each trust, (c) properly evidenced reports to courts or
other accounting for trusts, and (d) copies of all court orders in connection
with trust matters.
No trust funds shall be invested in any securities in which corporate
fiduciaries located in this state may not lawfully invest
Page Eleven of Thirteen
<PAGE>
except (a) in accordance with express instructions contained in the trust
instrument, (b) pursuant to court order, or (c) where the trust instrument
expressly provides that investments may be made without regard to otherwise
applicable laws governing investments by fiduciaries.
CHANGES IN BY-LAWS
SECTION 12. These By-Laws may be amended upon vote of a majority of
the entire Board of Directors at any meeting of the Board, provided ten (10)
days' notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-Law, as amended, is
consistent with the requirements of the laws of the United States and of the
Articles of Association. A certified copy of all amendments to these By-Laws
shall be forwarded to the Comptroller of the Currency immediately after
adoption.
Page Twelve of Thirteen
<PAGE>
CERTIFICATION
At a meeting of the Board of Directors of the NATIONAL CITY BANK OF
MINNEAPOLIS regularly held on the 21st day of April, 1982, the foregoing revised
By-Laws were adopted.
IN TESTIMONY WHEREOF, we, the directors of this Association who were
present at said meeting, have hereunto subscribed our names.
DIRECTORS
/s/ David L. Andreas
------------------------------------
David L. Andreas
/s/ Marvin Borman
------------------------------------
Marvin Borman
/s/ Edward C. Brown, Jr.
------------------------------------
Edward C. Brown, Jr.
/s/ James B. Goetz
------------------------------------
James B. Goetz
/s/ James H. Hearon, III
------------------------------------
James H. Hearon, III
/s/ Walter W. Heller
------------------------------------
Walter W. Heller
/s/ C. Bernard Jacobs
------------------------------------
C. Bernard Jacobs
/s/ C. Wilbur Peters
------------------------------------
C. Wilbur Peters
Page Thirteen of Thirteen
<PAGE>
EXHIBIT 5
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, in connection with the proposed issue by North Star Universal , Inc. of
its Subordinated Extendible Time Certificates , we hereby consent that reports
of examinations by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
NATIONAL CITY BANK OF MINNEAPOLIS
/s/ DEWAYNE A. HOIUM
DeWayne A. Hoium
Vice President
<PAGE>
NATIONAL CITY BANK
STATEMENT OF CONDITION
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET (UNAUDITED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
December 31
-----------
(IN THOUSANDS) 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cash and Due from Banks $ 47,083 $ 26,119
Federal Funds Sold and Resale Agreements 50 20,450
Trading Account Securities 3,671
Available-for-Sale Securities 114,082 106,206
Held-to-Maturity Securities 25,412 34,683
Loans 319,560 294,950
Less: Valuation Allowance for Loan Losses (5,146) (5,506)
--------------------------
Net Loans 314,414 289,444
Bank Premises and Equipment 3,915 3,404
Accrued Income Receivable 3,479 3,822
Customer Acceptance Liability 280 18
Other Assets 14,446 12,935
--------------------------
ASSETS $523,161 $500,752
--------------------------
--------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Deposits:
Non-Interest Bearing $137,986 $115,704
Interest Bearing 235,483 187,201
--------------------------
Total Deposits 373,469 302,905
Federal Funds Purchased and Repurchase Agreements 75,556 121,297
Other Borrowed Funds 24,092 21,120
Acceptances Outstanding 280 18
Other Liabilities 3,723 6,639
--------------------------
Total Liabilities 477,120 451,979
Stockholders' Equity:
Common Stock, Par Value $5.00
Authorized 2,500,000 Shares
Issued 2,400,000 Shares 12,000 12,000
Surplus 12,000 12,000
Unrealized (Losses) Gains Net of Tax Effect (3,139) 229
Undivided Profits 25,180 24,544
--------------------------
Total Stockholders' Equity 46,041 48,773
--------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 523,161 $500,752
--------------------------
--------------------------
- --------------------------------------------------------------------------------
</TABLE>
National City Bank of Minneapolis Statement of Condition
December 31, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,102
<SECURITIES> 0
<RECEIVABLES> 9,362
<ALLOWANCES> (382)
<INVENTORY> 7,994
<CURRENT-ASSETS> 23,369
<PP&E> 8,234
<DEPRECIATION> (4,487)
<TOTAL-ASSETS> 111,093
<CURRENT-LIABILITIES> 23,158
<BONDS> 32,514
<COMMON> 2,360
0
0
<OTHER-SE> 31,015
<TOTAL-LIABILITY-AND-EQUITY> 111,093
<SALES> 92,307
<TOTAL-REVENUES> 92,307
<CGS> 73,281
<TOTAL-COSTS> 73,281
<OTHER-EXPENSES> 22,387
<LOSS-PROVISION> 49
<INTEREST-EXPENSE> 4,232
<INCOME-PRETAX> (7,642)
<INCOME-TAX> (2,230)
<INCOME-CONTINUING> (674)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (674)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
