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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 21, 1995
--------------------
MICHAEL FOODS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State of other jurisdiction of incorporation)
0-15568 41-1579532
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(Commission File Number) (IRS Employer Identification No.)
Suite 324, Park National Bank Bldg.
5353 Wayzata Boulevard
Minneapolis, Minnesota 55416
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (612) 546-1500
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N/A
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On December 21, 1995, Michael Foods, Inc., a Delaware corporation
("Michael"), and North Star Universal, Inc., a Minnesota corporation ("NSU"),
entered into an Agreement and Plan of Reorganization (the "Merger Agreement"),
pursuant to which, through a series of transactions, Michael will repurchase
and retire a portion of the shares of Michael common stock held by NSU at a
negotiated discount to the average market price of Michael common stock prior
to the closing of the transactions by assuming NSU's outstanding indebtedness.
NSU presently owns 7,354,950 shares, or approximately 38%, of the outstanding
Michael common stock. NSU's remaining Michael common stock will then be
distributed pro rata to NSU's shareholders. The net debt assumed will be
between $25 and $38 million and the price discount will be 8% to 10%,
depending on the level of indebtedness assumed by Michael. At the same time,
NSU will contribute all of its non-food businesses and assets to a newly formed
wholly-owned subsidiary ("Spinco").
Pursuant to the Merger Agreement, a wholly-owned subsidiary of NSU will
be merged with and into Michael (the "Merger"). As a result of the Merger,
Michael will become a wholly-owned subsidiary of NSU. Michael will change
its name to Michael Foods of Delaware, Inc. and NSU will change its name to
Michael Foods, Inc. The Merger has been structured so that it will qualify
as a tax free reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended.
Just prior to the Merger, NSU will effect a reverse stock split.
After giving effect to the reverse stock split, the aggregate number of
shares of NSU common stock outstanding will be equal to the number of shares
of Michael common stock then owned by NSU, less the number of shares of
Michael common stock repurchased by Michael as part of the transactions.
The Merger Agreement requires NSU to enter into a Distribution
Agreement with Spinco, which provides that immediately following the merger
the Spinco common stock will be distributed to NSU shareholders of
record prior to the merger. The distribution has been structured so that it
will be tax free to the NSU shareholders. Spinco will assume NSU liabilities
and indemnify Michael for NSU pre-merger liabilities.
The closing of the Merger is subject to various conditions, including
obtaining a favorable ruling from the Internal Revenue Service and the
approval of the Merger and certain other matters by the holders of common
stock of both Michael and NSU.
The Merger Agreement with exhibits and the related press release of
Michael and NSU are attached as exhibits to this report and are incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
The following exhibits are filed herewith:
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EXHIBIT NUMBER DESCRIPTION
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2 Agreement and Plan of Reorganization by and between
Michael Foods, Inc., North Star Universal, Inc. and
NSU Merger Co., dated as of December 21, 1995, with
exhibits.
20 Press release of North Star and Michael, issued
December 21, 1995, regarding the Merger and
Distribution.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
MICHAEL FOODS, INC.
Dated: December 26, 1995 By: /s/ John D. Reedy
------------------------------------
John D. Reedy, Vice President-Finance
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE
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2 Agreement and Plan of Reorganization by
and between Michael Foods, Inc., North
Star Universal, Inc. and NSU Merger Co.,
dated as of December 21, 1995, with exhibits.
20 Press release of North Star and Michael,
issued December 21, 1995, regarding the
Merger and Distribution.
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______________
AGREEMENT AND PLAN OF REORGANIZATION
by and between
MICHAEL FOODS, INC.,
NORTH STAR UNIVERSAL, INC.
and
NSU MERGER CO.
______________
______________
December 21, 1995
______________
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TABLE OF CONTENTS
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Page No.
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ARTICLE 1. Definitions and Preliminary Transactions . . . . . . . . . . . . . 2
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Distribution of Spinco Common Stock. . . . . . . . . . . . . . . . 7
1.3 Reverse Stock Split. . . . . . . . . . . . . . . . . . . . . . . . 7
1.4 No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . 8
1.5 NSU Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . 8
1.6 NSU Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Effect on Michael Capital Stock and
Merger Sub Capital Stock . . . . . . . . . . . . . . . . . . . . .10
2.3 Rights of Holders of Michael Capital Stock . . . . . . . . . . . .10
2.4 Procedure for Exchange of Stock. . . . . . . . . . . . . . . . . .11
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF MICHAEL. . . . . . . . . . . . .14
3.1 Organization and Qualification . . . . . . . . . . . . . . . . . .14
3.2 Authority Relative to this Agreement; Non-Contravention. . . . . .14
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . .15
3.4 Exchange Act Reports . . . . . . . . . . . . . . . . . . . . . . .15
3.5 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
3.7 No Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . .16
3.8 Prospectus/Proxy Statement . . . . . . . . . . . . . . . . . . . .16
3.9 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF NSU. . . . . . . . . . . . . . .17
4.1 Organization and Qualification . . . . . . . . . . . . . . . . . .17
4.2 Authority Relative to this Agreement; Non-Contravention. . . . . .17
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . .18
4.4 Exchange Act Reports . . . . . . . . . . . . . . . . . . . . . . .19
4.5 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .19
4.6 Absence of Certain Developments. . . . . . . . . . . . . . . . . .19
4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
4.8 No Brokers or Finders. . . . . . . . . . . . . . . . . . . . . . .20
4.9 Prospectus/Proxy Statement . . . . . . . . . . . . . . . . . . . .20
4.10 Validity of the Surviving Corporation Common Stock . . . . . . . .20
</TABLE>
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4.11 Ownership of Michael Common Stock. . . . . . . . . . . . . . . . .21
4.12 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
ARTICLE 5. CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . . . .21
5.1 Conduct of Business by NSU . . . . . . . . . . . . . . . . . . . .21
5.2 Conduct of Business by Michael . . . . . . . . . . . . . . . . . .22
ARTICLE 6. ADDITIONAL COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . .22
6.1 Governmental Filings . . . . . . . . . . . . . . . . . . . . . . .22
6.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.3 Access to Information; Confidentiality . . . . . . . . . . . . . .23
6.4 Registration Statement . . . . . . . . . . . . . . . . . . . . . .23
6.5 Accounting and Tax Treatment . . . . . . . . . . . . . . . . . . .25
6.6 Michael Stock Plans. . . . . . . . . . . . . . . . . . . . . . . .25
6.7 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . .25
6.8 Directors and Officers Insurance . . . . . . . . . . . . . . . . .25
6.9 Securities Reports . . . . . . . . . . . . . . . . . . . . . . . .26
6.10 Stock Listing. . . . . . . . . . . . . . . . . . . . . . . . . . .26
6.11 Shareholder Approvals. . . . . . . . . . . . . . . . . . . . . . .26
6.12 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . .26
6.13 Failure to Fulfill Conditions. . . . . . . . . . . . . . . . . . .27
6.14 Tax Ruling or Opinion. . . . . . . . . . . . . . . . . . . . . . .27
6.15 Resignations and Election of Directors . . . . . . . . . . . . . .27
6.16 Orderly Disposition and Registration
Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . .27
6.17 Shareholder Vote . . . . . . . . . . . . . . . . . . . . . . . . .27
6.18 Filing of Reports Necessary for use of Rule 145. . . . . . . . . .28
6.19 Notification of Certain Matters. . . . . . . . . . . . . . . . . .28
6.20 Notification of Anticipated NSU Net Indebtedness . . . . . . . . .29
6.21 Distribution Agreement . . . . . . . . . . . . . . . . . . . . . .29
ARTICLE 7. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
7.1 Conditions to Obligations of Each Party. . . . . . . . . . . . . .29
7.2 Additional Conditions to Obligation of NSU . . . . . . . . . . . .31
7.3 Additional Conditions to Obligation of Michael . . . . . . . . . .32
</TABLE>
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ARTICLE 8. TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . .34
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . .34
8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
8.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
ARTICLE 9. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . .36
9.1 Public Statements. . . . . . . . . . . . . . . . . . . . . . . . .36
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . .37
9.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .37
9.5 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . .37
9.6 Non-Survival of Representations, Warranties
and Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.7 Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.9 Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . .38
ARTICLE 10. DISPUTE RESOLUTION. . . . . . . . . . . . . . . . . . . . . . . .38
10.1 Mediation and Binding Arbitration. . . . . . . . . . . . . . . . .38
10.2 Initiation . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
10.3 Submission to Mediation. . . . . . . . . . . . . . . . . . . . . .39
10.4 Selection of Mediator. . . . . . . . . . . . . . . . . . . . . . .39
10.5 Mediation and Arbitration. . . . . . . . . . . . . . . . . . . . .39
10.6 Selection of Arbitrators . . . . . . . . . . . . . . . . . . . . .39
10.7 Cost of Arbitration. . . . . . . . . . . . . . . . . . . . . . . .40
EXHIBITS
Exhibit A - Discount Factor
Exhibit B - Form of Certificate of Merger
Exhibit C - Form of Distribution Agreement
Exhibit D - Form of New Articles
Exhibit E - Form of Orderly Disposition and
Registration Rights Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated December 21, 1995, by and
between MICHAEL FOODS, INC., a Delaware corporation ("Michael"), NORTH STAR
UNIVERSAL, INC., a Minnesota corporation ("NSU"), and NSU MERGER CO., a Delaware
corporation and a wholly-owned subsidiary of NSU ("Merger Sub")
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Michael and NSU have determined that it
is in the best interests of Michael and NSU and their respective shareholders to
consummate the merger (the "Merger") of Merger Sub, a newly-formed subsidiary of
NSU, with and into Michael with Michael as the surviving corporation;
WHEREAS, Michael and NSU desire that the Merger be made on the terms and
subject to the conditions set forth in this Agreement and qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended;
WHEREAS, as a condition of the Merger, Michael requires that NSU distribute
and NSU is willing to distribute immediately after the Merger to NSU
shareholders of record prior to the Merger, all of the capital stock of a newly
incorporated wholly owned subsidiary, to which, prior to the Merger, all of the
assets of NSU will be assigned, contributed or otherwise transferred other than
(i) the shares of Merger Sub, (ii) the shares of Michael Common Stock (defined
below) owned by NSU on the date hereof, (iii) cash held by NSU, and (iv) certain
other assets as the parties mutually agree, and that NSU be released from, or
mutually acceptable adequate provisions be made for, all liabilities and
obligations other than as mutually agreed by the parties, so that, after giving
effect to the Merger and such distribution, the business and operations of NSU
after the Merger will be the business and operations of Michael;
WHEREAS, the distribution contemplated by the previous WHEREAS clause will
be made in accordance with the Distribution Agreement (as defined below);
WHEREAS, as a further condition of the Merger, Michael requires and NSU is
willing to reduce the number of outstanding shares of NSU Common Stock (as
defined below) to an amount equal to the number of shares of Michael Common
Stock owned by NSU less a number of shares determined by formula to reflect the
amount of the liabilities retained by NSU at the time of the Merger net of the
cash retained by NSU at the time of the Merger; and
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WHEREAS, Michael is requiring such reduction in the number of outstanding
shares of NSU Common Stock so that each share of Michael Common Stock will be
exchangeable for one share of the Surviving Corporation Common Stock (as defined
below) after the Merger.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND PRELIMINARY TRANSACTIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
AFFILIATE: as defined in Regulation 12b-2 promulgated under the Exchange
Act, as such Regulation is in effect on the date hereof.
ANTICIPATED NSU NET INDEBTEDNESS: as defined in Section 6.20.
AVERAGE PRICE OF MICHAEL COMMON STOCK: the average closing sales price per
share of Michael Common Stock reported on the NASDAQ-NMS as published by THE
WALL STREET JOURNAL during the twenty (20) trading days ending on the third
trading day immediately preceding the Effective Date.
CERTIFICATE OF MERGER: the Certificate of Merger in substantially the form
of Exhibit B hereto.
CODE: the Internal Revenue Code of 1986, as amended, or any successor
legislation.
CONTINUING OPTIONS: as defined in Section 2.2(b).
CREDIT AGREEMENT: the Credit Agreement between NSU and First Bank National
Association, a national banking association, including any amendments thereto,
and any replacement credit agreement or facility.
DISCOUNT FACTOR: the factor determined in accordance with the table in
Exhibit A based on the amount of the NSU Net Assumed Liabilities at the
Effective Time.
DISSENTING SHARES: as defined in Section 1.5.
DISSENTING SHARES HOLDBACK: shall be an amount mutually agreed upon by NSU
and Michael based on the number of Dissenting Shares for which such Liability
has not been
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paid by the Effective Date plus a reasonable amount to assure that
the Surviving Corporation will not incur any Liability with respect to such
Dissenting Shares in excess of the amount mutually agreed by Michael and NSU.
DISTRIBUTION: the distribution, on the Distribution Date, of all of the
outstanding shares of Spinco Common Stock by NSU to the holders of record of NSU
Common Stock on the Distribution Record Date, which distribution shall be deemed
to have been effected by NSU upon delivery by NSU to the distribution agent of
an instruction directing the distribution agent to effect the distribution of
the Spinco Common Stock in accordance with Section 3.03 of the Distribution
Agreement and such distribution shall not be effected nor deemed to have been
effected until after the Effective Time.
DISTRIBUTION AGREEMENT: the Distribution Agreement between NSU and Spinco
in substantially the form of Exhibit C hereto.
DISTRIBUTION DATE: the Effective Date; provided, however, that the
Distribution shall not occur until after the Effective Time of the Merger.
DISTRIBUTION RECORD DATE: the close of business on the date to be
determined by the NSU Board as the record date for the Distribution, which date
shall be prior to the Effective Date.
DGCL: the Delaware General Corporation Law, as amended.
EFFECTIVE DATE: as defined in Section 2.1(d).
EFFECTIVE TIME: as defined in Section 2.1(d).
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
EXCHANGE AGENT: as defined in Section 2.4(a).
EXCHANGE FUND: as defined in Section 2.4(c).
EXCHANGE RATIO: as defined in Section 2.2(a).
GAAP: generally accepted accounting principles.
HSR ACT: the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
IRS: the Internal Revenue Service.
LIABILITIES: any and all debts, liabilities, accounts payable, Taxes,
claims and other obligations, absolute or contingent, mature or not mature,
liquidated or unliquidated,
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accrued or unaccrued, known or unknown, whenever arising (unless otherwise
specified in this Agreement), including all costs and expenses relating
thereto, and including, without limitation, those debts, liabilities and
obligations arising under any law, rule, regulation, or any actual or
threatened action, suit, proceeding or investigation by or before any court,
any governmental or other regulatory or administrative agency or commission
or any arbitration tribunal, any order or consent decrees of any governmental
entity or any award of any arbitrator of any kind, and those arising under
any contract, commitment or undertaking.
MATERIAL ADVERSE EFFECT: with respect to an entity means any condition,
event, change or occurrence that has had or may reasonably be expected to have a
material adverse effect on the business, operations, results of operations or
financial condition of such entity on a consolidated basis.
MBCA: Minnesota Business Corporation Act, as amended.
MERGER: as defined in the preambles of this Agreement.
MICHAEL 10-K REPORTS: as defined in Section 3.4.
MICHAEL 10-Q REPORTS: as defined in Section 3.4.
MICHAEL BOARD: the Board of Directors of Michael.
MICHAEL COMMON STOCK: the common stock, par value $.01 per share, of
Michael.
MICHAEL STOCK PLANS: as defined in Section 2.2(b).
MICHAEL SUBSIDIARY: as defined in Section 3.5.
NASDAQ-NMS: the NASDAQ National Market System.
NEW ARTICLES: the amended and restated articles of incorporation of NSU in
substantially the form of Exhibit D hereto which will be effective on the
Effective Date.
NSU 10-K REPORTS: as defined in Section 4.4.
NSU 10-Q REPORTS: as defined in Section 4.4.
NSU ASSUMED LIABILITIES: the NSU Indebtedness and the NSU Retained
Liabilities.
NSU BOARD: the Board of Directors of NSU prior to the Merger Effective
Date.
NSU COMMON STOCK: the Common Stock, par value $1.00 per share, of NSU,
prior to the Merger Effective Date.
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NSU INDEBTEDNESS: indebtedness (principal and accrued interest)
represented by NSU's outstanding subordinated debentures and subordinated
extendable and fixed time certificates and the NSU indebtedness (principal and
accrued interest) owing pursuant to the Credit Agreement.
NSU NET ASSUMED LIABILITIES: an amount equal to (i) the NSU Indebtedness
as of the Effective Time plus the amount of the Dissenting Shares Holdback, less
(ii) the amount of cash included in the NSU Retained Assets as of the Effective
Time, provided that such amount shall be no less than $25,000,000 and no more
than $38,000,000.
NSU OPTIONS: as defined in Section 1.6.
NSU STOCK OPTION PLANS: as defined in Section 1.6.
NSU SUBSIDIARY: as defined in Section 4.5.
NSU RETAINED ASSETS: the following assets:
(i) such amount of cash as NSU may, in its sole discretion, determine
to hold at the Effective Time;
(ii) 7,354,950 shares of Michael Common Stock owned by NSU as of the
date of this Agreement;
(iii) the capital stock of Merger Sub;
(iv) the rights of NSU under this Agreement, the Distribution
Agreement and the Orderly Disposition and Registration Rights Agreement;
and
(v) any and all net operating loss carryforwards and other Tax
attributes properly allocable to NSU following the Effective Date in
accordance with the relevant provisions of the Code.
NSU RETAINED LIABILITIES: the following Liabilities:
(i) any Liability arising from any NSU shareholders who have
effectively dissented from the NSU shareholder action in connection with
the Merger and the Distribution in accordance with Sections 471 and 473 of
the MBCA;
(ii) any Liability of NSU (Surviving Corporation) under the
Distribution Agreement arising after the Effective Date;
(iii) any Liability of NSU (Surviving Corporation) under this
Agreement after the Effective Date; and
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(iv) any Liability of NSU (Surviving Corporation) under the Orderly
Disposition and Registration Rights Agreement arising after the Effective
Date.
NSU TRANSFERRED ASSETS: all assets of NSU other than the NSU Retained
Assets.
NSU TRANSFERRED LIABILITIES: all Liabilities of NSU (i) arising at any
time prior to the Effective Date other than the NSU Assumed Liabilities, or (ii)
arising as a result of the Distribution (other than any liability of NSU for
Taxes resulting from a breach of Section 2.07 of the Distribution Agreement by
NSU (Surviving Corporation) after the Effective Date).
ORDERLY DISPOSITION AND REGISTRATION RIGHTS AGREEMENT: the Orderly
Disposition and Registration Rights Agreement dated the date hereof between NSU
and certain shareholders of NSU in the form of Exhibit E hereto.
PROSPECTUS/PROXY STATEMENT: as defined in Section 6.4.
REGISTRATION STATEMENT: as defined in Section 6.4.
REPURCHASED MICHAEL COMMON STOCK: the number of shares of Michael Common
Stock owned by NSU equal to (i) the NSU Net Assumed Liabilities, divided by (ii)
the product of the Discount Factor multiplied by the Average Price of Michael
Common Stock.
REQUISITE MICHAEL SHAREHOLDER VOTE: as defined in Section 3.2.
REQUISITE NSU SHAREHOLDER VOTE: as defined in Section 4.2.
REVERSE STOCK SPLIT: as defined in Section 1.3.
SEC: the Securities and Exchange Commission.
SECURITIES ACT: the Securities Act of 1933, as amended.
SPINCO: the wholly owned subsidiary of NSU to which NSU will transfer the
NSU Transferred Assets and the NSU Transferred Liabilities.
SPINCO COMMON STOCK: the Common Stock, par value $.01 per share, of
Spinco.
SUBSIDIARY: with respect to any entity shall mean each corporation in
which such entity owns directly or indirectly fifty percent or more of the
voting securities of such corporation and shall, unless otherwise indicated, be
deemed to refer to both direct and indirect subsidiaries of such entity.
SURVIVING CORPORATION: as defined in Article 2.
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SURVIVING CORPORATION COMMON STOCK: the common stock, par value $.01 per
share, of the Surviving Corporation.
TAXES: any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, environmental taxes, customs duties, capital
stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, workers' compensation,
employment-related insurance, real property, personal property, sales, use,
transfer, value added, alternative or add-on minimum or other governmental tax,
fee, assessment or charge of any kind whatsoever including any interest,
penalties or additions to any Tax or additional amounts in respect of the
foregoing.
1.2 DISTRIBUTION OF SPINCO COMMON STOCK.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 and the conditions set forth in Article 7 shall have
been fulfilled or waived,
(i) NSU shall, prior to the Effective Date, contribute to Spinco all
of the NSU Transferred Assets in accordance with the Distribution
Agreement;
(ii) NSU shall use all reasonable efforts to obtain releases from,
cause Spinco to assume, indemnify NSU and Merger Sub from or, in accordance
with the terms of the Distribution Agreement, otherwise provide for the
payment or recovery by NSU or Merger Sub with respect to the NSU
Transferred Liabilities; and
(iii) NSU shall declare the Distribution to NSU shareholders of
record on the Distribution Record Date which shall be payable conditioned
only upon the Merger on the Distribution Date.
(b) The Distribution will be effected in accordance with the terms of the
Distribution Agreement, which will also govern the relative rights and
obligations of Spinco and the Surviving Corporation after the Merger. NSU shall
cause the Distribution to be conducted in accordance with all applicable federal
and state securities laws.
1.3 REVERSE STOCK SPLIT. Provided that this Agreement shall not have been
terminated in accordance with Section 8.1 and the conditions set forth in
Article 7 have been fulfilled or waived, NSU shall authorize and effect a
combination of the outstanding NSU Common Stock in the form of a reverse stock
split (the "Reverse Stock Split") effective on the Effective Date and
immediately prior to the Effective Time so that, immediately prior to the
Effective Time and after giving effect to the Reverse Stock Split, the aggregate
number of shares of NSU Common Stock outstanding on a fully diluted basis
(excluding any Dissenting Shares) is equal to: (i) the number of shares of
Michael Common Stock then owned directly or beneficially by NSU, less (ii) the
number of shares of Repurchased Michael Common Stock.
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1.4 NO FRACTIONAL SHARES. No fractional shares of the Surviving
Corporation Common Stock, and no certificates representing such fractional
shares, shall be issued in connection with the Reverse Stock Split. In lieu of
any fractional share, the Surviving Corporation shall pay to each holder of NSU
Common Stock subject to the Reverse Stock Split who otherwise would be entitled
to receive a fractional share of NSU Common Stock as a result of the Reverse
Stock Split an amount of cash (without interest) determined by multiplying (a)
the Average Price of Michael Common Stock times (b) the fractional share
interest to which such holder would otherwise be entitled. The payment for
fractional shares shall be made upon the surrender for exchange of certificates
representing NSU Common Stock which were subject to the Reverse Stock Split.
1.5 NSU DISSENTERS' RIGHTS. Notwithstanding anything in this Agreement to
the contrary, shares of NSU Common Stock that are issued and outstanding on the
record date for the meeting of NSU shareholders referred to in Section 6.11 and
which are held by NSU shareholders who shall have effectively dissented from the
NSU shareholder action with respect to the Distribution in accordance with the
MBCA (the "Dissenting Shares") shall not be converted into shares of the
Surviving Corporation, shall not be subject to the Reverse Stock Split and shall
not be entitled to the Distribution, unless and until such holder shall have
failed to perfect or shall have effectively withdrawn or lost its, his or her
right to appraisal and payment under the MBCA. The Dissenting Shares shall have
only those rights granted to dissenting shares under the MBCA.
1.6 NSU STOCK OPTION PLANS. NSU shall cause all options (the "NSU
Options") outstanding under the 1986 Incentive Stock Option Plan of NSU, the
1986 Non-Qualified Stock Option Plan of NSU, the 1988 Nonqualified Stock Option
Plan of NSU (the "NSU Stock Option Plans") or otherwise disclosed in Schedule
4.3 to be cancelled or exercised prior to the Effective Time. At or prior to
the Effective Time, all of the NSU Stock Option Plans shall be terminated.
ARTICLE 2
MERGER
Subject to the satisfaction or waiver of the conditions set forth in
Article 7, on a date mutually satisfactory to the parties as soon as practicable
following satisfaction or waiver of such conditions, (i) Merger Sub will merge
with and into Michael, (ii) Michael will become a wholly-owned subsidiary of
NSU, (iii) Michael will change its name to "Michael Foods of Delaware, Inc.,"
(iv) NSU will complete the Distribution, and (v) NSU will change its name to
"Michael Foods, Inc.". NSU, in its capacity as the publicly held entity owning
Michael as a wholly-owned subsidiary after giving effect to the Merger, the
Reverse Stock Split and Distribution, is then defined herein as the "Surviving
Corporation." The Merger will be effected pursuant to the Certificate of Merger
and pursuant to the provisions of, and with the effect provided in Section 251
of the DGCL.
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2.1 EFFECT OF MERGER.
(a) On the Effective Date, (i) Merger Sub shall be merged with and into
Michael and the separate existence of Merger Sub shall cease, (ii) Michael will
become a wholly-owned subsidiary of NSU, (iii) Michael will change its name to
"Michael Foods of Delaware, Inc.," and (iv) NSU will change its name to "Michael
Foods, Inc." On the Effective Date, effective at the Effective Time, the
articles of incorporation of the Surviving Corporation will be amended and
restated as the New Articles. The Board of Directors of the Surviving
Corporation immediately after the Effective Time will consist of nine (9)
members of which two (2) directors will be designated in accordance with Section
8 of the Orderly Disposition and Registration Rights Agreement and the remaining
directors will be designated by the Michael Board. Immediately after the
Effective Time the Board of Directors of the Surviving Corporation will elect
the officers of Michael immediately prior to the Effective Time as the officers
of Surviving Corporation.
(b) At the Effective Time, Michael shall thereupon and thereafter be
responsible and liable for all the liabilities, debts and obligations of each of
Michael and the Merger Sub.
(c) At the Effective Time, Michael shall thereupon and thereafter possess
all the rights, privileges, immunities and franchises, of a public as well as of
a private nature, of each of Michael and the Merger Sub; all property, real,
personal and mixed, and all debts due on whatever account, and all and every
other interest, of or belonging to or due to each of Michael and the Merger Sub,
shall be taken and deemed to be transferred to and vested in Michael without
further act or deed; and the title to any real estate or any interest therein,
vested in Michael and the Merger Sub shall not revert or be in any way impaired
by reason of the Merger.
(d) Subject to the provisions of Articles 7 and 8 hereof, the closing of
the transactions contemplated hereby shall take place at such location, on such
date and at such time as Michael and NSU mutually agree at the earliest
practicable time after the satisfaction or waiver of the conditions in Article
7, but in no event later than ten (10) business days after all such conditions
have been satisfied or waived, or on such other date as may be mutually agreed
by the parties hereto. On the closing date, to effect the Merger, the parties
hereto will cause a Certificate of Merger to be filed with the Delaware
Secretary of State in accordance with the DGCL. Also on the Effective Date,
the parties hereto will effect the other transactions contemplated hereby,
including the filing of the New Articles with the Minnesota Secretary of State.
The Merger shall be effective when the Certificate of Merger is filed with the
Delaware Secretary of State (the "Effective Time"). As used herein, the term
"Effective Date" shall mean the date on which the Certificate of Merger is filed
with the Delaware Secretary of State.
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2.2 EFFECT ON MICHAEL CAPITAL STOCK AND MERGER SUB CAPITAL STOCK.
To effectuate the Merger, and subject to the terms and conditions of this
Agreement, at the Effective Time:
(a) each issued and outstanding share of Michael Common Stock (other than
shares of Michael Common Stock (i) held as treasury stock of Michael or (ii)
held directly or indirectly by NSU) shall be converted into and exchangeable for
one share (the "Exchange Ratio") of the Surviving Corporation Common Stock
(after giving effect to the adoption of the New Articles on the Effective Date
as provided in Section 2.1(a) above) and the Surviving Corporation shall issue
to holders of Michael Common Stock shares of the Surviving Corporation Common
Stock based on the Exchange Ratio in exchange for the outstanding shares of
Michael Common Stock;
(b) the 1987 Incentive Stock Option Plan of Michael, the 1987 Non-
Qualified Stock Option Plan of Michael, the 1992 Stock Option Plan for Non-
Employee Directors of Michael and the 1994 Executive Incentive Plan (the
"Michael Stock Plans") and all outstanding options (the "Michael Options") to
purchase shares of Michael Common Stock issued pursuant to the Michael Stock
Plans shall be assumed and adopted by the Surviving Corporation in accordance
with the terms of the Michael Stock Plans and the Michael Options shall have the
rights provided in such plans (the "Continuing Options"). In the case of any
option to which Section 421 of the Code applies by reason of its qualification
under Section 422 of the Code, the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such options shall be determined in order to comply with Section 424(a) of the
Code; and
(c) each share of Michael Common Stock held as treasury stock of Michael
or held directly or indirectly by NSU shall be canceled, retired and cease to
exist, and no exchange or payment shall be made with respect thereof.
(d) all outstanding shares of common stock, $.01 par value, of the Merger
Sub held by the Surviving Corporation shall be converted into one thousand
(1,000) shares of Michael Common Stock at the Effective Time and will remain
outstanding after the Effective Date as capital stock of Michael held by the
Surviving Corporation and all other outstanding shares of Michael Common Stock
shall be canceled.
2.3 RIGHTS OF HOLDERS OF MICHAEL CAPITAL STOCK.
(a) On and after the Effective Date and until surrendered for exchange,
each outstanding stock certificate which immediately prior to the Effective Date
represented shares of Michael Common Stock shall be deemed for all purposes, to
evidence ownership of and to represent the number of whole shares of the
Surviving Corporation Common Stock into which such shares of Michael Common
Stock shall have been converted, and the record holder of such outstanding
certificate shall, after the Effective Date, be entitled to
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vote the shares of the Surviving Corporation Common Stock into which such
shares of Michael Common Stock shall have been converted on any matters on
which the holders of record of the Surviving Corporation Common Stock, as of
any date subsequent to the Effective Date, shall be entitled to vote. In any
matters relating to such certificates of Michael Common Stock, the Surviving
Corporation may rely conclusively upon the record of shareholders maintained
by Michael containing the names and addresses of the holders of record of
Michael Common Stock on the Effective Date.
(b) On and after the Effective Date, the Surviving Corporation shall
reserve a sufficient number of authorized but unissued shares of the Surviving
Corporation Common Stock for issuance in connection with the conversion of
Michael Common Stock into the Surviving Corporation Common Stock and the shares
of Michael Common Stock reserved for issuance under the Michael Stock Plans,
including the shares issuable upon exercise of the Continuing Options.
2.4 PROCEDURE FOR EXCHANGE OF STOCK.
(a) After the Effective Date, holders of certificates theretofore
evidencing outstanding shares of Michael Common Stock, upon surrender of such
certificates to an exchange agent appointed by Michael (the "Exchange Agent"),
shall be entitled to receive certificates representing the number of whole
shares of the Surviving Corporation Common Stock into which shares of Michael
Common Stock theretofore represented by the certificates so surrendered shall
have been converted as provided in Section 2.2(a) hereof. As soon as
practicable after the Effective Date, the Surviving Corporation shall cause the
Exchange Agent to mail appropriate and customary transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Michael Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent) to each
holder of Michael Common Stock of record as of the Effective Date advising such
holder of the effectiveness of the Merger and the procedure for surrendering to
the Exchange Agent outstanding certificates formerly evidencing ownership of the
Michael Common Stock in exchange for new certificates evidencing ownership of
the Surviving Corporation Common Stock. The Surviving Corporation shall not be
obligated to deliver the consideration to which any former holder of shares of
Michael Common Stock is entitled as a result of the Merger until such holder
surrenders the certificate or certificates representing such shares for exchange
as provided in such transmittal materials and this Section 2.4(a). Upon
surrender, each certificate evidencing Michael Common Stock shall be canceled.
(b) After the Effective Date, holders of certificates theretofore
evidencing outstanding shares of NSU Common Stock subject to the Reverse Stock
Split, upon surrender of such certificates to the Exchange Agent, shall be
entitled to receive (i) certificates representing the whole number of shares of
the Surviving Corporation Common Stock into which the shares of NSU Common Stock
subject to the Reverse Stock Split so surrendered shall have been combined as a
result of the Reverse Stock Split, and (ii) cash
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payments in lieu of fractional shares, if any, as provided in Section 1.4
hereof. As soon as practicable after the Effective Date, the Surviving
Corporation shall cause the Exchange Agent to mail appropriate and customary
transmittal materials (which shall specify that delivery shall be effected,
and risk of loss and title to the certificates theretofore representing
shares of NSU Common Stock subject to the Reverse Stock Split shall pass,
only upon proper delivery of such certificates to the Exchange Agent) to each
holder of NSU Common Stock subject to the Reverse Stock Split of record as of
the Effective Date advising such holder of the effectiveness of the Merger,
the Reverse Stock Split and the Distribution and the procedure for
surrendering to the Exchange Agent outstanding certificates formerly
evidencing ownership of the NSU Common Stock subject to the Reverse Stock
Split in exchange for new certificates evidencing ownership of the Surviving
Corporation Common Stock. The Surviving Corporation shall not be obligated
to deliver the consideration to which any former holder of shares of NSU
Common Stock subject to the Reverse Stock Split is entitled as a result of
the Merger and the Reverse Stock Split until such holder surrenders the
certificate or certificates representing such shares for exchange as provided
in such transmittal materials and this Section 2.4(b). Notwithstanding the
immediately preceding sentence, as provided in the Distribution Agreement and
in accordance with the terms thereof, the certificates evidencing the Spinco
Common Stock shall be mailed on the Distribution Date to the NSU shareholders
of record on the Distribution Record Date, other than holders of Dissenting
Shares, and the surrender of the certificates evidencing the NSU Common Stock
subject to the Reverse Stock Split shall not be a condition to the delivery,
after the Effective Date, of the certificates evidencing the Spinco Common
Stock. Upon surrender, each certificate evidencing NSU Common Stock subject
to the Reverse Stock Split shall be canceled.
(c) On the Effective Date, the Surviving Corporation shall deposit, or
shall cause to be deposited, with the Exchange Agent, for exchange in accordance
with this Section 2.4, certificates representing the shares of the Surviving
Corporation Common Stock and cash in lieu of fractional shares (such
certificates and cash are hereinafter referred to as the "Exchange Fund") to be
issued or paid by the Surviving Corporation pursuant to Articles 1 and 2 in
connection with the Merger and the Reverse Stock Split. As provided in the
Distribution Agreement, the certificates evidencing the Spinco Common Stock
shall have been deposited by NSU with the transfer agent of NSU on or prior to
the Effective Date, for distribution on the Distribution Date in accordance with
the terms of the Distribution Agreement and the terms hereof. After the
Effective Date, the Surviving Corporation shall, on the payment or distribution
date, tender to the Exchange Agent as an addition to the Exchange Fund all
dividends and other distributions applicable to certificates held in the
Exchange Fund for shares of the Surviving Corporation Common Stock issuable in
respect of the NSU Common Stock subject to the Reverse Stock Split.
(d) Until outstanding certificates representing NSU Common Stock subject
to the Reverse Stock Split are surrendered as provided in Section 2.4(b) hereof,
no dividend or distribution payable to such holders of record of NSU Common
Stock, except the Spinco Common Stock payable in connection with the
Distribution, shall be paid to any holder of
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such outstanding certificates, but upon surrender of such outstanding
certificates by such holder there shall be paid to such holder the amount of
any dividends or distributions (without interest) theretofore paid with
respect to the whole shares of the Surviving Corporation Common Stock into
which such shares are converted as a result of the Reverse Stock Split, but
not paid to such holder, and which dividends or distributions had a record
date occurring subsequent to the Effective Date.
(e) After the Effective Date, there shall be no further registration of
transfers on the records of Michael of outstanding certificates formerly
representing shares of Michael Common Stock at the Effective Date (other than
the shares of the Merger Sub which are converted into Michael Common Stock
pursuant to Section 2.3(c)) and there shall be no further registration of
transfers on the records of the Surviving Corporation of outstanding
certificates representing shares of NSU Common Stock subject to the Reverse
Stock Split. If any such certificate is presented to Michael or the Surviving
Corporation, it shall be forwarded to the Exchange Agent for cancellation and
exchange for certificates representing shares of the Surviving Corporation
Common Stock as herein provided.
(f) All shares of the Surviving Corporation Common Stock issued upon the
surrender for exchange of Michael Common Stock in accordance with the above
terms and conditions shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Michael Common Stock.
All shares of the Surviving Corporation Common Stock issued upon the surrender
for exchange of NSU Common Stock subject to the Reverse Stock Split in
accordance with the above terms and conditions shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of NSU
Common Stock.
(g) Any portion of the Exchange Fund (including the proceeds of any
investments thereof, any shares of the Surviving Corporation Common Stock and
any dividends or distributions thereon) that remains unclaimed by the holders of
Michael Common Stock or NSU Common Stock subject to the Reverse Stock Split, as
the case may be, for six months after the Effective Date shall be returned or
repaid to the Surviving Corporation. Any holders of Michael Common Stock or NSU
Common Stock subject to the Reverse Stock Split who have not theretofore
complied with this Section 2.4 shall thereafter look only to the Surviving
Corporation for issuance of their shares of the Surviving Corporation Common
Stock, cash in lieu of fractional shares and any unpaid dividends and
distributions on the Surviving Corporation Common Stock deliverable in respect
of the shares of NSU Common Stock subject to the Reverse Stock Split that such
holder holds as determined pursuant to this Agreement, in each case, without any
interest thereon. If outstanding certificates for shares of Michael Common
Stock or NSU Common Stock subject to the Reverse Stock Split are not surrendered
or the payment for them not claimed prior to the date on which such payments
would otherwise escheat to or become the property of any governmental unit or
agency, the unclaimed items shall, to the extent not prohibited by abandoned
property and any other applicable law, become the property of the Surviving
Corporation (and to the extent not in its possession shall be paid over to it),
free and clear of all claims or interest
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of any person previously entitled to such claims. Notwithstanding the
foregoing, none of Surviving Corporation, Michael, NSU, the Exchange Agent or
any other person shall be liable to any former holder of Michael Common Stock
or NSU Common Stock subject to the Reverse Stock Split for any amount
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
(h) In the event any certificate for Michael Common Stock or NSU Common
Stock subject to the Reverse Stock Split shall have been lost, stolen or
destroyed, the Exchange Agent shall issue and pay in exchange for such lost,
stolen or destroyed certificate, upon the making of an affidavit of that fact by
the holder thereof, such shares of the Surviving Corporation Common Stock and
cash for fractional shares, if any, as may be required pursuant to this
Agreement; provided, however, that the Surviving Corporation, in its discretion
and as a condition precedent to the issuance and payment thereof, may require
the owner of such lost, stolen or destroyed certificate to deliver a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Surviving Corporation, Michael, NSU, the Exchange Agent or any other
party with respect to the certificate alleged to have been lost, stolen or
destroyed.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MICHAEL
Michael hereby represents and warrants to NSU as follows:
3.1 ORGANIZATION AND QUALIFICATION. Michael is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power to carry on its business as now
conducted. Each of the Michael Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation. The copies of the Charter and Bylaws of Michael which have been
made available to NSU prior to the date of this Agreement are correct and
complete copies of such documents as in effect as of the date of this Agreement.
As used in this Agreement, the term "Charter" with respect to any corporation
shall mean those instruments that at that time constitute its charter as filed
or recorded under the general corporation or other applicable law of the
jurisdiction of its incorporation or organization, including the articles or
certificate of incorporation and any and all amendments thereto. Each of
Michael and the Michael Subsidiaries is licensed or qualified to do business in
every jurisdiction in which the nature of its business or its ownership of
property requires it to be licensed or qualified, except where the failure to be
so licensed or qualified would not have a Material Adverse Effect on Michael.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT; NON-CONTRAVENTION. Michael has
the requisite corporate power and authority to enter into this Agreement and the
Certificate of Merger and to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Certificate of Merger by
Michael and the consummation
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by Michael of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of Michael and, except for approval of
this Agreement and the Merger by the requisite vote of Michael's
shareholders, no other corporate proceedings on the part of Michael are
necessary to authorize this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Michael and, assuming it is a valid and binding obligation of
NSU, constitutes a valid and binding obligation of Michael enforceable in
accordance with its terms except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity
and by bankruptcy, insolvency and similar laws affecting creditors' rights
and remedies generally. Except as set forth in Schedule 3.2, neither Michael
nor any of the Michael Subsidiaries is subject to, or obligated under, any
provision of (a) its Charter or Bylaws, (b) any agreement, arrangement or
understanding, (c) any license, franchise or permit or (d) subject to
obtaining the approvals referred to in the next sentence, any law,
regulation, order, judgment or decree, which would be breached or violated,
or in respect of which a right of termination or acceleration or any
encumbrance on any of its assets would be created, by the execution, delivery
or performance of this Agreement, the Certificate of Merger, or the
consummation of the transactions contemplated hereby or thereby, other than
any such breaches, violations, rights of termination or acceleration or
encumbrances which, in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect on Michael. Except for (a) the filing
required by the HSR Act and the termination of any waiting period thereunder,
(b) the filing with the SEC of a joint proxy statement in definitive form
relating to the meetings of Michael's and NSU's shareholders to be held in
connection with this Agreement and the transactions contemplated hereby, (c)
the filing with the SEC of the Registration Statement and effectiveness of
the Registration Statement, (d) the approval of the Merger, the Certificate
of Merger and this Agreement by the requisite vote of the shareholders of
Michael (the "Requisite Michael Shareholder Vote"), (e) approvals under
applicable Blue Sky laws, (f) the filing of the Certificate of Merger with
the Delaware Secretary of State in accordance with the DGCL, and (g) such
filings, authorizations or approvals as may be set forth in Schedule 3.2, no
authorization, consent or approval of, or filing with, any public body, court
or authority is necessary on the part of Michael or any of the Michael
Subsidiaries for the consummation by Michael of the transactions contemplated
by this Agreement, except for such authorizations, consents, approvals and
filings as to which the failure to obtain or make the same will not, in the
aggregate, have a Material Adverse Effect on Michael or adversely affect the
consummation of the transactions contemplated hereby.
3.3 CAPITALIZATION. The authorized, issued and outstanding shares of
capital stock of Michael as of the date hereof is correctly set forth on
Schedule 3.3. The issued and outstanding shares of capital stock of Michael are
duly authorized, validly issued, fully paid and nonassessable and have not been
issued in violation of any preemptive rights.
3.4 EXCHANGE ACT REPORTS. Prior to the execution of this Agreement,
Michael has delivered or made available to NSU complete and accurate copies of
(a) Michael's Annual Reports on Form 10-K for the years ended December 31, 1990,
1991, 1992, 1993 and 1994
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(the "Michael 10-K Reports") as filed with the SEC, (b) all Michael proxy
statements and annual reports to shareholders used in connection with
meetings of Michael shareholders held since January 1, 1991 and (c) Michael's
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and
September 30, 1995 (the "Michael 10-Q Reports") as filed with the SEC. As of
their respective dates or as subsequently amended prior to the date hereof,
such documents (i) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading and (ii) complied as to form in all material
respects with the applicable rules and regulations of the SEC. Since January
1, 1991, Michael has filed in a timely manner all reports that it was
required to file with the SEC pursuant to the Exchange Act, as amended, and
the rules and regulations promulgated thereunder. The Michael financial
statements (including any footnotes thereto) contained in the Michael 10-K
Reports and the Michael 10-Q Reports were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as
otherwise noted therein) and fairly present the financial condition of
Michael as of the dates thereof, except, in the case of unaudited interim
financial statements, subject to normal year-end adjustments and the omission
of footnotes.
3.5 SUBSIDIARIES. Schedule 3.5 correctly sets forth the name and
jurisdiction of incorporation of each Subsidiary of Michael (each a "Michael
Subsidiary" and collectively the "Michael Subsidiaries"). Except as disclosed
on Schedule 3.5, all of the issued and outstanding shares of capital stock of
each Michael Subsidiary are owned directly or indirectly by Michael free and
clear of any lien, pledge, security interest, encumbrance or charge of any kind.
3.6 LITIGATION. As of the date hereof, there are no actions, suits,
proceedings, orders or investigations pending or, to the knowledge of Michael,
threatened against Michael, at law or in equity, or before or by any federal,
state or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign which challenges or seeks to make illegal
or to delay or otherwise directly or indirectly to restrain or prohibit the
consummation of the transactions contemplated hereby or seeks to obtain material
damages in connection with the transactions contemplated hereby. As used in
this Agreement, the phrase "to the knowledge of," or words of similar import,
with respect to an entity means to the knowledge of management officials of such
entity having responsibility for the matter in question.
3.7 NO BROKERS OR FINDERS. Except as disclosed on Schedule 3.7, there are
no claims for brokerage commissions, finders' fees, investment advisory fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement, understanding, commitment or agreement made
by or on behalf of Michael or any of the Michael Subsidiaries.
3.8 PROSPECTUS/PROXY STATEMENT. At the time the Registration Statement
becomes effective and at the time the Prospectus/Proxy Statement is mailed to
the shareholders of
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Michael and NSU in order to obtain approvals referred to in Section 6.11 and
at all times subsequent to such mailing up to and including the times of such
approvals, the Registration Statement and the Prospectus/Proxy Statement
(including any amendments or supplements thereto), with respect to all
information furnished to NSU by Michael as provided in Section 6.4(b) below)
for inclusion in the Prospectus/Proxy Statement or consistent with
information so furnished by Michael relating to Michael (including the
Michael Subsidiaries) and its shareholders, Michael Common Stock, the Michael
Stock Plans, the Continuing Options, this Agreement, the Certificate of
Merger, the Merger and all other transactions contemplated hereby, will (a)
comply in all material respects with applicable provisions of the Securities
Act and the Exchange Act and the rules and regulations promulgated
thereunder, and (b) not contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements contained therein, in light of the circumstances under which
they are made, not misleading.
3.9 DISCLOSURE. The representations and warranties of Michael contained
in this Agreement are true and correct in all material respects, and such
representations and warranties do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to Michael which has not been
disclosed to NSU pursuant to this Agreement, the Schedules hereto, the Michael
10-K Reports and the Michael 10-Q Reports, all taken together as a whole, which
has had or could reasonably be expected to have a Material Adverse Effect on
Michael or materially adversely affect the ability of Michael to consummate in a
timely manner the transactions contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF NSU
NSU hereby represents and warrants to Michael as follows:
4.1 ORGANIZATION AND QUALIFICATION. NSU is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota,
and has the requisite corporate power to carry on its business as now conducted.
Each of the NSU Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. The
copies of the Charter and Bylaws of NSU and Merger Sub which have been made
available to Michael on or prior to the date of this Agreement are correct and
complete copies of such documents as in effect as of the date of this Agreement.
Each of NSU and the NSU Subsidiaries is licensed or qualified to do business in
every jurisdiction in which the nature of its business or its ownership of
property requires it to be licensed or qualified, except where the failure to be
so licensed or qualified would not have a Material Adverse Effect on NSU.
4.2 AUTHORITY RELATIVE TO THIS AGREEMENT; NON-CONTRAVENTION. Each of NSU,
the Merger Sub and Spinco has the requisite corporate power and authority to
enter into this
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Agreement, the Certificate of Merger and the Distribution Agreement to which
it is or will be a party and to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement, the Certificate of
Merger and the Distribution Agreement by NSU, the Merger Sub and Spinco to
which it is or will be a party, and the consummation by NSU, the Merger Sub
and Spinco of the transactions contemplated hereby and thereby have been duly
authorized by the Boards of Directors of NSU, the Merger Sub and Spinco.
Except for approval of this Agreement, the Merger, the New Articles, the
Reverse Stock Split and the Distribution by the requisite vote of NSU's
shareholders, no other corporate proceedings on the part of NSU, Merger Sub
or Spinco are necessary to authorize this Agreement, the Certificate of
Merger and the Distribution Agreement and the consummation of the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by NSU and Merger Sub and, assuming it is a valid and
binding obligation of Michael, constitutes a valid and binding obligation of
NSU and Merger Sub enforceable in accordance with its terms except as
enforcement may be limited by general principles of equity whether applied in
a court of law or a court of equity and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally. Except as set forth
in Schedule 4.2, neither NSU nor any of the NSU Subsidiaries is subject to,
or obligated under, any provision of (a) its Charter or Bylaws, (b) any
agreement, arrangement or understanding, (c) any license, franchise or permit
or (d) subject to obtaining the approvals referred to in the next sentence,
any law, regulation, order, judgment or decree, which would be breached or
violated, or in respect of which a right of termination or acceleration or
any encumbrance on any of its assets would be created, by the execution,
delivery or performance of this Agreement, the Certificate of Merger, the
Distribution Agreement or the consummation of the transactions contemplated
hereby or thereby, other than any such breaches, violations, rights of
termination or acceleration or encumbrances which, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on NSU. Except
for (a) the filings, notices, consents and approvals described in Section 3.2
hereof, (b) the filing with the SEC of a registration statement on Form S-1
registering the shares of Spinco Common Stock to be distributed in the
Distribution, if required, (c) approval of the Merger and this Agreement, the
New Articles, the Reverse Stock Split and the Distribution by the requisite
vote of the shareholders of NSU (the "Requisite NSU Shareholder Vote"), (d)
the filing of the New Articles with the Minnesota Secretary of State, and (e)
such filings, authorizations or approvals as may be set forth in Schedule
4.2, no authorization, consent or approval of, or filing with, any public
body, court or authority is necessary on the part of NSU or any of the NSU
Subsidiaries for the consummation by NSU or the Merger Sub of the
transactions contemplated by this Agreement, except for such authorizations,
consents, approvals and filings as to which the failure to obtain or make the
same will not, in the aggregate, have a Material Adverse Effect on NSU or
adversely affect the consummation of the transactions contemplated hereby.
4.3 CAPITALIZATION. The authorized, issued and outstanding shares of
capital stock of each of NSU and Merger Sub as of the date hereof is correctly
set forth on Schedule 4.3. The issued and outstanding shares of capital stock
of each of NSU, Merger Sub and Spinco are duly authorized, validly issued, fully
paid and nonassessable and have not been issued
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in violation of any preemptive rights. Except as disclosed on Schedule 4.3,
there are no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating NSU or Merger Sub to
issue, sell, purchase or redeem any shares of its capital stock or securities
or obligations of any kind convertible into or exchangeable for any shares of
its capital stock. Schedule 4.3 contains true and correct copies of all such
agreements, arrangements (including all stock plans, but excluding individual
stock option agreements) or commitments. The outstanding shares of NSU
Common Stock have been duly listed for trading on the Pacific Stock Exchange
and the NASDAQ-NMS.
4.4 EXCHANGE ACT REPORTS. Prior to the execution of this Agreement, NSU
has delivered or made available to Michael complete and accurate copies of (a)
NSU's Annual Reports on Form 10-K for the years ended December 31, 1990, 1991,
1992, 1993 and 1994 (the "NSU 10-K Reports") as filed with the SEC, (b) all NSU
proxy statements and annual reports to shareholders used in connection with
meetings of NSU shareholders held since January 1, 1991 and (c) NSU's Quarterly
Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30,
1995 (the "NSU 10-Q Reports") as filed with the SEC. As of their respective
dates or as subsequently amended prior to the date hereof, such documents (i)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statement
therein, in light of the circumstances under which they were made, not
misleading and (ii) complied as to form in all material respects with the
applicable rules and regulations of the SEC. Since January 1, 1991, NSU has
filed in a timely manner all reports that it was required to file with the SEC
pursuant to the Exchange Act. The NSU financial statements (including footnotes
thereto) contained in the NSU 10-K Reports and the NSU 10-Q Reports were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as otherwise noted therein) and fairly present the
financial condition of NSU as of the dates thereof, except in the case of
unaudited interim financial statements subject to normal year-end adjustments
and the omission of footnotes.
4.5 SUBSIDIARIES. Schedule 4.5 correctly sets forth the name and
jurisdiction of incorporation of each corporation, fifty percent or more of the
voting securities of which is owned directly or indirectly by NSU (each a "NSU
Subsidiary" and collectively the "NSU Subsidiaries"). All of the issued and
outstanding shares of capital stock of each NSU Subsidiary are owned directly or
indirectly by NSU free and clear of any lien, pledge, security interest,
encumbrance or charge of any kind.
4.6 ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in NSU's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 or on
Schedule 4.6, unless otherwise expressly contemplated or permitted by this
Agreement, since September 30, 1995 to the date hereof, neither NSU nor any of
the NSU Subsidiaries has:
(a) issued or sold any of its equity securities other than NSU Common
Stock, securities convertible into or exchangeable for its equity
securities other than NSU Common Stock, warrants, options or other rights
to acquire its equity securities other
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than NSU Common Stock;
(b) reclassified any of its outstanding shares of capital stock; or
(c) agreed to do any of the foregoing.
4.7 LITIGATION. As of the date hereof, there are no actions, suits,
proceedings, orders or investigations pending or, to the knowledge of NSU,
threatened against NSU or any of the NSU Subsidiaries, at law or in equity, or
before or by any federal, state or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign which challenges
or seeks to make illegal or to delay or otherwise directly or indirectly to
restrain or prohibit the consummation of the transactions contemplated hereby or
seeks to obtain material damages in connection with the transactions
contemplated hereby.
4.8 NO BROKERS OR FINDERS. Except as disclosed on Schedule 4.8, there are
no claims for brokerage commissions, finders' fees, investment advisory fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement, understanding, commitment or agreement made
by or on behalf of NSU or any of the NSU Subsidiaries.
4.9 PROSPECTUS/PROXY STATEMENT. At the time the Registration Statement
becomes effective and at the time the Prospectus/Proxy Statement is mailed to
the shareholders of NSU and Michael in order to obtain approvals referred to in
Section 6.11 hereof and at all times subsequent to such mailing up to and
including the times of such approvals, the Registration Statement and the
Prospectus/Proxy Statement (including any amendments or supplements thereto),
with respect to all information set forth therein relating to NSU (including the
NSU Subsidiaries) and its shareholders, this Agreement, the Certificate of
Merger, the Distribution and all other transactions contemplated hereby, will
(a) comply in all material respects with applicable provisions of the Securities
Act and the Exchange Act, and (b) not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they are made, not misleading, except that, in each case, no such
representations shall apply to any written information, including financial
statements, of or provided by Michael for such Prospectus/Proxy Statement.
4.10 VALIDITY OF THE SURVIVING CORPORATION COMMON STOCK. The shares of the
Surviving Corporation Common Stock to be issued to holders of Michael Common
Stock pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable.
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4.11 OWNERSHIP OF MICHAEL COMMON STOCK. As of the date hereof, NSU owns
good and valid title to 7,354,950 shares of Michael Common Stock, free and clear
of any liens, claims, encumbrances or restrictions (other than restrictions
imposed by securities laws) except as disclosed on Schedule 4.11.
4.12 LIABILITIES. As of the Effective Time, (a) NSU shall have no known
Liabilities other than (i) the NSU Assumed Liabilities for which the Surviving
Corporation shall be responsible, and (ii) the contingent liabilities listed in
Schedule 4.12 hereto against which the Surviving Corporation and its
Subsidiaries will be indemnified pursuant to Section 5.01 of the Distribution
Agreement, and (b) Merger Sub shall have no Liabilities, except its obligations
under this Agreement.
4.13 DISCLOSURE. The representations and warranties of NSU contained in
this Agreement are true and correct in all material respects, and such
representations and warranties do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading. There is no fact known to NSU and the NSU
Subsidiaries which has not been disclosed to Michael pursuant to this Agreement,
the Schedules hereto and the NSU 10-K Reports and the NSU 10-Q Reports, all
taken together as a whole, which has had or could reasonably be expected to have
a Material Adverse Effect on NSU or materially adversely affect the ability of
NSU to consummate in a timely manner the transactions contemplated hereby.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 CONDUCT OF BUSINESS BY NSU. From the date of this Agreement to the
Effective Date, unless Michael shall otherwise agree in writing or as otherwise
expressly contemplated or permitted by other provisions of this Agreement,
including but not limited to, this Section 5.1, NSU shall not, directly or
indirectly, (a) amend or propose to amend its Charter or Bylaws except for the
New Articles, (b) issue, sell or grant any of its equity securities other than
NSU Common Stock, securities convertible into or exchangeable for its equity
securities other than NSU Common Stock, warrants, options or other rights to
acquire its equity securities other than NSU Common Stock, (c) reclassify any
outstanding shares of capital stock of NSU, (d) acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture or other business organization or division or assets
thereof, except by a NSU Subsidiary and in a transaction in which NSU shall not
have any Liabilities with respect thereto after the Effective Date, (e) sell,
transfer, pledge or otherwise encumber the Michael Common Stock owned by NSU
other than as collateral for indebtedness under the Credit Agreement, (f)
purchase or otherwise acquire any additional shares of Michael Common Stock, (g)
default in its obligations under any material debt, contract or commitment which
default results in the acceleration of obligations due thereunder, or (h) enter
into or propose to enter into, or modify or propose to modify, any agreement,
arrangement, or understanding with respect
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to any of the foregoing matters.
5.2 CONDUCT OF BUSINESS BY MICHAEL. From the date of this Agreement to
the Effective Date, unless NSU shall otherwise agree in writing or as otherwise
expressly contemplated or permitted by other provisions of this Agreement,
including but not limited to, this Section 5.2, Michael shall not, directly or
indirectly, (a) amend its Charter or Bylaws, (b) split, combine or reclassify
any outstanding shares of capital stock of Michael, (c) declare, set aside, make
or pay any dividend or distribution in cash, stock, property or otherwise with
respect to the capital stock of Michael, except for regular quarterly dividends
which are not in excess of $.05 per share per quarter on the Michael Common
Stock, or (d) default in its obligations under any material debt, contract or
commitment which default results in the acceleration of obligations due
thereunder, except for such defaults arising out of this Agreement for which
consents, waivers or modifications are required to be obtained as set forth on
Schedule 3.2.
ARTICLE 6
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 GOVERNMENTAL FILINGS. Each party will use all reasonable efforts and
will cooperate with the other party in the preparation and filing, as soon as
practicable, of all filings, applications or other documents required under
applicable laws, including the Securities Act, the Exchange Act and the HSR Act,
to consummate the transactions contemplated by this Agreement. Prior to
submitting each filing, application, registration statement or other document
with the applicable regulatory authority, each party will, to the extent
practicable, provide the other party with an opportunity to review and comment
on each such application, registration statement or other document to the extent
permitted by applicable law. Each party will use all reasonable efforts and
will cooperate with the other party in taking any other actions necessary to
obtain such regulatory or other approvals and consents at the earliest
practicable time, including participating in any required hearings or
proceedings. Subject to the terms and conditions herein provided, each party
will use all reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement.
6.2 EXPENSES. Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses. Any such costs or expenses incurred by NSU shall be paid prior to the
Effective Time. Notwithstanding the foregoing, NSU and Michael will each pay,
when due, one-half of (i) all filing fees required to be paid under the HSR Act
by Michael, NSU or any shareholder of NSU who may be an "Ultimate Parent Entity"
under the HSR Act in connection with the Merger (but excluding the
Distribution), (ii) all costs of all SEC filing fees with respect to the
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Registration Statement as those fees relate to the shares of Surviving
Corporation Common Stock issuable to the holders of Michael Common Stock as a
result of the Merger, and (iii) all costs of qualifying the Surviving
Corporation securities to be issued in connection with the transactions
contemplated by this Agreement under state blue sky laws to the extent
necessary.
6.3 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Each party shall permit and shall cause each of its subsidiaries to
permit the other party full access on reasonable notice and at reasonable hours
to its properties and shall disclose and make available (together with the right
to copy) to the other party and its officers, employees, attorneys, accountants
and other representatives, all books, papers and records relating to the assets,
stock, properties, operations, obligations and liabilities of such party and its
subsidiaries, including, without limitation, all books of account (including,
without limitation, the general ledger), tax records, minute books of directors'
and shareholders' meetings, organizational documents, bylaws, contracts and
agreements, filings with any regulatory authority, accountants' work papers,
litigation files (including, without limitation, legal research memoranda),
documents relating to assets and title thereto (including, without limitation,
abstracts, title insurance policies, surveys, environmental reports, opinions of
title and other information relating to the real and personal property), plans
affecting employees, securities transfer records and shareholder lists, and any
books, papers and records relating to other assets or business activities in
which such party may have a reasonable interest; provided, however, that the
foregoing rights granted to each party shall, whether or not and regardless of
the extent to which the same are exercised, in no way affect the nature or scope
of the representations, warranties and covenants of the respective party set
forth herein.
(b) Each party shall comply with the provisions of its confidentiality
letter dated December 1, 1995 with the other party. This Agreement does not
supersede or modify the terms of such confidentiality letters.
6.4 REGISTRATION STATEMENT.
(a) For the purpose (i) of holding meetings of shareholders of Michael and
NSU to approve the Merger and this Agreement and, in the case of NSU, to approve
the New Articles, the Reverse Stock Split and the Distribution, and (ii) of
registering with the SEC and with applicable state securities authorities the
securities of the Surviving Corporation to be issued as contemplated by this
Agreement, the parties hereto shall cooperate in the preparation of an
appropriate registration statement (such registration statement, together with
all and any amendments and supplements thereto, being herein referred to as the
"Registration Statement"), which shall include a prospectus/joint proxy
statement satisfying all applicable requirements of the Securities Act, the
Exchange Act, applicable state securities laws and the rules and regulations
thereunder (such prospectus/joint proxy statement, together with any and all
amendments or supplements thereto, being herein
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referred to as the "Prospectus/Proxy Statement").
(b) Michael shall furnish such information concerning Michael and the
Michael Subsidiaries as is necessary in order to cause the Prospectus/Proxy
Statement, insofar as it relates to Michael, the Michael Subsidiaries and
Michael securities, to be prepared in accordance with Section 6.4(a). Michael
agrees promptly to advise NSU if at any time prior to the Michael or NSU
shareholders' meetings any information provided by Michael in the
Prospectus/Proxy Statement becomes incorrect or incomplete in any material
respect, and to share with NSU the information needed to correct such inaccuracy
or omission.
(c) NSU shall furnish Michael with such information concerning NSU and the
NSU Subsidiaries as is necessary in order to cause the Prospectus/Proxy
Statement, insofar as it relates to NSU, the NSU Subsidiaries and the NSU
securities, to be prepared in accordance with Section 6.4(a). NSU agrees
promptly to advise Michael if at any time prior to the Michael or NSU
shareholders' meetings any information provided by NSU in the Prospectus/Proxy
Statement becomes incorrect or incomplete in any material respect, and to
provide Michael with the information needed to correct such inaccuracy or
omission.
(d) NSU shall use all reasonable efforts to promptly prepare and (subject
to receipt of audited financial statements of each of NSU and Michael for the
year ended December 31, 1995) file the Registration Statement with the SEC and
applicable state securities agencies. NSU shall use reasonable efforts to cause
the Registration Statement to become effective under the Securities Act and
applicable state securities laws at the earliest practicable date. NSU agrees
to provide Michael with reasonable opportunity to review and comment on the
Registration Statement and any amendment thereto before filing with the SEC or
any other governmental entity and agrees not to make such filing if Michael
reasonably objects to the completeness or accuracy of any information contained
therein. Michael authorizes NSU to utilize in the Registration Statement the
information concerning Michael, the Michael Subsidiaries and Michael securities
provided to NSU for the purpose of inclusion in the Prospectus/Proxy Statement.
NSU shall advise Michael promptly when the Registration Statement has become
effective and of any supplements or amendments thereto, and NSU shall furnish
Michael with copies of all such documents. Prior to the Effective Date or the
termination of this Agreement, each party shall consult with the other with
respect to any material (other than the Prospectus/Proxy Statement) that might
constitute a "prospectus" relating to the Merger within the meaning of the
Securities Act.
(e) Michael shall use reasonable efforts to cause to be delivered to NSU a
letter relating to the financial statements of Michael included in the
Registration Statement from Grant Thornton LLP, Michael's independent auditors,
dated a date within two business days before the date on which the Registration
Statement shall become effective and addressed to NSU, in form and substance
reasonably satisfactory to NSU and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
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(f) NSU shall use reasonable efforts to cause to be delivered to Michael a
letter relating to the financial statements of NSU included in the Registration
Statement from Grant Thornton LLP, NSU's independent auditors, dated a date
within two business days before the date on which the Registration Statement
shall become effective and addressed to Michael, in form and substance
reasonably satisfactory to Michael and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
(g) NSU shall bear all printing and mailing costs in connection with the
preparation and mailing of the Prospectus/Proxy Statement to NSU shareholders.
Michael shall bear all printing and mailing costs in connection with the
preparation and mailing of the Prospectus/Proxy Statement to Michael
shareholders. Michael and NSU shall each bear their own legal and accounting
expenses in connection with the Registration Statement.
6.5 ACCOUNTING AND TAX TREATMENT. Neither NSU nor Michael, nor Surviving
Corporation after the Effective Date, shall, directly or indirectly, voluntarily
take any action which would disqualify the Merger, the Reverse Stock Split and
the Distribution as a business combination utilizing the reverse acquisition
concept with Michael being the accounting acquiror for accounting purposes and
the Merger as a "reorganization" that would be tax free to the shareholders of
NSU and Michael pursuant to Section 368(a) of the Code.
6.6 MICHAEL STOCK PLANS. At or prior to the Effective Time, NSU shall
take all corporate action necessary to authorize and reserve for issuance a
sufficient number of shares of the Surviving Corporation Common Stock, equal to
the number of shares of Michael Common Stock reserved for issuance under the
Michael Stock Plans to be adopted and assumed by the Surviving Corporation at
the Effective Time, including the shares issuable upon exercise of the
Continuing Options, in accordance with Section 2.2(b).
6.7 PRESS RELEASES. Michael and NSU shall agree with each other as to the
form and substance of any press release related to this Agreement or the
transactions contemplated hereby, and shall consult with each other as to the
form and substance of other public disclosures which may relate to the
transactions contemplated by this Agreement, provided, however, that nothing
contained herein shall prohibit either party, following notification to the
other party, from making any disclosure which is required by law or regulation.
6.8 DIRECTORS AND OFFICERS INSURANCE. Each of NSU and Michael will use
its reasonable efforts to obtain a quote for "tail policy" coverage for a period
of three years after the Effective Date under its officers and directors
liability insurance for claims asserted after the Effective Date against any
person who was an officer or director of NSU or any NSU Subsidiary prior to the
Effective Date which claims relate to the period prior to the Effective Date.
If such coverage is available, NSU will, prior to the Effective Date, select
which coverage it prefers and purchase or reimburse Michael for the cost of such
coverage.
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6.9 SECURITIES REPORTS. Each of Michael and NSU agree to provide to the
other party copies of all reports and other documents filed under the Securities
Act or Exchange Act with the SEC by it between the date hereof and the Effective
Date within two days after the date such reports or other documents are filed
with the SEC. Upon delivery of any such report or document, the delivering
party shall be deemed to have made the representations to the receiving party
with respect thereto as set forth in Sections 3.4 and 4.4, respectively.
6.10 STOCK LISTING. NSU shall use all reasonable efforts to list on the
NASDAQ-NMS the shares of the Surviving Corporation Common Stock to be issued in
connection with the Merger and the Reverse Stock Split, and to change the
trading symbol for the Surviving Corporation Common Stock to MIKL on the
Effective Date.
6.11 SHAREHOLDER APPROVALS. Each of Michael and NSU shall call a meeting
of its shareholders for the purpose of voting upon this Agreement and the
Merger, and, in the case of NSU, the New Articles, the Reverse Stock Split and
the Distribution, and shall hold such meeting on the later of (a) June 6, 1996,
or (b) such other date(s) as mutually agreed by NSU and Michael, but such
mutually agreed date(s) shall not be later than forty-five (45) days after the
effectiveness of the Registration Statement. The Board of Directors of each of
Michael and NSU shall recommend approval of this Agreement and the Merger, and,
in the case of NSU, the New Articles, the Reverse Stock Split and the
Distribution, and use all reasonable efforts (including, without limitation,
soliciting proxies for such approvals) to obtain approvals thereof from its
shareholders, provided, however, the Board of Directors of either may fail to
make the recommendation, and/or to seek to obtain the shareholder approval
referred to in this sentence, or withdraw, modify or change any such
recommendation, if such Board of Directors determines, after consultation with
counsel, that the making of such recommendation, the seeking to obtain such
shareholder approval, or the failure to so withdraw, modify or change its
recommendation, is reasonably likely to constitute a breach of the fiduciary or
legal obligations of such Board of Directors.
6.12 NO SOLICITATION.
(a) Unless and until this Agreement shall have been terminated pursuant to
Section 8.1, neither NSU nor its officers, directors or agents shall, directly
or indirectly, encourage, solicit or initiate discussions or negotiations with,
or engage in negotiations or discussions with, or provide non-public information
to, any corporation, partnership, person or other entity or groups concerning
any merger or sale of substantial assets, except for the sale of NSU assets
other than the Michael Common Stock owned by NSU; provided that NSU may engage
in such discussion in response to an unsolicited proposal from an unrelated
party if the Board of Directors of NSU determines, after consultation with
counsel, that the failure to engage in such discussions is reasonably likely to
constitute a breach of the fiduciary or legal obligations of the Board of
Directors of NSU. NSU will promptly advise Michael if it receives a proposal or
inquiry with respect to the matters described above.
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(b) Unless and until this Agreement shall have been terminated pursuant to
Section 8.1, neither Michael nor its officers, directors or agents shall,
directly or indirectly, encourage, solicit or initiate discussions or
negotiations with, or engage in negotiations or discussions with, or provide
non-public information to, any corporation, partnership, person or other entity
or groups concerning any merger or sale of substantial assets, except if (i)
Michael is the surviving corporation in such transaction, and (ii) the
shareholders of Michael immediately preceding such transaction will own at least
51% of the outstanding shares of Michael after giving effect to such
transaction; provided that Michael may engage in such discussion in response to
an unsolicited proposal from an unrelated party if the Board of Directors of
Michael determines, after consultation with counsel, that the failure to engage
in such discussions is reasonably likely to constitute a breach of the fiduciary
or legal obligations of the Board of Directors of Michael. Michael will
promptly advise NSU if it receives a proposal or inquiry with respect to the
matters described above.
6.13 FAILURE TO FULFILL CONDITIONS. In the event that either of the
parties hereto determines that a condition to its respective obligations to
consummate the transactions contemplated hereby cannot be fulfilled on or prior
to the termination of this Agreement, it will promptly notify the other party.
6.14 TAX RULING OR OPINION. Michael and NSU shall reasonably cooperate
with each other in submitting the request for private letter ruling by the IRS
contemplated by Section 7.1(d), shall promptly notify the other of any
communications with or from the IRS with respect to the ruling request, and
shall not submit any written material to the IRS in connection with the ruling
request without consulting with the other.
6.15 RESIGNATIONS AND ELECTION OF DIRECTORS. At the Effective Time, NSU
shall deliver the voluntary resignations of each officer of NSU and each
director of NSU who is not designated to be a director of the Surviving
Corporation in accordance with Section 2.1(a) and shall elect the other persons
who shall be directors of the Surviving Corporation in accordance with Section
2.1(a) to be directors of the Surviving Corporation upon the consummation of the
Merger.
6.16 ORDERLY DISPOSITION AND REGISTRATION RIGHTS AGREEMENT. Contemporaneous
with the execution and delivery of this Agreement, NSU shall execute and deliver
and shall cause the parties other than NSU to execute and deliver the Orderly
Disposition and Registration Rights Agreement. NSU covenants and agrees that
the provisions of the Orderly Disposition and Registration Rights Agreement will
not be amended, waived, terminated or otherwise modified prior to the Effective
Date without the prior written consent of Michael.
6.17 SHAREHOLDER VOTE. NSU will vote the shares of Michael Common Stock
owned by NSU in favor of the Merger, this Agreement, the Certificate of Merger
and the persons nominated by the Michael Board of Directors for election as
directors of Michael
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at the meeting of the Michael shareholders contemplated by Section 6.11,
provided the number of nominees is not greater than nine and provided further
that James H. Michael, Miles E. Efron and Jeffrey J. Michael are nominees of
Michael.
6.18 FILING OF REPORTS NECESSARY FOR USE OF RULE 145. After the Effective
Date, Surviving Corporation shall use reasonable efforts to file all reports and
data with the SEC necessary to permit the shareholders of Michael and NSU who
may be deemed "underwriters" (within the meaning of Rule 145 under the
Securities Act) of Michael Common Stock to sell the Surviving Corporation Common
Stock received by them in connection with the Merger pursuant to Rules 144 and
145(d) under the Securities Act if they would otherwise be so entitled. After
the Effective Date, Surviving Corporation will use reasonable efforts to file
with the SEC reports, statements, and other materials required by the federal
securities laws on a timely basis.
6.19 NOTIFICATION OF CERTAIN MATTERS.
(a) Each party shall give prompt notice to the other party of (i) the
occurrence or failure to occur of any event or the discovery of any information,
which occurrence, failure or discovery would be likely to cause any
representation or warranty on its part contained in this Agreement to be untrue,
inaccurate or incomplete after the date hereof in any material respect or, in
the case of any representation or warranty given as of a specific date, would be
likely to cause any such representation or warranty on its part contained in
this Agreement to be untrue, inaccurate or incomplete in any material respect as
of such specific date, and (ii) any material failure of such party to comply
with or satisfy any covenant or agreement to be complied with or satisfied by it
hereunder.
(b) From time to time after the date hereof and prior to the Effective
Time, each party shall promptly supplement or amend any of its representations
and warranties which apply to the period after the date hereof by delivering an
updated Schedule to the other party pursuant to this Section 6.19(b) with
respect to any matter hereafter arising which would render any such
representation or warranty after the date of this Agreement materially untrue,
inaccurate or incomplete as a result of such matter arising. Such supplement or
amendment to a party's representations and warranties contained in an updated
Schedule delivered pursuant to this Section 6.19(b) shall be deemed to have
modified the representations and warranties of the disclosing party, and no such
supplement or amendment, or the information contained in such updated Schedule,
shall constitute a breach of a representation or warranty of the disclosing
party; provided that no such supplement or amendment may cure any breach of a
covenant or agreement of any party under Articles 5 or 6. Within fifteen (15)
days after receipt of such supplement or amendment, the receiving party may
terminate this Agreement pursuant to Section 7.1(g) hereof if (i) the
information in such supplement or amendment together with the information in any
and all of the supplements or amendments previously provided by the disclosing
party indicate that the disclosing party has suffered or is reasonably likely to
suffer a Material Adverse Effect or, in the case of an updated Schedule 4.12 is,
in Michael's
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reasonable determination a material liability, and (ii) the disclosing party
has not cured the matters giving rise to such termination within fifteen (15)
days after the receiving party notifies the disclosing party that it is
exercising its right to terminate this Agreement under this Section 6.19(b).
6.20 NOTIFICATION OF ANTICIPATED NSU NET INDEBTEDNESS. No later than
thirty (30) days after the initial filing of the Registration Statement, NSU
shall notify Michael of the anticipated amount of the NSU Indebtedness at the
Effective Time, less the amount of cash to be included in the Retained Assets at
the Effective Time (the "Anticipated NSU Net Indebtedness"). NSU covenants that
the amount of the NSU Net Assumed Liabilities at the Effective Time less the
amount of the Dissenting Shares Holdback will be an amount within the range of
(i) the Anticipated NSU Net Indebtedness less $2,000,000, and (ii) the
Anticipated NSU Net Indebtedness plus $2,000,000.
6.21 DISTRIBUTION AGREEMENT. Prior to the Effective Date, NSU shall and
shall cause Spinco to duly execute and deliver the Distribution Agreement. NSU
shall perform all of its obligations under the Distribution Agreement which are
to be performed thereunder prior to the Effective Time and NSU shall cause
Spinco to perform all of its obligations under the Distribution Agreement which
are to be performed thereunder prior to the Effective Time. NSU covenants that
the Distribution Agreement will not be amended, waived, terminated or otherwise
modified prior to the Effective Time without the prior written consent of
Michael.
ARTICLE 7
CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each party to effect the transactions contemplated hereby shall be subject to
the fulfillment or waiver at or prior to the Effective Date of the following
conditions:
(a) NO INJUNCTION. No injunction or other order entered by a state or
federal court of competent jurisdiction shall have been issued and remain in
effect which would prohibit or make illegal the consummation of the transactions
contemplated hereby.
(b) NO PROHIBITIVE CHANGE OF LAW. There shall have been no law, statute,
rule or regulation, domestic or foreign, enacted or promulgated which would
prohibit or make illegal the consummation of the transactions contemplated
hereby.
(c) REGISTRATION STATEMENT. The Registration Statement and the
registration statement relating to the Spinco Common Stock to be distributed in
the Distribution, if required, shall have been declared effective and shall not
be subject to a stop order of the SEC, the Spinco Common Stock shall have been
registered pursuant to the Exchange Act
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<PAGE>
and, if the offer and sale of the Surviving Corporation securities in the
Merger or the Spinco Common Stock in the Distribution pursuant to this
Agreement is required to be registered under the securities laws of any
state, the registration statements shall have been declared effective and
shall not be subject to a stop order of the securities commission in such
state.
(d) TAX RULING OR FEDERAL TAX OPINION. Michael and NSU shall have
received a private letter ruling from the IRS or tax opinion addressed to both
Michael and NSU by counsel or independent certified accountants mutually
acceptable to Michael and NSU based on customary reliance and subject to
customary qualifications, to the effect that for federal income tax purposes:
(i) The formation of Merger Sub and the merger of Merger Sub
into Michael will be disregarded for federal income tax purposes, and
the transaction will be treated as an acquisition by NSU of the stock
of Michael in exchange solely for the shares of the Surviving
Corporation Common Stock.
(ii) The acquisition by NSU of all of the stock of Michael held
by stockholders other than NSU solely in exchange for the Surviving
Corporation Common Stock will qualify as a reorganization under
Section 368(a)(1)(B) of the Code. NSU and Michael will each be a
party to the reorganization within the meaning of Section 368(b) of
the Code.
(iii) The transfer by NSU of all of the stock of the NSU
Subsidiaries (other than Spinco and the Merger Sub) held, directly and
indirectly, by NSU to Spinco will qualify as a reorganization under
Section 368(a)(i)(D) of the Code.
(iv) No gain or loss will be recognized by NSU upon the
distribution of the stock of Spinco to persons who were stockholders
of NSU on the record date for the distribution pursuant to Section
361(c)(1) of the Code.
(v) No gain or loss will be recognized by stockholders of NSU
upon the receipt of the Spinco stock distributed by NSU pursuant to
Section 355(a)(1) of the Code.
(vi) The Reverse Stock Split will not be treated as a stock
distribution, or a transaction that has the effect of such a
distribution, to which Sections 301, 305(b) or 305(c) apply. As a
result, no taxable income will be recognized under such Sections by
any of the stockholders of Michael or NSU, except for cash paid in
lieu of fractional shares to holders of NSU Common Stock.
(e) LISTING. The Surviving Corporation Common Stock to be issued to
holders of Michael Common Stock as a result of the Merger and to the holders of
NSU Common
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Stock as a result of the Reverse Stock Split shall have been approved for
listing on the NASDAQ-NMS.
(f) CONSENTS AND APPROVALS. All material consents and approvals necessary
to consummate the transactions contemplated by this Agreement shall have been
obtained, including those set forth on Schedules 3.2 and 4.2, but excluding any
consents or approvals required pursuant to the Credit Agreement.
(g) ADVERSE PROCEEDINGS. There shall not be threatened, instituted or
pending any action or proceeding before any court or governmental authority or
agency, domestic or foreign, challenging or seeking to make illegal, or to delay
or otherwise directly or indirectly to restrain or prohibit, the consummation of
the transactions contemplated hereby or seeking to obtain material damages in
connection with the transactions contemplated hereby.
(h) GOVERNMENTAL ACTION. There shall not be any action taken, or any
statute, rule, regulation, judgment, order or injunction proposed, enacted,
entered, enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby by any federal, state or other court, government or
governmental authority or agency, which could reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in Section
7.1(g).
(i) DISTRIBUTION AGREEMENT CONDITIONS. The conditions precedent to the
Distribution (other than consummation of the Merger) set forth in Section 3.02
of the Distribution Agreement shall have been satisfied or waived.
7.2 ADDITIONAL CONDITIONS TO OBLIGATION OF NSU. The obligation of NSU to
consummate the transactions contemplated hereby in accordance with the terms of
this Agreement is also subject to the fulfillment or waiver of the following
conditions:
(a) REPRESENTATIONS AND COMPLIANCE. The representations and warranties of
Michael set forth in Article 3 shall have been true and correct as of the date
hereof, and, except to the extent such representations and warranties are made
as of a specified date, shall be true and correct as of the Effective Date as if
made at and as of the Effective Date, except where the failure to be true and
correct would not have, or would not reasonably be expected to have, a Material
Adverse Effect on Michael. Michael shall in all material respects have
performed each obligation and agreement and complied with each covenant to be
performed and complied with by it hereunder at or prior to the Effective Date.
(b) OFFICERS' CERTIFICATE. Michael shall have furnished to NSU a
certificate of the Chief Executive Officer and the Chief Financial Officer of
Michael, dated as of the Effective Date, in which such officers shall certify
that, to their best knowledge, they have no reason to believe that the
conditions set forth in Section 7.2(a) have not been fulfilled.
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(c) SECRETARY'S CERTIFICATE. Michael shall have furnished to NSU (i)
copies of the text of the resolutions by which the corporate action on the part
of Michael necessary to approve this Agreement, the Certificate of Merger and
the transactions contemplated hereby and thereby were taken, (ii) a certificate
dated as of the Effective Date executed on behalf of Michael by its corporate
secretary or one of its assistant corporate secretaries certifying to NSU that
such copies are true, correct and complete copies of such resolutions and that
such resolutions were duly adopted and have not been amended or rescinded and
(iii) an incumbency certificate dated as of the Effective Date executed on
behalf of Michael by its corporate secretary or one of its assistant corporate
secretaries certifying the signature and office of each officer of Michael
executing this Agreement, the Certificate of Merger or any other agreement,
certificate or other instrument executed pursuant hereto by Michael.
(d) SHAREHOLDER APPROVAL. This Agreement and the Merger, the New
Articles, the Reverse Stock Split and the Distribution shall have been approved
by the Requisite NSU Shareholder Vote.
(e) FAIRNESS OPINION. Within five days prior to mailing the
Prospectus/Proxy Statement to the shareholders of NSU, NSU shall have received a
written opinion in a form reasonably acceptable to NSU from Goldsmith Agio &
Company (or another investment banking firm reasonably acceptable to NSU) to the
effect that the Merger and the Distribution, together, are fair from a financial
point of view to the holders of NSU Common Stock prior to the Effective Date.
(f) DISSENTING SHARES. The number of shares of NSU Common Stock with
respect to which the holders thereof have effectively dissented from the NSU
shareholder action contemplated hereby pursuant to the provisions of the MBCA
shall not exceed one percent (1%) of the issued and outstanding shares of NSU
Common Stock as of the record date for the meeting relating to such NSU
shareholder action.
7.3 ADDITIONAL CONDITIONS TO OBLIGATION OF MICHAEL. The obligation of
Michael to consummate the transactions contemplated hereby in accordance with
the terms of this Agreement is also subject to the fulfillment or waiver of the
following conditions:
(a) REPRESENTATIONS AND COMPLIANCE. The representations and warranties of
NSU set forth in Article 4 shall have been true and correct as of the date
hereof, and, except to the extent such representations and warranties are made
as of a specified date, shall be true and correct as of the Effective Date as if
made at and as of the Effective Date, except where the failure to be true and
correct would not have, or would not reasonably be expected to have, a Material
Adverse Effect on NSU. NSU shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed and
complied with by it hereunder at or prior to the Effective Date.
(b) OFFICERS' CERTIFICATE. NSU shall have furnished to Michael a
certificate of the Chief Executive Officer and the Chief Financial Officer of
NSU, dated as of the Effective
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Date, in which such officers shall certify that, to their best knowledge,
they have no reason to believe that the conditions set forth in Section
7.3(a) have not been fulfilled.
(c) SECRETARY'S CERTIFICATE. NSU shall have furnished to Michael (i)
copies of the text of the resolutions by which the corporate action on the part
of NSU necessary to approve this Agreement, the Certificate of Merger, the
Distribution, the Reverse Stock Split, the election of the directors of the
Surviving Corporation pursuant to Section 2.1, the Distribution Agreement and
the transactions contemplated hereby and thereby were taken, (ii) certificates
dated as of the Effective Date executed on behalf of NSU by its corporate
secretary or one of its assistant corporate secretaries certifying to Michael
that such copies are true, correct and complete copies of such resolutions and
that such resolutions were duly adopted and have not been amended or rescinded
and (iii) an incumbency certificate dated as of the Effective Date executed on
behalf of NSU by its corporate secretary or one of its assistant corporate
secretaries certifying the signature and office of each officer of NSU executing
this Agreement, the Certificate of Merger or any other agreement, certificate or
other instrument executed pursuant hereto.
(d) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have been
approved by the Requisite Michael Shareholder Vote.
(e) ACCOUNTING MATTERS. No event shall have occurred which, in the
reasonable opinion of Michael and concurred in by Grant Thornton LLP, would
prevent the Merger, the Reverse Stock Split and the Distribution from being
accounted as a business combination utilizing the reverse acquisition concept
with Michael being the accounting acquiror for accounting purposes under
generally accepted accounting principles.
(f) FAIRNESS OPINION. Within five days prior to mailing the
Prospectus/Proxy Statement to the shareholders of Michael, Michael shall have
received a written opinion in a form reasonably acceptable to Michael from Piper
Jaffray Inc. (or another investment banking firm reasonably acceptable to
Michael) to the effect that the Merger is fair from a financial point of view to
Michael.
(g) NET ASSUMED DEBT CERTIFICATE. NSU shall have furnished to Michael a
certificate of the Chief Financial Officer of NSU certifying the amounts of the
NSU Net Assumed Liabilities, the NSU Indebtedness, the Dissenting Shares
Holdback and the cash held by NSU as a Retained Asset at the Effective Time.
(h) OTHER AGREEMENTS AND RESIGNATIONS. Michael shall have received the
Orderly Disposition and Registration Rights Agreement and the Distribution
Agreement duly executed by the parties thereto. Each of the officers of NSU
immediately prior to the Effective Time shall deliver duly executed resignations
from their positions with NSU effective immediately after the Effective Time.
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ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated prior to the Effective
Date:
(a) by mutual consent of Michael and NSU, if the board of directors of
each so determines by vote of a majority of the members of its entire board;
(b) by either Michael or NSU, if any of the conditions to such party's
obligation to consummate the transactions contemplated in this Agreement shall
have become impossible to satisfy;
(c) by either Michael or NSU, if (i) the Merger and this Agreement is not
duly approved by the shareholders of each of Michael or NSU, including if a
shareholder meeting is not held as contemplated by the first sentence of Section
6.11, or (ii) the New Articles, the Reverse Stock Split and the Distribution are
not approved by the shareholders of NSU, including if a shareholder meeting is
not held as contemplated by the first sentence of Section 6.11;
(d) by either Michael or NSU if the Effective Date is not on or before
September 30, 1996 or such later date as Michael and NSU may mutually agree
(unless the failure to consummate the Merger by such date shall be due to the
action or failure to act of the party seeking to terminate this Agreement in
breach of such party's obligations under this Agreement);
(e) by NSU if the Average Price of Michael Common Stock is less than
$11.00 per share;
(f) by Michael if the Average Price of Michael Common Stock is more than
$17.00 per share; or
(g) by Michael or NSU pursuant to Section 6.19(b) in accordance with the
provisions of Section 6.19(b).
Any party desiring to terminate this Agreement shall give written notice of
such termination and the reasons therefor to the other party.
8.2 EFFECT OF TERMINATION.
(a) In the event this Agreement is properly terminated (i) by NSU as
provided in Section 8.1(b) due to the failure to satisfy the condition under
Section 7.2(d), (ii) by
34
<PAGE>
Michael under Section 8.1(b) due to the failure of the condition under
Section 7.3(a), (b) or (c), (iii) by Michael or NSU pursuant to Section
8.1(c) due to the failure of the shareholders of NSU to approve the Merger,
this Agreement, the New Articles, the Reverse Stock Split or the
Distribution, (iv) by NSU pursuant to Section 8.1(e), (v) by Michael pursuant
to Section 8.1(g), or (vi) by NSU as provided in Section 8.1(b) due to the
failure to satisfy the condition under Section 7.2(f), then, within ten days
after written demand from Michael, NSU shall pay to Michael an amount equal
to the out of pocket expenses incurred by Michael in connection with the
transactions contemplated by this Agreement, including but not limited to the
fees and expenses of Michael's attorneys, accountants and investment banker,
up to an aggregate of $500,000 payable either, at the option of NSU, in
immediately available funds or in shares of Michael Common Stock having a
fair market value (determined on the basis of the average closing sales price
of Michael Common Stock during the twenty (20) trading days immediately
preceding such termination) equal to such amount.
(b) In the event this Agreement is properly terminated (i) by Michael
pursuant to Section 8.1(b) due to the failure to satisfy the condition under
Section 7.3(d), (ii) by NSU under Section 8.1(b) due to the failure of the
condition under Section 7.2(a), (b) or (c), (iii) by Michael or NSU pursuant to
Section 8.1(c) due to the failure of the shareholders of Michael to approve the
Merger and this Agreement, (iv) by Michael pursuant to Section 8.1(f), (v) by
NSU pursuant to Section 8.1(g), or (vi) the transactions contemplated by this
Agreement are not consummated solely because Michael shall not have obtained the
necessary modifications to its material debt instruments as disclosed in
Schedule 3.2 or prepaid such debt instruments, then, within ten days after
written demand from NSU, Michael shall pay to NSU an amount equal to the out of
pocket expenses incurred by NSU in connection with the transactions contemplated
by this Agreement, including but not limited to the fees and expenses of NSU's
attorneys, accountants and investment banker, up to an aggregate of $500,000,
payable either, at the option of Michael, in immediately available funds or in
shares of Michael Common Stock having a fair market value (determined on the
basis of the average closing sales price of Michael Common Stock during the
twenty (20) trading days immediately preceding such termination) equal to such
amount.
Notwithstanding anything contained in this Agreement to the contrary, the
expense reimbursement provisions of this Section 8.2(a) or (b), shall be the
sole and exclusive remedies of the parties to this Agreement for any violation
or breach hereof and shall be in lieu of any and all claims that the non-
breaching party has, or might have at law or in equity.
8.3 AMENDMENT. This Agreement may not be amended except by an instrument
in writing approved by the parties to this Agreement and signed on behalf of
each of the parties hereto.
8.4 WAIVER. At any time prior to the Effective Date, any party hereto
may (a)
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extend the time for the performance of any of the obligations or other acts
of the other party hereto or (b) waive compliance with any of the agreements
of the other party or with any conditions to its own obligations, in each
case only to the extent such obligations, agreements and conditions are
intended for its benefit. Any such extension or waiver shall only be
effective if made in writing and duly executed by the party giving such
extension or waiver.
ARTICLE 9
GENERAL PROVISIONS
9.1 PUBLIC STATEMENTS. Neither Michael nor NSU shall make any public
announcement or statement with respect to the Merger, this Agreement, the
Reverse Stock Split, the Distribution or any related transactions without the
approval of the other party; provided, however, that either Michael or NSU may,
upon reasonable notice to the other party, make any public announcement or
statement that it believes is required by federal securities law. To the extent
practicable, each of Michael and NSU will consult with the other with respect to
any such public announcement or statement.
9.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be sufficiently given if made by hand delivery, by fax, by
telecopier, by overnight delivery service, or by registered or certified mail
(postage prepaid and return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by it by
like notice):
If to Michael:
Michael Foods, Inc.
324 Park National Building
5353 Wayzata Boulevard
Minneapolis, MN 55416
Attn: President and Chief Executive Officer
with copies to:
Maun & Simon, PLC
2900 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-4133
Attn: Albert A. Woodward
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<PAGE>
If to NSU:
North Star Universal, Inc.
610 Park National Bank Building
5353 Wayzata Boulevard
Minneapolis, MN 55416
Attention: President and Chief Executive Officer
with copies to:
Dorsey & Whitney
Pillsbury Center South
220 South Sixth Street
Minneapolis, MN 55402
Attention: J. Andrew Herring
All such notices and other communications shall be deemed to have been duly
given as follows: when delivered by hand, if personally delivered; when
received, if delivered by registered or certified mail (postage prepaid and
return receipt requested); when receipt acknowledged, if faxed or telecopied;
and the next day delivery after being timely delivered to a recognized overnight
delivery service.
9.3 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
Sections and Articles of this Agreement unless otherwise stated. Words such as
"herein," "hereinafter," "hereof," "hereto," "hereby" and "hereunder," and word
of like import, unless the context requires otherwise, refer to this Agreement
(including the Exhibits and Schedules hereto). As used in this Agreement, the
masculine, feminine and neuter genders shall be deemed to include the others if
the context requires.
9.4 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties shall negotiate
in good faith to modify this Agreement and to preserve each party's anticipated
benefits under this Agreement.
9.5 MISCELLANEOUS. This Agreement (together with all other documents and
instruments referred to herein): (a) constitutes the entire agreement, and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, with
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respect to the subject matter hereof; (b) shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the
State of Minnesota, without giving effect to the principles of conflict of
laws thereof; and (c) shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, but shall not be
assignable by either party hereto without the prior written consent of the
other party hereto. This Agreement may be executed in two or more
counterparts which together shall constitute a single agreement.
9.6 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the parties set forth herein shall not survive
the consummation of the Merger, but covenants that specifically relate to
periods, activities or obligations subsequent to the Merger shall survive the
Merger. In addition, if this Agreement is terminated pursuant to Section 8.1,
the covenants contained in Section 6.3(b) and 8.2 shall survive such
termination.
9.7 SCHEDULES. The Schedules and other disclosure referred to in this
Agreement shall be delivered as of the date hereof under cover of a letter from
the Chief Executive Officer or Chief Financial Officer of Michael or NSU, as the
case may be.
9.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
9.9 THIRD PARTY BENEFICIARIES. Except as provided in the next following
sentence, each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than the
parties hereto. The provisions of Section 6.18 are intended for the benefit of
Affiliates of NSU and Michael.
ARTICLE 10
DISPUTE RESOLUTION
10.1 MEDIATION AND BINDING ARBITRATION. If a dispute arises between NSU and
Michael as to the interpretation of this Agreement or any other agreement
entered into pursuant hereto, NSU and Michael agree to use the following
procedures, in lieu of either party pursuing other available remedies and as the
sole remedy, to resolve the dispute.
10.2 INITIATION. A party seeking to initiate the procedures shall give
written notice to the other party, describing briefly the nature of the dispute.
A meeting shall be held between the parties within 10 days of the receipt of
such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the dispute.
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10.3 SUBMISSION TO MEDIATION. If, within 30 days after such meeting, the
parties have not succeeded in negotiating a resolution of the dispute, they
agree to submit the dispute to mediation in accordance with the Center for
Public Resources Model ADR Procedure - Mediation of Business Disputes, as
modified herein, and to bear equally the costs of the mediation.
10.4 SELECTION OF MEDIATOR. The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the Center for
Public Resources or another mutually agreed-upon organization if they have been
unable to agree upon such appointment within 20 days from the conclusion of the
negotiation period.
10.5 MEDIATION AND ARBITRATION. The parties agree to participate in good
faith in the mediation and negotiations related thereto for a period of 30 days
following the initial mediation session. If the parties are not successful in
resolving the dispute through the mediation by the end of such 30-day period,
then the parties agree to submit the matter to binding arbitration in accordance
with the Center for Public Resources Rules for Non-Administered Arbitration of
Business Disputes, as modified herein, by a panel of three arbitrators, in
Minneapolis, Minnesota, selected in accordance with the provisions of Section
10.6 hereof. The arbitration shall be governed by the Rules of the American
Arbitration Association then in effect and as modified herein, and judgment upon
the award rendered by the arbitrator may be entered by any court having
jurisdiction thereof. The arbitrators shall not, under any circumstances, have
any authority to award punitive, exemplary or similar damages and may not, in
any event, make any ruling, finding or award that does not conform to the terms
and conditions of this Agreement. Nothing contained in this Article 10 shall
limit or restrict in any way the right or power of a party at anytime to seek
injunctive relief in any court and to litigate the issues relevant to such
request for injunctive relief before such court (i) to restrain the other party
from breaching this Agreement or (ii) for specific enforcement of this Article
10. The parties agree that any legal remedy available to a party with respect
to a breach of this Article 10 will not be adequate and that, in addition to all
other legal remedies, each party is entitled to an order specifically enforcing
this Article 10.
10.6 SELECTION OF ARBITRATORS. The parties shall have 10 days from the end
of the mediation period to agree upon mutually acceptable neutral persons not
affiliated with either of the parties to act as arbitrators. If the panel of
arbitrators has not been selected within such time, the parties agree jointly to
request the Center for Public Resources or another mutually agreed-upon
organization to supply within 10 days a list of potential arbitrators with
qualifications as specified by the parties in the joint request. Within five
days of receipt of the list, the parties shall independently rank the proposed
candidates, shall simultaneously exchange rankings, and shall select as the
arbitrator the individual receiving the highest combined ranking who is
available to serve. Neither party nor the arbitrators may disclose the
existence or results of any arbitration under this Agreement or any
39
<PAGE>
evidence presented during the course of arbitration without the prior consent
of both parties, except as required to fulfill applicable disclosure and
reporting requirements, or as otherwise required by law.
10.7 COST OF ARBITRATION. Each party shall bear its own costs incurred in
the arbitration. If either party refuses to submit to arbitration any dispute
required to be submitted to arbitration pursuant to this Article 10, and instead
commences any other proceeding, including litigation, then the party who seeks
enforcement of the obligation to arbitrate shall be entitled to its attorneys'
fees and costs incurred in any such proceeding.
IN WITNESS WHEREOF, NSU and Michael have caused this Agreement to be
executed on the date first written above by their respective officers.
MICHAEL FOODS, INC.
By ______________________________
Gregg A. Ostrander
President and Chief Executive Officer
NORTH STAR UNIVERSAL, INC.
By ______________________________
Jeffrey J. Michael
President and Chief Executive Officer
NSU MERGER CO.
By ______________________________
Jeffrey J. Michael
President and Chief Executive Officer
STATE OF MINNESOTA)
)ss.
COUNTY OF HENNEPIN)
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The foregoing instrument was acknowledged before me this 21st day of
December, 1995 by Gregg A. Ostrander, President and Chief Executive Officer of
Michael Foods, Inc., a Delaware corporation, on behalf of the corporation.
______________________________
[SEAL] Notary Public
STATE OF MINNESOTA)
)ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 21st day of
December, 1995 by Jeffrey J. Michael, President and Chief Executive Officer of
North Star Universal, Inc., a Minnesota corporation, on behalf of the
corporation.
______________________________
[SEAL] Notary Public
STATE OF MINNESOTA)
)ss.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 21st day of
December, 1995 by Jeffrey J. Michael, President and Chief Executive Officer of
NSU Merger Co., a Delaware corporation, on behalf of the corporation.
______________________________
[SEAL] Notary Public
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Exhibit A
DISCOUNT FACTOR
AMOUNT OF NSU NET ASSUMED LIABILITIES DISCOUNT FACTOR
More than $33,750,000 and less than
or equal to $38,000,000. . . . . . . . . . . . . . . . . . . 0.9000
More than $32,500,000 and less than
or equal to $33,750,000. . . . . . . . . . . . . . . . . . . 0.9025
More than $31,250,000 and less than
or equal to $32,500,000. . . . . . . . . . . . . . . . . . . 0.9050
More than $30,000,000 and less than
or equal to $31,250,000. . . . . . . . . . . . . . . . . . . 0.9075
More than $28,750,000 and less than
or equal to $30,000,000. . . . . . . . . . . . . . . . . . . 0.9100
More than $27,500,000 and less than
or equal to $28,750,000. . . . . . . . . . . . . . . . . . . 0.9125
More than $26,250,000 and less than
or equal to $27,500,000. . . . . . . . . . . . . . . . . . . 0.9150
More than $25,000,000 and less than
or equal to $26,250,000. . . . . . . . . . . . . . . . . . . 0.9175
$25,000,000. . . . . . . . . . . . . . . . . . . . . . . . . 0.9200
42
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Exhibit B
FORM OF CERTIFICATE OF MERGER
<PAGE>
CERTIFICATE OF MERGER
OF
NSU MERGER SUB CO.
INTO
MICHAEL FOODS, INC.
Pursuant to Section 251 of the Delaware General Corporation Law, the
undersigned President and Secretary of MICHAEL FOODS, INC., a Delaware
corporation, hereby certify that:
1. The constituent corporations are: NSU Merger Sub Co., a Delaware
corporation, and Michael Foods, Inc., a Delaware corporation.
2. An Agreement and Plan of Reorganization has been adopted, approved,
executed, certified and acknowledged by each of the constituent corporations
in accordance with section 251(c) of the Delaware General Corporation Law.
3. Michael Foods, Inc. shall be the surviving corporation.
4. The certificate of incorporation of Michael Foods, Inc. shall be
the certificate of incorporation of the surviving corporation.
5. The executed Agreement and Plan of Reorganization is on file at
the principal office of Michael Foods, Inc. at 5353 Wayzata Boulevard, 324
Park National Building, Minneapolis, Minnesota 55416.
6. A copy of the Agreement and Plan of Reorganization will be
furnished by Michael Foods, Inc., on request and without cost, to any
stockholder of any constituent corporation.
IN WITNESS WHEREOF, Michael Foods, Inc. has caused this certificate to
be executed by Gregg A. Ostrander, its President and attested by Jeffrey M.
Shapiro, its Secretary, this ____ day of _____________, 1996.
MICHAEL FOODS, INC.
By______________________________________
Gregg A. Ostrander, President
ATTEST:
By_____________________________________
Jeffrey M. Shapiro, Secretary
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__________________________________________________________
DISTRIBUTION AGREEMENT
by and between
NORTH STAR UNIVERSAL, INC.
and
NEW HOLDING COMPANY, INC.
__________________________________________________________
____________________, 1996
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TABLE OF CONTENTS
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ARTICLE I
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DEFINITIONS 2
Section 1.01 General 2
Section 1.02 Exhibits, etc. 7
ARTICLE II
REORGANIZATION AND RELATED TRANSACTIONS 7
Section 2.01 Sequence of Events 7
Section 2.02 Transfers of Assets; Assumption of Liabilities 7
Section 2.03 Elimination of Intercompany Accounts 8
Section 2.04 Transfers Not Effected At or Prior to the
Distribution; Transfers Deemed Effective as of
the Distribution Date 8
Section 2.05 No Representations or Warranties 9
Section 2.06 Conveyancing and Assumption Instruments 10
Section 2.07 Tax Treatment 10
ARTICLE III
THE DISTRIBUTION 11
Section 3.01 Cooperation Prior to the Distribution 11
Section 3.02 NSU Board Action; Conditions Precedent to the
Distribution 11
Section 3.03 The Distribution 12
Section 3.04 Fractional Shares 12
ARTICLE IV
SPINCO ASSUMPTION OF CERTAIN NSU INDEBTEDNESS 13
Section 4.01 Assumption of Certain NSU Indebtedness 13
ARTICLE V
INDEMNIFICATION 13
Section 5.01 Indemnification by Spinco 13
Section 5.02 Indemnification by NSU 14
Section 5.03 Procedure for Indemnification 15
Section 5.04 Set-Off Rights 17
ARTICLE VI
EMPLOYEE BENEFIT PLANS 17
Section 6.01 The 401(k) Savings Plan 18
Section 6.02 Welfare Plans 18
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Section 6.03 NSU Employees 19
Section 6.04 Other Liabilities and Obligations 19
Section 6.05 Preservation of Rights To Amend or Terminate
Plans 19
ARTICLE VII
TAX MATTERS 19
Section 7.01 Allocation of Items of Income or Deduction for
Reporting Purposes 19
Section 7.02 Spinco Indemnification for Tax Periods Prior to
Distribution Date 19
Section 7.03 NSU Liable for Filing and Payment of Spinco's
Taxes Prior to Distribution Date 20
Section 7.04 Spinco Liable for Filing and Payment of Its Own
Taxes for Tax Periods Beginning Prior to
Distribution Date and Ending After Distribution
Date 20
Section 7.05 Spinco's Right to Make Section 172(b)(3)
Election and Qualified Right to Subsequent
Refund 20
Section 7.06 Scope of NSU's Power to Negotiate Settlement
During Audit for Periods after the Merger
Effective Date 21
Section 7.07 Rights of Parties With Respect to an Asserted
Tax Liability 21
Section 7.08 Mutual Duty to Cooperate and Act in Good Faith
With Respect to Filing or Amending of Returns,
Claiming Refunds, or Conducting Audit 22
ARTICLE VIII
CERTAIN ADDITIONAL MATTERS 22
Section 8.01 The Spinco Board 22
Section 8.02 Spinco Charter and By-Laws 23
Section 8.03 NSU Long-Term Liabilities; Minimum Value of
Spinco 23
Section 8.04 Adjustment for Dissenting Shares Liability 24
Section 8.05 NSU Covenants 24
ARTICLE IX
ACCESS TO INFORMATION AND SERVICES 24
Section 9.01 Provision of Corporate Records 24
Section 9.02 Access to Information 25
Section 9.03 Provision of Services 25
Section 9.04 Production of Witnesses 25
Section 9.05 Reimbursement 25
Section 9.06 Retention of Records 26
Section 9.07 Confidentiality 26
ARTICLE X
DISPUTE RESOLUTION 26
Section 10.01 Mediation and Binding Arbitration 26
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Section 10.02 Initiation 26
Section 10.03 Submission to Mediation 26
Section 10.04 Selection of Mediator 27
Section 10.05 Mediation and Arbitration 27
Section 10.06 Selection of Arbitrators 27
Section 10.07 Cost of Arbitration 28
ARTICLE XI
MISCELLANEOUS 28
Section 11.01 Complete Agreement; Construction 28
Section 11.02 Survival of Agreements 28
Section 11.03 Expenses 28
Section 11.04 Governing Law 28
Section 11.05 Notices 28
Section 11.06 Amendments 29
Section 11.07 Successors and Assigns 29
Section 11.08 Termination 29
Section 11.09 Subsidiaries 29
Section 11.10 No Third Party Beneficiaries 29
Section 11.11 Titles and Headings 30
Section 11.12 Exhibits and Schedules 30
Section 11.13 Legal Enforceability 30
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Exhibit C
FORM OF DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, dated as of ______________, 1996 (this
"Agreement"), is entered into by and between NORTH STAR UNIVERSAL, INC., a
Minnesota corporation ("NSU"), and NEW HOLDING COMPANY, INC., a Minnesota
corporation and a wholly owned subsidiary of NSU ("Spinco"). This Agreement is
intended to survive and continue after the "Merger" and the "Distribution" (as
such terms are hereinafter defined), and any reference to NSU in this Agreement
shall be deemed to include NSU from and after the consummation of the Merger and
the change of the name of NSU to "Michael Foods, Inc."
WHEREAS, NSU is a party to an Agreement and Plan of Reorganization dated
December 21, 1995 (the "Merger Agreement"), providing for the merger (the
"Merger") of NSU Merger Co. ("Merger Sub"), a Delaware corporation and a newly
formed and wholly-owned subsidiary of NSU, with and into Michael Foods, Inc., a
Delaware corporation ("Michael"), with Michael as the surviving corporation;
WHEREAS, Michael has required that, as a condition of the Merger, the
non-food businesses, including assets and liabilities, be separated from the
food business of NSU represented by the shares of common stock of Michael owned
by NSU;
WHEREAS, to satisfy this condition to the Merger, the parties hereto have
agreed that (i) immediately following the Merger, NSU will distribute to NSU
shareholders of record prior to the Merger, all assets of NSU other than (A) any
issued and outstanding shares of common stock, $.01 par value, of Merger Sub,
(B) the shares of common stock, $.01 par value, of Michael ("Michael Common
Stock") owned by NSU as of the date of the Merger Agreement, (C) a certain
amount of cash held by NSU at the time of the consummation of the Merger, and
(D) such other assets as to which the parties may mutually agree, and (ii) NSU
will be released from, or adequate provisions be made for all liabilities and
obligations of NSU other than as mutually agreed by the parties, so that after
giving effect to the Merger and such distribution, the business and operations
of NSU after the Merger will be the business and operations of Michael, except
for certain known and specified NSU indebtedness and certain obligations and
liabilities to be retained by NSU subsequent to the consummation of the Merger;
and
WHEREAS, NSU and Spinco have determined that it is necessary and desirable
to set forth the principal corporate transactions required to effect such
distribution and to set forth other agreements that will govern certain other
matters following such distribution.
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NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 GENERAL. Any term not otherwise defined
herein shall have the meaning ascribed to it in the Merger Agreement. As used
in this Agreement, the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
ACTUAL PAYMENT: as defined in Section 8.03(b) of this Agreement.
AFFILIATE: as defined in Regulation 12b-2 promulgated under the Exchange
Act, as such Regulation is in effect on the date hereof.
AGENT: the distribution agent for the shareholders of record of NSU on the
Record Date, as appointed by NSU, to distribute shares of Spinco Common Stock
pursuant to the Distribution (as defined below).
CODE: the Internal Revenue Code of 1986, as amended, or any successor
legislation.
COMMISSION: the Securities and Exchange Commission.
CONTRACTS: as defined in Section 2.02 of this Agreement.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: collectively, the various
agreements, instruments and other documents, in form and substance mutually
satisfactory to NSU and Spinco, to be entered into to effect the transfer of
assets and the assumption of Liabilities in the manner contemplated by this
Agreement.
CREDIT AGREEMENT: the Credit Agreement dated ______________, 199
between NSU and First Bank National Association, a national banking association,
including any amendments thereto and any replacement credit agreement or credit
facility.
DISSENTING SHARES: as defined in Section 1.5 of the Merger Agreement.
DISSENTING SHARES HOLDBACK: as defined in Section 1.1 of the Merger
Agreement.
DISSENTING SHARES LIABILITY: as defined below under the definition of "NSU
Retained Liabilities."
DISTRIBUTION: the distribution, on the Distribution Date, of all of the
outstanding shares
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of Spinco Common Stock by NSU to the holders of record of NSU
Common Stock on the Record Date, which distribution shall be deemed to have been
effected by NSU upon delivery by NSU to the Agent of an instruction directing
the Agent to effect the distribution of the Spinco Common Stock in accordance
with Section 3.03 of this Agreement and such distribution shall not be effected
nor deemed to have been effected until after the Effective Time.
DISTRIBUTION DATE: the Merger Effective Date; provided, however, that the
Distribution shall not occur until after the Effective Time.
EAGLE GUARANTY: the obligations of NSU under that certain Guaranty
Agreement dated May 1, 1989 between NSU and American National Bank & Trust
Company pursuant to which NSU guaranteed the payment of the principal of,
premium, if any, and interest on $1,470,000 City of Welcome, Minnesota
Industrial Development Revenue Bonds, Series 1989.
EFFECTIVE TIME: as defined in Section 2.1(d) of the Merger Agreement.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
EXCHANGE RATIO: the ratio of one share of Spinco Common Stock for each
shares of NSU Common Stock (outstanding on the Record Date), or such other
ratio determined by NSU and Spinco to be the number of shares (or fraction of a
share) of Spinco Common Stock to be distributed in the Distribution for each
share of NSU Common Stock (outstanding on the Record Date).
IRS: the Internal Revenue Service.
LIABILITIES: any and all debts, liabilities, accounts payable, Taxes,
claims and other obligations, absolute or contingent, mature or not mature,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever
arising (unless otherwise specified in this Agreement), including all costs and
expenses relating thereto, and including, without limitation, those debts,
liabilities and obligations arising under any law, rule, regulation, or any
actual or threatened action, suit, proceeding or investigation by or before any
court, any governmental or other regulatory or administrative agency or
commission or any arbitration tribunal, any order or consent decrees of any
governmental entity or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
MERGER: as defined in the preambles of this Agreement.
MERGER AGREEMENT: as defined in the preambles of this Agreement.
MERGER EFFECTIVE DATE: the date, pursuant to the terms of the Merger
Agreement, on which the Merger is effective.
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MICHAEL: as defined in the first paragraph of this Agreement.
MICHAEL COMMON STOCK: as defined in Section 1.1 of the Merger Agreement.
NSU: as defined in the first paragraph of this Agreement.
NSU ASSUMED LIABILITIES: the NSU Indebtedness and the NSU Retained
Liabilities.
NSU BOARD: the Board of Directors of NSU prior to the Merger Effective
Date.
NSU COMMON STOCK: the Common Stock, par value $1.00 per share, of NSU,
prior to the Merger Effective Date.
NSU INDEBTEDNESS: indebtedness (principal and accrued interest) represented
by NSU's outstanding subordinated debentures and subordinated extendable and
fixed time certificates and the NSU indebtedness owing pursuant to the Credit
Agreement.
NSU LONG-TERM LIABILITIES: the Liability of NSU relating to the U.K. Leases
and the Eagle Guaranty.
NSU RETAINED ASSETS: the following assets:
(i) such amount of cash as NSU may, in its sole discretion, determine to
hold at the Merger Effective Date;
(ii) 7,354,950 shares of Michael Common Stock owned by NSU as of the date
of this Agreement;
(iii) the capital stock of Merger Sub;
(iv) the rights of NSU under this Agreement, the Merger Agreement and the
Orderly Disposition and Registration Rights Agreement; and
(v) any and all net operating loss carryforwards and other Tax attributes
properly allocable to NSU following the Merger Effective Date in
accordance with the relevant provisions of the Code.
NSU RETAINED LIABILITIES: the following Liabilities:
(i) any Liability arising from any NSU shareholders who have effectively
dissented from the NSU shareholder action in connection with the Merger
and the Distribution in accordance with Section 471 and 473 of the MBCA
("Dissenting Shares Liability");
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(ii) any Liability of NSU under this Agreement arising after the Merger
Effective Date;
(iii) any Liability of NSU under the Merger Agreement
arising after the Merger Effective Date; and
(iv) any Liability of NSU under the Orderly Disposition and Registration
Rights Agreement arising after the Merger Effective Date.
NSU TRANSFERRED ASSETS: all assets of NSU other than the NSU Retained
Assets, specifically including Spinco rights under this Agreement (including
Spinco's rights pursuant to Section 8.05 and Section 5.04).
NSU TRANSFERRED LIABILITIES: all Liabilities of NSU (i) arising at any time
prior to the Merger Effective Date, other than the NSU Assumed Liabilities, or
(ii) arising as a result of the Distribution (other than any liability of NSU
for Taxes resulting from a breach of Section 2.07 by NSU after the Merger
Effective Date).
ORDERLY DISPOSITION AND REGISTRATION RIGHTS AGREEMENT: the Orderly
Disposition and Registration Rights Agreement, dated December 21, 1995, between
NSU and certain shareholders of NSU in the form of Exhibit E to the Merger
Agreement.
RECORD DATE: the close of business on the date to be determined by the NSU
Board as the record date for the Distribution, which date shall be prior to the
Merger Effective Date.
REGISTRATION STATEMENT: that certain registration statement on Form S-1
registering under the Securities Act the Spinco Common Stock to be distributed
in the Distribution.
RELEASE DATE: the date upon which Spinco shall have taken one of the
following actions with respect to each of the NSU Long-Term Liabilities:
(i) obtained a release and discharge of the NSU Long-Term Liabilities;
(ii) provided evidence to NSU, after the Merger Effective Date, of the
satisfaction of the NSU Long-Term Liabilities in a form reasonably
satisfactory to NSU; or
(iii) obtained an irrevocable stand-by letter of credit (the "L/C")
approved as to issuer, form and content by NSU (which approval will not
be unreasonably withheld), to be issued in favor of NSU for an amount at
least equal
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to the present value of any remaining Liability with respect to the
NSU Long-Term Liabilities, such present value calculation to be based on a
discount rate of 6%.
SECURITIES ACT: the Securities Act of 1933, as amended.
SPINCO: as defined in the first paragraph of this Agreement.
SPINCO BOARD: the Board of Directors of Spinco.
SPINCO BY-LAWS: the By-Laws of Spinco, substantially in the form of EXHIBIT
A to be in effect at the Distribution Date.
SPINCO CHARTER: the Restated Articles of Incorporation of Spinco,
substantially in the form of EXHIBIT B, to be in effect at the Distribution
Date.
SPINCO COMMON STOCK: the Common Stock, par value $.01 per share, of Spinco.
SPINCO EMPLOYEE: any individual who, prior to the Merger Effective Date,
was employed by NSU or any Subsidiary of NSU and who, on or after the Merger
Effective Date, or otherwise in connection with the Distribution, is employed by
Spinco or a Subsidiary of Spinco.
SUBSIDIARY: with respect to any entity shall mean each corporation in which
such entity owns directly or indirectly fifty percent or more of the voting
securities of such corporation and shall, unless otherwise indicated, be deemed
to refer to both direct and indirect subsidiaries of such entity.
TAXES: any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, environmental taxes, customs duties, capital
stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, workers' compensation,
employment-related insurance, real property, personal property, sales, use,
transfer, value added, alternative or add-on minimum or other tax, fee,
assessment or charge of any kind whatsoever including any interest, penalties or
additions to any Tax or additional amounts in respect of the foregoing.
TRANSFER EFFECTIVE DATE: the date, as determined by the NSU Board, on which
the transfers of assets by NSU to Spinco and the assumption of liabilities by
Spinco, as described in Section 2.02 shall be effective, which in any case shall
be prior to the Merger Effective Date.
U.K. LEASES: (i) the Lease of Unit 4 Bracknell Business Centre, Downmill
Road,
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Bracknell, Berkshire, United Kingdom dated August 1, 1984 between
Queensgate Developments Limited and The Burton Group Public Limited Company and
assigned to C.E. Services (Europe) Ltd. (f.k.a. Landmark Communications Services
Limited) guaranteed by C.E. Services, Inc. (as the successor in interest to
Landmark Communications Services, Inc.) pursuant to a License to Assign dated
March 15, 1990 and assumed by NSU in connection with the Stock Purchase
Agreement by and between Amdahl Corporation and NSU dated May 5, 1995 and
pursuant to the terms of an Assumption Agreement dated , 1995
between NSU and Queensgate Developments Limited, and (ii) the Lease of Unit 5
Bracknell Business Centre, Downmill Road, Bracknell, Berkshire, United Kingdom
dated March 22, 1985, between Benton Nominees Limited and Robert David Grant and
Susan Margaret Grant trading as Grants Electrical Supplies and assigned to C.E.
Services (Europe) Ltd. (f.k.a. Landmark Communications Services Limited) and
guaranteed by Richard Charles Jones and Dennis Leonard Western pursuant to a
License to Assign dated June 28, 1991 and assumed by NSU in connection with a
Stock Purchase Agreement by and between Amdahl Corporation and NSU dated May 5,
1995 and pursuant to the terms of an Assumption Agreement dated __________, 1995
between NSU and Benton Nominees Limited.
Section 1.02 EXHIBITS, ETC. References to an "Exhibit" or to a
"Schedule" are, unless otherwise specified, to one of the Exhibits or
Schedules attached to this Agreement, and references to a "Section" or an
"Article" are, unless otherwise specified, to one of the Sections or Articles
of this Agreement.
ARTICLE II
REORGANIZATION AND RELATED TRANSACTIONS
Section 2.01 SEQUENCE OF EVENTS. It is the intention of the parties
hereto that the transactions contemplated by this Article II shall, to the
extent practicable, be effected in the order in which such transactions are
set forth in this Article II.
Section 2.02 TRANSFERS OF ASSETS; ASSUMPTION OF LIABILITIES. (a)
Subject to the terms and conditions of this Agreement, effective at the start
of business on the Transfer Effective Date:
(i) NSU shall contribute and transfer to Spinco or a Spinco Subsidiary,
as appropriate, all of NSU's right, title and interest in and to all of
the NSU Transferred Assets.
(ii) NSU shall assign and transfer, and Spinco shall assume, all of NSU's
rights, benefits and Liabilities arising pursuant to and under all
contracts, agreements, real and personal property leases, licenses,
instruments, arrangements and commitments (collectively, "Contracts")
entered into or made by NSU prior
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to the Merger Effective Date, other than the Contracts relating to the
NSU Assumed Liabilities (the "Assumed Contracts"); PROVIDED, HOWEVER, that
no Assumed Contract shall be assigned contrary to law or the terms of such
Assumed Contract and, with respect to the Assumed Contracts that cannot be
assigned or novated to Spinco on the Transfer Effective Date, the
performance obligations of NSU thereunder shall, unless not permitted by
such Assumed Contract, be subcontracted or subleased to Spinco until such
Assumed Contract has been fully performed by Spinco or assigned or novated.
NSU and Spinco shall use reasonable efforts to obtain all necessary
consents and Spinco shall take all necessary actions to perform and
complete all Assumed Contracts in accordance with their terms even if
neither assignment, novation, subcontracting nor subleasing is permitted
by the other party. As provided in Article V hereof, Spinco shall
indemnify NSU from and against any Liabilities under the Assumed
Contracts. NSU covenants and agrees that it shall promptly pay over to
Spinco any amounts received by NSU after the Transfer Effective Date as a
result of the performance by Spinco of any of the Assumed Contracts.
(iii) Spinco shall assume and agrees to pay, perform or discharge all
the NSU Transferred Liabilities.
(b) Whether or not all of the NSU Transferred Assets or the NSU
Transferred Liabilities shall have been legally transferred to Spinco as of the
Transfer Effective Date, NSU and Spinco agree that, as of the Transfer Effective
Date, Spinco shall have, and shall be deemed to have acquired, complete and sole
beneficial ownership over all the NSU Transferred Assets together with all of
NSU's rights, powers and privileges incident thereto, and shall be deemed to
have assumed the NSU Transferred Liabilities and all of NSU's duties,
obligations and responsibilities incident thereto.
Section 2.03 ELIMINATION OF INTERCOMPANY ACCOUNTS. All intercompany
receivables, payables and loans in existence as of the Merger Effective Date
between NSU, on the one hand, and any NSU Subsidiary, on the other hand
(other than accounts, if any, relating to intercompany contractual or other
obligations which are to survive the Distribution as provided herein) shall
be eliminated, as of the Merger Effective Date, without the transfer of cash,
by dividend or capital contributions, as appropriate.
Section 2.04 TRANSFERS NOT EFFECTED AT OR PRIOR TO THE DISTRIBUTION;
TRANSFERS DEEMED EFFECTIVE AS OF THE DISTRIBUTION DATE. To the extent that
any transfers and assumptions contemplated by this Article II shall not have
been consummated on or prior to the Transfer Effective Date, the parties
shall cooperate to effect such transfers and assumptions as promptly
following the Transfer Effective Date as shall be practicable, it nonetheless
being agreed and understood by the parties that no party shall
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be liable in any manner to any other party for any failure of any of the
transfers contemplated by this Article II to be consummated prior to the
Transfer Effective Date and that this Section 2.04 shall in no way affect the
indemnification obligations of the parties pursuant to Article V. Subject to
the provisions of Section 3.02, nothing herein shall be deemed to require the
transfer of any assets or the assumption of any Liabilities which by their
terms or by operation of law cannot be transferred or assumed; provided that
Spinco shall indemnify NSU against all NSU Transferred Liabilities pursuant
to Section 5.01. In the event that any such transfer of the NSU Transferred
Assets (other than capital stock of corporations to be transferred hereunder)
or assumption of the NSU Transferred Liabilities has not been consummated,
effective as of and after the Transfer Effective Date (i) NSU shall
thereafter hold such assets for the benefit of Spinco (at the expense of
Spinco) and retain any such Liabilities for the account of Spinco, and take
such other action as may be reasonably requested by Spinco, at Spinco's
expense, in order to place such party, insofar as reasonably possible, in the
same position as would have existed had such asset or Liability been
transferred as of the Transfer Effective Date, (ii) NSU shall, at Spinco's
expense, continue to be bound under any agreements relating to the NSU
Transferred Assets or NSU Transferred Liabilities that cannot be so
transferred, and (iii) unless not permitted by law, Spinco shall pay, perform
and discharge fully all obligations of NSU thereunder from and after the
Transfer Effective Date and indemnify NSU for all indemnifiable losses
arising out of such performance by Spinco pursuant to the provisions of
Article V hereto. NSU shall, without further consideration therefor, pay and
remit to Spinco promptly all monies, rights and other considerations received
in respect of any such performance. NSU shall exercise its rights and
options under any such agreements relating to the NSU Transferred Assets or
NSU Transferred Liabilities only as reasonably directed by Spinco, and at
Spinco's expense. As and when any such asset or liability becomes
transferable, such transfer shall be effected forthwith. Notwithstanding the
foregoing, the parties shall use their best efforts to obtain all consents
and approvals, to enter into all amendatory agreements and to make all
filings and applications which may be required for the consummation of the
transactions contemplated by this Agreement, including, without limitation,
all applicable regulatory filings or consents under federal or state
environmental laws.
Section 2.05 NO REPRESENTATIONS OR WARRANTIES. Spinco understands and
agrees that NSU is not, in this Agreement or in any other agreement or
document contemplated by this Agreement or otherwise, representing or
warranting in any way (i) as to the value or freedom from encumbrance of, or
any other matter concerning, any NSU Transferred Assets or (ii) as to the
legal sufficiency to convey title to any such assets or the execution,
delivery and filing of this Agreement, including, without limitation, any
Conveyancing or Assumption Instruments, it being agreed and understood that
all such assets are being transferred AS IS, WHERE IS, and that the party to
which such assets are to be transferred hereunder shall bear the economic and
legal risk that any conveyances of such assets shall prove to be insufficient
or that Spinco or any of its
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Subsidiaries' title to any such assets shall be other than good and
marketable and free from encumbrances. Similarly, each party hereto understands
and agrees that no party hereto is, in this Agreement or in any other agreement
or document contemplated by this Agreement or otherwise, representing or
warranting in any way that the obtaining of any consents or approvals, the
execution and delivery of any amendatory agreements and the making of any
filings or applications contemplated by this Agreement will satisfy the
provisions of any or all applicable agreements or the requirements of any or all
applicable laws or judgments, it being agreed and understood that the party to
which any assets are transferred shall bear the economic and legal risk that any
necessary consents or approvals are not obtained or that any requirements of
laws or judgments are not complied with.
Section 2.06 CONVEYANCING AND ASSUMPTION INSTRUMENTS. In connection
with the transfers of the NSU Transferred Assets other than capital stock and
the assumptions of the NSU Transferred Liabilities contemplated by this
Agreement, the parties shall execute or cause to be executed by the
appropriate entities the Conveyancing and Assumption Instruments in such
forms as the parties shall agree. The transfer of capital stock shall be
effected by means of delivery of stock certificates and executed stock powers
and notation on the stock record books of the corporation.
Section 2.07 TAX TREATMENT. During the two year period following the
Merger Effective Date, NSU shall not, nor shall it permit Michael to do any
of the following, and neither of them has any plan or intention to:
(a) liquidate Michael;
(b) merge Michael with or into another corporation, unless Michael is the
surviving corporation and the merger is not treated for tax purposes as a
sale or other disposition of Michael common stock;
(c) sell any shares of Michael Common Stock or cause Michael to issue any
of shares of Michael Common Stock to any party other than NSU; or
(d) sell any assets of NSU to any third party not otherwise an affiliate
of the foregoing, except for (i) sales in the ordinary course of business
or (ii) sales of assets if, after giving effect to such sales, Michael
will retain at least 90% of the fair market value of its gross assets in
active trades or businesses within the meaning of Section 355 of the Code.
provided, however, NSU or Michael may undertake any of the actions listed above
if (i) Spinco consents thereto or (ii) NSU obtains either a tax opinion or a
favorable private letter ruling from the Internal Revenue Service, in each case
reasonably satisfactory to Spinco, to the effect that the actions to be
undertaken would not adversely affect the tax
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free nature of the Merger or the Distribution to all of the parties thereto.
The shareholders of record of NSU on the Record Date shall be third party
beneficiaries of the provisions of this Section 2.07.
ARTICLE III
THE DISTRIBUTION
Section 3.01 COOPERATION PRIOR TO THE DISTRIBUTION. Prior to the Merger
Effective Date:
(a) NSU and Spinco shall prepare and shall use all reasonable efforts to
cause the Registration Statement to become effective under the Securities Act.
Once declared effective under the Securities Act, NSU shall mail to the holders
of NSU Common Stock the prospectus included in the Registration Statement, which
shall set forth appropriate disclosure concerning Spinco, the Distribution and
other matters. NSU and Spinco shall also prepare, and Spinco shall file with
the Commission, a Form 8-A, to register the Spinco Common Stock under the
Exchange Act. NSU and Spinco shall use all reasonable efforts to cause the Form
8-A to become effective under the Exchange Act.
(b) NSU and Spinco shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereof which are appropriate to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by Article VI.
(c) NSU and Spinco shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the Distribution and the
other transactions contemplated by this Agreement.
(d) NSU and Spinco shall prepare, and Spinco shall file and pursue, an
application to permit listing of the Spinco Common Stock on the NASDAQ National
Market.
Section 3.02 NSU BOARD ACTION; CONDITIONS PRECEDENT TO THE DISTRIBUTION.
The NSU Board shall, in its discretion, establish the Record Date, the
Transfer Effective Date and the Distribution Date (which shall be the same as
the Merger Effective Date) and any appropriate procedures in connection with
the Distribution. The Distribution is expressly conditioned on the prior
consummation of the Merger. Additionally, in no event shall the Distribution
occur (i) if at the Distribution Date NSU shall not have received an opinion
of tax counsel or a private letter ruling from the IRS to the effect that the
Distribution will qualify as a tax-free spin-off under Section 355 of the
Code, and (ii) unless prior to such time the following conditions shall have
been satisfied or waived by the parties hereto:
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(a) the transactions contemplated by Sections 2.02 hereof, shall have been
consummated in all material respects;
(b) the Spinco Common Stock shall have been approved for quotation on the
NASDAQ National Market or listing on a national securities exchange, subject to
official notice of issuance;
(c) the Spinco Board, comprised as contemplated by Section 8.01, shall
have been elected by NSU, as sole shareholder of Spinco, and the Spinco Charter
and Spinco ByLaws shall have been adopted and shall be in effect;
(d) the Registration Statement shall have been declared effective by the
Commission and the Form 8-A relating to the shares of Spinco Common Stock to be
distributed in the Distribution shall have become effective under the Exchange
Act; and
(e) all conditions precedent to the obligations of NSU and Michael under
the Merger Agreement (other than consummation of the Distribution) shall have
been satisfied or waived and the Merger shall have been consummated.
The satisfaction or waiver of such conditions shall create an obligation on the
part of NSU to effect the Distribution on the Distribution Date.
Section 3.03 THE DISTRIBUTION. On or prior to the Distribution Date,
NSU shall deliver to the Agent the certificate for all of the outstanding
shares of Spinco Common Stock which are owned by NSU. On the Distribution
Date, after the Effective Time of the Merger, NSU shall deliver to the Agent
an instruction to distribute as promptly as practicable following the
Distribution Date to each holder of record of NSU Common Stock on the Record
Date stock certificates evidencing such number of shares of Spinco Common
Stock equal to the product of the Exchange Ratio times the number of shares
of NSU Common Stock held of record by such holder on the Record Date and cash
in lieu of any fractional share of Spinco Common Stock obtained in the manner
provided in Section 3.04 hereof. If the number of outstanding shares of
Spinco Common Stock exceeds the amount to be distributed in the Distribution,
then the remaining shares shall be deemed to have been contributed by NSU to
the capital of Spinco and retired and canceled. Spinco agrees to provide to
the Agent sufficient certificates in such denominations as the Agent may
request in order to effect the Distribution. All of the shares of Spinco
Common Stock issued in the Distribution shall be fully paid, nonassessable
and free of preemptive rights. The Distribution shall, for all purposes
under this Agreement, be deemed to have been effected at the time NSU
delivers to the Agent the instruction directing the Agent to distribute the
certificates evidencing Spinco Common Stock and cash in lieu of fractional
shares.
Section 3.04 FRACTIONAL SHARES. No certificate or scrip representing
fractional
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shares of Spinco Common Stock shall be issued as part of the Distribution,
and in lieu of receiving fractional shares each holder of NSU Common Stock
who would otherwise be entitled to receive a fractional share of Spinco
Common Stock pursuant to the Distribution will receive cash for such
fractional share. NSU and Spinco agree that NSU shall instruct the Agent to
determine the number of whole shares and fractional shares of Spinco Common
Stock allocable to each holder of record of NSU Common Stock as of the Record
Date, to aggregate all such fractional shares into whole shares and sell the
whole shares obtained thereby in the open market pursuant to Rule 236 under
the Securities Act, if available, at then prevailing prices on behalf of
holders who otherwise would be entitled to receive fractional share interests
and to distribute to each such holder such holder's ratable share of the
total proceeds of such sale. Spinco shall bear the costs of commissions
incurred in connection with such sale. If the Agent is unable to sell such
shares in the open market pursuant to Rule 236, Spinco will pay to such
holders of NSU Common Stock in lieu of any fractional share or amount of cash
determined by multiplying (a) the average closing price per share of Spinco
Common Stock on the NASDAQ National Market during the five days following the
Distribution Date times (b) the fractional share interest to which such
holder would otherwise be entitled.
ARTICLE IV
SPINCO ASSUMPTION OF CERTAIN NSU INDEBTEDNESS
Section 4.01 ASSUMPTION OF CERTAIN NSU INDEBTEDNESS. Spinco and NSU
shall, on or prior to the Distribution Date, to the extent required under any
indenture with respect to any of the outstanding debentures or any of the
outstanding subordinated extendable or fixed time certificates, execute and
deliver supplemental indentures or other agreements or instruments evidencing
Spinco's assumption of NSU's obligations with respect to such outstanding
debentures and subordinated extendable and fixed time certificates; PROVIDED,
HOWEVER, that as provided herein, and as contemplated by the Merger
Agreement, as between NSU and Spinco, the NSU Indebtedness is not an NSU
Transferred Liability and NSU shall be responsible for the payment in full,
in accordance with the terms thereof of all of the NSU Indebtedness and shall
indemnify, pursuant to Section 5.02 of this Agreement, Spinco for any and all
Liabilities with respect to the NSU Indebtedness.
ARTICLE V
INDEMNIFICATION
Section 5.01 INDEMNIFICATION BY SPINCO.
(a) From and after the Merger Effective Date, Spinco shall indemnify,
defend, assume and hold harmless NSU, Michael, all Michael Subsidiaries and
Merger
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Sub and any of them (together, the "NSU Indemnified Parties") from and
against: (i) all Liabilities (other than the NSU Assumed Liabilities) of NSU or
any NSU Subsidiary (other than Michael and its Subsidiaries), including any
Subsidiary owned by NSU prior to the Merger Effective Date but not owned by NSU
on the Merger Effective Date, arising out of: (A) the NSU Transferred
Liabilities, specifically including the Assumed Contracts, and (B) the
transactions contemplated under this Agreement, including the Distribution and
any Taxes as a result of the Distribution (other than (X) any liabilities
resulting from any breach by NSU, after the Merger Effective Date, of this
Agreement, (Y) any liability of NSU for Taxes resulting from a breach by NSU,
after the Merger Effective Date, of Section 2.07, and (Z) obligations, after the
Merger Effective Date, expressly assumed by NSU hereunder); (ii) all Liabilities
arising from any claim made by any shareholder of Spinco on or after the
Distribution Date or by any shareholder or former shareholder of NSU prior to
the Merger Effective Date relating to any act or omission of NSU on or prior to
the Merger Effective Date in connection with the Merger or any of the other
transactions as contemplated by the Merger Agreement; (iii) all Liabilities
assumed by Spinco pursuant to Article VI; (iv) all Liabilities of Spinco or any
Subsidiary of Spinco arising out of transactions or events entered into or
occurring after the Merger Effective Date, or any action or inaction, including
but not limited to, contracts, commitments and litigation, with respect to,
entered into or based upon transactions or events occurring after the Merger
Effective Date with respect to Spinco or any Subsidiary of Spinco (other than
the NSU Assumed Liabilities); (v) any breach of this Agreement by Spinco or any
Subsidiary of Spinco after the Merger Effective Date; and (vi) damages, costs,
and expenses including attorney's fees incurred in defending and settling claims
for such Liabilities.
(b) The obligations to indemnify the NSU Indemnified Parties shall be
unconditional and shall not be subject to any claim of setoff, contribution or
waiver, except as provided in Section 5.04.
Section 5.02 INDEMNIFICATION BY NSU.
(a) From and after the Merger Effective Date, NSU shall indemnify,
defend, assume and hold harmless Spinco and any Spinco Subsidiary and any of
them (together, the "Spinco Indemnified Parties") from and against: (i) all
Liabilities of NSU, Michael or any Subsidiary of NSU or Michael arising out of
transactions or events entered into or occurring after the Merger Effective
Date, or any action or inaction, including but not limited to, contracts,
commitments and litigation, with respect to, entered into or based upon
transactions or events occurring after the Merger Effective Date with respect to
NSU, Michael, any Subsidiary of NSU after the Merger Effective Date or any
Subsidiary of Michael, other than any Liability arising out of the NSU
Transferred Liabilities, including the Assumed Contracts; (ii) all Liabilities
relating to the NSU Assumed Liabilities; (iii) all Liabilities of Michael or any
Subsidiary of Michael arising before, on or after the Merger Effective Date;
(iv) all Liabilities arising from any
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claim made by any current or former Michael shareholder or shareholder of NSU
after the Merger Effective Date who was a Michael shareholder immediately
prior to the Merger Effective Date relating to any act or omission of Michael
in connection with the Merger or any of the other transactions contemplated
in the Merger Agreement or this Agreement; (v) any breach of this Agreement
by NSU after the Merger Effective Date; and (vi) damages, costs and expenses
including attorney's fees incurred in defending and settling claims for such
obligations, expenses or Liabilities.
(b) The obligations to indemnify the Spinco Indemnified Parties shall
be unconditional and shall not be subject to any claim of setoff, contribution
or waiver, except as provided herein.
Section 5.03 PROCEDURE FOR INDEMNIFICATION.
(a) The Spinco Indemnified Parties or the NSU Indemnified Parties
(each referred to hereinafter as an "Indemnified Party"), as the case may be,
shall promptly give notice to the indemnifying party hereunder (the
"Indemnifying Party") after obtaining knowledge of any claim, demand or request
for payment against any Indemnified Party for any Liabilities indemnifiable
hereunder and shall permit the Indemnifying Party to pay or assume the defense
of such Liability, and any litigation arising from such Liability.
Notwithstanding the foregoing notice requirement, the right to indemnification
hereunder shall not be affected by the failure of the party seeking
indemnification to give such notice or any delay by such party in giving such
notice unless, and only to the extent that, the rights and remedies of the
Indemnifying Party shall have been prejudiced as a result of the failure to
give, or the delay in giving, such notice. The failure by an Indemnifying Party
to notify the Indemnified Party of its election to defend any such Liability
within ten (10) days after notice thereof shall have been given to the
Indemnifying Party, shall be deemed a waiver by the Indemnifying Party of its
right to defend such Liability.
(b) If an Indemnifying Party assumes the defense of any Liability and
any litigation that results from such Liability, then the obligations of the
Indemnifying Party as to such litigation shall include employing counsel
reasonably satisfactory to the Indemnified Party, taking all steps necessary in
the defense or settlement of such litigation and holding the Indemnified Party
harmless from and against any and all claims and expenses caused by or arising
out of any settlement approved by the Indemnified Party or any judgment in
connection with such litigation. Without the prior written consent of the
Indemnified Party, the Indemnifying Parties shall not, in the defense of any
such litigation, consent to the entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof, the giving by
the claimant or the plaintiff to the Indemnified Party of a full release, in
form reasonably satisfactory to the Indemnified Party, from all liability in
respect of such litigation. The Indemnified Party shall be entitled to
participate in the defense of any litigation at its
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own expense. If the defendants in any such action include both the
Indemnified Party and the Indemnifying Party and the Indemnified Party shall
have reasonably concluded that there may be legal defenses available to it
which are different from or additional to those available to the Indemnifying
Party, the Indemnified Party shall have the right, at the expense of the
Indemnifying Party, to select separate counsel reasonably satisfactory to the
Indemnifying Party to assume such additional legal defenses, and to otherwise
participate in the defense of such action on behalf of the Indemnified Party.
(c) If the Indemnifying Party does not assume the defense of any
Liability within ten (10) days after the Indemnified Party gives notice thereof
to the Indemnifying Party, then the Indemnified Party may defend against such
Liability and any litigation with respect thereto, in such manner as it deems
appropriate and the Indemnified Party may settle any such litigation on such
terms as it deems appropriate and the Indemnifying Party shall, in accordance
with the provisions of Sections 5.01 or 5.02, as the case may be, reimburse the
Indemnified Party for the amount of such settlement and for all losses and
expenses, including attorney's fees, incurred by the Indemnified Party in
connection with the defense of such Liability.
(d) The Indemnified Party and the Indemnifying Party agree to
cooperate with each other in resolving or attempting to resolve any claim as to
which indemnification is sought under this Agreement and will permit the other
party access to all books and records which might be useful for such purpose
during normal business hours and at the place where such books and records are
normally kept. The Indemnified Party and the Indemnifying Party further agree
to make available, at reasonable times, such of their respective employees,
officers and agents who may have knowledge of matters relating to any claim
arising out of this agreement for the purpose of providing testimony or
assisting in the preparation or prosecution of a defense to any claim by a third
party as to which indemnification is sought under this Agreement.
(e) Any dispute arising between the parties hereto as to the
obligations under this Article V shall be resolved pursuant to Article X hereto.
If there is no dispute with respect to any payment under this Article V from an
Indemnifying party to an Indemnified Party, then within ten (10) days after
written demand for such payment by the Indemnified Party, the Indemnifying Party
shall pay to the Indemnified Party the amount of any loss, expense, damage or
other payment suffered, incurred or made by the Indemnified Party against which
the Indemnified Party is indemnified by the Indemnifying Party under this
Article V. In the event the Indemnifying Party fails to pay such undisputed
amount within said ten (10) day period, or it is determined pursuant to the
provisions of Article X that the Indemnifying Party is obligated to pay an
amount which it had previously disputed, the Indemnified Party shall be entitled
to collect the following from the Indemnifying Party: (i) interest from the
date of the Indemnified Party's demand for payment on the amount owing to the
Indemnified Party at the rate equal to the reference rate as publicly announced
from time to time by First
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Bank National Association plus two (2) percentage points, compounded monthly,
until the full amount owing, including any interest, has been paid in full
with all payments being applied first against accrued and unpaid interest,
and (ii) all costs and expenses, including reasonable attorneys fees,
incurred by the Indemnified Party in collecting the amounts owing from the
Indemnifying Party under this Article V.
Section 5.04 SET-OFF RIGHTS. If and when, as a result of the net
operating loss carryforwards properly allocable to NSU from all Tax periods
prior to or ending on the Merger Effective Date, NSU unconditionally realizes
a benefit in the form of a reduction in the federal or state income Taxes
which NSU would otherwise be obligated to pay, Spinco may set-off the amount
of any such Tax savings against any Liability of Spinco under this Agreement
(including the indemnification obligations under Section 5.01) or, in the
event Spinco has already made payments pursuant to its indemnification
obligations hereunder, NSU will reimburse Spinco for payments previously made
by Spinco to or on behalf of an NSU Indemnified Party with respect to its
obligations under this Agreement. The benefit shall not be finally and
unconditionally determined for any year until such year is closed for any
future adjustment of federal income Tax liability. Any amount set-off by
Spinco or reimbursed to Spinco by NSU hereunder shall bear interest from and
after the date that such benefit was reflected on the consolidated Tax return
of NSU or taken into account in an NSU estimated Tax payment to the date of
such off-set or reimbursement at the rate of 6% per annum. NSU shall
promptly provide Spinco notice of each and every time it has filed a Tax
report or return wherein it has claimed or used such Tax benefit.
ARTICLE VI
EMPLOYEE BENEFIT PLANS
Section 6.01 THE 401(K) SAVINGS PLAN. (a) As soon as practicable after
the date hereof (i) effective as of the Merger Effective Date, Spinco shall
assume and be solely responsible for, all Liabilities of NSU under the
[NORTH STAR UNIVERSAL 401(K) SAVINGS PLAN] (the "Savings Plan") and (ii)
prior to the Merger Effective Date, NSU agrees to take such actions as may be
necessary in order for Spinco or a Subsidiary of Spinco effectively to
maintain and administer such Savings Plan. Spinco and NSU shall each take,
or cause to be taken, all such actions as may be necessary or appropriate in
order to establish Spinco or a Subsidiary of Spinco as successor to NSU as to
all rights, assets, duties and Liabilities of NSU under, or with respect to,
the Savings Plan, including, but not limited to, the rights, assets, duties
and Liabilities of NSU under, or with respect to, any and all trust
agreements to the extent that they relate solely to the Savings Plan. Any
action taken by NSU pursuant to this Section 6.01 after the Merger Effective
Date shall be at Spinco's expense.
(b) Upon Spinco or a Subsidiary of Spinco becoming the successor
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employer or successor plan sponsor to NSU or any of its subsidiaries under the
Savings Plan, NSU agrees to take such actions as may be necessary to amend any
trust agreement required to be amended in order for Spinco or a Subsidiary of
Spinco effectively to assume and administer the Savings Plan.
(c) Transfers pursuant to this Section 6.01 shall be effected, where
practicable, so as to preserve each plan participant's investment election.
(d) NSU and Spinco shall, in connection with the transfers described
in this Section 6.01, cooperate in making all appropriate filings required under
the Code or ERISA, and the regulations thereunder and any applicable securities
laws, and take all such action as may be necessary and appropriate to cause such
transfers to take place as soon as practicable after the Distribution Date.
(e) From and after the Merger Effective Date, NSU and its
Subsidiaries thereafter shall cease to have any liability or obligation
whatsoever with respect to the Savings Plan. As provided in Article V, Spinco
shall indemnify NSU and such Subsidiaries against any such liability.
Section 6.02 WELFARE PLANS.
(a) Except as otherwise specifically provided in this Section 6.02,
as of the Merger Effective Date, Spinco shall assume all Liabilities of NSU in
connection with claims brought under any of NSU's or its Subsidiaries' medical,
dental, life insurance, health, accident, disability or other welfare benefit
plans in existence on or prior to the Merger Effective Date and from and after
the Merger Effective Date, NSU and its Subsidiaries thereafter shall cease to
have any such liability or obligation. From and after the Merger Effective
Date, NSU shall no longer be a participating employer in such welfare benefit
plans.
(b) As of the Merger Effective Date, Spinco shall assume and shall
be solely responsible for, all Liabilities of NSU in connection with claims for
post-employment welfare benefits (including, but not limited to, medical, health
and life insurance benefits) made by or in respect of (i) any Spinco Employee or
(ii) any employee of NSU prior to the Merger Effective Date who shall have
retired or whose employment otherwise terminates on or before the Merger
Effective Date, regardless of whether such claim shall relate to events which
occurred prior or subsequent to the Merger Effective Date. Spinco shall also
assume all "COBRA" continuation Liabilities of NSU as of the Merger Effective
Date.
(c) Prior to the Merger Effective Date, NSU and Spinco shall take
all actions necessary and appropriate to effect the assumption of the NSU
welfare plans by Spinco or a Subsidiary of Spinco and to provide the benefit
coverage otherwise necessary
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to assume the Liabilities which are or shall become the responsibility of
Spinco under this Section 6.02.
Section 6.03 NSU EMPLOYEES. Effective as of the Merger Effective Date,
Spinco agrees to assume the employment of all employees of NSU who have not
resigned or been terminated on or prior to such date. Spinco shall assume
and be solely responsible for all Liabilities in connection with claims made
by or on behalf of such NSU employees in respect of salary, benefits,
severance pay, salary continuation and similar obligations relating to
the employment or the termination or alleged termination of the employment
of any such person, regardless of whether such termination or alleged
termination occurred prior to or subsequent to the Merger Effective Date.
Section 6.04 OTHER LIABILITIES AND OBLIGATIONS. As of the Merger
Effective Date, Spinco shall assume and be solely responsible for all
Liabilities of NSU with respect to claims made by persons who were, prior
to the Merger Effective Date, employees of NSU, relating to any employee
liability or obligation not otherwise provided for in this Agreement.
Section 6.05 PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS. No
provisions of this Agreement shall be construed as a limitation on the right
of Spinco or any Spinco Subsidiary to amend such plan or terminate its
participation therein which Spinco or any Spinco Subsidiary would otherwise
have under the terms of such plan or otherwise, and no provision of this
Agreement shall be construed to create a right in any employee or beneficiary
of such employee under a plan which such employee or beneficiary would not
otherwise have under the terms of the plan itself.
ARTICLE VII
TAX MATTERS
Section 7.01 ALLOCATION OF ITEMS OF INCOME OR DEDUCTION FOR REPORTING
PURPOSES. NSU, in consultation with and subject to the approval of Spinco,
shall either (i) cause Spinco to close its permanent books and records
(including work papers) as of the Distribution Date, in accordance with
Treasury Regulations Section 1.1502-76(b)(2) in order to permit Spinco's
taxable income for the taxable period ending on the Distribution Date to
be reported and determined on the basis of income shown on its permanent
books and records (including work papers) or (ii) allocate items of income
or deduction between tax periods ending on or before the Distribution Date
and tax periods beginning after the Distribution Date in accordance with
Treasury Regulations Section 1.1502-76(b)(2)(ii).
Section 7.02 SPINCO INDEMNIFICATION FOR TAX PERIODS PRIOR TO
DISTRIBUTION DATE. Spinco agrees to indemnify and hold harmless NSU from and
against any liability for Taxes attributable to NSU or Spinco (specifically
including for all purposes of this Article VII, Taxes attributable to all NSU
Transferred Assets and NSU Transferred Liabilities
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transferred pursuant to Article II) for Tax periods or portions thereof
ending on or before the Distribution Date. For purposes of this Section
7.02, "Spinco" shall mean Spinco, itself, as well as all of its Subsidiaries
eligible to be included in a consolidated federal income tax return filed by
Spinco as the common parent, including any Subsidiary owned by NSU prior to
the Merger Effective Date but not then owned by NSU, and "NSU" shall mean
NSU, itself, as well as all of its Subsidiaries eligible to be included in a
consolidated federal income tax return filed by NSU as the common parent.
Section 7.03 NSU LIABLE FOR FILING AND PAYMENT OF SPINCO'S TAXES PRIOR
TO DISTRIBUTION DATE. NSU, in consultation with and subject to the approval
of Spinco, shall, at Spinco's expense, file (or shall cause to be filed) all
tax returns of Spinco for tax periods ending on or before the Distribution
Date. NSU shall, to the extent permissible, include (or cause to be
included) the results of the operations of Spinco in NSU's consolidated
federal tax return and in any other consolidated, unitary, or combined tax
return for tax periods ending on or before the Distribution Date and shall,
subject to the indemnification obligations under Section 7.02, pay all Taxes
due for such periods with respect to Spinco.
Section 7.04 SPINCO LIABLE FOR FILING AND PAYMENT OF ITS OWN TAXES FOR
TAX PERIODS BEGINNING PRIOR TO DISTRIBUTION DATE AND ENDING AFTER
DISTRIBUTION DATE. Spinco shall file (or shall cause to be filed) all Tax
returns of Spinco for any Tax period which begins before the Distribution
Date and ends on or after the Distribution Date. Spinco shall also file (or
shall cause to be filed) all Tax returns of Spinco for all subsequent Tax
periods. Accordingly, Spinco shall pay all Taxes shown as due on such
returns or ultimately determined to be due with respect to such periods and
shall be entitled to keep and retain for itself any refunds of Taxes or
credits paid on behalf of or made available to it. All Tax returns and any
schedules to be included therewith for the Tax period which begins before the
Distribution Date and ends after the Distribution Date shall be prepared on a
basis consistent with those prepared for prior Tax periods and consistent
with the method used by NSU to allocate items of Spinco's income or deduction
for the Tax period ending on the Distribution Date pursuant to Section 7.01
hereof, and shall be subject to the approval of NSU prior to being filed by
Spinco, which approval shall not be unreasonably withheld.
Section 7.05 SPINCO'S RIGHT TO MAKE SECTION 172(B)(3) ELECTION AND
QUALIFIED RIGHT TO SUBSEQUENT REFUND. Spinco shall have the right and option
to make an election pursuant to Section 172(b)(3) of the Code to carry
forward any of its net operating losses incurred in tax periods beginning
after the Distribution Date which, if carried back, would be carried back to
a tax period ending on or before the Distribution Date. Notwithstanding the
foregoing, whether or not Spinco makes such an election, Spinco shall be
entitled to any and all tax refunds, whether received by NSU or Spinco, that
result from a carryback of net operating losses or credits of Spinco arising
in a tax
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period beginning after the Distribution Date to a tax period ending on or
before the Distribution Date.
Section 7.06 SCOPE OF NSU'S POWER TO NEGOTIATE SETTLEMENT DURING AUDIT
FOR PERIODS AFTER THE MERGER EFFECTIVE DATE. In the event that any Taxing
authority conducts an audit to determine the amount of any net operating loss
carryforwards of NSU as of the Merger Effective Date for any Tax period
beginning after the Distribution Date, NSU shall notify Spinco and allow
Spinco to participate with NSU in contesting such issue and each party shall
pay its own expenses relating to the contesting of such issue.
Notwithstanding the foregoing, NSU shall have the right to finally resolve
such issue.
Section 7.07 RIGHTS OF PARTIES WITH RESPECT TO AN ASSERTED TAX
LIABILITY. Promptly after receipt by NSU of a written notice of any demand,
claim or circumstance, including any Tax audit, which, after the lapse of
time, would or might give rise to a claim or commencement of any action,
proceeding, or investigation with respect to which indemnity may be sought
under Section 7.02 hereof (an "Asserted Tax Liability"), NSU shall give
written notice thereof to Spinco (the "Tax Claim Notice"). The Tax Claim
Notice shall contain factual information (to the extent known to NSU)
describing in reasonable detail the Asserted Tax Liability and shall include
copies of any notice or other document received from any taxing authority in
respect of such Asserted Tax Liability. If NSU fails to give Spinco prompt
notice of an Asserted Tax Liability as required by this Section 7.07, and if
such failure results in an irrevocable financial detriment to Spinco, then
any amount which Spinco is otherwise required to pay NSU pursuant to Section
7.02 hereof with respect to such Asserted Tax Liability shall be reduced by
the amount of such irrevocable financial detriment. Spinco may elect to
direct, through counsel of its own choosing reasonably acceptable to NSU and
at its own expense, the compromise or contest, either administratively or in
the courts, of any Asserted Tax Liability. If Spinco elects to direct the
compromise or contest of any Asserted Tax Liability, it shall, either within
30 calendar days after receiving the Tax Claim Notice with respect to such
Asserted Tax Liability (or sooner, if the nature of the Asserted Tax
Liability so requires) notify NSU of its intent to do so, and NSU shall
cooperate at its own expense in the compromise or contest of such Asserted
Tax Liability. Spinco, at its discretion, may enter into a settlement
agreement with respect to, or otherwise resolve, any Asserted Tax Liability
without the express consent of NSU, unless such settlement affects the Tax
returns of NSU after the Merger Effective Date, in which case the consent of
NSU shall be required and shall not be unreasonably withheld. If Spinco (1)
within 30 calendar days after receiving the Tax Claim Notice with respect to
such Asserted Tax Liability (or sooner, if the nature of the Asserted Tax
Liability so requires) notifies NSU that it has elected not to direct the
compromise or contest of the Asserted Tax Liability, or (2) fails to properly
notify NSU within such period of its election to direct or not to direct the
compromise or contest of the Asserted Tax Liability, NSU may pay, compromise,
or contest at its own expense and in
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its sole discretion such Asserted Tax Liability. If NSU or Spinco elects to
direct the compromise or contest of any liability for Taxes as provided
herein, the other party shall promptly empower (by power of attorney and such
other documentation as may be appropriate) such representative of the
empowered party as the empowered party may designate to represent the
empowering party in any audit, claim for refund or administrative or judicial
proceeding insofar as such audit, claim for refund or proceeding involves an
asserted liability for Taxes for which Spinco would be liable under Section
7.02 hereof. For all purposes of this Section 7.07, the right to
participate in all proceedings either administratively or in the courts
relating to an Asserted Tax Liability shall include the right to attend and
be kept fully informed of all of the foregoing but shall not include, unless
expressly provided for herein, the power to compromise, contest or make any
other decisions with respect to an Asserted Tax Liability.
Section 7.08 MUTUAL DUTY TO COOPERATE AND ACT IN GOOD FAITH WITH
RESPECT TO FILING OR AMENDING OF RETURNS, CLAIMING REFUNDS, OR CONDUCTING
AUDIT. NSU and Spinco shall provide each other with such cooperation and
information as either reasonably may request of the other in filing any tax
return, amended return, or claim for refund, in determining a liability for
Taxes or a right to a refund of Taxes, or in conducting any audit or
proceeding in respect of Taxes. Such cooperation and information shall
include providing copies of relevant tax returns or portions thereof,
together with accompanying schedules and related work papers and documents
relating to rulings or other determinations by tax authorities. Each party
shall make its employees available on a mutually convenient basis to provide
explanation of any documents or information provided hereunder. NSU shall
make available to Spinco, with respect to all tax years in which Spinco was
includable in NSU's affiliated group (as defined in Section 1504 of the Code)
copies of all work papers and schedules relating to the preparation of
Spinco's pro forma federal and state income tax returns which were included
in NSU's federal consolidated and state income tax returns which are
necessary to reconcile such pro forma returns with the amounts actually
included in such consolidated returns. NSU and Spinco shall make available
to each other all other books and records relating to Taxes of Spinco with
respect to all tax years in which Spinco was includable in NSU's affiliated
group (as defined in Section 1504 of the Code). NSU and Spinco agree to
maintain and preserve for a period of eight (8) years after the period to
which such documents relate, and, upon written request, to provide to the
other party, such factual information as that party reasonably requires for
filing tax returns, tax planning, and contesting any tax audit that only NSU
or Spinco, as the case may be, actually possesses.
ARTICLE VIII
CERTAIN ADDITIONAL MATTERS
Section 8.01 THE SPINCO BOARD. Spinco and NSU shall take all actions
which
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may be required to elect or otherwise appoint, as of the Distribution Date,
the following [five]persons as directors of Spinco:
Section 8.02 SPINCO CHARTER AND BY-LAWS. Prior to the Merger Effective
Date, Spinco shall adopt the Spinco Charter and the Spinco By-Laws and shall
file the Spinco Charter with the Secretary of State of the State of Minnesota.
Section 8.03 NSU LONG-TERM LIABILITIES; MINIMUM VALUE OF SPINCO.
(a) RELEASE DATE. Prior to the third anniversary of the Merger
Effective Date, Spinco shall have caused the Release Date to have occurred with
respect to each of the NSU Long-Term Liabilities.
(b) MINIMUM VALUE. Spinco shall not (A) pay any dividends, whether
in cash or in property, or make any other distribution to its shareholders, or
redeem any of its capital stock for cash or property, (B) sell, transfer or
dispose of any material amount of its assets in a single transaction or related
series of transactions, except in the ordinary course of its business or for
fair value, or (C) sell, transfer or dispose of all or substantially all of its
assets or engage in any merger, consolidation or reorganization unless (X) in
the case of the sale, transfer or other disposition of all or substantially all
of its assets, the purchaser assumes the obligations of Spinco (jointly and
severally with Spinco) under this Agreement, (Y) in the case of a merger,
consolidation or reorganization, the surviving entity assumes the obligations of
Spinco under this Agreement, or (Z) the Market Value (as defined below) of
Spinco immediately after giving effect to such dividend, distribution,
redemption or other transaction is at least equal to the following amounts
during the following periods:
(i) $9,000,000 during the period beginning on the Merger Effective Date
and continuing to the later to occur of (x) the Release Date or (y) the third
anniversary of the Merger Effective Date;
(ii) $3,000,000 during the period from the end of the period referenced in
clause (i) above and continuing to the fifth anniversary of the Merger Effective
Date.
The term "Market Value" shall mean the greater of: (a) the market
capitalization of Spinco's outstanding equity securities, if Spinco is a
publicly traded company, or (b) the
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net book value of Spinco computed in accordance with generally accepted
accounting principles, except that securities owned by Spinco which are
publicly traded shall be valued at their market value without any adjustment
for lack of liquidity or control premium, but reduced for any taxes payable
on the disposition of such securities, taking into account any and all tax
benefits (E.G., net operating loss carryforward, tax credits, deductions or
exclusions) available to Spinco and using Spinco's then applicable effective
tax rate for purposes of such calculations.
Section 8.04 ADJUSTMENT FOR DISSENTING SHARES LIABILITY. If the actual
amount paid after the Merger Effective Date with respect to the Dissenting
Shares (the "Actual Payment") is less than the Dissenting Shares Holdback,
then within ten days after the date of determination of the Actual Payment,
NSU shall pay to Spinco by wire transfer of immediately available funds to a
designated account the amount of such shortfall. Notwithstanding anything
herein or in the Merger Agreement to the contrary, with respect to the
Dissenting Shares and the Dissenting Shares Liability, NSU agrees that it
shall promptly give notice to Spinco after obtaining knowledge of any
threatened or pending claim regarding the Dissenting Shares or the Dissenting
Shares Liability and Spinco shall, at its expense, assume and direct the
negotiation, settlement or defense of such claim and any litigation arising
from such claim, and NSU agrees to cooperate with Spinco in resolving or
attempting to resolve any such claim or litigation; provided that Spinco
shall not, without NSU's prior consent, settle any such claim after the
Merger Effective Date if such settlement may result in the Dissenting Shares
Liability exceeding the Dissenting Shares Holdback.
Section 8.05 NSU COVENANTS.
(a) From and after the Merger Effective Date, NSU shall be solely
responsible for the payment, performance and discharge of the NSU Assumed
Liabilities and shall pay, perform and discharge the NSU Assumed Liabilities in
accordance with the governing instruments and applicable laws related thereto.
Subject to the prior consummation of the Merger, NSU covenants and agrees to
repay in full all of the NSU Indebtedness not later than six months after the
Merger Effective Date, all such repayments (excluding any payments made with
respect to any instruments that have matured or otherwise become due and payable
in accordance with their respective terms prior to such repayment date) to be
effected on or about the same date.
ARTICLE IX
ACCESS TO INFORMATION AND SERVICES
Section 9.01 PROVISION OF CORPORATE RECORDS. NSU shall arrange as soon
as practicable following the Distribution Date for the transportation at
Spinco's cost to Spinco of existing corporate records in its possession
relating to the NSU Transferred Assets and the NSU Transferred Liabilities,
including original corporate minute books,
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stock ledgers and certificates and corporate seals of Spinco and the Spinco
Subsidiaries, and all active agreements, active litigation files and filings
with governmental agencies, except to the extent such items are already in
the possession of Spinco or a Spinco Subsidiary. NSU shall also provide to
Spinco, unless already in the possession of Spinco or a Spinco Subsidiary and
only to the extent that NSU maintains them, lists of trademarks, patents
(design and mechanical) and copyrights included in the Spinco Assets. Such
records shall be the property of Spinco, but shall be available to NSU for
review and duplication until NSU shall notify Spinco in writing that such
records are no longer of use to NSU.
Section 9.02 ACCESS TO INFORMATION. From and after the Distribution
Date, NSU shall afford to Spinco and its authorized accountants, counsel and
other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to all records, books,
contracts, instruments, computer data and other data and information
(collectively, "Information") within NSU's possession relating to Spinco, the
NSU Transferred Assets or the NSU Transferred Liabilities, insofar as such
access is reasonably required by Spinco. Information may be requested under
this Article IX for, without limitation, audit, accounting, claims,
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations and for performing this Agreement and the
transactions contemplated hereby.
Section 9.03 PROVISION OF SERVICES. In addition to any services
contemplated to be provided following the Distribution Date by this
Agreement, each party, upon written request, shall make available to the
other party, during normal business hours and in a manner that will not
unreasonably interfere with such party's business, its financial, tax,
accounting, legal, employee benefits and similar staff and services
(collectively "Services") whenever and to the extent that they may be
reasonably required in connection with the preparation of tax returns,
audits, claims, litigation or administration of employee benefit plans, and
otherwise to assist in effecting an orderly transition following the
Distribution.
Section 9.04 PRODUCTION OF WITNESSES. At all times from and after the
Distribution Date, each of Spinco and NSU shall use reasonable efforts to
make available to the other upon written request, its and its subsidiaries'
officers, directors, employees and agents as witnesses to the extent that
such persons may reasonably be required in connection with any legal,
administrative or other proceedings in which the requesting party may from
time to time be involved.
Section 9.05 REIMBURSEMENT. Except to the extent otherwise contemplated
by this Agreement, a party providing Information or Services to the other
party under this Article IX shall be entitled to receive from the recipient,
upon the presentation of invoices therefor, payments for such amounts,
relating to supplies, disbursements and other out-of-pocket expenses, as may
be reasonably incurred in providing such
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Information or Services.
Section 9.06 RETENTION OF RECORDS. Except as otherwise required by law,
or agreed to in writing, each of NSU and Spinco shall retain, and shall cause
its Subsidiaries to retain, for a period of at least eight years following
the Distribution Date, all information relating to the other and the other's
subsidiaries.
Section 9.07 CONFIDENTIALITY. NSU and Spinco shall hold, and shall
cause their respective officers, employees, agents and consultants and
advisors to hold, in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its independent
legal counsel, by other requirements of law, all confidential information
concerning the other party furnished to it by such other party or its
representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (i) available to such party on a
non-confidential basis prior to its disclosure by the other party, (ii) in
the public domain through no fault of such party or (iii) later lawfully
acquired from other sources by the party to which it was furnished), and each
party shall not release or disclose such information to any other person,
except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who shall be bound by the provisions of this Section
9.07. Each party shall be deemed to have satisfied its obligation to hold
confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
ARTICLE X
DISPUTE RESOLUTION
Section 10.01 MEDIATION AND BINDING ARBITRATION. If a dispute arises
between NSU and Spinco as to the interpretation of this Agreement or any
other agreement entered into pursuant hereto, including, without limitation,
any indemnification obligations pursuant to Article V, NSU and Spinco agree
to use the following procedures, in lieu of either party pursuing other
available remedies and as the sole remedy, to resolve the dispute.
Section 10.02 INITIATION. A party seeking to initiate the procedures
shall give written notice to the other party, describing briefly the nature
of the dispute. A meeting shall be held between the parties within 10 days
of the receipt of such notice, attended by individuals with decision-making
authority regarding the dispute, to attempt in good faith to negotiate a
resolution of the dispute.
Section 10.03 SUBMISSION TO MEDIATION. If, within 30 days after such
meeting, the parties have not succeeded in negotiating a resolution of the
dispute, they agree to submit the dispute to mediation in accordance with the
Center for Public Resources Model ADR Procedure - Mediation of Business
Disputes, as modified herein, and to
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bear equally the costs of the mediation.
Section 10.04 SELECTION OF MEDIATOR. The parties will jointly appoint a
mutually acceptable mediator, seeking assistance in such regard from the
Center for Public Resources or another mutually agreed-upon organization if
they have been unable to agree upon such appointment within 20 days from the
conclusion of the negotiation period.
Section 10.05 MEDIATION AND ARBITRATION. The parties agree to
participate in good faith in the mediation and negotiations related thereto
for a period of 30 days following the initial mediation session. If the
parties are not successful in resolving the dispute through the mediation by
the end of such 30-day period, then the parties agree to submit the matter to
binding arbitration in accordance with the Center for Public Resources Rules
for Non-Administered Arbitration of Business Disputes, as modified herein, by
a panel of three arbitrators, in Minneapolis, Minnesota, selected in
accordance with the provisions of Section 10.06 hereof. The arbitration
shall be governed by the Rules of the American Arbitration Association then
in effect and as modified herein, and judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction thereof. The
arbitrators shall not, under any circumstances, have any authority to award
punitive, exemplary or similar damages and may not, in any event, make any
ruling, finding or award that does not conform to the terms and conditions of
this Agreement. Nothing contained in this Article X shall limit or restrict
in any way the right or power of a party at any time to seek injunctive
relief in any court and to litigate the issues relevant to such request for
injunctive relief before such court (i) to restrain the other party from
breaching this Agreement or (ii) for specific enforcement of this Article X.
The parties agree that any legal remedy available to a party with respect to
a breach of this Article X will not be adequate and that, in addition to all
other legal remedies, each party is entitled to an order specifically
enforcing this Article X.
Section 10.06 SELECTION OF ARBITRATORS. The parties shall have 10 days
from the end of the mediation period to agree upon mutually acceptable
neutral persons not affiliated with either of the parties to act as
arbitrators. If the panel of arbitrators has not been selected within such
time, the parties agree jointly to request the Center for Public Resources or
another mutually agreed-upon organization to supply within 10 days a list of
potential arbitrators with qualifications as specified by the parties in the
joint request. Within five days of receipt of the list, the parties shall
independently rank the proposed candidates, shall simultaneously exchange
rankings, and shall select as the arbitrator the individual receiving the
highest combined ranking who is available to serve. Neither party nor the
arbitrators may disclose the existence or results of any arbitration under
this Agreement or any evidence presented during the course of arbitration
without the prior consent of both parties, except as required to fulfill
applicable disclosure and reporting requirements, or as otherwise required by
law.
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Section 10.07 COST OF ARBITRATION. Each party shall bear its own costs
incurred in the arbitration. If either party refuses to submit to
arbitration any dispute required to be submitted to arbitration pursuant to
this Article X, and instead commences any other proceeding, including
litigation, then the party who seeks enforcement of the obligation to
arbitrate shall be entitled to its attorneys' fees and costs incurred in any
such proceeding.
ARTICLE XI
MISCELLANEOUS
Section 11.01 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement,
including the Schedules and Exhibits and other agreements and documents
referred to herein, shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to the subject matter.
Section 11.02 SURVIVAL OF AGREEMENTS. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the parties contained in
this Agreement shall survive the Distribution Date.
Section 11.03 EXPENSES. All costs and expenses arising prior to the
Distribution Date (whether or not then payable) in connection with the
preparation, execution, delivery and implementation of this Agreement and
with the consummation of the transactions contemplated by this Agreement
shall be paid in accordance with Section 6.2 of the Merger Agreement.
Section 11.04 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota, without
regard to the principles of conflicts of laws thereof.
Section 11.05 NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered by hand or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by
like notice) and shall be deemed given on the date on which such notice is
received:
To NSU:
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with a copy to:
To Spinco:
with a copy to:
Section 11.06 AMENDMENTS. This Agreement may not be modified or amended
except by an agreement in writing signed by the parties.
Section 11.07 SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.
Section 11.08 TERMINATION. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Merger Effective Date by and
in the sole discretion of the NSU Board without the approval of Spinco or
NSU's shareholders. In the event of such termination, no party shall have
any liability of any kind to any other party.
Section 11.09 SUBSIDIARIES. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions,
agreements and obligations set forth herein to be performed by any subsidiary
of such party which is contemplated to be a subsidiary of such party on and
after the Distribution Date.
Section 11.10 NO THIRD PARTY BENEFICIARIES. Except for the provisions
of Article
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V relating to Indemnified Parties and as specified in Section 2.07, this
Agreement is solely for the benefit of the parties hereto and their
respective subsidiaries and Affiliates and should not be deemed to confer
upon third parties any remedy, claim, Liability, reimbursement, claim of
action or other right in excess of those existing without reference to this
Agreement.
Section 11.11 TITLES AND HEADINGS. Titles and headings to sections
herein are inserted for the convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
Section 11.12 EXHIBITS AND SCHEDULES. The Exhibits and Schedules shall
be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
Section 11.13 LEGAL ENFORCEABILITY. Any provision of this Agreement
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 provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision or remedies otherwise available to any
party hereto. Without prejudice to any rights or remedies otherwise
available to any party hereto, each party hereto acknowledges that damages
would be an inadequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the parties hereunder shall be
specifically enforceable.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year first above written
NORTH STAR UNIVERSAL, INC.
By
Name
Its
NEW HOLDING COMPANY, INC.
By
Name
Its
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Exhibit D
FORM OF NEW ARTICLES
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
NORTH STAR UNIVERSAL, INC.
We, the undersigned, respectively the President and Secretary of North Star
Universal, Inc., a corporation subject to the provisions of Minnesota Statutes
Chapter 302A., known as the Minnesota Business Corporation Act, do hereby
certify that at a meeting of the shareholders of said corporation duly called
and held at _______________________, at _____ p.m. on _________________________,
1996, pursuant to notice mailed to all shareholders entitled to vote thereon,
the following Amended and Restated Articles of Incorporation were adopted by a
majority vote of all of the shares of stock present at such meeting and entitled
to vote to supersede and take the place of the existing articles of
incorporation and all amendments and restatements thereto, to wit:
ARTICLE I.
Name
The name of this corporation shall be Michael Foods, Inc.
ARTICLE II.
PURPOSE
This corporation shall have general business purposes.
ARTICLE III.
REGISTERED OFFICE
The registered office of this corporation shall be 324 Park National Bank
Building, 5353 Wayzata Boulevard, Minneapolis, Minnesota, 55416, County of
Hennepin.
ARTICLE IV.
CAPITAL STOCK
This corporation shall have authorized capital stock consisting of
50,000,000 shares, which shall be composed of 40,000,000 shares of common stock
having a par value of $.01 per share and 10,000,000 undesignated shares. Each
share of common stock shall be entitled to one vote on all matters presented to
the shareholders for a vote.
The Board of Directors may, from time to time, establish by resolution,
different
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classes or series of shares and may fix the rights and preferences of
said shares in any class or series. The Board of Directors shall have the
authority to issue shares of a class or series, shares of which may then be
outstanding to holders of shares of another class or to effectuate share
dividends, splits, or conversions of its outstanding shares.
ARTICLE V.
CERTAIN SHAREHOLDER RIGHTS.
Shareholders shall have no preemptive rights to purchase, subscribe for or
otherwise acquire any new or additional securities of the corporation. No
shareholder shall be entitled to cumulative voting rights.
ARTICLE VI.
DIRECTORS
1. The business of this corporation shall be managed by or under the
direction of a board of directors consisting of not less than three (3)
directors. Directors need not be shareholders of the corporation. The Board of
Directors in its discretion may elect honorary directors who shall serve without
voting power.
2. Directors shall be elected for a term of one (1) year and until their
successors are elected and qualified. If any vacancy occurs in the board of
directors, the remaining directors, by the affirmative vote of a majority
thereof, shall elect a director or directors to fill the vacancy until the next
regular meeting of the shareholders.
3. The directors shall have all of the powers conferred upon directors by
the Minnesota Business Corporation Act.
4. An action required or permitted to be taken by the board of directors
of this corporation may be taken by written action signed by the number of
directors that would be required to take the same action at a meeting of the
board at which all directors are present except as to those matters which
require shareholder approval, in which case the written action must be signed by
all members of the board of directors.
5. To the full extent permitted by the Minnesota Business Corporation
Act, as it exists on the date hereof or may hereafter be amended, a director of
this corporation shall not be liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director. No amendment to or
repeal of this section shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with respect to acts
or omissions of such director occurring prior to such amendment or repeal.
ARTICLE VII.
INDEMNIFICATION
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The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of the corporation) to the full extent
permitted by the Minnesota Business Corporation Act.
ARTICLE VIII.
The private property of the shareholders of this corporation shall not be
subject to the payment of corporate debts to any extent whatsoever.
IN TESTIMONY WHEREOF, we have hereunto set our hands this _____ day of
_______________________, 1996.
____________________________________
. . . . . . . . .GREGG A. OSTRANDER
. . . . . . . . . . . . . President
___________________________________
. . . . . . . . .JEFFREY M. SHAPIRO
. . . . . . . . . . . . . Secretary
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____ day of
________________, 1996, by Gregg A. Ostrander and Jeffrey M. Shapiro, President
and Secretary respectively of North Star Universal, Inc., a Minnesota
corporation, on behalf of the Corporation.
________________________________
Notary Public
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Exhibit E
FORM OF ORDERLY DISPOSITION AND
REGISTRATION RIGHTS AGREEMENT
ORDERLY DISPOSITION AND REGISTRATION RIGHTS AGREEMENT
This Agreement made and entered into this ______ day of December, 1995, by
and between NORTH STAR UNIVERSAL, INC., a Minnesota corporation, which, upon the
effective date of the Merger defined in the first recital hereof, will be the
parent corporation to the surviving corporation resulting from the merger of
Merger Sub and Michael as described in the first recital hereof ("Michael
Minnesota)", and 4J2R1C, a Minnesota limited partnership, 3J2R, a Minnesota
limited partnership, JAMES H. MICHAEL and JEFFREY J. MICHAEL (such individuals
and partnerships, together with any immediate family members of such individuals
or any corporation, partnership of trust in which such individuals or their
immediate family members are the sole shareholders, partners or beneficiaries
thereof, to be hereinafter collectively referred to as the "Michael
Shareholders").
WITNESSETH:
WHEREAS, Michael Minnesota is a party to an Agreement and Plan of
Reorganization dated December ___, 1995 (the "Merger Agreement") providing for
the merger (the "Merger") of NSU Merger Co. ("Merger Sub"), a newly formed
Delaware corporation and wholly-owned subsidiary of Michael Minnesota, with and
into Michael Foods, Inc., a Delaware corporation ("Michael"), as the surviving
corporation; and
WHEREAS, under Section 6.16 of the Merger Agreement, Michael Minnesota
agreed to execute and deliver and to cause the Michael Shareholders to execute
and deliver this Orderly Disposition and Registration Rights Agreement.
NOW THEREFORE, IN CONSIDERATION of the premises and of the terms and
conditions hereinafter set forth, the parties agree as follows:
1. DEFINITIONS. Unless the context otherwise requires or unless otherwise
defined in this agreement, capitalized terms shall have the meanings ascribed to
them in the Merger Agreement. Any references to Michael Minnesota shall include
North Star Universal, Inc. and Michael Minnesota from and after the consummation
of the Merger and the change of its name to Michael Foods, Inc.
2. ACTIONS PENDING EFFECTIVE TIME. From the date of this Agreement until
the Effective Time, the Michael Shareholders, individually and collectively,
shall:
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a. not sell or offer to sell, hypothecate or transfer any shares of Michael
Minnesota common stock, except that this limitation shall not apply to sales of
Michael Minnesota common stock made pursuant to Rule 144 of the Securities and
Exchange Commission (the "SEC"), or the pledge of Michael Minnesota common stock
to secure surety bonds for Michael-Curry Companies, Inc. or transfers of Michael
Minnesota common stock among Michael Shareholders;
b. vote in favor of the Merger, the Spinoff, the Reverse Stock Split and
the election of directors nominated by Michael Minnesota management at any
meeting of shareholders duly called and held for such purposes; and
c. prepare and file any pre-merger notification to the Federal Trade
Commission required in connection with the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules of the Federal Trade Commission
thereunder.
3. RESTRICTIONS UPON DISPOSITION. For a period of twenty-four (24) months
following the Effective Date, the Michael Shareholders, individually or
collectively, shall not:
a. sell or offer to sell shares of common stock of Michael Minnesota
exceeding five percent (5%) of the then outstanding shares of common stock of
Michael Minnesota to any person or group in any single transaction or series of
transactions without providing to Michael Minnesota the first right to buy such
shares as provided in Section 5 below;
b. sell or offer to sell any shares of common stock of Michael Minnesota to
any person or group which owns five percent (5%) or more of the outstanding
common stock of Michael Minnesota without providing to Michael Minnesota the
first right to buy such shares as provided in Section 5 below; or
c. pledge, hypothecate, or encumber any shares of Michael Minnesota owned
by any of the Michael Shareholders except to secure surety bonds obtained by
Michael-Curry Companies, Inc.
For purposes of this agreement, the term "group" shall mean any two or more
persons who agree to act together for the purpose of acquiring, holding, voting
or disposing of common stock of Michael Minnesota.
4. SHARES COVERED. This agreement shall apply to all shares of common
stock of Michael Minnesota which are owned by the Michael Shareholders at the
date of this agreement or which are acquired by the Michael Shareholders prior
to the Effective Date or as a result of the Merger, but shall not apply to any
shares of common stock of Michael Minnesota which are purchased or otherwise
acquired by any of the Michael Shareholders subsequent to the Effective Date
unless such shares were subject to this agreement at the time they were so
acquired by a Michael Shareholder.
5. OPTION TO PURCHASE. Upon the occurrence of any of the events described
in Section 3(a) or (b), the Michael Shareholders or Shareholder proposing to
sell or offer
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shares of common stock of Michael Minnesota shall provide written
notice thereof to Michael Minnesota and shall offer to Michael Minnesota the
right to purchase such shares. The notice shall state the number of shares
offered and the price per share and any other conditions of the proposed sale or
offer and shall include a copy of any written document setting forth the terms
of the proposed sale or offer between the Michael Shareholders and the purchaser
or offeree. Michael Minnesota shall have twenty (20) days from its receipt of
such notice within which to purchase the shares so offered. In the event
Michael Minnesota does not complete the purchase within such twenty (20) day
period, the Michael Shareholders or Shareholder sending the notice shall be
permitted for a period of thirty (30) days thereafter to sell Michael Minnesota
shares equal in number to the shares offered in such notice free of any
restrictions of this agreement at a price no less than the purchase price per
share set forth in such notice and under terms and conditions no more favorable
to the purchaser than the terms and conditions offered to Michael Minnesota in
such notice.
6. TENDER OFFER. The restrictions set forth in Section 3 and the option to
purchase granted to Michael Minnesota in Section 5 shall not apply if a tender
offer is made for all or substantially all of the outstanding Michael Minnesota
common stock and the management of Michael Minnesota does not, within seven (7)
days of the commencement of such tender offer, announce its opposition to the
tender offer. Notwithstanding the foregoing, the following additional terms and
conditions shall apply in the event of a tender offer:
a. In the event that one or more of the Michael Shareholders has offered
shares to Michael Minnesota pursuant to Section 5 hereof and, prior to
acceptance of such offer by Michael Minnesota, a tender offer is made for all or
substantially all of the outstanding Michael Minnesota common stock, Michael
Minnesota shall, within twenty (20) days of the date such Michael Shareholder(s)
have made such offer, have the right to acquire the shares offered by such
Michael Shareholder(s) at the higher of the price offered by the Michael
Shareholder(s) or the tender offer price, regardless of whether Michael
Minnesota's management has announced it opposition to such tender offer.
b. In the event that one or more of the Michael Shareholders has offered
shares to Michael Minnesota pursuant to Section 5 hereof and, following
acceptance of such offer by Michael Minnesota but prior to the closing of such
transaction, either a tender offer is made for all or substantially all of the
outstanding Michael Minnesota common stock or the management of Michael
Minnesota rescinds an earlier opposition to such a tender offer, Michael
Minnesota shall have the option of (a) rescinding its agreement to purchase the
shares from such Michael Shareholder(s) within two (2) days of the commencement
of such tender offer or its announcement of its rescindment of its opposition to
the tender offer; or (b) acquiring such shares at the higher of the price
offered by such Michael Shareholder(s) at the tender offer price.
7. LEGEND. Each of the Michael Shareholders shall forthwith deliver to the
secretary of Michael Minnesota all certificates representing shares of common
stock of Michael
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Minnesota which are subject to this agreement for the purpose of placing
thereon the following legend:
"The shares represented by this certificate are subject to certain
restrictions on the transfer, sale or other disposition of the shares
pursuant to an agreement dated ________________, 1995 between the issuer
and the registered owner hereof, a copy of which may be obtained from
the secretary of the corporation."
The secretary shall promptly return the legended certificates to the Michael
Shareholders.
8. DIRECTORS. For a period of twenty-four (24) months following the
Effective Date, the Board of Directors of Michael Minnesota shall include
representatives of the Michael Shareholders as provided below. The first board
of directors of Michael Minnesota at the Effective Date shall include Jeffrey J.
Michael and Miles E. Efron or other substitute nominees of the Michael
Shareholders if either of them are unable or unwilling to serve as
representatives of the Michael Shareholders. Within thirty (30) days following
the end of each calendar year after the Effective Date and within the twenty-
four (24) months following the Effective Date, the Michael Shareholders shall
give notice to Michael Minnesota of their nominee or nominees for Board of
Directors. If the Michael Shareholders collectively own 10% or more of the
outstanding common stock of Michael Minnesota, they shall be entitled to
nominate two (2) directors. If the Michael Shareholders own less than 10% of
the outstanding common stock of Michael Minnesota, they shall be entitled to
nominate one (1) director. Notice hereunder shall be given by Jeffrey J.
Michael, as representative of all the Michael Shareholders.
9. REGISTRATION RIGHTS.
a. PIGGYBACK RIGHTS. If at any time within twenty-four (24) months
following the Effective Date, Michael Minnesota proposes to register common
stock under the Securities Act of 1933, as amended (the "Securities Act") in
connection with a public offering of common stock for its own account solely for
cash (other than a registration on form S-4 or S-8 or any successor form
thereof) in a manner that would permit registration of all or a portion of the
Michael Minnesota common stock owned by the Michael Shareholders, it will give
prompt notice thereof to the Michael Shareholders. Upon written notice of any
Michael Shareholders to Michael Minnesota received within fifteen (15) days
after delivery of notice of the proposed offering by Michael Minnesota, Michael
Minnesota will use its best efforts to effect the registration of the Michael
Minnesota shares covered by such notice under the Securities Act; provided,
however, that Michael Minnesota shall have the right to abandon the registration
in its entirety at any time and shall not be required to register shares of the
Michael Shareholders if the underwriters in any underwritten offering reasonably
object to the inclusion of such shares in the registration, and provided
further, that in any underwritten offering, the Michael Shareholders
participating in the registration agree to sell their shares to the underwriters
on the same terms and conditions as apply to Michael Minnesota, with such
differences as customarily apply in combined primary and
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secondary offerings.
b. REQUESTED REGISTRATION. If, at any time commencing on the Effective
Date and continuing for a period of twenty-four (24) months thereafter, Michael
Minnesota shall receive a written request from one or more Michael Shareholders
that Michael Minnesota effect the registration under the Securities Act of all
or a part of such Michael Shareholder's(') shares of Michael Minnesota common
stock constituting in the aggregate at least 500,000 shares (such number of
shares to be adjusted to reflect any stock split, stock dividend or other
combination or reclassification of Michael Minnesota's capital stock after the
Effective Date) and requesting that such shares be sold in a registered public
offering in accordance with this Section 9, then Michael Minnesota will, within
ten (10) days after receipt thereof, give notice to all other Michael
Shareholders of the receipt of such request and each such holder may elect by
written notice received by Michael Minnesota within ten (10) days from the date
of the notice by Michael Foods to have all or part of his shares of Michael
Minnesota common stock included in such registration; provided, however, that
the Michael Shareholders collectively shall only have the right to cause Michael
Minnesota to effect a registration pursuant to this section on two occasions
during such twenty-four (24) month period. Upon receipt of such notice, Michael
Minnesota will, as soon as practicable, use reasonable efforts to effect the
registration under the Securities Act of all registrable securities which it has
been so requested to register and provided further, that Michael Minnesota: (i)
shall not be obligated to cause any special audit to be undertaken in connection
with any such registration; (ii) shall be entitled to postpone for a reasonable
period of time, but not in excess of one hundred twenty (120) days, the filing
of any registration statement otherwise required to be prepared pursuant to this
section if Michael Minnesota is, at such time, conducting or about to conduct an
underwritten public offering of equity securities (or securities convertible
into equity securities) and is advised in writing by its managing underwriter
that such offer would, in its opinion, be adversely effected by the registration
so requested; and (iii) shall be entitled to postpone such requested
registration for up to 120 days if Michael Minnesota determines, in view of the
advisability of deferring public disclosure of material corporate developments
or other information, that such registration and the disclosure required to be
made pursuant thereto would not be in the best interest of Michael Minnesota at
such time.
c. FORM OF REQUESTED REGISTRATION. All registrations proposed to be
effected under this Section shall be made on Form S-3 unless the registration
shall be in connection with underwritten public offering and the managing
underwriter shall advise Michael Minnesota in writing that, in its opinion, the
use of another form of registration statement is of material importance to the
success of such proposed offering. In such case, the registration shall be
effected on such other form. During the term of this agreement, Michael
Minnesota shall take all such reasonable actions as may be necessary to maintain
its eligibility to use such form(s).
d. EXPENSES. In connection with any registration statement pursuant to
this section and whether or not the sale of the shares is consummated, each
selling Michael Shareholder
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will pay: (i) a pro rata portion of the aggregate registration expenses and
other expenses incurred by Michael Minnesota in connection with the
registration of the sale of the shares and the sale of the shares offered
based on the number of such Michael Shareholder's(') registrable securities
included in the registration statement at the time the registration statement
is filed with the SEC relative to the total number of securities covered by
such registration statement at such time, (ii) a pro rata portion (based on
the number of such Michael Shareholder's registrable securities included in
the registration statement at the time the registration statement is filed
with the SEC relative to the total number of securities covered by such
registration statement at such time) of the aggregate fees and disbursements
of underwriters customarily paid by issuers or sellers of securities,
including liability insurance if Michael Minnesota so desires or if the
underwriters so require, and the reasonable fees and expenses of any special
experts retained in connection with the requested registration; (iii) the
fees and disbursements of counsel to Michael Shareholder(s); and (iv) all
underwriting discounts and commissions and transfer taxes, if any, applicable
to shares of registrable securities to be sold on behalf of Michael
Shareholder(s). All such amounts shall be due and payable at the request of
Michael Minnesota at the closing of any underwritten offering, the effective
date of the registration statement in the case of a non-underwritten offering
or upon abandonment of the registration.
e. COMPLETION. A registration requested pursuant to this section will not
be deemed to have been effected unless it has become effective under the
Securities Act, provided that, if within 180 days after it has become effective
the offering of registrable securities pursuant to such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court, such registration will be deemed
not to have been effected.
f. SELECTION OF UNDERWRITER AND INVESTMENT MANAGER. If a requested
registration pursuant to this section involves an underwritten offering, Michael
Minnesota shall have the exclusive right to select an investment banker or
bankers and managers to administer the offering. The offer or sale of Michael
Minnesota shares to an underwriter in a registered public offering shall not
constitute a sale or offer to sell the shares for purposes of Section 3(a) or
3(b).
g. REGISTRATION. If and whenever Michael Minnesota is required to use its
reasonable efforts to cause the registration of any registrable securities under
the Securities Act as provided in this agreement, Michael Minnesota will, as
expeditiously as reasonably possible: (i) prepare and file with the SEC a
registration statement with respect to such registrable securities and use its
best efforts to cause such registration statement to become effective and, upon
the request of the holders of a majority of the registrable securities
registered by the Michael Shareholder(s) hereunder, keep such registration
statement effective for one hundred eighty (180) days; (ii) prepare and file
with the SEC such amendments and supplements to such registration statement and
the prospectus used in
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connection therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement; (iii) furnish to each Michael Shareholder
seeking registration hereunder such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and summary prospectus), and such other documents as each such
Michael Shareholder may reasonably request in order to facilitate the
disposition of the registrable securities by such seller but only while it
shall be required under the provisions hereof to cause the registration
statement to remain current; (iv) use its reasonable efforts to register or
qualify such registrable securities covered by such registration statement
under such other securities or blue sky laws of such jurisdictions as the
sellers shall reasonably request, except that Michael Minnesota shall not,
for any purpose, be required to qualify generally to do business as a foreign
corporation in any jurisdiction where, but for the requirements of this
clause, it would not be obligated to be so qualified, to subject itself to
taxation in any such jurisdiction, or consent to general service of process
in any such jurisdiction; (v) use its reasonable efforts to list the
securities being registered on the National Association of Securities
Dealers, Inc. National Market System ("NASDAQ-NMS"), if such registrable
securities are not already so listed.
h. INFORMATION. Michael Minnesota may require each selling Michael
Shareholder to furnish it with such information regarding such selling Michael
Shareholder and pertinent to the disclosure requirements relating to the
registration and the distribution of such securities as Michael Minnesota may
from time to time reasonably request in writing.
i. UNDERWRITING AGREEMENT. The selling Michael Shareholders shall execute
and deliver an underwriting agreement in customary form in connection with any
underwritten offering made pursuant to a registration hereunder.
10. INDEMNIFICATION AND CONTRIBUTION. As a condition to the registration
of registrable securities of the Michael Shareholders pursuant to this
agreement, Michael Minnesota may require the selling Michael Shareholders to
enter into an Indemnification and Contribution Agreement with respect to claims
or liabilities arising under the Securities Act or the Securities Exchange Act
of 1934 as a result of the representations and warranties made by the selling
Michael Shareholder(s) in connection with their offer or sale of the registrable
securities. Such agreement shall be in customary form and shall contain mutual
cross indemnity and contribution provisions.
11. GENERAL PROVISIONS.
a. GOVERNING LAW. This agreement shall be governed by and interpreted and
enforced in accordance with the laws of the State of Minnesota without giving
effect to any conflicts of law provisions.
b. REMEDIES. Michael Minnesota, on the one hand, and the Michael
Shareholders, on the other, acknowledges and agrees that the other would not
have an adequate remedy
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at law for money damages in the event that any of the covenants or agreements
in this agreement of such party were not performed in accordance with its
terms, and it is therefore agreed that in addition to and without limiting
any other remedy or right such party may have, any party will have the right
to an injunction or other equitable relief (including specific performance)
in any court of competent jurisdiction, enjoining any such breach and
enforcing specifically the terms and provisions hereof. All rights, powers
and remedies provided under this agreement or otherwise available in respect
hereof at law or in equity shall be cumulative and not alternative.
Notwithstanding the foregoing, Michael Minnesota hereby acknowledges and
agrees that, from the date hereof until and including the Effective Date, it
shall not be entitled hereunder to any claim for money damages against the
Michael Shareholder, it being the intention of the parties hereto that any
claim for damages arising out of a failure of the Merger to become effective
shall be limited to the damages specified in Section 8.2(a) of the Merger
Agreement, which such damages shall be payable by North Star Universal, Inc.,
a Minnesota corporation which is a constituent party to the proposed Merger.
c. NOTICES. All notices, demands, requests, certificates or other
communications under this Agreement and all legal processes in regard hereto
shall be in writing and shall be decreed to be validly given, made or served
when delivered personally or deposited in the U.S. mail, postage prepaid, for
delivery by express, registered or certified mail, or delivered to a recognized
overnight courier service guaranteeing next Business Day delivery, addressed as
follows:
If to North Star Universal, Inc.: Michael Foods, Inc.
5353 Wayzata Boulevard
324 Park National Bank Building
Minneapolis, Minnesota 55416
Attention: President
If to the Michael Shareholders: Jeffrey J. Michael
5745 Seven Oaks Court
Minnetonka, Minnesota 55345
d. SEVERABILITY. If any term, provision, covenant or restriction of this
agreement is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. The parties agree that they will use their
best efforts at all times to support and defend this agreement.
e. AMENDMENTS. This agreement may be amended only by an agreement in
writing signed by all of the parties hereto.
f. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only and
shall not control or affect the meaning or construction of any provision of this
agreement.
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g. COUNTERPARTS. This agreement shall become binding when one or more
counterparts hereof, individually or taken together, bears the signatures of
each of the parties hereto. This agreement may be executed in any number of
counterparts, each of which shall be an original as against the party whose
signature appears thereon, or on whose behalf such counterpart is executed, but
all of which when taken together shall be one and the same statement.
h. SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and inure
to the benefit of and be enforceable by the successors and assigns of the
parties hereto, provided that a Michael Shareholder may not assign any of his
rights or obligations hereunder to any person without the prior written consent
of Michael Minnesota. Notwithstanding the foregoing, the consent of Michael
Minnesota shall not be required in connection with the assignment of this
agreement to the estate of a Michael Shareholder.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound have
duly executed this agreement, all as of the day and year first above written.
NORTH STAR UNIVERSAL, INC.
By: ____________________________
Its: _______________________
4J2R1C, A LIMITED PARTNERSHIP
By: ______________________________
A General Partner
3J2R, A LIMITED PARTNERSHIP
By: ________________________________
A General Partner
____________________________________
JAMES H. MICHAEL
___________________________________
JEFFREY J. MICHAEL
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Contact: MARK D. WITMER
DIRECTOR OF CORPORATE COMMUNICATIONS
(612) 546-1500
Contact: PETER E. FLYNN
EXECUTIVE VICE PRESIDENT
North Star Universal, Inc.
(612) 546-7500
For Immediate Release
MICHAEL FOODS TO REPURCHASE SHARES; NORTH STAR UNIVERSAL
TO MAKE TAX-FREE DISTRIBUTIONS
--------------------------------------------------------
MINNEAPOLIS, December 21 -- Michael Foods, Inc. (NMS-MIKL) and North Star
Universal, Inc. ("NSU") (NMS-NSRU) jointly announced today that they have
entered into an agreement which provides for a series of transactions.
Michael Foods will repurchase and retire a portion of NSU's Michael Foods
stock holdings, at a negotiated discount to the average market price of
Michael Foods' stock prior to the transactions closing, by assuming NSU's net
outstanding debt. NSU presently owns 7,354,950 shares, or approximately 38%,
of Michael Foods' common stock. NSU's remaining Michael Foods stock holdings
will then be allocated pro rata to NSU's stockholders. This distribution will
be effected through a reverse stock split reducing the number of outstanding
NSU shares to a number equal to the Michael Foods shares owned by NSU, less
the shares repurchased by Michael Foods as part of the transactions. The net
debt to be assumed by Michael Foods will be $25 - $38 million and the price
discount will be 8%-10% depending upon the level of debt assumed.
The repurchase transaction will be accomplished through a tax-free business
combination of Michael Foods and NSU. The resulting publicly-held entity
will be named Michael Foods, Inc. and will operate the present businesses of
Michael Foods.
In the second part to the transactions, NSU will form a new company which
will hold NSU's assets and holdings remaining at the time of the closing of
the transactions. Such assets currently include two computer networking
companies (Americable and Transition Networks), a manufacturing company
(Eagle Engineering & Manufacturing), and an equity holding in CorVel
Corporation (NMS-CRVL). Shares of this new company will be spun-off tax-free
to NSU's stockholders and will be publicly traded after the spin-off.
In commenting on the proposed transactions, Chief Executive Officer Gregg A.
Ostrander of Michael Foods and Chief Executive Officer Jeffrey J. Michael of
North Star Universal, said, "The transactions have been carefully structured
to be a significant 'win/win` for both Michael Foods' and NSU's stockholders."
<PAGE>
Mr. Ostrander added, "Michael Foods' stockholders should benefit from an
expected increase in per share earnings as a result of the purchase of a
significant block of stock at a discount to market prices and an expected
increase in the liquidity of our stock."
Mr. Michael added, "NSU's stockholders should benefit from the unlocking of
the value within NSU. NSU's stockholders will obtain, on a tax-free basis,
direct control of a significant portion of the Michael Foods shares currently
held by NSU corporately, as well as the other assets and holdings to be
spun-out of NSU as a result of the transactions."
The transactions are subject to receipt of an Internal Revenue Service ruling
that the transactions are tax-free to the stockholders of Michael Foods and
NSU, the approval of both company's stockholders, and other closing conditions.
A mid-1996 closing is anticipated.
Michael Foods, Inc. is a diversified food processor and distributor with
particular interests in egg products, refrigerated grocery products, frozen
and refrigerated potato products and specialty dairy products. Principal
subsidiaries include M. G. Waldbaum Company, Crystal Farms Refrigerated
Distribution Company, Northern Star Co. and Kohler Mix Specialties, Inc.
North Star's direct and indirect wholly-owned subsidiaries include Americable
and Transition Networks. Americable is a provider of connectivity and
networking products and services. Transition Networks designs, manufactures and
markets connectivity devices used in local area network ("LAN") applications.
North Star also owns a 38% interest in Michael Foods, Inc. and a 35% interest
in CorVel Corporation.
# # #
12-21-95
