<PAGE>
As filed with the Securities and Exchange Commission on May 15, 1995.
REGISTRATION NO. 33-58163
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
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/
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 Indenture pursuant to which
the Time Certificates will be issued does not limit the amount of Senior
Indebtedness of the Company, which may vary from time to time. As of March 31,
1995, the total amount of Senior Indebtedness of the Company was $2.7 million.
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 with an expected
termination date of April 30, 1998; however the Company reserves the right to
terminate this offering of Time Certificates at any time prior to such date.
No minimum amount of Time Certificates must be sold in order for the Company to
accept and deposit the proceeds of this offering. There is no assurance that
all or any portion of the offered 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 $200,000.
</TABLE>
The Date of this Prospectus is May 15, 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.
(3) The Company's Annual Report on Form 10-K/A-1 for the year ended
December 31, 1993, which contains the audited consolidated financial
statements of CorVel Corporation at March 31, 1994 and the report of
the independent certified public accountants related thereto.
(4) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
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") and Transition Engineering, Inc. ("Transition
Engineering"). 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.
Additionally, at March 31, 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 31, 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.
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 specialty dairy products to fast food
businesses and other foodservice outlets, independent retailers,
ice cream manufacturers and others.
-3-
<PAGE>
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.
On May 5, 1995, the Company sold C.E. Services, Inc. through the sale of
its shares of Dalworth Holdings, Inc., a holding company for C.E. Services,
Inc., Bridging Solutions Corporation, Commercial Computer Services, Inc. and
C.E. Services (Europe) Limited (collectively "C.E. Services"). See "Recent
Developments" and "Unaudited Pro Forma Condensed Consolidated Financial
Information."
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."
-4-
<PAGE>
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."
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
$44.2 million as of March 31, 1995, and the Company's debt-to-equity ratio at
March 31, 1995, was 1.29 to 1. Also, the Company had cash flow deficits from
operations of approximately $328,000 in the three month period ended March 31,
1995, $4.6 million in 1994, $3.1 million in 1993 and $3.9 million in 1992.
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. 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 with
respect to the Three Month Period Ended March 31, 1995," and "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.
RATIO OF EARNINGS TO FIXED CHARGES. The Company's ratio of earnings to
fixed charges for each of the five fiscal years ended December 31, 1990, 1991,
1992, 1993 and 1994 was 2.46, 1.53, .02, .28 and (.51), respectively. The
Company's ratio of earnings to fixed charges for the fiscal quarter ended
March 31, 1995 was (.44). During the first quarter of 1995 and each of
the last three fiscal years, the Company's earnings were inadequate to
cover its fixed charges. The coverage deficiency was approximately
$7,642,000, $3,615,000 and $4,822,000 for the fiscal years ended December 31,
1994, 1993 and 1992, respectively. The coverage deficiency for the
three month period ended March 31, 1995 was approximately $1,800,000. Based on
the Company's recent cash flow deficits and its historically high debt to equity
ratio, the Company does not expect its fixed charges to decrease significantly
or its earnings from its principal operating subsidiaries, Americable and
Transition Engineering, to improve significantly. Accordingly, the Company's
earnings may continue to be inadequate to cover its fixed charges. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition with respect to the Three Month Period Ended March 31, 1995," and
"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)
-6-
<PAGE>
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 with respect to the Three Month
Period Ended March 31, 1995," and "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 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,
and during the first quarter of 1995, the Company received a cash dividend of
$368,000 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 with respect to the Three Month
Period Ended March 31, 1995," and "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.
CERTAIN OPERATING RISKS RELATED TO THE COMPANY'S OPERATING SUBSIDIARIES.
There are certain operating risks relating to each of the Company's principal
operating subsidiaries, Americable and Transition Engineering. Both Americable
and Transition Engineering operate in highly competitive industries. Many of
the competitors of Americable and Transition Engineering are more established,
have greater financial resources, broader name recognition and, in many cases,
lower manufacturing costs. Americable's manufactured products are not protected
from competition by virtue of any proprietary rights such as trade secrets or
patents. The ability of each of Americable and Transition Engineering to
compete successfully in its industry is highly dependent on its ability to
respond to market changes on a timely basis and to maintain current
relationships with key customers and distributors. Additionally, Transition
Engineering's business may be materially adversely affected if (i) it is unable,
for technological or other reasons, to develop products on a cost-effective
basis and in a timely manner in response to changes in the industry, (ii) it
fails to timely manufacture and maintain required quantities of its products in
response to customer needs, or (iii) the products or product enhancements that
it develops do not achieve market acceptance. Transition Engineering has, in
the past, experienced delays in introducing certain of its new products and
enhancements. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition with respect to the Three Month Period
Ended March 31, 1995," and "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.
-7-
<PAGE>
The earnings and cash flows of these subsidiaries have varied
substantially from year to year, and after taking into account corporate
expenses related to the operating subsidiaries, these subsidiaries have
experienced operating losses from time to time. In the event these operating
subsidiaries experience cash flow deficits that require the Company to provide
working capital to fund operations or make other cash investments, the Company's
ability to make scheduled payments of interest and principal on its
indebtedness, including the Time Certificates offered hereby, could be
materially adversely affected. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition with respect to the Three Month
Period Ended March 31, 1995," and "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 March 31, 1995, the outstanding Senior Indebtedness of
the Company was $2.7 million, and there was $41.5 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 with
respect to the Three Month Period Ended March 31, 1995," and "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."
-8-
<PAGE>
RECENT DEVELOPMENTS
On May 5, 1995, the Company sold C.E. Services for approximately
$2.5 million cash through the sale of its shares of Dalworth Holdings, Inc., a
holding company for C.E. Services, Inc., Bridging Solutions Corporation,
Commercial Computer Services, Inc. and C.E. Services (Europe) Limited.
C.E. Services is a third-party provider of systems, parts and services for
mainframe computers and peripherals. The loss on disposition is estimated
to be $3.8 million, net of an income tax benefit of approximately $1.5 million.
See "Unaudited Pro Forma Condensed Consolidated Financial Information" and the
Unaudited Consolidated Financial Statements for the Three Month Periods Ended
March 31, 1995 and 1994 and the Notes thereto included elsewhere in this
Prospectus.
UNAUDITED SELECTED CONSOLIDATED
FINANCIAL DATA FOR THE THREE MONTH
PERIODS ENDED MARCH 31, 1995 AND 1994
The following table sets forth unaudited selected consolidated
financial data for the Company which have been extracted from, and should be
read in conjunction with, the Unaudited Consolidated Financial Statements for
the Three Month Periods Ended March 31, 1995 and 1994, and the Notes thereto
included elsewhere in this Prospectus. Results for the three month period
ended March 31, 1995 are not necessarily indicative of results for the full
year. The unaudited selected consolidated financial data for the three
month periods ended March 31, 1995 and 1994 include normal incurring
adjustments that are in the opinion of management of the Company necessary
for a fair presentation of such financial data.
<TABLE>
<CAPTION>
(In thousands, except per share amounts and ratios)
1995 1994
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues $17,656 $23,989
Operating income (loss) (740) (235)
Interest expense, net (1,060) (1,036)
Loss before income taxes and equity in earnings
of unconsolidated subsidiaries (1,800) (1,271)
Net income (loss) (63) 146
---------- ----------
---------- ----------
Income (loss) per share ($0.01) $0.01
---------- ----------
---------- ----------
Ratio of earnings to fixed charges (0.44) X (0.03) X
BALANCE SHEET DATA
Total assets $110,075
Long-term debt, including current maturities 44,067
Shareholders' equity 34,230
----------
----------
</TABLE>
-9-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS WITH RESPECT TO THE THREE MONTH
PERIOD ENDED MARCH 31, 1995
GENERAL
As described above, the Company is a holding company. The Company's
three key holdings consist of Michael Foods, CorVel and its computer businesses.
At March 31, 1995, the Company owned a 38% interest in Michael Foods and a 37%
ownership interest in CorVel. The common stock of each of Michael Foods and
CorVel is included on the NASDAQ National Market System under the symbols MIKL
and CRVL. The Company's investments in Michael Foods and CorVel are accounted
for as unconsolidated subsidiaries using the equity method of accounting.
Following the sale of C.E. Services on May 5, 1995, the Company's
continuing operations consist of Americable and Transition Engineering.
The following are unaudited summarized operating results for each of the
Company's continuing operations (which, during the period, consisted
of Americable, Transition Engineering and C.E. Services) for the three
months ended March 31 (in thousands).
<TABLE>
<CAPTION>
Three months ended March 31, 1995 1994
- --------------------------------------------------------------------
<S> <C> <C>
Revenues
Americable $ 9,278 $ 7,751
Transition Engineering 3,642 2,460
C.E. Services 5,100 14,043
Eliminations (364) (265)
----------------------
$17,656 $23,989
----------------------
----------------------
Gross Profit
Americable $ 2,437 $ 2,039
Transition Engineering 1,338 1,012
C.E. Services 1,000 2,424
----------------------
$ 4,775 $ 5,475
----------------------
----------------------
Operating Income (Loss)
Americable $ 265 $ (148)
Transition Engineering 301 130
C.E. Services (1,010) 66
Corporate expenses (296) (283)
----------------------
$ (740) $ (235)
----------------------
----------------------
</TABLE>
-10-
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 vs. THREE MONTHS ENDED MARCH 31, 1994
Consolidated revenues decreased $6.3 million or 26% to $17.6 million from
$24 million in 1994. The $8.9 million or 64% decrease at C.E. Services includes
approximately $9 million of decreased revenues from the resale of used mainframe
systems and features and approximately $200,000 of lower technical service and
warehousing revenues. Offsetting these decreases was approximately $276,000 of
revenue from a computer service bureau business which commenced operations in
the fourth quarter of 1994. The decline in revenues at C.E. Services is
attributable to the continued reduction in the domestic and international demand
for used mainframe systems and features. As discussed previously, the Company
sold C.E. Services on May 5, 1995.
Revenues at Americable increased approximately $1.5 million or 20% to $9.3
million. This includes increased revenues of approximately $1.2 million and
$300,000 resulting from higher demand from networking products and services and
bulk cable and other connectivity products, respectively. Revenues at Transition
Engineering increased approximately $1.2 million, or 48%, to $3.6 million, which
includes increased sales of approximately $700,000, or 44%, to domestic
customers and approximately $500,000, or 54% to international customers.
Overall, these increases are primarily a result of new product introductions
and higher product demand from both new and existing customers. Sales from new
product introductions and enhancements accounted for approximately $870,000, or
24% of net sales for the period. 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 percent of revenues, increased to 27% in
1995 as compared to 22.8% in 1994. The increased margins at C.E. Services
reflect a higher percentage of technical service and warehousing revenues as a
result of the dramatic reduction in revenues from resale activities. This was
offset by decreased margins at Transition Engineering as a result of lower
pricing on certain product lines due to increased competition. Margins at
Americable were relatively unchanged between years.
The Company's selling, general and administrative expenses decreased
$195,000, or 3.4%, to $5.5 million from $5.7 million in 1994. C.E. Services
had lower selling, general and administrative expenses of approximately $350,000
due primarily to staff and other expense reductions implemented in the third
quarter of 1994. Operating expenses at Americable were relatively unchanged for
the period. Americable expects, however, that its sales and marketing expenses,
as a percentage of revenues, may increase during the year through the addition
of sales personnel in new geographic locations. These anticipated increases in
operating expenses may result in lower operating profits at Americable, if the
company is unable to maintain current gross profit margins and continued sales
growth.
Transition Engineering had increased operating expenses of approximately
$155,000, which includes approximately $45,000 of higher research and product
development costs, $55,000 of increased sales and marketing expenses associated
with advertising and participation in trade shows and approximately $55,000 of
higher general and administrative expenses from the addition of administrative
and support personnel needed to support its overall growth. Transition
Engineering believes that its research and development expenses will continue to
increase in order to achieve market acceptance of new products. There can be no
assurance, however, that its research and development efforts will result in
commercially successful new products in the future. In addition Transition
Engineering believes that sales and marketing expenses may continue to increase
in terms of absolute dollars in an effort to differentiate its products and
enhance its competitive position. These anticipated increases in operating
expenses may result in lower operating profit at Transition Engineering, if
the company is unable to maintain its current gross profit margins and continued
sales growth.
The income tax benefits of $530,000 in 1995 and $390,000 in 1994 relate to
the elimination of deferred tax liabilities that will reverse as net operating
losses available for carryforward are utilized in future periods. To the extent
loss carryforwards are realized in the future, deferred taxes will be
reinstated.
-11-
<PAGE>
Equity in earnings of unconsolidated subsidiaries increased $180,000 to
$1,207,000 from $1,027,000 in the previous year. This includes an increase of
$109,000 and $71,000 in the equity in earnings of Michael Foods and CorVel,
respectively, which is a result of higher earnings at each of these companies.
Further information with respect to the results of operations of Michael
Foods and CorVel is contained in the Management's Discussion and Analysis
of Financial Condition and Results of Operation sections of their respective
quarterly report on Form 10-Q and annual report on Form 10-K for the period
ended March 31, 1995.
The Company will report discontinued operations, the loss on disposition
of approximately $3.8 million, net of an estimated income tax benefit of
approximately $1.5 million, for the quarter ended June 30, 1995. See
"Unaudited Pro Forma Condensed Consolidated Financial Information."
CAPITAL RESOURCES AND LIQUIDITY
Historically, the Company has experienced cash flow deficits from
operations. Cash used in operations was $328,000 for the three months ended
March 31, 1995, as compared to $610,000 in 1994. The Company expects 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 the three month periods ended March 31, 1995 and 1994, the Company
received dividends of $368,000. 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 Time Certificates
being offered pursuant to this Prospectus). 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. At March 31, 1995, the
Company had approximately $41.5 million principal amount of Time Certificates
subordinated debentures outstanding.
For the three months ended March 31, 1995, approximately $2.3 million or
55% of debenture maturities were reinvested in new debentures. Included within
long-term debt repayments for the three months ended March 31, 1995, is
approximately $1.8 million of redemptions of subordinated debentures. Proceeds
from long-term debt include approximately $1.5 million of new debentures sold
along with $467,000 of compounded interest on debentures. The net activity
under the debenture program for the period resulted in net cash proceeds to the
Company of approximately $100,000.
Americable and Transition Engineering maintain a revolving line of
credit and term loan facility which provides borrowings up to $5.5 million
due in May 1996. Borrowings under the revolving credit facility are based on
eligible accounts receivable and inventory with interest at prime plus 1.5%
(10.5% at March 31, 1995). At March 31, 1995, there were outstanding
borrowings of $1.1 million under the revolving line of credit and $1.4
million under the term loan.
At March 31, 1995, the Company had no borrowings outstanding under its $6.5
million revolving credit facility and approximately $2.8 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 for the remainder of the year.
-12-
<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated statements of
operations present the estimated effect of the sale of C.E. Services as if
the transaction had been consummated on January 1, 1994 and 1995. The
unaudited pro forma condensed consolidated balance sheet at March 31, 1995,
reflects this transaction on a pro forma basis as if it had been consummated
on March 31, 1995.
The unaudited pro forma condensed consolidated financial information
reflects the terms of the definitive sale agreement of C.E. Services. The
unaudited pro forma condensed consolidated financial information is based on
assumptions deemed appropriate by the Company based on its best current
judgment, which assumptions are set forth in the accompanying notes to
unaudited pro forma condensed consolidated financial information included
elsewhere in this Prospectus. The unaudited pro forma condensed consolidated
financial information is not necessarily indicative of the results that
actually would have occurred had this transaction been consummated on the
date indicated or of results of operations which may be obtained in the
future. The sale of C.E. Services was completed on May 5, 1995.
The unaudited pro forma condensed consolidated financial information
should be read in conjunction with North Star Universal, Inc. and Subsidiaries
historical consolidated financial statements and notes thereto included in the
Company's Annual Report to Shareholders for the year ended December 31, 1994,
which accompanies this Prospectus and Unaudited Condensed Consolidated Financial
Statements with respect to the Three Month Periods ended March 31, 1995 and 1994
and the Notes thereto included elsewhere in this Prospectus.
-13-
<PAGE>
NORTH STAR UNIVERSAL, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 1995
(In thousands)
<TABLE>
<CAPTION>
Eliminate Pro Forma
Historical C.E. Services Adjustments Pro Forma
---------- ------------- ----------- ---------
ASSETS (a)
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $3,462 $(513) $2,500 (b) $5,449
Accounts receivable, net 8,435 (1,152) 7,283
Inventories 7,478 (1,413) 6,065
Prepaid expenses and other 1,560 (414) 1,146
----------- ---------- ---------- ---------
Total current assets 20,935 (3,492) 2,500 19,943
Property and equipment, net 3,534 (2,054) 1,480
Investment in unconsolidated subsidiaries 77,388 0 77,388
Goodwill, net 6,772 (1,683) 5,089
Other assets 1,446 (217) 1,229
----------- ---------- ---------- ---------
$110,075 $(7,446) $2,500 $105,129
----------- ---------- ---------- ---------
----------- ---------- ---------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable and current maturities of
long-term debt $13,463 $(155) $13,308
Accounts payable and accrued expenses 10,116 (1,968) 950 (c) 9,098
----------- ---------- ---------- ---------
Total current liabilities 23,579 (2,123) 950 22,406
Long-term debt, net of current maturities 30,754 (25) 30,729
Deferred income taxes 21,512 0 (1,490) (d) 20,022
Shareholders' Equity
Common stock 2,360 0 2,360
Additional paid-in-capital 31,062 0 31,062
Retained earnings (deficit) 886 0 (2,336) (d) (1,450)
Foreign currency translation adjustment (78) 78 0
----------- ---------- ---------- ---------
Total shareholders' equity 34,230 78 (2,336) 31,972
----------- ---------- ---------- ---------
$110,075 $(2,070) $(2,876) $105,129
----------- ---------- ---------- ---------
----------- ---------- ---------- ---------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information.
-14-
<PAGE>
NORTH STAR UNIVERSAL INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Eliminate
Historical C.E. Services Pro Forma
---------- ------------- ---------
(a)
<S> <C> <C> <C>
Revenues $17,656 $(5,099) $12,557
Operating and product costs 12,881 (4,100) 8,781
--------- -------- --------
Gross profit 4,775 (999) 3,776
Selling, general, and administrative
expenses 5,515 (2,010) 3,505
--------- -------- --------
Operating income (loss) (740) 1,011 271
Interest expense, net (1,060) 1 (1,059)
--------- -------- --------
Loss before income taxes and equity in
earnings of unconsolidated
subsidiaries (1,800) 1,012 (788)
Income tax benefit (530) 320 (210)
--------- -------- --------
Loss before equity in earnings of
unconsolidated subsidiaries (1,270) 692 (578)
Equity in earnings of unconsolidated
subsidiaries 1,207 1,207
--------- -------- --------
Net income (loss) ($63) $692 $629
--------- -------- --------
--------- -------- --------
Income (loss) per share $(0.01) $0.06
--------- --------
--------- --------
Weighted average shares outstanding 9,438,000 9,836,100
--------- --------
--------- --------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information
-15-
<PAGE>
NORTH STAR UNIVERSAL INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the Year Ended December 31, 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Eliminate
Historical C.E. Services Pro Forma
---------- ------------- ---------
(a)
<S> <C> <C> <C>
Revenues $92,307 $(45,114) $47,193
Operating and product costs 73,281 (38,953) 34,328
--------- --------- ---------
Gross profit 19,026 (6,161) 12,865
Selling, general, and administrative
expenses 22,436 (8,787) 13,649
--------- --------- ---------
Operating loss (3,410) 2,626 (784)
Interest expense, net (4,232) 38 (4,194)
--------- --------- ---------
Loss before income taxes and equity in
earnings of unconsolidated
subsidiaries (7,642) 2,664 (4,978)
Income tax benefit 2,230 (580) 1,650
--------- --------- ---------
Loss before equity in earnings of
unconsolidated subsidiaries (5,412) 2,084 (3,328)
Equity in earnings of unconsolidated
subsidiaries 4,738 4,738
--------- --------- ---------
Net income (loss) $(674) $2,084 $1,410
--------- --------- ---------
--------- --------- ---------
Income (loss) per share $(0.07) $0.14
--------- ---------
--------- ---------
Weighted average shares outstanding 9,438,000 9,833,900
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
information
NORTH STAR UNIVERSAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(a) Eliminates the results of operations of C.E. Services for the year ended
December 1994 and the three months ended March 31, 1995, and the assets and
liabilities of C.E. Services as of March 31, 1995.
(b) Reflects the proceeds on the sale of C.E. Services.
(c) Reflects estimated obligations of the Company under the terms of the sale
agreement and other costs related to this sale transaction.
(d) Reflects the estimated loss on disposition of approximately $3.8 million,
net of the income tax benefit of $1.5 million at an estimated effective tax
rate of 39%.
-16-
<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 March 31, 1995, $41.5 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 with an expected termination date of April 30, 1998; however, the Company
reserves the right to terminate this offering of Time Certificates at any time
prior to such date. In compliance with Rule 3a4-1 of the Exchange Act, the
officers and employees of the Company limit their participation in the offering
of the Time Certificates to preparation of written communication or delivery of
such communication through the mail or other means that does not involve oral
solicitation by the officer or employee, responding to inquiries of a potential
purchaser in a communication initiated by the potential purchaser, or performing
ministerial and clerical work related to the offering. No underwriting
discounts or commissions of any kind will be paid to such officers or employees
in connection with this offering. Also, the Company does not use agents or
finders to locate potential purchases of Time Certificates. 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.
-17-
<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.
-18-
<PAGE>
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 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
-19-
<PAGE>
entitled to receive payment in full before the holders of the Time
Certificates are entitled to receive any payment. (Article 10).
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 March 31, 1995,
the outstanding Senior Indebtedness of the Company was $2.7 million.
Also, as of March 31, 1995, there was $41.5 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
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<PAGE>
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).
REDEMPTION BY THE HOLDER UPON DEATH OR DISABILITY; OFFERS BY THE COMPANY
TO REPURCHASE TIME CERTIFICATES. 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. Except as described above, Time Certificate holders have no
right to require redemption of amounts under the Time Certificate. Any offer to
repurchase Time Certificates made by the Company at the holders' option will be
made in compliance with any applicable tender offer rules under the Exchange
Act, including Rule 14e-1 thereunder. (Article 3).
MODIFICATION OF INDENTURE. The Indenture may be modified by the Company
and the Trustee at any time or times with the consent of the holders of not less
than a majority in principal amount of the 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).
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<PAGE>
MERGER OR REORGANIZATION OF THE COMPANY. The Indenture prohibits the
Company from consolidating or merging with or into, or transferring or leasing
all or substantially all its assets to, a third party, unless the third party
agrees to assume all obligations of the Company under the Indenture. The
Company would also remain obligated to pay the principal and interest on the
Time Certificates in the event of such a transaction. The Indenture does not
prohibit or require consent of the holders of Time Certificates for a highly
leveraged transaction, consolidation or merger which complies with the foregoing
restrictions even though such transaction, consolidation or merger could
adversely affect the holders of Time Certificates. (Section 5.01).
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.
-22-
<PAGE>
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.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
North Star Universal, Inc. and Subsidiaries
Unaudited Consolidated Financial Statements for the Three Month Periods Ended
March 31, 1995 and 1994
Condensed Consolidated Balance Sheets . . . . . . . . . . . .25
Condensed Consolidated Statements of Operations . . . . . . .26
Condensed Consolidated Statements of Cash Flows . . . . . . .27
Notes to Condensed Consolidated Financial Statements. . . . .28
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<PAGE>
North Star Universal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
-----------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,462 $ 5,102
Accounts receivable, net 8,435 8,980
Inventories 7,478 7,994
Prepaid expenses and other current assets 1,560 1,293
-----------------------
Total current assets 20,935 23,369
Property and equipment, net 3,534 3,747
Investment in unconsolidated subsidiaries 77,388 75,663
Goodwill, net 6,772 6,816
Other assets 1,446 1,498
-----------------------
$110,075 $111,093
-----------------------
-----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to bank $ 150 $ 600
Current portion of long-term debt 13,313 12,518
Accounts payable and accrued expenses 9,785 9,678
Income taxes payable 331 333
-----------------------
Total current liabilities 23,579 23,129
Long-term debt, net of current maturities 30,754 32,543
Deferred income taxes 21,512 21,225
Shareholders' Equity
Common stock, $.25 par value
100,000,000 shares authorized,
9,438,000 issued and outstanding 2,360 2,360
Additional paid-in-capital 31,062 31,015
Retained earnings 886 949
Foreign currency translation adjustment (78) (128)
-----------------------
Total shareholders' equity 34,230 34,196
-----------------------
$110,075 $111,093
-----------------------
-----------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-25-
<PAGE>
North Star Universal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1995 1994
-------------------------
<S> <C> <C>
Revenues $ 17,656 $ 23,989
Operating and product costs 12,881 18,514
-------------------------
Gross profit 4,775 5,475
Selling, general, and administrative expenses 5,515 5,710
-------------------------
Operating loss (740) (235)
Interest expense, net (1,060) (1,036)
-------------------------
Loss before income taxes and equity in
earnings of unconsolidated subsidiaries (1,800) (1,271)
Income tax benefit (530) (390)
-------------------------
Loss before equity in earnings
of unconsolidated subsidiaries (1,270) (881)
Equity in earnings of unconsolidated
subsidiaries 1,207 1,027
-------------------------
Net income (loss) $ (63) $ 146
-------------------------
-------------------------
Income (loss) per share $ (0.01) $ 0.01
-------------------------
-------------------------
Weighted average shares outstanding 9,438,000 9,834,900
-------------------------
-------------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-26-
<PAGE>
North Star Universal, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
1995 1994
-----------------------
<S> <C> <C>
Net cash used in operating activities $ (328) $ (610)
Cash flows for investing activities
Capital expenditures (119) (205)
Other (117) 235
-----------------------
Net cash used in investing activities (236) 30
-----------------------
Cash flow from financing activities
Proceeds from long-term debt 12,335 12,591
Payments on long-term debt (13,329) (12,446)
Proceeds from notes payable 675 1,150
Payments on notes payable (1,125) (850)
Cash dividends received from Michael Foods 368 368
-----------------------
Net cash provided by financing activities (1,076) 813
-----------------------
Net increase (decrease) in cash and
cash equivalents (1,640) 233
Cash and cash equivalents at beginning of period 5,102 6,981
-----------------------
Cash and cash equivalents at end of period $ 3,462 $ 7,214
-----------------------
-----------------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-27-
<PAGE>
North Star Universal, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION --
The accompanying unaudited condensed consolidated financial statements have
been prepared by North Star Universal, Inc. ("North Star" or the "Company"),
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The information furnished in the condensed consolidated
financial statements includes normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of such financial
statements. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's 1994
Annual Report to Shareholders which accompanies this Prospectus.
Revenues and operating profits for the three months ended March 31 may not
necessarily be indicative of the results to be expected for the full year.
2. SUBSEQUENT EVENT
On May 5, 1995, the Company completed the sale of its shares in Dalworth
Holdings, Inc. and subsidiaries, including C.E. Services Inc., (collectively
"C.E. Services") to Amdahl Corporation for $2.5 million cash. The loss on
disposition is estimated to be approximately $3.8 million, net of an income tax
benefit of approximately $1.5 million. This disposition will be reflected as
discontinued operations, net of applicable income tax effects, in the
consolidated financial statements for the quarter ended June 30, 1995 as follows
(in thousands):
<TABLE>
<S> <C>
Discontinued Operations -
Loss from operations, net of income tax benefit of $160 $ 245
Loss on disposition, net of income tax benefit of $1,330 2,091
-------
$ 2,336
-------
-------
</TABLE>
The following is summarized operating results of C.E. Services for the three
months ended March 31, (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------------------------
<S> <C> <C>
Revenues $5,099 $14,043
Gross profit 999 2,424
Operating income (loss) (1,011) 66
</TABLE>
The Company has amended its revolving credit facility to give effect to the sale
of C.E. Services. Unaudited condensed pro forma financial statements reflecting
this sale is included elsewhere in this Prospectus.
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<PAGE>
3. INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES --
The Company's unconsolidated subsidiaries consist of its investments in
Michael Foods, Inc. ("Michael Foods") and CorVel Corporation ("CorVel"). CorVel
has a fiscal year ended March 31. The following is summarized balance sheet and
income statement information of the Company's unconsolidated subsidiaries as of,
and for the three month period ended, March 31, 1995 (in thousands):
<TABLE>
<CAPTION>
Michael Foods CorVel
----------------------------
<S> <C> <C>
Current assets $ 93,185 $ 29,861
Noncurrent assets 243,544 12,895
Current liabilities 59,859 6,790
Noncurrent liabilities 107,775 212
Revenues 126,692 26,090
Gross profit 19,943 4,668
Net income 3,692 1,632
</TABLE>
4. INVENTORIES --
Inventories are stated at the lower of average cost (first-in, first-out)
or market. Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------------------------
<S> <C> <C>
Work in process and finished goods $ 6,034 $ 4,775
Purchased parts and supplies 1,444 3,219
--------------------------
$ 7,478 $ 7,994
--------------------------
--------------------------
</TABLE>
5. EARNINGS PER SHARE --
Earnings per share are based on the average number of shares outstanding
during the period after giving effect to the assumed exercise of outstanding
stock options, except where the effects are antidilutive.
6. INCOME TAXES --
Deferred income taxes arise from temporary differences between financial
and tax reporting. To the extent the Company's financial reporting basis in its
investment in unconsolidated subsidiaries exceeds its tax basis, and is not
expected to be realized in a tax-free manner, the Company records a deferred tax
liability. At March 31, 1995, the deferred tax liability includes a
cumulative tax effect of approximately $21.6 million and $5.1 million for the
differences in the financial reporting and tax basis of the Company's
investments in Michael Foods and CorVel, respectively.
7. RECLASSIFICATIONS --
Certain 1994 amounts have been reclassified to conform with the financial
statement presentation used in 1995. Such reclassifications had no impact on
previously reported retained earnings or net income.
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<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
Recent Developments. . . . . . . . . . . . . . 9 YEAR SUBORDINATED
Unaudited Selected Financial FIXED-TERM TIME
Data for the Three Month CERTIFICATES
Periods Ended March 31,
1995 and 1994. . . . . . . . . . . . . . . . 9
Management's Discussion and Analysis
of Financial Condition and
Results of Operations with
respect to the Three Month
Period Ended March 31, 1995. . . . . . . . . 10
Unaudited Pro Forma Condensed
Consolidated Financial
Information. . . . . . . . . . . . . . . . . 13
Use of Proceeds. . . . . . . . . . . . . . . . 17
Plan of Distribution . . . . . . . . . . . . . 17
Description of Time Certificates . . . . . . . 18
Experts. . . . . . . . . . . . . . . . . . . . 23
Legal Matters. . . . . . . . . . . . . . . . . 23
Index to Financial Statements. . . . . . . . . 24
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
May 15, 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. . . . . . . . . . . . . . . 50,000
Legal fees and expenses . . . . . . . 65,000
Accounting fees . . . . . . . . . . . 50,000
Trustee's fee . . . . . . . . . . . . 10,000
Miscellaneous . . . . . . . . . . . . 11,208
-------
Total . . . . . . . . . . . . . . . $200,000
-------
-------
</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.
*10.34 Letter Agreement, dated March 29, 1995, between the Company and
Peter E. Flynn, amending the Employment Agreement described in
Exhibit 10.19 above.
**10.35 Stock Purchase Agreement, dated May 5, 1995, by and between Amdahl
Corporation and the Company, relating to the sale of C.E. Services.
**10.36 Waiver and Seventh Amendment to Restated and Amended Revolving Credit
Loan Agreement, dated May 3, 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.
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).
II-5
<PAGE>
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.
**12.6 Computation of Ratio of Earnings to Fixed Charges for North Star
Universal, Inc. for the fiscal quarter ended March 31, 1995.
*13.4 1994 Annual Report to Shareholders of North Star Universal, Inc.
**23.1 Consent of Independent Certified Public Accountants - Grant Thornton
LLP.
**23.2 Consent of Independent Auditors - Ernst & Young
LLP
*24.1 Power of Attorney (included on the signature page of this
Registration Statement previously filed).
*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 Schedules
___________
* Previously filed.
** Filed with this Amendment No. 2 to the Registration Statement.
II-6
<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-7
<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 Amendment
No. 2 to this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, this 12th day of May, 1995.
NORTH STAR UNIVERSAL, INC.
By /s/Jeffrey J. Michael
-----------------------------------
Jeffrey J. Michael, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1933, this Amendment No. 2 to 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 May 12, 1995
- -------------------------
Miles E. Efron
JAMES H. MICHAEL* Director May 12, 1995
- -------------------------
James H. Michael
/s/Jeffrey J. Michael President, Chief Executive May 12, 1995
- ------------------------- Officer and Director
Jeffrey J. Michael (principal executive officer)
/s/Peter E. Flynn Executive Vice President, May 12, 1995
- ------------------------- Chief Financial Officer
Peter E. Flynn (principal financial and
accounting officer), Secretary
and Director
Director
- -------------------------
Fred E. Stout
RICHARD J. BRAUN* Director May 12, 1995
- -------------------------
Richard J. Braun
*By /s/ Jeffrey J. Michael
------------------------
Jeffrey J. Michael, pro se
and attorney-in-fact
II-8
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Number
- ------- ------
10.35 Stock Purchase Agreement, dated May 5, 1995, by and between
Amdahl Corporation and the Company.
10.36 Waiver and Seventh Amendment to Restated and Amended
Revolving Credit Loan Agreement.
12.6 Computation of Ratio of Earnings to Fixed Charges for
North Star Universal, Inc. for the fiscal quarter ended March 31,
1995.
23.1 Consent of Independent Certified Public Accountants-
Grant Thornton LLP
23.2 Consent of Independent Auditors-
Ernst & Young LLP
27.1 Financial Data Schedules
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT") is entered into as of May
5, 1995 by and between Amdahl Corporation ("AMDAHL"), a Delaware corporation and
North Star Universal, Inc. ("NORTH STAR"), a Minnesota corporation.
A. Dalworth Holdings, Inc. ("DALWORTH") is a wholly owned subsidiary of North
Star.
B. Dalworth Holdings, Inc. has three wholly owned subsidiaries: C.E. Services,
Inc. ("CES"), Bridging Solutions Corporation ("BSC") and Commercial
Computer Services, Inc. ("CCSI")
C. CES has two subsidiaries: C.E. Services (Europe) Ltd. ("CES EUROPE") and
Landmark Communications Services Limited ("LANDMARK EUROPE").
D. Dalworth or any of its direct or indirect subsidiaries, individually, shall
be referred to as a "DALWORTH COMPANY"; Dalworth and its direct and
indirect subsidiaries, collectively, shall be referred to as the "DALWORTH
COMPANIES".
E. North Star desires to sell all of the outstanding capital stock of Dalworth
to Amdahl and Amdahl desires to acquire such capital stock of Dalworth from
North Star on the terms and conditions set forth herein.
Amdahl and North Star hereby agree as follows:
1. SALE OF SHARES. North Star agrees to sell to Amdahl and Amdahl agrees to
purchase from North Star One Thousand (1,000) shares of Common Stock of Dalworth
Holdings, Inc. (the "SHARES") for an aggregate purchase price of Two Million
Five Hundred Thousand Dollars ($2,500,000) (the "PURCHASE PRICE"), pursuant to
the terms and conditions of this Agreement.
2. CLOSING. The purchase and sale of the Shares will take place at a closing
(the "CLOSING") held at Amdahl Corporation, 1250 East Arques Ave., Sunnyvale, CA
94088 on May 5, 1995 or at such other time and place as the Amdahl and North
Star may mutually agree (the "CLOSING DATE"). Subject to the satisfaction or
waiver of each of the conditions to the obligations of the parties set forth in
Sections 5 and 6, at the Closing, North Star will deliver to Amdahl all
certificates representing the Shares, duly endorsed to Amdahl by North Star,
against delivery of the Purchase Price for such Shares. The Purchase Price
shall be paid in cash at the Closing by wire transfer of immediately available
funds to an account designated by North Star.
3. REPRESENTATIONS AND WARRANTIES OF NORTH STAR. North Star hereby
represents and warrants to Amdahl as of the date of this Agreement, except as
set forth on a schedule attached hereto referencing the relevant section, as
follows (Whenever a representation or warranty made in this Section 3 is limited
to "the knowledge of North Star," "North Star's knowledge" or other words having
similar effect, knowledge shall mean the actual knowledge of each of the members
of North Star's executive
Amdahl Confidential
<PAGE>
management team, or each of the members of the Dalworth Companies' executive
management teams and certain other key employees or contractors of the Dalworth
Companies, all of whom are listed on Schedule 3.0, after due inquiry of the
responsible officers within each Dalworth Company.):
3.1 CORPORATE ORGANIZATION AND GOOD STANDING. Each of the Dalworth
Companies is a corporation duly organized, validly existing, and in good
standing under the laws of its state or jurisdiction of incorporation, has
the corporate power and authority to own, operate, and lease its properties
and to carry on its business as now conducted and is qualified as a foreign
corporation in each jurisdiction in which a failure to be so qualified
would reasonably be expected to have a material adverse effect on the
business, operations or financial condition of the Dalworth Companies taken
as a whole (a "MATERIAL ADVERSE EFFECT"). CES is qualified as a foreign
corporation in Illinois. None of the other Dalworth Companies is qualified
to do business as a foreign corporation in any jurisdiction. True and
complete copies of the Articles of Incorporation and Bylaws, or Memorandum
and Articles of Association, as appropriate, of each of the Dalworth
Companies are attached as EXHIBIT 3.1 hereto.
3.2 POWER AND AUTHORITY AND VALIDITY.
3.2.1 North Star has the right, corporate power and authority to
enter into and perform its obligations under this Agreement and the
Contribution Agreement. North Star's execution, delivery and
performance of this Agreement and the Release and Forgiveness
Agreement and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by North
Star by all necessary corporate action.
3.2.2 Except Exon Florio, as to which North Star makes no
representation, no filing, authorization or approval, with or by any
governmental entity, is necessary to enable North Star to enter into,
and to perform its obligations under, this Agreement, the Release and
Debt Forgiveness Agreement (as described in Section 5.3) and the
Contribution Agreement (as described in Section 6.4). North Star has
taken such steps as may be necessary to comply with the securities
and Blue Sky laws of all jurisdictions which are applicable in
connection with the transactions contemplated hereby.
3.2.3 Each of this Agreement, the Release and Debt Forgiveness
Agreement (as described in Section 5.3) and the Contribution
Agreement (as described in Section 6.4). when executed and delivered
by North Star, will be the valid and binding obligation of North
Star, enforceable against North Star in accordance with its terms,
except as to the effect, if any, of (a) applicable bankruptcy and
other similar laws affecting the rights of creditors generally, (b)
rules of law governing specific performance, injunctive relief and
other equitable remedies and (c) the enforceability of provisions
requiring indemnification in connection with the offering or sale of
securities.
2
<PAGE>
3.3 CAPITALIZATION.
3.3.1 The authorized capital stock of Dalworth Holdings, Inc.
consists of 10,000,000 shares of Common Stock, no par value, of which
1,000 shares are issued and outstanding. The authorized capital
stock of CES consists of 25,000,000 shares of Common Stock, $01 par
value, of which 1,000 shares are issued and outstanding. The
authorized capital stock of BSC consists of 10,000,000 shares of
Common Stock, $.01 par value, of which 1,000 shares are issued and
outstanding. The authorized capital stock of CCSI consists of
10,000,000 shares of Common Stock, no par value, of which 1,000
shares are issued and outstanding. The authorized capital stock of
CES Europe consists of 600,000 Ordinary Shares and 800,000 Redeemable
Preference Shares, of which 400,000 Ordinary Shares and 800,000
Redeemable Preference Shares are issued and outstanding. The
authorized capital stock of Landmark Europe consists of 1,000 shares,
of which 2 shares are issued and outstanding.
3.3.2 All issued and outstanding shares of stock of each Dalworth
Company have been duly authorized and validly issued, are fully paid
and nonassessable, and have been offered, issued, sold and delivered
by such Dalworth Company in compliance with all registration or
qualification requirements (or applicable exemptions therefrom) of
applicable federal and state securities laws. There are no options,
warrants, calls, commitments, conversion privileges or preemptive or
other rights or agreements outstanding to purchase any of the
authorized but unissued capital stock of any Dalworth Company or any
securities convertible into or exchangeable for shares of stock of
any Dalworth Company or obligating any Dalworth Company to grant,
extend or enter into any such option, warrant, call, right,
commitment, conversion privilege or other right or agreement, and
there is no liability for dividends accrued but unpaid. There are no
voting agreements, rights of first refusal or other restrictions
(other than normal restrictions on transfer under applicable federal
and state securities laws) applicable to any of the outstanding
securities of any Dalworth Company. No Dalworth Company is under any
obligation to register under the Securities Act of 1933, as amended
(the "SECURITIES ACT") any of its presently outstanding securities or
any securities that may be subsequently issued.
3.4 SUBSIDIARIES. Except for (i) CES, BSC and CCSI, each of which is
wholly owned by Dalworth and (ii) CES Europe and Landmark Europe, each of
which is wholly owned by CES (except that C.B. Russey owns one Ordinary
Share of CES Europe and one share of Landmark Europe, each of which will be
transferred to an affiliate of Amdahl pursuant to Section 6.7 (Transfer of
Shares in European Subsidiaries by C.B. Russey)), none of the Dalworth
Companies have any subsidiaries or any ownership interest, direct or
indirect, in any corporation, partnership, joint venture or other business
entity.
3.5 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution and
delivery of this Agreement, the Release and Debt Forgiveness Agreement (as
described
3
<PAGE>
in Section 5.3) and the Contribution Agreement (as described in
Section 6.4). by North Star nor the performance by North Star of its
obligations pursuant hereto and thereto, will conflict with, or (with or
without notice or lapse of time, or both) result in a termination, breach,
impairment or violation of (a) any provision of the Articles of
Incorporation or Bylaws of North Star or any Dalworth Company, as currently
in effect, (b) any "Material Agreement," as defined in Section 3.9 (Certain
Material Agreements), to which any Dalworth Company or North Star is a
party or by which any Dalworth Company or North Star is bound, or (c) any
federal, state, local or foreign judgment, writ, decree, order, statute,
rule or regulation applicable to North Star or any Dalworth Company or
their respective assets or properties. The consummation of the transaction
contemplated hereby the Release and Debt Forgiveness Agreement (as
described in Section 5.3) and the Contribution Agreement (as described in
Section 6.4). will not require the consent of any third party.
3.6 LITIGATION. To North Star's knowledge, there is no action,
proceeding, claim or investigation pending against North Star or any
Dalworth Company before any court or administrative agency that, if
determined adversely to North Star or such Dalworth Company, may reasonably
be expected to have a Material Adverse Effect, nor, to North Star's
knowledge, has any such action, proceeding, claim or investigation been
threatened, nor, to North Star's knowledge, is there any reasonable basis
therefor. There is, to North Star's knowledge, no reasonable basis for any
stockholder or former stockholder of any Dalworth Company, or any other
person, firm, corporation or entity, to assert a claim against such
Dalworth Company or Amdahl based upon: (a) ownership or rights to
ownership of any shares of any Dalworth Company stock, (b) any rights as a
Dalworth Company stockholder, including any option or preemptive rights or
rights to notice or to vote or (c) any rights under any agreement among any
Dalworth Company and its stockholders.
3.7 TAXES. Each Dalworth Company has filed all federal, state, local and
foreign tax returns required to be filed, has paid all taxes required to be
paid in respect of all periods for which returns have been filed, has
established an adequate accrual or reserve for the payment of all taxes
payable in respect of the periods subsequent to the periods covered by the
most recent applicable tax returns, has made all necessary estimated tax
payments, and has no liability in excess of $25,000 for taxes in excess of
the amount so paid or accruals or reserves so established. No Dalworth
Company is delinquent in the payment of any tax or is delinquent in the
filing of any tax returns, and no deficiencies for any tax have been
threatened, claimed, proposed or assessed. For the purposes of this
Agreement the terms "TAX" and "TAXES" include all federal, state, local and
foreign income, gains, franchise, excise, property, sales, use, employment,
license, payroll, occupation, recording, value added or transfer taxes,
governmental charges, fees, levies or assessments (whether payable directly
or by withholding), and, with respect to such taxes, any estimated tax,
interest and penalties and additions to tax.
3.8 DALWORTH COMPANY FINANCIAL STATEMENTS. North Star has delivered to
Amdahl as EXHIBIT 3.8 the audited consolidated balance sheet of the
Dalworth
4
<PAGE>
Companies as of December 31, 1994, the unaudited consolidated balance sheet
of the Dalworth Companies as of March 31, 1995 (the "BALANCE SHEET"), and
income statements and statements of cash flows for the year ended December
31, 1994 and the quarter ended March 31, 1995 (collectively the "FINANCIAL
STATEMENTS"). The Financial Statements (a) are in accordance with the
books and records of the Dalworth Companies, (b) fairly present the
financial condition of the Dalworth Companies at the date therein indicated
and the results of operations for the period therein specified and (c) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis. The Dalworth Companies have no debt,
liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise which would be required to be, but are not,
reflected in the Financial Statements under generally accepted accounting
principles, except for those that may have been incurred after the date of
the Financial Statements in the ordinary course of business, consistent
with past practice and that are not in excess of $25,000 either
individually or collectively.
3.9 CERTAIN MATERIAL AGREEMENTS. No Dalworth Company is a party or
subject to any of the following oral or written agreements (collectively,
"MATERIAL AGREEMENTS"):
(a) Maintenance contract providing for payments by or to any
Dalworth Company in an aggregate amount of $200,000 or more or any other
contract providing for payments by or to any Dalworth Company in an
aggregate amount of $25,000 or more;
(b) License agreement as licensor or licensee (except for standard
non-exclusive hardware and software licenses (i) granted to end-user
customers of any Dalworth Company in the ordinary course of business, the
forms of which have been delivered to Amdahl or of which Amdahl has been
made aware or (ii) licensed from a third party by any Dalworth Company in
the ordinary course of business).
(c) Agreement for the purchase, sale or lease of real property;
(d) Agreement for the purchase, sale or lease of personal property
requiring payments by or to any Dalworth Company in an aggregate amount of
$25,000 or more
(e) Joint venture contract or arrangement or any other agreement
that involves a sharing of profits with other persons;
(f) Instrument evidencing indebtedness for borrowed money by way of
direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise, except for trade indebtedness
incurred in the ordinary course of business, and except as disclosed in the
Financial Statements; or
(g) Contract containing covenants purporting to limit any Dalworth
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Company's freedom to compete in any line of business in any geographic
area.
All agreements, contracts, plans, leases, instruments, arrangements,
licenses and commitments listed in the Schedule attached hereto relating to
this Section (herein, collectively, the "DALWORTH MATERIAL AGREEMENTS") are
valid, binding, in full force and effect, and enforceable against the other
party thereto in accordance with their terms, except as to the effect, if
any, of (a) applicable bankruptcy and other similar laws affecting the
rights of creditors generally and (b) rules of law governing specific
performance, injunctive relief and other equitable remedies. No Dalworth
Company is, nor, to the knowledge of North Star, is any other party
thereto, in breach or default in any material respect under the terms of
any Dalworth Material Agreement, which breach or default may reasonably be
expected to have a Material Adverse Effect.
3.10 TITLE TO PROPERTIES. Each Dalworth Company has good and marketable
title to all of its assets as shown on the Balance Sheet, free and clear of
all liens, charges, restrictions or encumbrances (other than for taxes not
yet due and payable). To the knowledge of North Star, all machinery,
equipment, tools and other personal property included in such properties is
in good condition and repair, normal wear and tear excepted, and all leases
of real or personal property to which any Dalworth Company is a party are
fully effective and afford such Dalworth Company peaceful and undisturbed
possession of the subject matter of the lease. During the five-year period
prior to the date of this Agreement, no Dalworth Company has received any
written notice that it is in violation of any zoning, building, safety or
environmental ordinance, regulation or requirement or other law or
regulation applicable to the operation of owned or leased properties, the
violation of which would have a Material Adverse Effect.
3.11 ABSENCE OF CERTAIN CHANGES. Since the date of the Balance Sheet,
there has not been with respect to any Dalworth Company:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations thereof which change by itself or in
conjunction with all other such changes, whether or not arising in the
ordinary course of business, has a Material Adverse Effect thereon;
(b) any material change in any method of accounting or accounting
practice of the Dalworth Companies;
(c) any notes or accounts receivable or portions thereof, which are
in excess of $25,000 individually or in the aggregate, written off as
uncollectible;
(d) any contingent liability incurred thereby as guarantor with
respect to the obligations of others;
(e) any mortgage, encumbrance or lien placed on any of the
properties thereof except for statutory or common law liens arising in the
ordinary course of business (e.g. materialmen's liens);
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(f) any obligation or, to the knowledge of North Star, liability
incurred thereby in excess of $25,000 individually or in the aggregate
other than obligations and liabilities incurred in the ordinary course of
business;
(g) any purchase or sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of
the properties or assets thereof other than in the ordinary course of
business;
(h) any damage, destruction or loss, whether or not covered by
insurance that has had or is reasonably expected to have a Material Adverse
Effect;
(i) any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, the capital stock
thereof; any split, combination or recapitalization of the capital stock
thereof or any direct or indirect redemption, purchase or other acquisition
of the capital stock thereof;
(j) any labor dispute to which any Dalworth Company is a party or
claim of unfair labor practices, any change in the compensation payable or
to become payable to any of its officers, employees or agents, or any bonus
payment or arrangement made to or with any of such officers, employees or
agents other than in the ordinary course of business;
(k) any change with respect to the management, supervisory or other
key personnel thereof;
(l) any payment or discharge of a lien relating to a liability or
obligation in excess of $25,000, which lien or liability was not either
shown on the Balance Sheet or incurred in the ordinary course of business
thereafter; or
(m) any obligation or liability incurred thereby to any of its
officers, directors or stockholders, or any loans or advances made thereby
to any of its officers, directors or stockholders, except normal
compensation and expense allowances payable to officers.
3.12 INTELLECTUAL PROPERTY. The Dalworth Companies own, or have the right
to use, sell or license all material Intellectual Property Rights (as
defined below) reasonably required for the conduct of their respective
businesses as presently conducted (such Intellectual Property Rights being
hereinafter collectively referred to as the "DALWORTH IP RIGHTS") and such
rights to use, sell or license are reasonably sufficient for such conduct
of their respective businesses. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
will not constitute a material breach of any instrument or agreement
governing any Dalworth IP Right (the "DALWORTH IP RIGHTS AGREEMENTS"), will
not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any Dalworth IP Right or materially impair the
right of any Dalworth Company to use, sell or license any Dalworth IP Right
or portion thereof, except where such breach, forfeiture or termination
would not have a Material Adverse Effect. There are no royalties,
honoraria, fees or other
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payments payable by any Dalworth Company to any person by reason of the
ownership, use, license, sale or disposition of the Dalworth IP Rights
(other than as set forth in SCHEDULE 3.12(a)). Neither the manufacture,
marketing, license, sale or intended use of any product currently licensed
or sold by any Dalworth Company or currently under development by any
Dalworth Company, nor any other aspect of the business of any Dalworth
Company as presently conducted, violates or will as a result of the change
of control resulting from the transactions set forth herein cause Amdahl or
any Dalworth Company to violate any license or agreement between any
Dalworth Company and any third party or infringes or will, as a result of
the change of control resulting from the transactions set forth herein,
cause Amdahl or any Dalworth Company to infringe any Intellectual Property
Right of any other party. There is no pending or, to the knowledge of
North Star, threatened claim or litigation contesting the validity,
ownership or right to use, sell, license or dispose of any Dalworth IP
Right nor, to the knowledge of North Star, is there any reasonable basis
for any such claims, nor has any Dalworth Company received any notice
asserting that any Dalworth IP Right or the proposed use, sale, license or
disposition thereof conflicts or will conflict with the rights of any other
party, nor, to the knowledge of North Star, is there any reasonable basis
for any such assertion. Each Dalworth Company has taken reasonable and
practicable steps designed to safeguard and maintain the secrecy and
confidentiality of, and its proprietary rights in, all material Dalworth IP
Rights. All officers, employees and consultants of each Dalworth Company
have executed and delivered to the respective Dalworth Company an agreement
regarding the protection of proprietary information in the form attached
hereto as EXHIBIT 3.12(b). All of the officers, employees and consultants
of the Dalworth Companies listed on SCHEDULE 3.12(c), which list includes
all individuals who have been involved in the development of software or
any other invention or work of authorship on behalf of any Dalworth
Company, have executed and delivered to the respective Dalworth Company an
agreement in the form attached as Exhibit 3.12(d) regarding the assignment
to such Dalworth Company of all Intellectual Property Rights arising from
the services performed for such Dalworth Company. SCHEDULE 3.12(e)
contains a list of all applications, registrations, filings and other
formal actions made or taken pursuant to federal, state and foreign laws by
each Dalworth Company to perfect or protect its interest in Dalworth IP
Rights, including, without limitation, all patents, patent applications,
trademarks, trademark applications and service marks. As used herein, the
term "INTELLECTUAL PROPERTY RIGHTS" shall mean patents, patent
applications, patent rights, copyrights, copyright applications,
trademarks, trademark applications, trade names, service marks, service
mark licenses, know-how, trade secrets, customer lists, proprietary
processes and formulae, all source and object code, algorithms,
architecture, structure, display screens, layouts, inventions, development
tools and all documentation and media constituting, describing or relating
to the above, including, without limitation, manuals, memoranda and
records.
3.13 COMPLIANCE WITH LAWS. To the knowledge of North Star, each Dalworth
Company has complied, or prior to the Closing Date will have complied, and
is or will be at the Closing Date in full compliance, in all material
respects with all applicable laws, ordinances, regulations and rules
(collectively, "APPLICABLE
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LAWS"), excluding all Applicable Laws relating to environmental protection,
employment matters, ERISA, as hereinafter defined, and Taxes, with respect
to which North Star makes certain representations elsewhere in this
Agreement, and all orders, writs, injunctions, awards, judgments and
decrees applicable to it or to the assets properties and business thereof,
the violation of which would have a Material Adverse Effect. Each of the
Dalworth Companies has received all permits and approvals from, and has
made all filings with, all government agencies and authorities that are
reasonably necessary in connection with its present business, except where
the failure to have obtained any permit or approval or to have made any
filing would not reasonably be expected to have a Material Adverse Effect.
3.14 EMPLOYEES; ERISA AND OTHER COMPLIANCE.
3.14.1 Except as set forth in SCHEDULE 3.14.1, no Dalworth Company
has any written employment contracts or consulting agreements
currently in effect that are not terminable at will (other than
agreements with the sole purpose of providing for the confidentiality
of proprietary information or assignment of inventions).
3.14.2 SCHEDULE 3.14.2 identifies (i) each "EMPLOYEE BENEFIT PLAN,"
as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"); (ii) all other material written or
formal plans or agreements involving direct or indirect compensation
or benefits (including any employment agreements entered into between
any Dalworth Company and any employee thereof, but excluding workers'
compensation, unemployment compensation and other government-mandated
programs); and (iii) all other severance or similar contracts,
arrangements (written or oral) providing for insurance coverage
(including self-insured arrangements), vacation benefits, severance
benefits, hospitalization benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock purchase,
phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits
for employees, consultants or directors; entered into, currently
maintained or maintained within the last 3 years, contributed to or
entered into by any Dalworth Company under which any Dalworth Company
or any ERISA Affiliate (as defined below) thereof has any present or
future obligation or liability (collectively, the "DALWORTH EMPLOYEE
PLANS"). For purposes of this Section, "ERISA AFFILIATE" shall mean
any entity which is a member of (A) a "CONTROLLED GROUP OF
CORPORATIONS," as defined in Section 414(b) of the Internal Revenue
Code of 1986, as amended (the "CODE"), (B) a group of entities under
"COMMON CONTROL," as defined in Section 414(c) of the Code, or (C) an
"AFFILIATED SERVICE GROUP," as defined in Section 414(m) of the Code,
or treasury regulations promulgated under Section 414(i) of the Code,
any of which includes a Dalworth Company. Copies of all Dalworth
Employee Plans (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof (including
summary plan descriptions) have been delivered to Amdahl, and the
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three most recent annual reports (Form 5500, including, if
applicable, Schedule B thereto) prepared in connection with any such
Dalworth Employee Plan have been made available to Amdahl for
examination. All Dalworth Employee Plans which individually or
collectively would constitute an "EMPLOYEE PENSION BENEFIT PLAN," as
defined in Section 3(2) of ERISA (collectively, the "DALWORTH PENSION
PLANS"), are identified as such in SCHEDULE 3.14.2. All
contributions due from any Dalworth Company with respect to any of
the Dalworth Employee Plans have been made as required under ERISA or
have been accrued on any such Dalworth Company's financial statements
as of December 31, 1994. Each Dalworth Employee Plan has been
maintained substantially in compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and
regulations, including, without limitation, ERISA and the Code, which
are applicable to such Dalworth Employee Plans.
3.14.3 No Dalworth Pension Plan constitutes, or has since the
enactment of ERISA constituted, a "MULTIEMPLOYER PLAN," as defined in
Section 3(37) of ERISA. No Dalworth Pension Plans are subject to
Title IV of ERISA. No "PROHIBITED TRANSACTION," as defined in
Section 406 of ERISA or Section 4975 of the Code, has occurred with
respect to any Dalworth Employee Plan which is covered by Title I of
ERISA which would result in a liability in excess of $25,000 to the
Dalworth Companies, taken as a whole, excluding transactions effected
pursuant to a statutory or administrative exemption. Nothing done or
omitted to be done and no transaction or holding of any asset under
or in connection with any Dalworth Employee Plan has or will make any
Dalworth Company or any officer or director of a Dalworth Company
subject to any liability in excess of $25,000 under Title I of ERISA
or liable for any tax or penalty pursuant to Section 4972, 4975, 4976
or 4979 of the Code or Section 502 of ERISA in excess of $5,000.
3.14.4 Any Dalworth Pension Plan which is intended to be qualified
under Section 401(a) of the Code (a "DALWORTH 401(a) PLAN") is so
qualified and has been so qualified during the period from its
adoption to date, and the trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code. North Star has either
(i) delivered to Amdahl or (ii) provided to an Amdahl employee for
inspection, a complete and correct copy of the most recent Internal
Revenue Service determination letter with respect to each Dalworth
401(a) Plan.
3.14.5 There has been no amendment to, written interpretation or
announcement (whether or not written) by any Dalworth Company
relating to, or change in employee participation or coverage under,
any Dalworth Employee Plan that would increase by more than $25,000
the expense of maintaining such Dalworth Employee Plan above the
level of the expense incurred in respect thereof for the fiscal year
ended December 31, 1994.
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3.14.6 Each Dalworth Company has provided, or will have provided
prior to the Closing, to individuals entitled thereto all required
notices and coverage pursuant to Section 4980B of the Code and the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), with respect to any "QUALIFYING EVENT" (as defined in
Section 4980B(f)(3) of the Code) occurring prior to and including the
Closing Date (other than any notice that would be required with
respect to any action that Amdahl intends to take or cause any
Dalworth Company to take after the Closing Date), and no tax in
excess of $25,000 payable on account of Section 4980B of the Code has
been incurred with respect to any current or former employees (or
their beneficiaries) of any Dalworth Company.
3.14.7 Each Dalworth Company is in compliance in all material
respects with all applicable laws, agreements and contracts relating
to employment, employment practices, wages, hours, and terms and
conditions of employment, including, but not limited to, employee
compensation matters, except where the failure to comply would not
reasonably be expected to have a Material Adverse Effect.
3.14.8 To North Star's knowledge, no employee of any Dalworth
Company is in violation of any term of any employment contract,
patent or confidential information disclosure agreement,
noncompetition agreement, or any other contract or agreement, or any
restrictive covenant relating to the right of any such employee to be
employed by the Dalworth Company, or to use trade secrets or
proprietary information of others, and the employment of such
employees does not subject any Dalworth Company to any liability.
3.14.9 A list of employees, officers and consultants of the Dalworth
Companies, as of May 3, 1995 and their current salary as of May 3,
1995 is set forth on SCHEDULE 3.14.9.
3.14.10 No Dalworth Company is a party to any (a) agreement with any
executive officer or other key employee thereof (i) the benefits of
which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving a Dalworth Company in
the nature of the transaction contemplated by this Agreement, (ii)
providing any term of employment or compensation guarantee, or (iii)
providing severance benefits or other benefits after the termination
of employment of such employee regardless of the reason for such
termination of employment, or (b) agreement or plan, including,
without limitation, any stock option plan, stock appreciation rights
plan or stock purchase plan, any of the benefits of which will be
accelerated, by the occurrence of the transaction contemplated by
this Agreement or the value of any of the benefits of which will be
calculated on the basis of the transaction contemplated by this
Agreement.
3.15 CORPORATE DOCUMENTS. North Star has made available to Amdahl for
examination all documents and information listed in the schedules or
exhibits
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called for by this Agreement which have been requested by Amdahl or its
legal counsel, including, without limitation, the following: (a) copies of
the Articles of Incorporation and Bylaws of each Dalworth Company as
currently in effect; (b) the minute books of each Dalworth Company
containing all records of all proceedings, consents, actions and meetings
of the stockholders, the board of directors and any committees thereof; (c)
the stock ledger and journal of each Dalworth Company reflecting all stock
issuances and transfers; and (d) all permits, orders, and consents issued
by any regulatory agency with respect to each Dalworth Company, or any
securities of each Dalworth Company, and all applications for such permits,
orders, and consents.
3.16 NO BROKERS. Neither North Star nor any Dalworth Company is obligated
for the payment of fees or expenses of any investment banker, broker or
finder in connection with the origin, negotiation or execution of this
Agreement or in connection with the transaction contemplated hereby.
3.17 INSURANCE. Each Dalworth Company maintains and at all times during
the prior three years has maintained fire and casualty, general liability,
business interruption, and product liability insurance at least in the
amounts set forth on SCHEDULE 3.17, which coverage is in effect as of the
Closing Date.
3.18 ENVIRONMENTAL MATTERS.
3.18.1 During the period that each Dalworth Company has leased its
respective properties, there have been no disposals or releases of
Hazardous Materials (as defined below)caused by any Dalworth Company
or, to North Star's knowledge, by any third party on, from or under
such properties or facilities the clean up or remediation of which is
required by any Dalworth Company under any Environmental laws and
would have a Material Adverse Effect. North Star has no knowledge of
any, disposals, releases or threatened releases of Hazardous
Materials on, from or under any of such properties or facilities
which may have occurred prior to the respective Dalworth Company
taking possession of any of such properties or facilities. North Star
has no knowledge of any presence of Hazardous Materials on or under
any of such properties or facilities which may have occurred prior to
the respective Dalworth Company taking possession of any of such
properties or facilities, the release or mishandling of which could
result in a Material Adverse Effect. For purposes of this Agreement,
the terms "DISPOSAL", "RELEASE" and "THREATENED RELEASE" have the
definitions assigned thereto by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section
9601 ET SEQ., as amended ("CERCLA"). For the purposes of this
Section, "HAZARDOUS MATERIALS" means any hazardous or toxic
substance, material or waste which is or becomes prior to the Closing
regulated under, or defined as a "HAZARDOUS SUBSTANCE," "POLLUTANT,"
"CONTAMINANT," "TOXIC CHEMICAL," "HAZARDOUS MATERIAL," "TOXIC
SUBSTANCE" or "HAZARDOUS CHEMICAL" under (I) CERCLA; (ii) the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Section 11001 ET SEQ.; (iii) the Hazardous Materials Transportation
Act,
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49 U.S.C. Section 1801, ET SEQ.; (iv) the Toxic Substances Control
Act, 15 U.S.C. Section 2601 ET SEQ.; (v) the Occupational Safety and
Health Act of 1970, 29 U.S.C. Section 651 ET SEQ.; (vi) regulations
promulgated under any of the above statutes; or (vii) any applicable
state or local statute, ordinance, rule or regulation that has a
scope or purpose similar to those identified above.
3.18.2 To the knowledge of North Star, none of the properties or
facilities of any Dalworth Company is in violation of any applicable
federal, state or local law, ordinance, regulation or order relating
to the industrial hygiene or environmental conditions on, under or
about such properties or facilities, including but not limited to,
soil and ground water condition, the fine for which violation is in
excess of $25,000 or which violation would have a Material Adverse
Effect. During the time that any Dalworth Company has owned or leased
its respective properties and facilities, neither such Dalworth
Company nor, to North Star's knowledge, any third party, has used,
generated, manufactured or stored on, under or about such properties
or facilities or transported to or from such properties or facilities
any Hazardous Materials other than in material compliance with law.
3.18.3 During the time that each of the Dalworth Companies has
leased their respective properties and facilities, there has been no
litigation, proceeding or administrative action brought or threatened
in writing against any such Dalworth Company, or any settlement
reached by any such Dalworth Company with, any party or parties
alleging the presence, disposal, release or threatened release of any
Hazardous Materials on, from or under any of such premises.
3.19 CERTAIN TRANSACTIONS AND AGREEMENTS. None of the officers or
directors of any Dalworth Company, nor any "AFFILIATE" or "ASSOCIATE" (as
such terms are defined in the rules and regulations promulgated under the
Securities Act) of any Dalworth Company, has any direct or indirect
ownership interest in any firm or corporation that competes with any
Dalworth Company, except with respect to (i) any interest in less than one
percent of the stock of any corporation whose stock is publicly traded,
(ii) the ownership interest of Dalworth in each of the other Dalworth
Companies and (iii) the ownership interest of CES in each of CES Europe and
Landmark Europe. None of such persons is directly or indirectly interested
in any contract or informal arrangement with any Dalworth Company, except
for (i) normal compensation for services as an officer, director or
employee thereof, (ii) transactions by and among the Dalworth Companies and
(iii) arrangements relating to the payment of Dalworth Company taxes,
maintenance of employee benefit plans covering Dalworth Company employees,
maintenance of insurance covering the Dalworth Companies and their
employees and certain cash advances made by North Star to the Dalworth
Companies. Except indirectly as a result of stock ownership, none of such
persons has any interest in any property, real or personal, tangible or
intangible, including inventions, patents, copyrights, trademarks or trade
names or any trade secrets, used in or pertaining to the business of any
Dalworth Company.
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4. REPRESENTATIONS AND WARRANTIES OF AMDAHL. Amdahl hereby represents and
warrants to North Star that the following statements are true, accurate and
correct:
4.1 POWER AND AUTHORITY AND VALIDITY.
4.1.1 Amdahl has the right, corporate power and authority to enter
into and perform its obligations under this Agreement, the Assumption
of Lease Guarantee (as described in Section 5.2) and the Assignment
and Assumption of Loan Guarantee (as described in Section 5.4).
Amdahl's execution, delivery and performance of this Agreement, the
Assumption of Lease Guarantee and the Assignment and Assumption of
Loan Guarantee and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by Amdahl
by all necessary corporate action.
4.1.2 No filing, authorization or approval, with or by any
governmental entity, is necessary to enable Amdahl to enter into, and
to perform its obligations under, this Agreement , the Assumption of
Lease Guarantee and the Assignment and Assumption of Loan Guarantee.
4.1.3 Each of this Agreement , the Assumption of Lease Guarantee and
the Assignment and Assumption of Loan Guarantee, when executed and
delivered by Amdahl will be the valid and binding obligation of
Amdahl, enforceable against Amdahl in accordance with its terms,
except as to the effect, if any, of (a) applicable bankruptcy and
other similar laws affecting the rights of creditors generally, (b)
rules of law governing specific performance, injunctive relief and
other equitable remedies and (c) the enforceability of provisions
requiring indemnification in connection with the offering or sale of
securities.
4.2 NO BROKERS. Amdahl is not obligated for the payment of fees or
expenses of any investment banker, broker or finder in connection with the
origin, negotiation or execution of this Agreement or in connection with
the transaction contemplated hereby.
4.3 INVESTMENT INTENT. Amdahl is purchasing the Shares for its own
account with the present intention of holding the Shares for purposes of
investment and not with a view toward selling or distributing all or any
part thereof in any transaction which would constitute a distribution
within the meaning of the Securities Act of 1933. Amdahl will refrain from
transferring or otherwise disposing of any of the Shares or any interest
therein, in such a manner as to cause North Star to be in violation of the
registration requirements of the Securities Act of 1933, or applicable
state securities or blue sky laws.
4.4 NO VIOLATION OF EXISTING AGREEMENT. Neither the execution and
delivery of this Agreement and the Amdahl Assumption Agreement by Amdahl
nor the performance by Amdahl of its obligations pursuant hereto and
thereto will (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of (a) any provision of the
Articles of Incorporation or
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Bylaws of Amdahl, as currently in effect, or (b) any federal, state, local
or foreign judgment, writ, decree, order, statute, rule or regulation
applicable to Amdahl or its assets or properties.
4.5 NO PRESENT INTENT TO ORDER PLANT CLOSING OR MASS LAYOFF. Amdahl has
no present intent to cause any Dalworth Company to order a "plant closing"
or "mass layoff" within the meaning of the Worker Adjustment and Retraining
Notification Act (29 U.S.C. Sections 2101- 2109). Nothing in this Section
shall restrict Amdahl's right to cause any Dalworth Company to order a
plant closing or mass layoff after the date of this Agreement.
4.6 NO PRESENT INTENT TO TERMINATE EMPLOYMENT OF EXECUTIVE OFFICERS.
Amdahl has no present intent to terminate, or cause any Dalworth Company to
terminate, the employment of any of the following Dalworth Company
executive officers immediately following the Closing: C.B. Russey, Douglas
T. McLeod, Herbert W. Whitney, W. Clark Marting Robert B. Knight, Brian
Thorby, David A. Riggs, Ebrahim Ismail and Charles Myers (individually, an
"EXECUTIVE OFFICER"). Nothing in this Section shall restrict Amdahl's
right to make a decision after the Closing to terminate, or cause a
Dalworth Company to terminate, the employment of any Executive Officer for
any reason or no reason. No Executive Officer shall be entitled to rely on
the representation set forth in this Section for any purpose and no such
Executive Officer shall be deemed a third party beneficiary of any portion
of this Agreement.
4.7 NO FOREIGN PERSON OWNS MAJORITY OF AMDAHL STOCK. No non-U.S. citizen
or entity domiciled outside of the U.S. owns fifty percent (50%) or more of
the outstanding common stock of Amdahl.
5. CONDITIONS TO OBLIGATIONS OF NORTH STAR. North Star's obligations
hereunder are subject to the fulfillment or satisfaction, on and as of the
Closing, of each of the following conditions (any one of which may be waived by
North Star, but only in a writing signed by North Star):
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Amdahl set forth in Section 4 (Representations and Warranties
of Amdahl) shall be true and accurate in every material respect on and as
of the Closing Date with the same force and effect as if they had been made
at the Closing, and North Star shall receive a certificate to such effect
executed by Amdahl's Vice President and General Manager, Customer Service.
5.2 AMDAHL'S ASSUMPTION OF LEASE GUARANTEE. Amdahl shall have executed
the Assumption of Lease Guarantee in the form attached hereto as Exhibit
5.2 (the "AMDAHL ASSUMPTION AGREEMENT").
5.3 RELEASE AND DEBT FORGIVENESS AGREEMENT. Amdahl shall have executed,
indicating its assent thereto, that certain Release and Debt Forgiveness
Agreement in the form attached hereto as Exhibit 5.3 (the "DEBT FORGIVENESS
AGREEMENT"), between each of the Dalworth Companies and North Star.
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5.4 AMDAHL'S ASSUMPTION OF GUARANTEE OF CES BORROWINGS FROM TEXAS
COMMERCE BANK. Amdahl shall have executed the Assignment and Assumption of
Loan Guarantee in the form attached hereto as Exhibit 5.4
6. CONDITIONS TO OBLIGATIONS OF AMDAHL. Amdahl's obligations hereunder are
subject to the fulfillment or satisfaction, on and as of the Closing, of each of
the following conditions (any one of which may be waived by Amdahl, but only in
a writing signed by Amdahl):
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of North Star set forth in Section 3 (Representations and
Warranties of North Star) shall be true and accurate in every material
respect on and as of the Closing with the same force and effect as if they
had been made at the Closing, and Amdahl shall receive a certificate to
such effect executed by North Star's Executive Vice President and Chief
Financial Officer.
6.2 GOOD STANDING CERTIFICATES. Amdahl shall have received from North
Star long-form Certificates of Status dated on or after a date one week
prior to the Closing Date from the secretary of state, department of
corporations or other similar agency, as appropriate, and franchise tax
board of (i) each of the states of Texas and Illinois, stating that CES is
in good standing in each such state and (ii) the State of Texas, stating
that each of Dalworth, BSI and CCSI is in good standing in such state.
6.3 BOARD RESOLUTIONS APPROVING TRANSACTION. Certified copies of the
resolutions of North Star's board of directors authorizing the execution
and delivery of this Stock Purchase Agreement, North Star's assumption of
Bracknell Leases and related guarantee, and Release and Debt Forgiveness
Agreement and the performance of North Star of its obligations thereunder.
6.4 INTERCOMPANY INDEBTEDNESS. North Star shall have provided Amdahl a
resolution of its Board of Directors authorizing and approving a
contribution to the capital of Dalworth of the full amount of the
intercompany indebtedness owed by all of the Dalworth Companies to North
Star as of the Closing Date, and all interest accrued as of the Closing
Date. North Star and CES shall have executed the Contribution Agreement,
in the form attached hereto as Exhibit 6.4.
6.5 RELEASE AND DEBT FORGIVENESS AGREEMENT. Each of the Dalworth
Companies and North Star shall have executed the Release and Debt
Forgiveness Agreement, in the form attached hereto as Exhibit 5.3.
6.6 TRANSFER OF SHARES IN EUROPEAN SUBSIDIARIES BY C.B. RUSSEY. C.B.
Russey shall have assigned all right title and interest in any and all
shares of stock owned by him in CES Europe and Landmark Europe to Amdahl
(UK) Limited.
6.7 FIRPTA. Amdahl shall have received a properly executed Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA") Notification Letter,
in form and substance satisfactory to Amdahl, which states that North Star
does
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not constitute a "FOREIGN PERSON" under the Code and includes North Star's
taxpayer identification number and office address, for purposes of
satisfying Amdahl's obligations under Treasury Regulation Section 1.1445-
2(b)(2).
6.8 RESIGNATION OF DIRECTORS. The directors of each of the Dalworth
Companies in office immediately prior to the Closing shall have resigned as
directors, as of the Closing.
7. POST-CLOSING COVENANTS.
7.1 SECTION 338(h)(10) ELECTION. Amdahl and North Star mutually agree
that they will make and timely file joint elections under Section
338(h)(10) of the Code and Section 1.338(h)(10)-1 of the Federal Income Tax
Regulations (the "REGULATIONS") for and on behalf of each Dalworth Company
that is a U.S. domestic corporation. The Code Section 338(h)(10) elections
are to be made on Internal Revenue Service Forms 8023 and/or 8023-A in
accordance with the relevant Regulations and the instructions to such
forms. Amdahl and North Star shall act in good faith to agree upon the
Modified Aggregate Deemed Sale Price (as defined in the Regulations) and
the allocation of such price among the assets of such Dalworth Companies in
accordance with the Regulations, and shall file in all tax returns on a
basis consistent with such allocation. The parties understand that under
the Code Section 338(h)(10) election, each Dalworth Company for whom the
election is made will be deemed, for tax purposes, to have sold all of its
assets and distributed the proceeds in complete liquidation, while the
actual or deemed sale of such Dalworth Company's stock is ignored. North
Star agrees that it is solely responsible for any tax liabilities resulting
from the deemed sales of assets pursuant to the Code Section 338(h)(10)
elections.
7.2 STATE AND LOCAL TAX CODE ELECTION. Amdahl and North Star agree to
jointly comply with the requirements under any applicable state and local
law, including, in particular, California Revenue and Taxation Code Section
23051.5, so that the joint elections under Code Section 338(h)(10) for
federal income tax purposes are also valid and effective elections for
purposes of such state and local tax laws, including the California
franchise tax.
7.3 EMPLOYEE WELFARE PLANS AND WORKERS' COMPENSATION INSURANCE. Amdahl
and North Star acknowledge and agree that North Star will terminate all of
the welfare benefit plans set forth on Schedule 7.3 as they relate to the
employees of each of the Dalworth Companies and North Star will terminate
all workers' compensation insurance coverage relating the employees of each
of the Dalworth Companies as of the earlier of (i) Amdahl's notice that it
has set up substitute welfare benefits plans or procured workers'
compensation insurance coverage relating to such employees, respectively,
or (ii) one hundred eighty (180) days after the Closing Date (the
"INSURANCE TERMINATION DATE"), provided that such welfare benefit plans and
workers' compensation insurance policies will provide for coverage of any
employee claims occurring prior to the Insurance Termination Date.
Notwithstanding the foregoing, North Star will not terminate any health or
dental plans until January 1, 1996. Amdahl agrees to have welfare benefit
plans and workers' compensation insurance in effect as of the date any
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such plan is terminated pursuant to the previous sentence. Amdahl agrees to
indemnify, reimburse and hold harmless North Star (or to cause each of the
Dalworth Companies to indemnify, reimburse and hold harmless North Star)
for any and all Damages (as defined in Section 9.1 (North Star's Agreement
to Indemnify)) incurred by North Star after the Closing Date relating to
welfare benefits and workers compensation insurance coverage for employees
or former employees of each of the Dalworth Companies with respect to any
and all claims, occurrences, acts, omissions and conditions arising during
or relating to any and all periods prior to the termination of such welfare
benefits or worker's compensation insurance, excluding amounts incurred by
North Star relating to health care and dental coverage provided under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") for
persons electing such COBRA coverage prior to the Closing Date. Amdahl's
reimbursement obligation provided hereunder includes, without limitation,
the following:
7.3.1 All Damages incurred by North Star after the Closing Date as a
result of all workers' compensation claims relating to employees of
each of the Dalworth Companies resulting from injuries occurring
prior to or on the Insurance Termination Date, including currently
existing claims and claims for injuries which occurred on or prior to
the Closing Date but which have not yet been reported; provided that
in the event the premium under such worker's compensation insurance
coverage for any period prior to the Insurance Termination Date is
subsequently adjusted, Amdahl shall be reimbursed by North Star for
any reductions thereof and North Star shall be reimbursed by Amdahl
(or the Dalworth Companies) for any increase thereof.; and
7.3.2 All health care, dental, life, long-term disability and short-
term disability Damages incurred by North Star after the Closing Date
for covered health care, dental, long-term disability and short-term
disability expenses incurred by the employees and former employees
(other than expenses incurred by persons electing continuation of
health care and dental coverage under COBRA prior to the Closing
Date) of each of the Dalworth Companies, which have been incurred on
or prior to the Closing Date, but have not been reported as of the
Closing Date.
Amdahl's obligation to indemnify, reimburse and hold North Star
harmless as set forth in this Section 7.3 shall not be subject to any
of the restrictions or limitations applicable to its indemnification
obligations set forth in Section 9.3 (Amdahl's Agreement to
Indemnify).
7.4 COBRA COVERAGE. Amdahl agrees, effective as of January 1, 1996, to
provide COBRA health care and dental coverage to any employee of any
Dalworth Company and each such employee's qualified beneficiaries within
the meaning of Section 4980B(f) of the Code who becomes eligible to elect
to receive such coverage on or after the Closing Date; provided that Amdahl
agrees to reimburse North Star (or to cause each of the Dalworth Companies
to reimburse North Star) for any and all Damages incurred by North Star
after the Closing Date relating to such COBRA health care and dental
coverage provided
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to persons electing continuation of such health care and dental coverage on
or after the Closing Date. Amdahl's indemnification obligation as set
forth in this Section 7.4 shall not be subject to any of the restrictions
or limitations applicable to its indemnification obligations set forth in
Section 9.3 (Amdahl's Agreement to Indemnify)
7.5 TERMINATION OF INSURANCE. Amdahl acknowledges and agrees that North
Star will terminate the property, casualty and other insurance coverages
set forth on Exhibit 7.5 with respect to all of the Dalworth Company's
effective as of the Closing Date. North Star agrees to reimburse Amdahl,
or each of the Dalworth Companies for any prepaid insurance premiums paid
by such Dalworth Company to North Star covering any period subsequent to
the Closing Date to the extent that such premiums are reduced by the
insurance carrier.
7.6 NORTH STAR'S ASSUMPTION OF BRACKNELL LEASES. North Star shall use
its best efforts to obtain the consent of the landlord to North Star's
assumption of the following real estate leases and all guaranties relating
thereto executed by any Dalworth Company: (i) Lease of Unit 5 Bracknell
Business Centre Downmill Road Bracknell Berkshire dated March 22, 1985 by
and between Benton Nominees Limited and Robert David Grant and Susan
Margaret Grant trading as Grants Electrical Supplies, which lease was
assigned to CES Europe on June 28, 1991 and (ii) Lease of Unit 4 Bracknell
Business Centre Downmill Road Bracknell Berkshire dated August 1, 1984 by
and between Queensgate Developments Limited and The Burton Group Public
Limited Company, which lease was assigned to CES Europe on March 15, 1990,
both relating to facilities in Bracknell, United Kingdom (the "BRACKNELL
LEASES") Immediately after receiving such consent, North Star shall
execute an agreement pursuant to which North Star will assume all of CES
Europe's obligations under the Bracknell Leases and all of CES's
obligations under the related guaranties arising on or after the Closing
Date, which assumption agreement shall be in a form reasonably approved by
Amdahl. Amdahl agrees that any and all rents or deposits relating to the
Bracknell Leases held by any third party shall hereafter be held for the
benefit of North Star and further agrees to execute or cause CES Europe to
execute, any documents required to effect the foregoing, provided such
documents are reasonably acceptable to Amdahl. North Star will indemnify,
reimburse and hold harmless Amdahl and any Amdahl Affiliate from and
against any and all claims, demands, actions, causes of actions, judgments,
losses, damages, liabilities assessments, costs and expenses including,
without limitation, interest, penalties and reasonable legal fees asserted
against, imposed upon, or incurred or suffered by Amdahl or any Amdahl
Affiliate as a result of, arising out of or in connection with the
Bracknell Leases. North Star's indemnification obligation as set forth in
this Section shall not be subject to any of the restrictions or limitations
applicable to its indemnification obligations set forth in Section 9.1
(North Star's Agreement to Indemnify).
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
8.1 NORTH STAR'S REPRESENTATIONS. The representations and warranties of
North Star set forth in Sections 3.1 through 3.6, 3.8 through 3.13, 3.14.1,
3.14.6
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through 3.14.10 and 3.14 through 3.20 of this Agreement will terminate 18
months from the Closing Date. The representations and warranties of North
Star set forth in Sections 3.7 (Taxes) and 3.14.2 through 3.14.4 and 3.14.5
(parts of Employees; ERISA and Other Compliance) of this Agreement will
remain operative and in full force and effect, regardless of any
investigation made by or on behalf of Amdahl, until the expiration of the
statute of limitations (including any extensions thereof).
8.2 AMDAHL'S REPRESENTATIONS. The representations and warranties of
Amdahl set forth in Section 4 (Representations and Warranties of Amdahl)
will terminate 18 months from the Closing Date.
8.3 EFFECT OF EXPIRATION OF REPRESENTATIONS. A party will have
liabilities and obligations for Damages (as defined in Section 9) only with
respect to claims submitted or notice of claims provided during the time
period of survivability of the specific representation or warranty as set
forth herein. Notwithstanding the expiration date of the representations
and warranties set forth herein, if a party shall notify the other party
with respect to the submission of a claim during the time of survivability
of such representation or warranty, the other party's liability or
obligation for Damages shall continue in full force and effect until
settled to the claiming party's satisfaction with respect to those claims
timely made.
9. INDEMNIFICATION AND LIABILITY.
9.1 NORTH STAR'S AGREEMENT TO INDEMNIFY. Subject to the limitations set
forth in Sections 8.1 and subsections (a), (b), (c) and (d) of this Section
North Star will indemnify, reimburse and hold harmless Amdahl and its
parents, subsidiaries, affiliated corporations, officers, directors, agents
and employees (hereinafter referred to individually as an "AMDAHL
AFFILIATE" and collectively as "AMDAHL AFFILIATES"), from and against any
and all claims, demands, actions, causes of actions, judgments, losses,
damages, liabilities assessments, costs and expenses including, without
limitation, interest, penalties and reasonable legal fees, net of any
recoveries under insurance policies, indemnities or contributions from
third parties (hereinafter referred to as "DAMAGES"), asserted against,
imposed upon, or incurred or suffered by Amdahl or any Amdahl Affiliate as
a result of, arising out of or in connection with any inaccuracy in or
breach of or default in connection with all of the representations and
warranties given or made by North Star in this Agreement, in any exhibit or
schedule hereto or any certificate, document or instrument delivered by or
on behalf of North Star pursuant hereto PROVIDED however, that:
(a) North Star shall not be liable for the first Two Hundred
Thousand Dollars ($200,000) of Damages asserted against, imposed upon, or
incurred or suffered by Amdahl or any Amdahl Affiliate as a result of,
arising out of or in connection with all inaccuracies in or breaches of or
defaults in connection with any of the representations and warranties set
forth in Section 3 (Representations and Warranties of North Star);
(b) subject to the limitations set forth in sub-paragraph (d) of
this
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Section, the aggregate liability of North Star pursuant to this Section 9.1
for all Damages asserted against, imposed upon, or incurred or suffered by
Amdahl or any Amdahl Affiliate as a result of, arising out of or in
connection with inaccuracy in or breach of or default in connection with
all of the representations and warranties set forth in Sections 3.1 through
3.6, 3.8 through 3.11, 3.13 through 3.17, and 3.19 through 3.20 shall be
limited to One Million Dollars ($1,000,000); and
(c) subject to the limitations set forth in sub-paragraph (d) of
this Section, the aggregate liability of North Star pursuant to this
Section 9.1 for Damages for Damages asserted against, imposed upon, or
incurred or suffered by Amdahl or any Amdahl Affiliate as a result of,
arising out of or in connection with inaccuracy in or breach of or default
in connection with all of the representations and warranties set forth in
Sections 3.7 (Taxes), 3.12 (Intellectual Property) and 3.18 (Environmental
Matters) shall not exceed the Purchase Price.
(d) Notwithstanding anything contained herein to the contrary, the
liability of North Star for Damages asserted against, imposed upon or
incurred or suffered by Amdahl or any Amdahl affiliate under this Section
as a result of, arising out of or in connection with inaccuracy in or
breach of or default in connection with all of the representations and
warranties of North Star shall not, in the aggregate, exceed the Purchase
Price.
9.2 NO LIMIT ON DAMAGES FOR FRAUD. Nothing in this Agreement shall be
construed as limiting in any way the remedies that may be available to a
party in the event of fraud relating to the representations, warranties,
agreements or covenants made by the other party to this Agreement. As used
in this Section 9.1, "fraud" shall mean the (i) intentional
misrepresentation or suggestion as a fact of that which is not true by a
party who does not believe it to be true, or (ii) the intentional failure
to disclose a fact, with the intent to deceive the other party. Fraud
shall not include any (a) negligent misrepresentation or omission, (b) any
representation of a fact which the party should have known, but did not
know, was false, or (c) any failure to disclose a fact that the party
should have known, but did not know. The burden of establishing fraud
shall be on the party asserting the existence of fraud.
9.3 AMDAHL'S AGREEMENT TO INDEMNIFY. Subject to the limitations set forth
in Section 8.2 and subsections (a) and (b) of this Section, Amdahl will
indemnify, reimburse and hold harmless North Star and its parents,
subsidiaries, affiliated corporations, officers, directors, agents and
employees (hereinafter referred to individually as a "NORTH STAR AFFILIATE"
and collectively as "NORTH STAR AFFILIATES") from and against any and all
Damages asserted against, imposed upon, or incurred or suffered by North
Star or any North Star Affiliate as a result of, arising out of or in
connection with any inaccuracy in or breach of or default in connection
with all of the representations and warranties given or made by Amdahl in
this Agreement, in any exhibit or schedule hereto or any certificate,
document or instrument delivered by or on behalf of Amdahl pursuant hereto,
PROVIDED however that:
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(a) Amdahl shall not be liable for the first Two Hundred Thousand
Dollars ($200,000) of Damages asserted against, imposed upon or incurred or
suffered by North Star or any North Star Affiliate as a result of, arising
out of or in connection with all inaccuracies in or breaches of or defaults
in connection with any of representations and warranties set forth in
Section 4 (Representations and Warranties of Amdahl) ; and
(b) Notwithstanding anything contained herein to the contrary, the
liability of Amdahl for Damages asserted against, imposed upon or incurred
or suffered by North Star or any North Star affiliate under this Section as
a result of, arising out of or in connection with inaccuracy in or breach
of or default in connection with all of the representations and warranties
of Amdahl shall not, in the aggregate, exceed One Million Dollars
($1,000,000).
9.4 METHOD OF ASSERTING CLAIMS. As used herein, an "Indemnified Party"
shall refer to Amdahl and all Amdahl Affiliates or North Star and all North
Star Affiliates, as applicable, the "Notifying Party" shall refer to the
party hereto whose Indemnified Parties are entitled to indemnification
hereunder, and the "Indemnifying Party" shall refer to the party hereto
obligated to indemnify such Notifying Party's Indemnified Parties.
9.4.1 In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party for the liability or
the costs or expenses of which are Damages (any such third party
action or proceeding being referred to as a "CLAIM"), the Notifying
Party shall give the Indemnifying Party prompt notice thereof. The
failure to give such notice shall not affect any Indemnified Party's
ability to seek reimbursement unless such failure has materially and
adversely affected the Indemnifying Party's ability to defend
successfully a Claim. The Indemnifying Party shall be entitled to
contest and defend such Claim; PROVIDED, that the Indemnifying Party
(i) has a reasonable basis for concluding that such defense may be
successful and (ii) diligently contests and defends such Claim.
Notice of the intention so to contest and defend shall be given by
the Indemnifying Party to the Notifying Party within 20 business days
after the Notifying party's notice of such Claim (but, in all events,
at least five business days prior to the date that an answer to such
Claim is due to be filed). Such contest and defense shall be
conducted by reputable attorneys employed by the Indemnifying Party.
The Notifying Party shall be entitled at any time, at its own cost
and expense (which expense shall not constitute Damages unless the
Notifying Party reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict of interest,
may not adequately represent, any interests of the Indemnified
Parties, and only to the extent that such expenses are reasonable),
to participate in such contest and defense and to be represented by
attorneys of its or their own choosing. If the Notifying Party
elects to participate in such defense, the Notifying Party will
cooperate with the Indemnifying Party in the
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conduct of such defense. Neither the Notifying Party nor the
Indemnifying Party may concede, settle or compromise any Claim
without the consent of the other party, which consents will not be
unreasonably withheld.
9.4.2 In the event any Indemnified Party should have a claim against
any Indemnifying Party that does not involve a Claim, the Notifying
Party shall deliver a notice of such claim with reasonable promptness
to the Indemnifying Party.
9.4.3 After the Closing, the rights set forth in this Section 9
shall be each party's sole and exclusive remedies against the other
party hereto for misrepresentations or breaches of representations,
warranties or covenants contained in this Agreement and any exhibit
or schedule hereto or any certificate, document or instrument
delivered pursuant to the terms hereof.
10. COVENANT NOT TO COMPETE. For a period of seven (7) years, North Star shall
not, directly or indirectly, own an equity interest in (other than an interest
of less than 5% in a publicly-traded entity), loan moneys to or provide services
as a consultant, shareholder or otherwise to any entity engaged in the business
of purchasing, refurbishing and reselling or providing maintenance services for
mainframe computers. North Star shall not, either for itself or for any other
person or entity, directly or indirectly, solicit business for, sell or provide,
or attempt to sell or provide (i) engineering, technical services or
refurbishment for the used mainframe computer market or (ii) internal parts to
support mainframe computer equipment, to any customers or potential customers of
any Dalworth Company; provided, that nothing in this Section shall restrict
Americable, Inc. and its subsidiaries from continuing their businesses as
currently conducted.
11. MISCELLANEOUS.
11.1 GOVERNING LAW; FORUM. The internal laws of the State of Texas
(irrespective of its choice of law principles) will govern the validity of
this Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto. Any action or
suit hereunder will be brought solely in the federal or state courts
located in the State of Texas and Amdahl and North Star each submits to the
personal jurisdiction thereof.
11.2 ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. Neither party
hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party hereto. This Agreement will be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
11.3 SEVERABILITY. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable,
the remainder of this Agreement and application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such
void and unenforceable
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provision of this Agreement with a valid and enforceable provision that
will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
11.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and
the same instrument.
11.5 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby or by law on
such party, and the exercise of any one remedy will not preclude the
exercise of any other.
11.6 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof or default in the performance
hereof will not be deemed to constitute a waiver of any other default or
any succeeding breach or default.
11.7 NO WAIVER. The failure of any party to enforce any of the provisions
hereof will not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.
11.8 EXPENSES. Each party will bear its respective expenses and legal
fees incurred with respect to this Agreement, and the transactions
contemplated hereby.
11.9 ATTORNEYS' FEES. Except as otherwise provided herein, should suit be
brought to enforce or interpret any part of this Agreement, the prevailing
party will be entitled to recover, as an element of the costs of suit and
not as damages, reasonable attorneys' fees to be fixed by the court
(including without limitation, costs, expenses and fees on any appeal).
11.10 NOTICES. Any Notice or other communication required or permitted to
be given under this Agreement will be in writing, will be delivered
personally, by facsimile, by overnight courier or by registered or
certified mail, postage prepaid and will be deemed given upon personal
delivery or receipt of facsimile, one day after delivery to overnight
courier or three days after deposit in the mails, to the following
addresses:
If to Amdahl: If to North Star:
Amdahl Corporation North Star Universal, Inc.
1250 East Arques Avenue 5353 Wayzata Boulevard
P.O. Box 3470 Suite 610
Sunnyvale, CA 94088-3470 Minneapolis, MN 55416
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Attn: William Ferone Attn: Peter E. Flynn
Vice President and GM, Chief Financial Officer
Customer Service
with a copy to: with a copy to:
Amdahl Legal Department J. Andrew Herring
1250 East Arques Avenue Dorsey & Whitney
P.O. Box 3470 Pillsbury Center South
Sunnyvale, CA 94088-3470 220 South Sixth Street
Minneapolis, MN 55402-1498
or to such other address as a party may have furnished to the other parties
in writing pursuant to this Section.
11.11 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof
will not be construed for or against either party. A reference to a
Section, exhibit or schedule will mean a Section in, or exhibit or schedule
to, this Agreement unless otherwise explicitly set forth. The titles and
headings herein are for reference purposes only and will not in any manner
limit the construction of this Agreement which will be considered as a
whole.
11.12 NO JOINT VENTURE. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any
of the parties hereto. No party is by virtue of this Agreement authorized
as an agent, employee or legal representative of any other party. No party
will have the power to control the activities and operations of any other
and their status is, and at all times, will continue to be, that of
independent contractors with respect to each other. No party will have any
power or authority to bind or commit any other. No party will hold itself
out as having any authority or relationship in contravention of this
Section.
11.13 FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the
intents and purposes of this Agreement.
11.14 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of this
Agreement are intended, nor will be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, stockholder, partner or any party hereto or
any other person or entity unless specifically provided otherwise herein,
and, except as so provided, all provisions hereof will be personal solely
between the parties to this Agreement.
11.15 ENTIRE AGREEMENT. This Agreement and the exhibits and schedules
hereto constitute the entire understanding and agreement of the parties
hereto
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with respect to the subject matter hereof and supersede all prior
agreements or understandings, inducements or conditions, express or
implied, written or oral, between the parties with respect hereto other
than the letters between the parties dated December 5, 1994 and February
28, 1995 regarding confidential materials. The express terms hereof
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
AMDAHL CORPORATION NORTH STAR UNIVERSAL, INC.
By: /s/ William F. Ferone By: /s/ Peter E. Flynn
----------------------------------- ----------------------------------
William F. Ferone Peter E. Flynn
Vice President and General Manager, Chief Financial Officer
Customer Service
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WAIVER AND SEVENTH AMENDMENT TO
RESTATED AND AMENDED REVOLVING CREDIT LOAN AGREEMENT
THIS WAIVER AND SEVENTH AMENDMENT, dated as of May 8, 1995 (the
"Amendment") 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, a Waiver and Fifth Amendment, dated
March 16, 1994 and a Sixth Amendment, dated January 31, 1995 (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 the default under SECTION 8.1(b) of the Credit
Agreement and to amend other 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 8.1(b) of the Credit Agreement, the Borrower will
not sell, transfer, lease or otherwise dispose of any of its assets or any
Person other than in the ordinary course of business. The Borrower has notified
the Bank that it has sold all of the stock of C.E. Services, Inc. Therefore,
the Borrower is in default under the terms of the Credit Agreement.
1.2 The Borrower has requested that the Bank waive any Event of Default
arising as a result of the above violation. The Bank hereby waives any Event of
Default arising from the Borrower's failure to comply with SECTION 8.1(b) as
described above. Such waiver is limited specifically to the violation referred
to herein and shall not be construed or interpreted to be a waiver of any other
existing or future Event of Default or of compliance with any other existing
terms.
ARTICLE II - AMENDMENT TO THE CREDIT AGREEMENT
2.1 AMENDMENTS.
<PAGE>
(a) SECTION 7.9 of the Credit Agreement is hereby amended as of the
date hereof by deleting the phrase "Thirty-Two Million Dollar
($32,000,000.00)" and inserting the phrase "Thirty Million Dollars
($30,000,000.00)" in lieu thereof.
(b) SECTION 8.5 of the Credit Agreement is hereby amended as of the
date hereof by deleting the phrase "2.25 to 1" and inserting the phrase
"2.50 to 1" in lieu thereof.
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 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.
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 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 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.
<PAGE>
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 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 FLYNN
-------------------------------
Its: EVP/CFO
-------------------------------
<PAGE>
FIRST BANK NATIONAL ASSOCIATION,
a national banking association
By: /S/ MICHAEL J. STALOCH
-------------------------------
Its: VICE PRESIDENT
-------------------------------
<PAGE>
North Star Universal, Inc. Exhibit 12.6
Computation of ratio of earnings to fixed charges
For the Three Months Ended March 31, 1995
(In thousands, except ratios)
<TABLE>
<CAPTION>
Earnings:
<S> <C>
Loss from continuing operations before
income taxes and minority interest $ (1,800)
Fixed charges 1,249
----------
Income from continuing operations before
income taxes, minority interest and fixed charges $ (551)
----------
----------
Fixed Charges:
Interest expense $ 1,060
Interest portion of rentals 189
Amortization of debt expense 0
----------
$ 1,249
----------
----------
Ratio of earnings to fixed charges (0.44)
Earnings coverage deficit below 1:1 ratio $ 1,800
</TABLE>
<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
May 10, 1995
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-2 No. 33-58163) of North Star Universal, Inc. and in the related Prospectus of
our report dated May 10, 1994, with respect to the consolidated financial
statements and schedules of CorVel Corporation included in the Annual Report
(Form 10-K/A-1) for the year ended December 31, 1993 of North Star Universal,
Inc.
/s/ Ernst & Young LLP
Orange County, California
May 11, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,462
<SECURITIES> 0
<RECEIVABLES> 8,793
<ALLOWANCES> (358)
<INVENTORY> 7,478
<CURRENT-ASSETS> 20,935
<PP&E> 8,423
<DEPRECIATION> (4,889)
<TOTAL-ASSETS> 110,075
<CURRENT-LIABILITIES> 23,579
<BONDS> 30,754
<COMMON> 2,360
0
0
<OTHER-SE> 31,062
<TOTAL-LIABILITY-AND-EQUITY> 110,075
<SALES> 17,656
<TOTAL-REVENUES> 17,656
<CGS> 12,881
<TOTAL-COSTS> 12,881
<OTHER-EXPENSES> 5,473
<LOSS-PROVISION> 42
<INTEREST-EXPENSE> 1,060
<INCOME-PRETAX> (1,800)
<INCOME-TAX> (530)
<INCOME-CONTINUING> (63)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
