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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
-------------------------
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 26, 1997
MICHAEL FOODS, INC.
--------------------
(Exact name of registrant as specified in its charter)
MINNESOTA 0-15638 41-0498850
--------- ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
324 PARK NATIONAL BANK BUILDING
5353 WAYZATA BOULEVARD
MINNEAPOLIS, MINNESOTA 55416
-----------------------------
(Address of principal executive offices) (Zip Code)
(612) 546-1500
--------------
(Registrant's telephone number, including area code)
NORTH STAR UNIVERSAL, INC.
--------------------------
6479 CITY WEST PARKWAY
----------------------
EDEN PRAIRIE, MINNESOTA 55344
-----------------------------
(Former name or former address, if changed since last report)
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INTRODUCTORY NOTE
On February 28, 1997, the Registrant and Michael Foods, Inc., a Delaware
corporation, completed a series of transactions described in detail in
Registration Statement 333-1863 which is incorporated herein by reference (the
"Reorganization"). Prior to the Reorganization, the name of the Registrant was
North Star Universal, Inc. The Registrant's common stock traded on the Nasdaq
National Market System under the symbol NSRU. The Common Stock of Michael
Foods, Inc. (Commission File No. 0-15568) traded on the Nasdaq National Market
System under the symbol MIKL. As a result of the Reorganization, Michael Foods,
Inc., a Delaware corporation, became a wholly-owned subsidiary of the Registrant
and changed its name to Michael Foods of Delaware, Inc. The Registrant,
continuing the business of Michael Foods of Delaware, Inc., changed its name to
Michael Foods, Inc., a Minnesota corporation, and now trades on the Nasdaq
National Market System under the symbol MIKLD. Historical information regarding
Michael Foods of Delaware, Inc. is now included with the Registrant's
information. Prior to the Reorganization, the Registrant transferred all of its
assets and liabilities other than Michael Foods, Inc., a Delaware corporation,
stock and certain debt to ENStar Inc. Following the reorganization, all of the
common stock of ENStar was distributed ratably to the Registrant's shareholders
of record as of February 27, 1997. The ENStar common stock is traded on the
Nasdaq National Market System under the symbol ENSR. After the Reorganization,
the business formerly conducted by North Star Universal, Inc. is now
conducted by ENStar Inc. and the business of Michael Foods, Inc., a Delaware
corporation, is conducted by the Registrant.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
A. Papetti's Acquisition. On February 26, 1997, Michael Foods, Inc.,
(n/k/a Michael Foods of Delaware, Inc., a Delaware corporation and now a
wholly-owned subsidiary of the Registrant) ("MFD"), completed a series of
transactions described in an Agreement and Plan of Reorganization (the "Merger
Agreement") among MFD, Papetti's Hygrade Egg Products, Inc., a New Jersey
corporation ("Papetti's"), and other entities related to Papetti's ("Related
Entities"), pursuant to which MFD acquired Papetti's through a merger and
acquired the Related Entities through mergers or asset purchases. Papetti's and
the Related Entities are engaged in the egg processing and distribution
business. Papetti's is headquartered in Elizabeth, New Jersey and its principal
egg processing and distribution facilities are located in New Jersey,
Pennsylvania, Iowa and Missouri. The Registrant will continue to operate the
Papetti's business as a separate subsidiary of its M. G. Waldbaum Company egg
production, processing and distribution subsidiary. See MFD Press Release
issued February 26, 1997 filed as Exhibit 20.1 hereto.
The purchase price consisted of 3,195,455 shares of MFD common stock,
assumption of approximately $23 million of notes payable and long-term debt and
approximately $42,900,000 in cash. The cash portion of the purchase price was
paid from the proceeds of the $125 million term loan described below. The
Papetti's transaction was accounted for as a purchase.
Pursuant to the Merger Agreement, two members of the Papetti's family,
Arthur J. Papetti and Stephen T. Papetti, were named as directors of MFD and
through the Reorganization described below, became directors of the Registrant.
The former shareholders of Papetti's are
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entitled, until the third anniversary of the closing, to nominate two directors
of the Registrant if the former shareholders beneficially own at least 10% of
the Registrant's common stock, or one director if the former shareholders
beneficially own less than 10% of the Registrant's common stock.
B. Reorganization. On February 28, 1997, MFD and the Registrant
completed the transactions described in the Agreement and Plan of
Reorganization between MFD, the Registrant and NSU Merger Co. dated December
21, 1995, as amended ("Reorganization Agreement") pursuant to which, through a
series of transactions, MFD, in effect, repurchased and retired a portion of
the shares of MFD common stock held by the Registrant in exchange for the
assumption of $21,250,000 of the Registrant's net indebtedness (the
"Reorganization"). The Reorganization Agreement contemplated that the historic
business of MFD would be continued by the Registrant. MFD was merged with a
subsidiary of the Registrant with MFD as the surviving entity. In the merger,
each MFD shareholder received one share of the Registrant's common stock for
each MFD common share. Immediately prior to the Reorganization, the Registrant
effected a reverse stock split whereby each share of the Registrant's
outstanding common stock was exchanged for .562 shares of new common stock of
the Registrant. The reverse stock split ratio was determined in a manner that
would reduce the number of outstanding common shares held by the Registrant's
common shareholders prior to the Reorganization to a number equal to the number
of MFD common shares held by the Registrant at the time of the Reorganization
less the number of MFD shares valued at $11.92 per share equal to $21,250,000
in net indebtedness retained by the Registrant. Upon consummation of the
reorganization, the Registrant's Board of Directors other than Mr. Efron and
Mr. Jeffrey J. Michael resigned and Mr. Ostrander, Mr. Coonrod, Mr. Knudtson,
Mr. Marshburn, Mr. Arthur J. Papetti, Mr. Stephen Papetti and Ms. Bellantoni
were appointed as directors of the Registrant. See press release filed
herewith as Exhibit 20.3.
C. ENStar Spinoff. Prior to February 28, 1997, and as a condition to the
completion of the Reorganization, the Registrant contributed all of its
operations, employees and its assets and liabilities other than the MFD stock
and $21,250,000 in net indebtedness to a wholly-owned subsidiary, ENStar Inc.
Immediately following the completion of the Reorganization, all of the ENStar
Inc. stock owned by the Registrant was distributed ratably to the Registrant's
shareholders of record as of February 27, 1997.
ITEM 5. OTHER EVENTS
A. Debt Financing. On February 26, 1997, MFD entered into a $125 million
term loan agreement with Metropolitan Life Insurance Company and certain other
insurance companies pursuant to which MFD issued $125 million aggregate
principal amount of its 7.58% senior notes due February 26, 2009. This
indebtedness was assumed by the Registrant upon completion of the Reorganization
described above. See press release filed herewith as Exhibit 20.1.
On February 26, 1997, MFD amended its existing Loan Agreement dated
December 1, 1989 with Metropolitan Life Insurance Company. The amendment was
entered into in order to conform the loan covenants and certain other provisions
in the loan agreement with the loan covenants and other loan provisions
contained in the $125 million term loan agreement described above. This
indebtedness was assumed by the Registrant upon completion of the Reorganization
described above.
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B. Bank Financing. On February 28, 1997, but prior to the completion of
the Reorganization described above, MFD entered into a new revolving loan
agreement of up to $80 million with Bank of America Illinois and certain other
banks as evidenced by a Revolving Loan Agreement dated February 28, 1997 and
Revolving Notes in the aggregate principal amount of $80 million issued pursuant
thereto. Under specified terms and conditions, this agreement may be
increased by MFD to $100 million. As part of this borrowing, an existing
revolving loan agreement with Bank of America Illinois and certain other banks
was terminated. This indebtedness was assumed by the Registrant upon
completion of the Reorganization described above. See press release filed
herewith as Exhibit 20.2.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
1. Audited combined balance sheet of
Papetti Companies at December 31, 1995, combined
statements of income, equity and cash flows for the year ended
December 31, 1995, and footnotes thereto.
2. Unaudited condensed combined balance sheet of Papetti Companies
at September 30, 1996, unaudited condensed combined statements of
operations and statements of cash flows for the nine months ended
September 30, 1996 and September 30, 1995, and related notes to
unaudited condensed combined financial statements.
3. Audited consolidated financial statements of Michael Foods, Inc.,
a Delaware corporation, and Subsidiaries for the years ended
December 31, 1995, December 31, 1994 and December 31, 1993 were
filed previously as exhibits to the Registrant's Form 10-K for
the year ended December 31, 1995 and are incorporated herein by
reference.
4. Unaudited condensed consolidated financial statements of Michael
Foods, Inc., a Delaware corporation, and Subsidiaries are
incorporated herein by reference to Exhibit 99.1 hereof, an
excerpt from Form 10-Q of Michael Foods, Inc., a Delaware
corporation (Commission File 0-15568) filed for the quarterly
period ended September 30, 1996.
(b) Pro Forma Financial Information
1. Unaudited pro forma condensed balance sheets of Registrant
(Michael Foods, Inc., a Minnesota corporation, f/k/a North Star
Universal, Inc., a Minnesota corporation) and ENStar Inc. at
September 30,1996 and unaudited pro forma condensed statements
of earnings for the nine months ended September 30, 1996 and
the year ended December 31, 1995.
2. Unaudited pro forma condensed combined balance sheet of
Michael Foods, Inc., a Delaware corporation, Papetti
Companies and the Registrant (Michael Foods, Inc., a Minnesota
corporation, f/k/a North Star Universal Inc., a Minnesota
corporation) at September 30, 1996 and related unaudited pro
forma condensed combined statements of earnings for the nine
months ended September 30, 1996 and the year ended December 31,
1995.
3. Notes to unaudited pro forma condensed combined financial
statements.
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PAPETTI COMPANIES
COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 1995
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REPORT OF INDEPENDENT ACCOUNTANTS
Boards of Directors, Stockholders and Partners
Papetti Companies
We have audited the accompanying combined balance sheet of the Papetti
Companies (see Note 1) as of December 31, 1995, and the related combined
statements of income, equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
the Papetti Companies as of December 31, 1995 and the combined results of their
operations and their combined cash flows for the year then ended in conformity
with generally accepted accounting principles.
As discussed in Note 1, an agreement has been reached for the Papetti Companies
to be acquired.
/s/ Coopers & Lybrand L.L.P.
Parsippany, New Jersey
October 7, 1996
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PAPETTI COMPANIES
Combined Balance Sheet
DECEMBER 31,
1995
------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,271,163
Restricted cash 437,811
Accounts receivable, trade, net of allowance for doubtful
accounts of $630,000 in 1995 25,215,806
Inventories 21,626,953
Due from related parties 3,587,292
Prepaid expenses and other 4,883,583
------------
Total current assets 59,022,608
------------
PROPERTY, PLANT AND EQUIPMENT-AT COST
Land 173,400
Buildings and improvements 5,678,288
Machinery and equipment 44,507,698
Leasehold improvements 4,124,635
Transportation equipment 8,742,386
------------
63,226,407
Less accumulated depreciation 35,070,018
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28,156,389
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OTHER ASSETS
Due from related parties 3,863,329
Goodwill, net 1,879,210
Other 2,516,204
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8,258,743
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Total Assets $ 95,437,740
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LIABILITIES AND EQUITY
CURRENT LIABILITIES
Bank borrowings $ 13,907,524
Current maturities of long-term debt 5,767,599
Accounts payable 26,857,563
Accrued compensation 708,569
Accrued insurance 303,325
Other accrued expenses 6,623,237
Due to related parties 151,422
------------
Total current liabilities 54,319,239
LONG-TERM DEBT, less current maturities 6,267,569
Minority interest 2,310,929
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62,897,737
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COMMITMENTS AND CONTINGENCIES
EQUITY
Partners' equity 353,330
Preferred stock 20,000
Common stock 2,422,872
Additional paid-in capital 723,896
Retained earnings 29,019,905
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Total equity 32,540,003
------------
Total liabilities and equity $ 95,437,740
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SEE NOTES TO COMBINED FINANCIAL STATEMENTS.
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PAPETTI COMPANIES
Combined Statement of Income
YEAR ENDED
DECEMBER 31,
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1995
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Net sales $ 278,785,836
Cost of sales 256,050,257
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Gross profit 22,735,579
Selling, general and administrative expenses 13,563,329
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Operating profit 9,172,250
Interest expense 2,304,119
Interest income (478,888)
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Income before taxes 7,347,019
Income tax expense 2,349,068
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Income before minority interest 4,997,951
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Minority interest 157,298
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Net income $ 4,840,653
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SEE NOTES TO COMBINED FINANCIAL STATEMENTS.
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PAPETTI COMPANIES
Combined Statement of Equity
PREFERRED STOCK COMMON STOCK ADDITIONAL
PARTNERS' SHARES SHARES PAID-IN RETAINED TOTAL
EQUITY ISSUED AMOUNT ISSUED AMOUNT CAPITAL EARNINGS EQUITY
--------- --------- -------- ------ ----------- ---------- ------------ ------------
Balance at:
December 31, 1994 $ 253,125 20,000 $ 20,000 2,404 $ 2,420,862 $ 524,906 $ 25,494,268 $ 28,713,161
Net income 108,083 4,732,570 4,840,653
Contributions 50,000 50,000
Issuance of common stock 1,675 2,010 198,990 201,000
Cash dividends (1,206,933) (1,206,933)
Partnership distributions (57,878) (57,878)
--------- --------- -------- ------ ----------- ---------- ------------ ------------
Balance at:
December 31, 1995 $ 353,330 20,000 $ 20,000 4,079 $ 2,422,872 $ 723,896 $ 29,019,905 $ 32,540,003
========= ========= ======== ====== =========== ========== ============ ============
SEE NOTES TO COMBINED FINANCIAL STATEMENTS.
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PAPETTI COMPANIES
Combined Statement of Cash Flows
YEAR ENDED
DECEMBER
31,
-----------
1995
-----------
Cash flows from operating activities:
Net income $ 4,840,653
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,776,980
Deferred income taxes (420,718)
Loss on sale of assets 76,123
Provision for doubtful accounts 457,131
Minority interest in income 157,298
(Increase) decrease in assets:
Accounts receivable, trade (6,199,305)
Inventories (4,648,454)
Due from related parties (3,089,199)
Prepaid expenses and other (2,411,127)
Other noncurrent assets (707,926)
Increase (decrease) in liabilities:
Due to related parties (904,954)
Accounts payable 7,825,702
Accrued compensation 268,699
Accrued insurance 56,522
Other accrued expenses 3,819,707
-----------
Net cash provided by operating activities 4,897,132
-----------
Cash flows from investing activities:
Proceeds from sale of property and equipment 426,827
Payments received on mortgage 502,514
Additions to patents and trademarks (227,737)
Advances to affiliates (4,000,000)
Purchase of property and equipment (6,590,208)
Other investing activities 35,089
-----------
Net cash used in investing activities (9,853,515)
-----------
Cash flows from financing activities:
Increase in bank borrowings 3,578,433
Proceeds from long-term debt 2,872,482
Repayments of long-term debt (2,394,008)
Advances to stockholders (660,000)
Net change in restricted cash (376,568)
Cash dividends paid to shareholders (1,206,933)
Cash dividends paid to minority interest (88,977)
Distributions to partners (57,878)
Distributions to minority interest (22,122)
Contributions by partners 50,000
Proceeds from issuance of common stock
to shareholders 201,000
Proceeds from issuance of common stock
to minority interest 99,000
-----------
Net cash provided by financing activities 1,994,429
-----------
Net (decrease) increase in cash and cash equivalents (2,961,954)
Cash and cash equivalents at beginning of year 6,233,117
-----------
Cash and cash equivalents at end of year $ 3,271,163
===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 2,578,430
Income taxes $ 4,729,000
Noncash investing activity:
Assets acquired by incurring directly related liabilities $ 598,589
SEE NOTES TO COMBINED FINANCIAL STATEMENTS.
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PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS ORGANIZATION, PRINCIPLES OF COMBINATION AND FISCAL YEAR
The combined financial statements of the Papetti Companies ("Companies")
include all the separate entities which are owned by the Papetti family as
presented below. The Companies are engaged in the procurement,
manufacturing and distribution of egg products to customers primarily
throughout the United States. The Companies' procurement trends consider
current market prices and availability of eggs. All significant balances
and transactions between the combined entities have been eliminated.
FORM INTEREST
OF OF INTEREST
COMMENCED BUSINESS PAPETTI OF
ENTITY ABBREVIATION OPERATION ORGANIZATION FAMILY OTHERS
- ------------------------- ------------ --------- ------------- -------- --------------------
Papetti's Hygrade Egg
Products, Inc. Hygrade 1967 C Corporation 100%
Papetti Foods, Inc. Foods 1994 S Corporation 100%
Quaker State Farms, Inc. Quaker 1990 S Corporation 100%
Papetti's of Iowa Food
Products, Inc. Iowa 1969 S Corporation 67% T. Rechsteiner - 33%
Monark Egg Corporation Monark 1991 S Corporation 75% T. Rechsteiner - 25%
Casa Trucking Limited
Partnership Casa 1994 Partnership 80% T. Catherman - 20%
Egg Specialties, Inc. Specialties 1995 S Corporation 66.6% T. Catherman - 16.7%
R. Mosier - 16.7%
Papetti Transport Leasing
Limited Partnership Transport 1993 Partnership 100%
Papetti Equipment Leasing
Limited Partnership Equipment 1993 Partnership 100%
Amounts included are as of December 31, and the year then ended for all
entities except Hygrade, which is as of October 31, and for the year then
ended. During the two months ended December 31, 1995, Hygrade incurred a
net loss of approximately $850,000.
The minority stockholders' and partners' proportionate share of the equity
of the Companies is shown as minority interest.
On June 28, 1996, the Companies reached an agreement to be acquired by
Michael Foods, Inc., a U.S. food processor and distributor, for a purchase
price of approximately $85 million consisting of cash and Michael Foods,
Inc. common stock. The acquisition is expected to close in the first
quarter of 1997.
CASH AND CASH EQUIVALENTS
The Companies consider highly liquid temporary investments with original
maturities of three months or less to be cash equivalents.
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PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
on the first-in, first-out (FIFO) method.
REVENUE RECOGNITION
Sales of the Companies' products are recognized when the goods are shipped
to customers and are recorded net of discounts, rebates, allowances and
returns.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is
provided by using accelerated methods over the following estimated useful
lives of the assets by most entities. Certain entities provide
depreciation by using the straight-line method.
Buildings and improvements 18-40 years
Machinery and equipment 3-20 years
Leasehold improvements 7-40 years
Transportation equipment 3-7 years
PATENTS AND TRADEMARKS
Patents and trademarks are carried at cost less accumulated amortization
which is calculated using the straight-line method over their legal or
estimated useful lives of fifteen years. Amounts total $1,068,108 at
December 31, 1995 and are included within other assets. The recoverability
of these carrying amounts are reviewed by management periodically and
adjusted for any unfavorable changes in value. Accumulated amortization
was $81,182 at December 31, 1995.
GOODWILL
Goodwill has arisen from acquisitions made by the Companies. All
acquisitions have been accounted for as purchases and the excess of the
total purchase price over the fair value of the net assets acquired was
recorded as goodwill. Goodwill is amortized using the straight-line method
over fifteen years. Accumulated amortization was $143,090 at December 31,
1995. The Companies evaluate their goodwill annually to determine
potential impairment by comparing the carrying value to the undiscounted
cash flows of the related assets. The Companies modify the life or adjust
the value of goodwill if an impairment is identified.
ADVERTISING COSTS
Advertising costs are expensed when incurred. The companies incurred
advertising costs of $820,974 for the year ended December 31, 1995.
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PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES
Some of the Companies are organized as partnerships and others as S
corporations. There is no provision for Federal income taxes on
partnerships or S corporations reflected in the combined statement of
income. Certain "S" corporations are subject to state income taxes.
Deferred income taxes are provided by using the asset and liability method.
Under this method, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Companies to
concentration of credit risk, consist principally of cash and trade
receivables. The Companies place their cash with high credit quality
institutions. Such amounts exceed FDIC insurance limits. Concentration of
credit risk with respect to trade receivables is limited due to the large
number of customers comprising the Companies' customer base. Ongoing
credit evaluations of customers' financial condition are performed and
collateral is not required.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. The most significant estimates relate to the
accrual for rebates and allowance for doubtful accounts. Actual results
could differ from those estimates.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long Lived
Assets and Long Lived Assets To Be Disposed Of," which the Companies are
required to adopt January 1, 1996. This standard establishes guidance on
when and how to measure impairment of long-lived assets, certain
identifiable intangibles, and how to value long-lived assets to be disposed
of. Management believes the adoption of this new accounting standard will
not have a material effect on the Companies' financial statements.
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PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. RESTRICTED CASH:
As required by the line of credit agreement (Note 5), Iowa is required to
deposit all collections from trade accounts receivable in a separate bank
account. The receipts deposited in this account are only to be applied
against the line of credit.
3. INVENTORIES:
Inventories consist of the following:
1995
------------
Raw materials and supplies $ 3,284,430
Work-in-progress and finished goods 18,342,523
------------
$ 21,626,953
============
4. PROPERTY, PLANT & EQUIPMENT:
Fully depreciated machinery and equipment still in use in the Companies'
operations totaled approximately $15,463,000 at December 31, 1995.
Depreciation expense was $5,068,409 for the year ended December 31, 1995.
5. BANK BORROWINGS:
Hygrade has lines of credit totaling $20,000,000. Amounts drawn against
the line bear interest at prime (8.75% at October 31, 1995). Borrowings
under the lines are collateralized by Hygrade's assets. The line of
credit outstanding borrowing was $4,000,000 at October 31, 1995.
Iowa has a revolving line of credit not to exceed $7,000,000 with a bank.
Amounts drawn against the line bear interest at 2.4% above prime (8.75% at
December 31, 1995). The line of credit matures on October 31, 1996 or 90
days after the bank's request. Restricted cash is credited against the
line immediately upon receipt by Iowa. The line of credit is
collateralized by all of Iowa's inventory and accounts receivable and by
limited personal guarantees of Iowa's stockholders. Iowa is required to
not permit the line of credit balance to exceed the lesser of $7,000,000
or certain amounts of accounts receivable and inventory. The line of
credit outstanding borrowing was $6,173,853 at December 31, 1995.
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PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. BANK BORROWINGS (CONTINUED):
Quaker has a maximum line of credit with a bank totaling $1,000,000.
Amounts drawn against the line bear interest at the bank's prime rate (8.5%
as of December 31, 1995). At December 31, 1995, $600,000 was outstanding.
The note is collateralized by accounts receivable and requires that Quaker
maintains various financial ratios.
At December 31, 1995 Monark had a revolving note of $3,500,000 with
interest at one and one-half percent over the bank's prime rate, (9% at
December 31, 1995). The agreement's expiration date is October 1996.
Monark is required to not permit the note's balance to exceed the lesser of
$3,500,000 or certain amounts of accounts receivable and inventory. The
note is collateralized by all of Monark's assets and is guaranteed up to
$1,000,000 by three shareholders individually. The agreement contains
various covenants including dividend restrictions. Monark's note payable
was $2,433,671 at December 31, 1995.
As of December 31, 1995, Specialties has a short-term credit line totaling
$1,500,000 with a bank, of which $800,000 was unused at December 31, 1995.
Interest is payable monthly at the bank's prime rate, (8.75% at December
31, 1995). The line is collateralized by equipment and has been guaranteed
by Hygrade.
At year end 1995, covenants of certain borrowings were in violation for
which management obtained waivers during 1996.
6. LONG-TERM DEBT:
The Companies' long-term debt consists of:
1995
-----------
Note payable, bank, requiring monthly principal
payments of $16,667 plus interest at prime plus
one-half percent. (9% at December 31, 1995) The
note is collateralized by all assets of Monark
and is guaranteed by their stockholders and
matures in October 1997. The agreement contains
various covenants pertaining to maintenance of
working capital and dividend restrictions. $ 1,366,654
Note payable, bank requiring monthly repayments
including interest at 7.32%. The note is
collateralized by certain assets of Hygrade and
matures in 1999. Hygrade is required to maintain
various financial ratios. Hygrade was not in
compliance with certain loan covenants at October
31, 1995. The lender has agreed to waive compliance
with the covenants.
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PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED):
However, as part of the waiver, the Companies
will repay the lender as part of the Michael
Foods acquisition (see Note 1) by January 31,
1997. The Companies have reflected all debt
from this lender as due in 1997. 1,437,500
Industrial Development Revenue Bonds requiring
annual principal payments of $600,000. Interest
is due semi-annually and the bonds carry interest
rates ranging from 7.40% to 8.50%. The bonds are
collateralized by a first mortgage lien on Iowa's
certain real property, a first security interest
on Iowa's certain fixtures and equipment and
further collateralized by guarantees and
restricted funds. The bonds mature in September
2001. 3,370,000
Note payable requiring monthly installments of
$51,459 plus interest at one-half percent above
prime (8.5% at December 31, 1995). The note is
collateralized by substantially all of Foods'
assets and matures in March 2002. The note is
guaranteed by Hygrade and requires that Hygrade
maintain a minimum tangible net worth. Foods was
not in compliance with certain loan covenants at
December 31, 1995. The lender has agreed to waive
compliance with the covenants and amend the
agreement to permit Foods to be in compliance with
such covenants through December 31, 1996. However,
as part of the waiver and amendment, the Companies
will repay the lender at the closing of the Michael
Foods acquisition. (See Note 1) As a result, the
Companies have reclassified debt from this lender
as current. 3,803,451
Other 2,057,563
-----------
12,035,168
Less: Current maturities 5,767,599
-----------
$ 6,267,569
===========
17
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED):
Aggregate minimum annual principal payments of long-term debt maturing in
years subsequent to December 31, 1995 are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------------
1996 $ 5,767,599
1997 3,645,544
1998 819,233
1999 793,261
2000 639,531
Thereafter 370,000
------------
$ 12,035,168
============
In addition to the aforementioned Hygrade and Foods covenants, at year end
1995, covenants of certain other loans were in violation for which
management obtained waivers during 1996.
7. ADMINISTRATIVE SERVICE CONTRACT:
Hygrade has an administrative service contract to provide its employees
with health care insurance, which includes a self-funded portion.
Under the insurance policy with the Plan's underwriter, Hygrade's
self-funded liability is limited for each plan year to a maximum of $75,000
per employee, with an aggregate liability limit of approximately
$1,371,000. These liability limits are adjusted annually. For this
purpose, the plan year runs from January 1 through December 31 of each
year. Hygrade has recorded an actuarially determined liability for
existing and incurred but not yet reported claims of $234,400.
18
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
8. EQUITY:
The preferred stock of Hygrade as of October 31, 1995 was:
SHARES
ISSUED
PAR SHARES AND
VALUE AUTHORIZED OUTSTANDING AMOUNT DESCRIPTION
----- ---------- ----------- -------- -----------
$1 20,000 20,000 $ 20,000 Voting
The holders of Hygrade's preferred stock receive noncumulative dividends of
$10 per share annually. Common stockholders then may receive dividends up
to $20 per share. Any dividends subsequently declared are divided equally
between preferred stockholders and common stockholders. In the event of
liquidation, preferred stockholders receive $100 per share before any
distributions are made to common stockholders. Hygrade may redeem its
preferred stock at a rate of $100 per share. Hygrade preferred
stockholders and common stockholders each have voting rights at a rate of
one vote per share. In October 1996, the preferred stock was redeemed and
cancelled in exchange for 115 shares of common stock.
The common stock of the Companies as of December 31, 1995 was:
SHARES
PAR SHARES ISSUED AND
COMPANY VALUE AUTHORIZED OUTSTANDING AMOUNT DESCRIPTION
----------- ----- ---------- ----------- ----------- -------------------
Hygrade - 1,000 1,000 $ 1
Foods - 2,500 300 5,000
Quaker - 200 200 50,000
Iowa $ 100 2,000 125 12,500 Class A
Iowa - 2,000 554 2,353,136 Class B, non-voting
Monark 1 30,000 225 225
Specialties 2,500 1,675 2,010
---------- ----------- -----------
40,200 4,079 $ 2,422,872
========== =========== ===========
Approximately 1,234 shares of issued and outstanding common stock is held
by minority shareholders and not reflected in the Companies' common stock.
Quaker common stockholders received dividends of $3,700 per share for the
year ended December 31, 1995.
Monark common stockholders received dividends of approximately $1,186 per
share for the year ended December 31, 1995.
19
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
9. ROYALTY AGREEMENTS:
Hygrade has a royalty agreement with a partnership in which it is a 49%
owner. Under the agreement Hygrade pays monthly royalties at the greater
of $30,000 or 2% of the sales of products processed utilizing the
technology which in turn are fully paid to the other partner. Royalty
expense for the year ended October 31, 1995 was $1,352,059.
10. INCOME TAXES:
The provision for income taxes consists of the following:
YEAR ENDED
DECEMBER 31,
------------
1995
------------
Current:
Federal $ 2,254,748
State 515,039
-----------
2,769,787
-----------
Deferred:
Federal (330,316)
State (90,403)
-----------
(420,719)
-----------
$ 2,349,068
===========
Deferred income taxes arise from temporary differences between financial
and tax reporting. Deferred tax assets are included with prepaid expenses
and other current assets. The tax effects of the cumulative temporary
differences resulting in the deferred tax assets are as follows:
YEAR ENDED
DECEMBER 31,
------------
1995
------------
Depreciation $ 91,946
Allowance for bad debts 185,389
Inventory 181,997
Accruals for rebates 1,387,237
Accruals for health insurance claims 95,648
Other 1,399
-----------
$ 1,943,616
===========
20
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED):
The following is a reconciliation of the Federal statutory income tax rate
to the combined effective tax rate:
YEAR ENDED
DECEMBER 31,
------------
1995
------------
Federal statutory rate 34.0%
State tax effect 4.2%
Effect of certain entities being S Corporations
or partnerships (5.9)%
Other (0.3)%
--------
32.0%
========
Foods, Quaker, Monark, Iowa and Specialties have elected tax status as "S"
Corporations, whereby the stockholders account for their share of the
respective entities' income, losses, deductions, and credits on their
Federal income tax returns. Foods is subject to state income taxes.
Quaker pays dividends to the shareholders to satisfy their income tax
liability. Quaker is subject to state franchise tax. Casa, Equipment and
Transport are partnerships whereby the partners account for their share of
the respective entities' income, losses deductions and credits on their
income tax returns.
11. INTERCOMPANY BALANCES AND TRANSACTIONS:
There are significant intercompany balances and transactions between
entities included in the Companies' combined financial statements. These
balances and transactions have been eliminated in combination. The
following table summarizes intercompany balances which have been eliminated
from the combined balance sheet.
DECEMBER 31,
1995
------------
Accounts receivable $ 4,289,000
Due from related parties 4,661,000
Long term debt 3,614,000
Accounts payable 1,810,000
Due to related parties 3,525,000
21
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
11. INTERCOMPANY TRANSACTIONS (CONTINUED):
Based on Hygrade having a different year end than the other entities,
certain balances between Hygrade and the other entities do not eliminate.
This deferred intercompany balance was approximately $2,506,000 as of
December 31, 1995. This amount has been included in the current portion of
due from related parties.
The following table summarizes intercompany transactions which have been
eliminated from the combined income statement:
YEAR ENDED
DECEMBER 31,
------------
1995
------------
Sales and cost of sales $ 61,139,000
Interest income and expense 322,000
12. RELATED PARTY TRANSACTIONS:
MORTGAGE RECEIVABLE
Due from related parties includes a mortgage receivable of $892,962 due
from Jersey Pride Urban Renewal (a partnership whose partners are two
stockholders of the Companies) as of December 31, 1995. Maturity of this
mortgage is as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------- ---------
1996 $ 182,227
1997 172,102
1998 122,379
1999 134,437
2000 147,687
Thereafter 134,130
---------
$ 892,962
=========
NOTES RECEIVABLE
Due from related parties at December 31, 1995 includes notes receivable of
$1,250,089, due from two stockholders of the Companies requiring annual
repayments of $100,000 each including interest at 7.00% and maturing in
2003.
Included in other assets at December 31, 1995 is $150,000 of noninterest
bearing notes receivable from individuals who are two stockholders of the
Companies.
22
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
12. RELATED PARTY TRANSACTIONS (CONTINUED):
NOTES RECEIVABLE (CONTINUED)
Due from related parties includes a note receivable to Iowa due from
shareholders and other individuals of $1,860,000 at December 31, 1995.
This arose in 1994 when certain stockholders and officers of Iowa and other
individuals entered into a note agreement with Iowa. The proceeds from
this note were used to meet the equity requirements of a Papetti Farms,
Inc. financing agreement. The terms of the note, as amended, require a
seven-year payment schedule with annual repayments beginning June 10, 1997,
with interest payable at the prime rate as determined by Firstar Bank of
Wisconsin plus 1.5%.
RENT
The Companies lease operating facilities on a month-to-month basis from
related partnerships. Rental expense for the operating facilities totaled
approximately $1,850,000 for the year ended December 31, 1995.
GUARANTEES
The Companies are parties to financial guarantees with off-balance-sheet
risk in the normal course of business to meet financing needs of some
related parties. The financial guarantees involve credit risk in excess of
the amount recognized in the balance sheet. The Companies' exposure to
credit loss in the event of nonperformance by the related parties for
financial guarantees written is represented by the amount of the
guarantees. The Companies do not require collateral to support the
financial guarantees.
The Companies have guaranteed loans for A&A Urban Renewal (a partnership
whose partners are two stockholders of the Companies) in the amount of
$1,375,000 at December 31, 1995. The Companies have guaranteed bonds
issued by the Schuykill County Industrial Development Authority,
Pennsylvania, issued on behalf of ASA Company, a related entity from whom
the Companies lease facilities, land and certain equipment. The bonds had
an original principal balance of $1,940,000 with $965,000 outstanding at
December 31, 1995. No reserve for losses on the guarantees is provided for
at December 31, 1995.
Certain of the combined entities have guaranteed the indebtedness of other
combined entities. In addition, certain stockholders have guaranteed loans
of several of the Companies at December 31, 1995.
23
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
12. RELATED PARTY TRANSACTIONS (CONTINUED):
SUNBEST-PAPETTI FARMS
Certain stockholders of the Companies hold a majority interest in Papetti
Farms, Inc., which owns 50% of Sunbest-Papetti Farms ("Sunbest"). Sunbest
is engaged in the egg laying business and commenced operations in 1994.
The amount due from Sunbest at December 31, 1995 was approximately
$717,000. The amount due to Sunbest at December 31, 1995 was approximately
$444,000. Purchases for the year ended December 31, 1995 from Sunbest were
approximately $8,618,000.
13. COMMITMENTS AND CONTINGENCIES:
LITIGATION
Hygrade was a defendant in a suit alleging patent infringement which has
been settled in connection with the purchase agreement with Michael Foods,
Inc. (Note 1). The settlement amount, $6 million, is contingently payable
upon the consummation of the purchase. The provision has been recorded as
of the date that the purchase agreement was signed, June 28, 1996, as this
was the point when the dollar amount became determinable and probable.
LEASE COMMITMENTS
The Companies lease certain of its facilities and equipment under operating
leases. At December 31, 1995, the minimum future rental commitments under
noncancelable leases payable over the remaining lives of the leases are:
1996 $ 314,577
1997 164,454
1998 114,248
1999 101,322
2000 24,330
---------
$ 718,931
=========
The Companies also lease certain of their operating facilities and land on
a month-to-month basis from related parties.
Rental expense under operating leases was approximately $2,531,000 for the
year ended December 31, 1995.
24
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES (CONTINUED):
PURCHASE COMMITMENTS
In order to insure a steady supply of eggs, several of the combined
companies have entered into three- to five-year contracts to purchase a
specified volume of eggs at market prices on the day the entities receive
the eggs from the suppliers. Purchases in excess of production
requirements can be readily sold in the open market.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS:
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires disclosure of information about the fair value of certain
financial instruments for which it is practicable to estimate that value.
For purposes of the following disclosure, the fair value of a financial
instrument is the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced sale or
liquidation.
The amounts disclosed represent management's best estimates of fair value.
The methods and assumptions used to estimate fair value are as follows:
a. Restricted cash - The carrying amounts approximate fair value because
of the short maturity of those instruments and the variable market rate
of interest accruing on the various accounts.
b. Due from related parties - The carrying amounts approximate fair value
because of the short maturity of the instruments and the interest rate
accruing on the various accounts approximates the rates currently
offered to the Companies for debt of the same remaining maturities.
c. Long-term debt - The fair value of the Companies' long-term debt is
estimated based on the quoted market prices for similar issues or by
discounting expected cash flows at the rates currently offered to the
Companies for debt of the same remaining maturities as advised by the
Companies' bankers.
25
PAPETTI COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED):
The assets and liability amounts recorded in the balance sheet (carrying
amount) and the estimated fair values of financial instruments at December
31, consisted of the following:
1995
----------------------------
CARRYING FAIR
AMOUNT VALUE
----------- ---------------
Cash and cash equivalents $ 3,271,163 3,271,163
Restricted cash 437,811 437,811
Due from related parties 7,450,621 7,450,621
Long-term debt 12,035,168 11,802,005
26
PAPETTI COMPANIES
CONDENSED COMBINED BALANCE SHEET
(Unaudited)
- -------------------------------------------------------------------------------
September 30,
1996
-------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,589,000
Accounts receivable, less allowances 35,291,000
Inventories 15,398,000
Prepaid and other 4,598,000
Due from related parties 4,854,000
------------
Total current assets 61,730,000
PROPERTY, PLANT AND EQUIPMENT - AT COST
Land 107,000
Buildings and improvements 6,254,000
Machinery and equipment 46,433,000
Leasehold improvements 5,500,000
Transportation equipment 10,367,000
------------
68,661,000
Less accumulated depreciation 38,124,000
------------
30,537,000
OTHER ASSETS
Goodwill, net 1,778,000
Due from related parties 69,000
Other 2,332,000
------------
4,179,000
------------
$ 96,446,000
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 12,271,000
Current maturities of long-term debt 5,522,000
Accounts payable 27,980,000
Accrued expenses and other liabilities 13,779,000
------------
Total current liabilities 59,552,000
LONG-TERM DEBT, less current maturities 7,501,000
MINORITY INTEREST 2,460,000
CONTINGENCIES --
STOCKHOLDERS' EQUITY
Partner's equity 550,000
Preferred stock 20,000
Common stock 2,423,000
Additional paid-in capital 723,000
Retained earnings 23,217,000
------------
26,933,000
------------
$ 96,446,000
============
- -------------------------------------------------------------------------------
See accompanying notes to condensed combined financial statements.
27
PAPETTI COMPANIES
CONDENSED COMBINED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, (Unaudited)
- -------------------------------------------------------------------------------
1996 1995
------------ ------------
Net sales $261,396,000 $198,467,000
Cost of sales 243,298,000 177,801,000
------------ ------------
Gross profit 18,098,000 20,666,000
Selling, general and administrative expenses 14,542,000 13,258,000
Litigation settlement 6,000,000 --
------------ ------------
Operating profit (loss) (2,444,000) 7,408,000
Interest expense, net 1,144,000 1,213,000
------------ ------------
Earnings (loss) before income taxes (3,588,000) 6,195,000
Income tax expense 214,000 2,080,000
------------ ------------
Earnings (loss) before minority interest (3,802,000) 4,115,000
Minority interest 262,000 40,000
------------ ------------
NET EARNINGS (LOSS) $ (4,064,000) $ 4,075,000
============ ============
- -------------------------------------------------------------------------------
See accompanying notes to condensed combined financial statements.
28
PAPETTI COMPANIES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, (Unaudited)
- -----------------------------------------------------------------------------------------------------------
1996 1995
------------ -------------
Net cash provided by operating activities $ 6,460,000 $ 4,154,000
Cash flows from investing activities:
Capital expenditures (8,543,000) (4,757,000)
Proceeds from sale of property, plant and equipment 2,421,000 427,000
Other 247,000 (422,000)
------------ ------------
Net cash used in investing activities (5,875,000) (4,752,000)
Cash flows from financing activities:
Net change in restricted cash 191,000 (798,000)
Payments on notes payable and long-term debt (11,250,000) (6,208,000)
Proceeds from notes payable and long-term debt 10,602,000 4,838,000
Cash dividends paid to shareholders and minority interest (1,394,000) (1,083,000)
Distributions to partners and minority interest (416,000) (80,000)
Contributions by partners -- 50,000
------------ ------------
Net cash used in financing activities (2,267,000) (3,281,000)
------------ ------------
Net decrease in cash and cash equivalents (1,682,000) (3,879,000)
Cash and cash equivalents at beginning of period 3,271,000 6,233,000
------------ ------------
Cash and cash equivalents at end of period $ 1,589,000 $ 2,354,000
============ ============
- -----------------------------------------------------------------------------------------------------------
See accompanying notes to condensed combined financial statements.
29
PAPETTI COMPANIES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1996 and 1995
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed combined financial statements have been
prepared in accordance with Regulation S-X pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although management believes
that the disclosures are adequate to make the information presented not
misleading.
All the Companies have a December 31 fiscal year end, except Papetti's Hygrade
Egg Products, Inc. ("Hygrade"), which is October 31. Thus, amounts included
are as of September 30 and for the nine months then ended for all entities
except Hygrade, which is as of July 31, and for the nine months then ended.
During the two months ended September 30, 1996, Hygrade earned net income of
approximately $380,000.
In the opinion of management, the unaudited condensed combined financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of September
30, 1996, the results of operations and cash flows for the nine month periods
ended September 30, 1996 and 1995. These financial statements should be read
in conjunction with the Companies' audited financial statements for the year
ended December 31, 1995 included in this filing. The results of operations for
the nine month period ended September 30, 1996 are not necessarily indicative
of the results for the full year.
Certain reclassifications of prior year amounts have been made to conform to
the current year presentation.
The Companies' preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reported periods. Actual results could differ from those estimates.
NOTE B - INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined on
the first-in, first-out method. Inventories consist of the following:
September 30, December 31,
1996 1995
------------- ------------
Work in process and finished goods $ 11,041,000 $ 18,343,000
Raw materials and supplies 4,357,000 3,284,000
------------ ------------
$ 15,398,000 $ 21,627,000
============ ============
30
PAPETTI COMPANIES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1996 and 1995
(Unaudited)
NOTE C - LONG-TERM DEBT
As of September 30, 1996, the Companies have several lines of credit and notes
payable to various financial institutions. Some of the loan agreements contain
convenants which in several instances require the Companies to maintain certain
financial ratios and restrict the payment of dividends. As of September 30,
1996, covenants of certain borrowings were in violation for which management
obtained waivers of all such requirements.
NOTE D - CONTINGENCIES
Hygrade was a defendant in a suit alleging patent infringement which has been
settled in connection with the purchase agreement with Michael Foods, Inc. (see
Note E). The settlement amount, $6 million, is payable contingent upon the
consummation of the purchase and has been recorded as of the date that the
purchase agreement was signed, June 28, 1996.
NOTE E - PURCHASE AGREEMENT
On June 28, 1996, the Companies reached an agreement to be acquired by Michael
Foods, Inc., a U.S. food processor and distributor. The purchase price will be
comprised of 3.2 million shares of Michael Foods, Inc. common stock valued at
approximately $38 million, assumption of approximately $23 million of debt and
approximately $43 million in cash, subject to certain adjustments. The
acquisition is expected to close in the first quarter of 1997.
31
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements have
been prepared to reflect the February 26, 1997 acquisition of Papetti's Hygrade
Egg Products, Inc. and its affiliated entities (collectively "Papetti") by
Michael Foods, Inc. ("Michael"), as if it had occurred on January 1, 1995 for
the pro forma statements of earnings and on September 30, 1996 for the pro
forma balance sheet. The acquisition of Papetti has been accounted for as a
purchase transaction and the purchase price has been allocated to the assets
and liabilities of Papetti based on their estimated fair value at September 30,
1996. The final allocation of the purchase price and the resulting impact may
differ from those reflected in the following unaudited pro forma condensed
combined financial statements.
The "Papetti Historical" financial information is as of September 30, 1996 and
the nine month period then ended and for the year ended December 31, 1995 for
all entities except for Papetti's Hygrade Egg Products, Inc., which is as of
July 31, 1996 and the nine month period then ended and for the fiscal year ended
October 31, 1995.
The following unaudited pro forma condensed combined financial statements have
also been prepared to reflect the February 28, 1997 effectiveness of the
Agreement and Plan of Reorganization by and between Michael, North Star
Universal, Inc. ("NSU") and NSU Merger Co. ("Merger Sub"), a wholly-owned
subsidiary of NSU. The transaction merged Merger Sub, with and into Michael
with Michael as the surviving corporation. At the time of the merger the
operating companies owned by NSU and certain other assets and liabilities,
including NSU's investment in CorVel Corporation, were distributed to the
former NSU shareholders in the form of the common stock of ENStar Inc.
("ENStar").The pro forma condensed financial statements reflect this
distribution. The merger agreement is accounted for in the following
statements as if it had occurred on January 1, 1995 for the pro forma
statements of earnings and on September 30, 1996 for the pro forma balance
sheets. The effect of this merger is the assumption by Michael of NSU debt and
the retirement of Michael shares of common stock, owned by NSU, in an amount
approximately equal to the debt assumed.
Assumptions underlying the pro forma adjustments are described in the
accompanying notes which should be read in conjunction with the unaudited pro
forma condensed combined financial statements. These financial statements
should also be read in conjunction with the historical financial statements of
Michael, NSU and Papetti and the notes thereto. The pro forma financial
statements do not purport to be indicative of the actual results of operations
which would have occurred had the operations of the companies been combined at
January 1, 1995 or the future results of operations which may be obtained by
the combined companies.
32
NORTH STAR UNIVERSAL, INC.
UNAUDITED PRO FORMA CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1996
(IN THOUSANDS)
PRO FORMA
NSU ADJUSTMENTS NSU
ASSETS HISTORICAL -ENSTAR PRO FORMA
----------- ----------- ---------
Current Assets
Cash and cash equivalents $ 8,068 $ 174(a) $ 7,894
Accounts receivable, net 9,704 9,704(a) -
Inventories 6,629 6,629(a) -
Prepaid expenses and other 773 367(a) 406
-------- ------- -------
Total current assets 25,174 16,874 8,300
Property and equipment, net 1,572 1,572(a) -
Goodwill, net 4,841 4,841(a) -
Investments in unconsolidated
subsidiaries 83,468 13,199(a) 70,269
Other assets 26 26(a) -
-------- ------- -------
$115,081 $36,512 $78,569
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 1,115 $ 1,115(a) $ -
Current portion of long-term debt 11,624 17(a) 11,607
Accounts payable 5,829 5,829(a) -
Accrued liabilities 5,522 5,522(a) -
-------- ------- -------
Total current liabilities 24,090 12,483 11,607
Long-term debt, less current portion 22,310 146(a) 22,164
Deferred income taxes 26,725 3,490(a) 23,235
Stockholders' equity 41,956 20,393(a) 21,563
-------- ------- -------
$115,081 $36,512 $78,569
======== ======= =======
33
NORTH STAR UNIVERSAL, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
PRO FORMA
NSU ADJUSTMENTS NSU
HISTORICAL -ENSTAR PRO FORMA
---------- ----------- ---------
Net sales $49,151 $49,151 (a) $ -
Cost of sales 36,147 36,147 (a) -
------- ------- --------
Gross profit 13,004 13,004 -
Selling, general, and administrative
expenses 12,744 12,594 (a) 150
------- ------- --------
Operating profit (loss) 260 410 (150)
Interest expense, net (2,573) (191)(a) (2,382)
Investment income 7,713 - 7,713
------- ------- --------
Earnings before income taxes and equity in
earnings of unconsolidated subsidiaries 5,400 219 5,181
Income tax expense 2,240 122 (a) 2,118
------- ------- --------
Earnings before equity in earnings of
unconsolidated subsidiaries 3,160 97 3,063
Equity in earnings of unconsolidated
subsidiaries 2,750 956 (a) 1,794
------- ------- --------
Earnings from continuing operations $ 5,910 $ 1,053 $ 4,857
======= ======= ========
34
NORTH STAR UNIVERSAL, INC.
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
PRO FORMA
NSU ADJUSTMENTS NSU
HISTORICAL -ENSTAR PRO FORMA
---------- ----------- ---------
Net sales $54,891 $54,891 (a) $ -
Cost of sales 39,525 39,525 (a) -
------- ------- --------
Gross profit 15,366 15,366 -
Selling, general, and administrative expenses 14,882 14,333 (a) 549
------- ------- --------
Operating profit (loss) 484 1,033 (549)
Interest expense, net (4,120) (247)(a) (3,873)
------- ------- --------
Earnings before income taxes and equity in
earnings of unconsolidated subsidiaries (3,636) 786 (4,422)
Income tax expense (benefit) (1,200) 405 (a) (1,605)
------- ------- --------
Earnings before equity in earnings of
unconsolidated subsidiaries (2,436) 381 (2,817)
Equity in earnings of unconsolidated
subsidiaries 5,526 1,191 (a) 4,335
------- ------- --------
Earnings from continuing operations $ 3,090 $ 1,572 $ 1,518
======= ======= ========
35
MICHAEL FOODS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
SEPTEMBER 30, 1996
(IN THOUSANDS)
PRO FORMA PRO FORMA
MICHAEL PAPETTI ADJUSTMENTS MICHAEL NSU ADJUSTMENTS MICHAEL
ASSETS HISTORICAL HISTORICAL -PAPETTI PRO FORMA PRO FORMA -NSU PRO FORMA
----------- ---------- ----------- ----------- --------- ----------- ---------
Current Assets
Cash and cash equivalents $ 2,966 $ 1,589 $ - $ 4,555 $ 7,894 $ (7,894) $ 4,555
Accounts receivable, net 50,472 40,145 (3,700) (b) 86,917 - - 86,917
6,000 (d)
(6,000) (e)
Inventories 57,875 15,398 - 73,273 - - 73,273
Prepaid expenses and other 3,059 4,598 (600) (f) 7,057 406 (406) (i) 6,357
(700) (f)
-------- ------- -------- --------- ------- -------- --------
Total current assets 114,372 61,730 (4,300) 171,802 8,300 (9,000) 171,102
Property and equipment, net 186,583 30,537 2,000 (c) 219,120 - - 219,120
Goodwill, net 56,550 1,778 56,959 (c) 114,509 - - 114,509
(1,778) (c)
1,000 (f)
Investment in unconsolidated
subsidiaries - - - - 70,269 (70,269) (i) -
Other assets 12,564 2,401 (1,487) (c) 8,078 - - 8,078
(6,000) (d)
600 (g)
-------- ------- -------- --------- ------- -------- --------
$370,069 $96,446 $ 46,994 $513,509 $78,569 $(79,269) $512,809
======== ======= ======== ======== ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 38,700 $12,271 $(50,971) (g) $ - $ - $ - $ -
Current portion of long-
term debt 12,709 5,522 (10,531) (g) 7,700 11,607 (7,894) (h) 7,700
(3,713) (h)
Accounts payable 37,674 27,980 - 65,654 - - 65,654
Accrued liabilities 23,009 13,779 (6,000) (e) 30,788 - - 30,788
-------- ------- -------- -------- ------- -------- --------
Total current liabilities 112,092 59,552 (67,502) 104,142 11,607 (11,607) 104,142
Long-term debt, less current
portion 42,910 7,501 42,913 (c) 155,826 22,164 (914) (h) 178,672
62,102 (g) 1,596 (f)
400 (f)
Deferred income taxes 29,758 - 800 (c) 30,558 23,235 (23,235) (i) 30,558
Minority interest - 2,460 (2,460) (c) - - - -
Stockholders' equity 185,309 26,933 (3,700) (b) 222,983 21,563 4,627 (h) 199,437
(23,233) (c) (47,440) (i)
37,674 (c) (2,296) (f)
-------- ------- -------- -------- ------- -------- --------
$370,069 $96,446 $ 46,994 $513,509 $78,569 $(79,269) $512,809
======== ======= ======== ======== ======= ======== ========
36
MICHAEL FOODS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
PRO FORMA PRO FORMA
MICHAEL PAPETTI ADJUSTMENTS MICHAEL NSU ADJUSTMENTS MICHAEL
HISTORICAL HISTORICAL PAPETTI PRO FORMA PRO FORMA -NSU PRO FORMA
----------- ------------ -------------- --------- --------- ----------- -----------
Net sales $455,478 $261,396 $ - $716,874 $ - $ - $716,874
Cost of sales 403,267 243,298 214 (j) 645,292 - - 645,292
(1,487) (k)
-------- -------- -------- -------- ------- -------- --------
Gross profit 52,211 18,098 1,273 71,582 - - 71,582
Selling, general, and
administrative expenses 33,597 14,542 (766) (k) 48,178 150 (150) (r) 48,178
987 (l)
(60) (m)
(122) (n)
Litigation settlement - 6,000 (6,000) (e) - - - -
-------- -------- -------- -------- ------- -------- --------
Operating profit (loss) 18,614 (2,444) 7,234 23,404 (150) 150 23,404
Interest expense, net (5,474) (1,144) (204) (b) (8,899) (2,382) 1,174 (q) (10,107)
(2,077) (o)
Investment income - - - - 7,713 (7,713) (r) -
-------- -------- -------- -------- ------- -------- --------
Earnings (loss) before income
taxes, equity in earnings of
unconsolidated subsidiaries,
and minority interest 13,140 (3,588) 4,953 14,505 5,181 (6,389) 13,297
Income tax expense 5,260 214 332 (p) 5,806 2,118 (2,601) (p) 5,323
-------- -------- -------- -------- ------- -------- --------
Earnings (loss) before equity in
earnings of unconsolidated
subsidiaries and minority
interest 7,880 (3,802) 4,621 8,699 3,063 (3,788) 7,974
Equity in earnings of
unconsolidated subsidiaries - - - - 1,794 (1,794) (r) -
Minority interest - (262) 262(s) - - - -
-------- -------- --------- -------- ------- -------- --------
Earnings (loss) from
continuing operations $ 7,880 $ (4,064) $ 4,883 $ 8,699 $ 4,857 $ (5,582) $ 7,974
======== ======== ========= ======== ======= ======== ========
Net earnings per share -
continuing operations $ 0.41 $ 0.38
======== ========
Weighted average shares
outstanding 19,379 20,791 (t)
======== ========
37
MICHAEL FOODS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
PRO FORMA PRO FORMA
MICHAEL PAPETTI ADJUSTMENTS MICHAEL NSU ADJUSTMENTS MICHAEL
HISTORICAL HISTORICAL - PAPETTI PRO FORMA PRO FORMA -NSU PRO FORMA
----------- ----------- ----------- --------- --------- ------- -----------
Net sales $536,627 $278,786 $ - $815,413 $ - $ - $815,413
Cost of sales 454,652 256,051 286 (j) 709,204 - - 709,204
(1,785)(k)
-------- -------- ------- -------- ------- ------- --------
Gross profit 81,975 22,735 1,499 106,209 - - 106,209
Selling, general, and
administrative expenses 45,729 13,563 (854)(k) 58,581 549 (549) (r) 58,581
1,315 (l)
(62)(m)
(1,110)(n)
-------- -------- ------- -------- ------- ------- --------
Operating profit (loss) 36,246 9,172 2,210 47,628 (549) 549 47,628
Interest expense, net (7,635) (1,825) (328)(b) (12,751) (3,873) 2,262 (q) (14,362)
(2,963)(o)
-------- -------- ------- -------- ------- ------- --------
Earnings (loss) before income
taxes and equity in earnings of
unconsolidated subsidiaries and
minority interest 28,611 7,347 (1,081) 34,877 (4,422) 2,811 33,266
Income tax expense 11,020 2,349 582 (p) 13,951 (1,605) 961 (p) 13,307
-------- -------- ------- -------- ------- ------- --------
Earnings (loss) before equity in
earnings of unconsolidated
subsidiaries and minority
interest 17,591 4,998 (1,663) 20,926 (2,817) 1,850 19,959
Equity in earnings of
unconsolidated subsidiaries - - - - 4,335 (4,335) (r) -
Minority interest - (157) 157 (s) - - - -
-------- ------- ------- -------- ------- ------- --------
Earnings from
continuing operations $ 17,591 $ 4,841 $(1,506) $ 20,926 $ 1,518 $(2,485) $ 19,959
========= ======== ======= ======== ======= ======= =========
Net earnings per share -
continuing operations $ 0.91 $ 0.96
========= =========
Weighted average shares
outstanding 19,328 20,740(t)
========= ========
38
NORTH STAR UNIVERSAL, INC. AND
MICHAEL FOODS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(A) To reflect the tax free distribution of ENStar Inc. to NSU shareholders
in connection with the reorganization with Michael (see Item 2 of
Form 8-K).
(B) To eliminate receivables from related parties that were forgiven prior to
consummation of the Papetti acquisition pursuant to the acquisition
agreement, along with elimination of the related interest income.
(C) Cost of the acquisition and estimated purchase accounting adjustments are
as follows (in thousands):
Common stock issued (1) $37,674
Cash paid (2) 42,913
--------
Total acquisition costs 80,587
Book value of assets acquired (25,693)
Elimination of Papetti patents and intangibles 1,487
Elimination of Papetti goodwill 1,778
Additional value assigned to property and equipment (3) (2,000)
Deferred tax liability on additional value assigned to
certain property and equipment 800
--------
Excess cost over net assets acquired (goodwill) $56,959
========
(1) Michael issued 3,195,455 shares under the purchase agreement.
The shares issued were valued at $11.79 per share, which is the
preliminarily estimated fair value of the common stock issued.
(2) The cash portion of the purchase price was funded through the
placement of senior term debt by Michael.
(3) Adjustment to record Papetti property and equipment being
acquired, at the preliminary appraised value.
39
(D) Under a technology license agreement, Michael has been offsetting 50% of
required cash royalty payments with legal costs it had incurred to defend
the licenser's patents. A prepaid royalty has arisen from the deferral of
these legal fees. In connection with the Papetti acquisition, Papetti and
Michael agreed to settle pre-existing litigation in the amount of
$6,000,000. As a result of the settlement, Michael will record a
receivable from Papetti of $6,000,000 and a corresponding reduction of its
prepaid royalty account at the time of the acquisition. Under the terms
of the license agreement, the proceeds from this settlement are first
applied to the prepaid royalty costs. This entry has been reflected as a
pro forma balance sheet adjustment at September 30, 1996.
(E) To reflect the elimination of the Michael litigation receivable and the
Papetti accrued litigation liability, along with eliminating the one-time
litigation settlement from the nine months ended September 30, 1996
statement of earnings.
(F) To record costs of the transactions. Michael incurred transaction costs
totaling $2,296,000 related to its merger with NSU, which were charged to
stockholders' equity as a cost of the treasury shares reacquired (see (I)
below).
(G) To record the refinancing of Papetti's and Michael's debt, which was
funded through the placement of senior term debt by Michael bearing
interest at a fixed rate of 7.58%, and a long-term revolving loan with
interest at a variable rate, together with the deferred financing costs of
$600,000.
(H) To apply the NSU cash to NSU indebtedness, as well as reduce the NSU
indebtedness to the actual amount assumed by Michael on the date of the
merger. The additional $4,627,000 pay down of the NSU indebtedness was
generated primarily by dividends received from ENStar.
(I) To eliminate NSU's investment in Michael and the related deferred income
taxes, and to reflect the reacquisition of 1,782,961 shares of Michael
common stock in exchange for the assumption of $21,250,000 of NSU net
indebtedness at the date of the merger. Michael expects to refinance the
assumed NSU indebtedness within two months of the merger with the proceeds
from the placement of senior term debt, which bears interest at a fixed
rate of 7.58%.
(J) To record additional depreciation expense resulting from the estimated
additional value assigned to property and equipment.
(K) To reduce Papetti officer compensation expense to employment contract
amounts which will be effective upon completion of the purchase.
(L) To record amortization of the excess cost over net assets acquired over
40 years - net of amounts previously reported by Papetti.
(M) To eliminate amortization of Papetti patents and intangibles which have
preliminarily been assigned no value for purposes of the pro forma
financial statements.
40
(N) To eliminate legal fees incurred by Papetti as a result of patent
litigation between Michael and Papetti.
(O) To record additional interest expense on the debt incurred for the cash
portion of the purchase price for Papetti, and to adjust Papetti interest
expense for the refinancing of their obligations. All new debt bears
interest at a fixed rate of 7.58%.
(P) To adjust income tax expense to an estimated effective rate of 40%.
(Q) To adjust interest expense on the indebtedness assumed in the NSU merger
for the refinancing of the indebtedness through the placement of senior
term debt by Michael bearing interest at a fixed rate of 7.58%.
(R) To eliminate the NSU income statement activity which will not be a part
of Michael's ongoing operations, including the elimination of NSU's gain
on the sale of CorVel Corporation common stock and the elimination of
NSU's equity in the earnings of Michael.
(S) To eliminate the minority interest in Papetti, as Michael acquired 100% of
the Papetti companies' operations.
(T) Includes an additional 3,195,455 shares issued under the Papetti
acquisition and a reduction of 1,782,961 shares retired as a result of the
NSU merger.
41
(c) Exhibits
Exhibit Number Description
2.1 Agreement and Plan of Reorganization, dated as of
December 21, 1995, by and among North Star Universal, Inc.,
Michael Foods, Inc. and NSU Merger Co. (filed as an
exhibit to the Report on Form 8-K filed by the Company on
December 27, 1995 (schedules omitted -- the Registrant
agrees to furnish a copy of any schedule to the Commission
upon request)).
3.1 * Amended and Restated Articles of Incorporation of the
Company dated February 28, 1997.
3.2 Amended and Restated Bylaws of the Company (filed as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994 and incorporated herein by
reference).
4.1 * Form of Common Stock Certificate.
4.2 Form of Indenture, dated as of April 26, 1989, between the
Company and National City Bank of Minneapolis, as trustee
(filed as Exhibit 4.1 to Registration No. 33-26176 and
incorporated herein by reference).
4.3 Form of First Supplemental Indenture, dated as of
March 16 1992, amending the Indenture described in
Exhibit 4.2 above (filed as Exhibit 4.2 to Registration
No. 33-46418 and incorporated herein by reference).
4.4 Form of Second Supplemental Indenture, dated as of
March 16, 1995, amending the Indenture described in
Exhibit 4.2 above (filed as Exhibit 4.3 to the Company's
Annual Report on Form 10-K for
42
the year ended December 31, 1994 and incorporated herein by
reference).
4.5 Indenture, dated as of December 1, 1986, between the Company and
National City Bank of Minneapolis, as trustee, relating to
$25,000,000 principal amount of Subordinated Debentures Series
87/88 (filed as Exhibit 4.1 to Registration No. 33-10558 and
incorporated herein by reference).
4.6 Indenture, dated as of September, 1985, between the Company and
American National Bank and Trust Company, as trustee, relating to
$14,000,000 principal amount of Subordinated Debentures, Series
1985 (filed as Exhibit 4 to Registration No. 2-99100 and
incorporated herein by reference).
10.1 Michael Foods, Inc. 1987 Incentive Stock Option Plan and Incentive
Stock Option Agreement (filed as Exhibit 10.15 to Michael Foods,
Inc., a Delaware corporation's Registration Statement on Form S-1
Registration No. 33-12949 and incorporated herein by reference).
10.2 Michael Foods, Inc. 1987 Non-Qualified Stock Option Plan and
Non-Qualified Stock Option Agreement (filed as Exhibit 10.16 to
Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-1 Registration No. 33-12949 and incorporated
herein by reference).
10.3 Form of Michael Foods, Inc. Director Stock Option Agreement (filed
as Exhibit 10.25 to Michael Foods, Inc., a Delaware corporation's
Registration Statement on Form S-1 Registration No. 33-12949 and
incorporated herein by reference).
10.4 Retirement Compensation Agreement between Milton G. Waldbaum Company
and Daniel W. Gardner, dated September 24, 1987 (filed as Exhibit
10.40 to Michael Foods, Inc., a Delaware corporation's Annual Report
on Form 10-K for the year ended December 31, 1989 and incorporated
herein by reference).
10.5 Loan Agreement and Promissory Note between Metropolitan Life
Insurance Company and Michael Foods, Inc., dated December 1, 1989
(filed as Exhibit 10.43 to Michael Foods, Inc., a Delaware
corporation's Annual Report on Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference).
10.6 Amendment to Michael Foods, Inc. Incentive and Non-Qualified Stock
Option Plans, dated November 21, 1989 (filed as Exhibit 4.6 to
Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-8 effective November 21, 1989, Registration No.
33-31914 and incorporated herein by reference).
10.7 License Agreement between Michael Foods, Inc. and North Carolina
State University, dated November 28, 1989 (filed as Exhibit 10.56
to Michael Foods, Inc., a Delaware corporation's Annual Report on
Form 10-K for the year ended December 31, 1990 and incorporated
herein by reference).
10.8 * Amendment dated December 18, 1996 to License Agreement between
Michael Foods, Inc., a Delaware corporation, and North Carolina
State University, dated November 28, 1989.
10.9 Severance Plan for Eligible Employees of Michael Foods, Inc. and
its Subsidiaries (incorporated by reference from the Michael
Foods, Inc., a Delaware corporation's Form 8, Amendment No. 1 to
Report on Form 10-K for the year ended December 31, 1990).
10.10 First Amendment to December 1, 1989 Loan Agreement and Promissory
Note between Michael Foods, Inc. and Metropolitan Life Insurance
Company, dated October 14, 1992 (filed as Exhibit 10.67 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1992 and incorporated herein
by reference).
43
10.11 Amendment to the Michael Foods, Inc. Non-Qualified Stock Option
Plan (filed as Exhibit 4.7 to the Michael Foods, Inc., a Delaware
corporation's Registration Statement on Form S-8 effective June 9,
1993 Registration No. 33-64078 and incorporated by reference).
10.12 Stock Option Plan for Non-Employee Directors (filed as Exhibit 4.1
to the Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-8 effective June 9, 1993 Registration No.
33-64076 and incorporated herein by reference).
10.13 Michael Foods, Inc. 1994 Executive Incentive Plan (filed as
Exhibit 10.76 to Michael Foods, Inc., a Delaware corporation's
Annual Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.14 Michael Foods, Inc. 1994 Executive Performance Stock Award Plan
(filed as Exhibit 10.77 to Michael Foods, Inc., a Delaware
corporation's Annual Report on Form 10-K for the year ended
December 31,1993 and incorporated herein by reference).
10.15 Employment Agreement between Michael Foods, Inc. and Gregg A.
Ostrander, dated January 31, 1994 (filed as Exhibit 10.79 to
Michael Foods, Inc., a Delaware corporation's Annual Report
on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.16 Second Amendment to December 1, 1989 Loan Agreement and Promissory
Note between Michael Foods, Inc. and Metropolitan Life Insurance
Company, dated February 23, 1994 (filed as Exhibit 10.81 to Michael
Foods, Inc., a Delaware corporation's Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated herein by
reference).
10.17 Michael Foods, Inc. Employee Stock Purchase Plan (filed as Exhibit
10.88 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.18 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Gregg A. Ostrander, dated December 31, 1994 (filed as Exhibit
10.89 to the Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.19 Employment Agreement between Michael Foods, Inc. and Jeffrey M.
Shapiro, dated December 31, 1994 (filed as Exhibit 10.90 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.20 Employment Agreement between Michael Foods, Inc. and Norman A.
Rodriguez, dated December 31, 1994 (filed as Exhibit 10.92 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.21 Employment Agreement between Michael Foods, Inc. and James J.
Kohler dated December 31, 1994 (filed as Exhibit 10.93 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.22 Employment Agreement between Michael Foods, Inc. and Kevin O.
Kelly, dated December 31, 1994 (filed as Exhibit 10.94 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.23 Employment Agreement between Michael Foods, Inc. and John D. Reedy,
dated December 31, 1994 (filed as Exhibit 10.95 to Michael
Foods, Inc., a Delaware corporation's Annual Report on Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference).
44
10.24 Michael Foods, Inc. 1994 Executive Incentive Plan, as Amended
Effective January 1, 1995 (filed as Exhibit 10.97 to Michael Foods,
Inc., a Delaware corporation's Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference).
10.25 Michael Foods, Inc. 1994 Executive Incentive Plan, as Amended
Effective January 1, 1996 (filed as Exhibit 10.98 to Michael Foods,
Inc., a Delaware corporation's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by reference).
10.26 Employment Agreement between Michael Foods, Inc. and Bill L.
Goucher, dated December 31, 1995 (filed as Exhibit 10.99 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein
by reference).
10.27 Resolution adopted by the Michael Foods, Inc. Board of Directors on
July 27, 1995 extending the termination date of the Severance Plan
for Eligible Employees of Michael Foods, Inc. and its Subsidiaries
for one additional year (filed as Exhibit 10.98 to Michael Foods,
Inc., a Delaware corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995 and incorporated herein by
reference).
10.28 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Jeffrey M. Shapiro, dated December 31, 1995 (filed as Exhibit
10.101 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.29 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Norman A. Rodriguez, dated December 31, 1995 (filed as Exhibit
10.102 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.30 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and James J. Kohler, dated December 31, 1995 (filed as Exhibit
10.103 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.31 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Kevin O. Kelly, dated December 31, 1995 (filed as Exhibit
10.104 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.32 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and John D. Reedy, dated December 31, 1995 (filed as Exhibit 10.105
to Michael Foods, Inc., a Delaware corporation's Annual Report on
Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10.33 Amendment No. 2 to Employment Agreement between Michael Foods, Inc.
and Gregg A. Ostrander, dated December 31, 1995 (filed as Exhibit
10.106 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.34 Resolution adopted by the Board of Directors on June 26, 1996,
amending the Severance Plan for Eligible Employees of Michael
Foods, Inc. and Subsidiaries and extending its termination date for
one additional year (filed as Exhibit 10.107 to Michael Foods,
Inc., a Delaware corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, and incorporated herein by
reference).
10.35 Agreement and Plan of Reorganization, and Amendment No. 1, by and
among Michael Foods, Inc., M. G. Waldbaum Company and Papetti's
Hygrade Egg Products, Inc., and Quaker State Farms, Inc., Papetti's
of Iowa Food Products, Inc., Monark Egg
45
Corporation, Egg Specialties, Inc., Papetti Foods, Inc.,
Casa Trucking Limited Partnership, Papetti Transport Leasing
Limited Partnership, and Papetti Equipment Leasing Partnership
(filed as Exhibit 10.111 to Michael Foods, Inc., a Delaware
corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, and incorporated herein by
reference).
10.36 Amendment No. 2, dated February 26, 1997, to Agreement and Plan of
Reorganization by and among Michael Foods, Inc., a Delaware
corporation, M. G. Waldbaum Company and Papetti's Hygrade Egg
Products, Inc., and Quaker State Farms, Inc., Papetti's of Iowa Food
Products, Inc., Monark Egg Corporation, Egg Specialties, Inc.,
Papetti Foods, Inc., Casa Trucking Limited Partnership, Papetti
Transport Leasing Limited Partnership, and Papetti Equipment Leasing
Partnership (filed as Exhibit B to Arthur J. Papetti Schedule 13D
relating to Michael Foods, Inc. filed March 7, 1997 and incorporated
herein by reference).
10.37 * Form of Employment Agreement, dated February 26, 1997, by and
between Arthur J. Papetti and Michael Foods, Inc.
10.38 Shareholder Agreement, dated February 26, 1997, by and among Michael
Foods, Inc., a Delaware corporation and Arthur N. Papetti as
Representative of and attorney-in-fact for the Shareholders and
Sellers Listed on Schedule I (filed as Exhibit D to Arthur J.
Papetti Schedule 13D filed March 7, 1997 and incorporated herein by
reference).
10.39 * Form of Loan Agreement dated as of February 26, 1997 between Michael
Foods, Inc., a Delaware corporation and various Lenders with regard
to $125,000,000 of 7.58% Senior Notes due February 26, 2009,
including form of Note and Novation and Assumption Agreement.
10.40 * Form of Amendment Agreement dated as of February 26, 1997 between
Michael Foods, Inc., a Delaware corporation and Metropolitan Life
Insurance Company regarding up to $50,000,000 of 9.5% Senior Notes
due December 1, 1999, including form of Note and Novation and
Assumption Agreement.
10.41 * Form of Revolving Loan Agreement dated as of February 28, 1997 among
Michael Foods, Inc., a Delaware corporation, the Listed Banks and
Bank of America National Trust, including exhibits.
10.42 * Form of Employment Agreement between Michael Foods, Inc., a Delaware
corporation and Stephen Papetti dated February 26, 1997.
10.43 * Form of Employment Agreement between Michael Foods, Inc., a Delaware
corporation and Arthur N. Papetti dated February 26, 1997.
10.44 * Lease by and between ASA Company, as Landlord and Michael Foods,
Inc., a Delaware corporation as Tenant dated February 26, 1997.
10.45 * Lease by and between Rechsteiner/Papetti, et al., as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.46 * Lease by and between Jersey Pride Urban Renewal, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.47 * Lease by and between Papetti Holding Company, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.48 * Lease by and between Papetti Holding Company, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.49 * Lease by and between Papetti Holding Company, Jack Bernstein,
Sherwood Weiser and Estate of David Levinson, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.50 * Lease by and between A & A Urban Renewal, as Landlord and Michael
Foods, Inc., a Delaware corporation as Tenant dated February 26,
1997.
46
20.1 * Press releases of Michael Foods, Inc., a Delaware
corporation issued February 26, 1997, regarding the Papetti
Agreement and Plan of Reorganization and Debt Financing.
20.2 * Press release of Michael Foods, Inc., a Delaware
corporation issued February 28, 1997, regarding Bank Financing.
20.3 * Press release of the Registrant and Michael Foods, Inc., a Delaware
corporation issued February 28, 1997, regarding the North Star
Universal/Michael Foods, Inc. a Delaware corporation/NSU Merger
Co./ENStar Reorganization.
99.1 * Excerpt of financial statements and notes thereto from Michael
Foods, Inc., a Delaware corporation's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.
____________________________
* Filed Herewith
47
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.
Dated: March 13, 1997
MICHAEL FOODS, INC.
By: /s/ John D. Reedy
------------------
John D. Reedy, Vice President-Finance,
Chief Financial Officer and Treasurer
48
EXHIBIT INDEX
Exhibit Number Description Page
- ------------- ----------- ----
2.1 Agreement and Plan of Reorganization, dated as of
December 21, 1995, by and among North Star Universal,
Inc., Michael Foods, Inc. and NSU Merger Co. (filed as
an exhibit to the Report on Form 8-K filed by the
Company on December 27, 1995 (schedules omitted -- the
Registrant agrees to furnish a copy of any schedule to
the Commission upon request)).
3.1 * Amended and Restated Articles of Incorporation of the
Company dated February 28, 1997.
3.2 Amended and Restated Bylaws of the Company (filed as
Exhibit 3.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1994 and
incorporated herein by reference).
4.1 * Form of Common Stock Certificate.
4.2 Form of Indenture, dated as of April 26, 1989, between
the Company and National City Bank of Minneapolis, as
trustee (filed as Exhibit 4.1 to Registration
No. 33-26176 and incorporated herein by reference).
4.3 Form of First Supplemental Indenture, dated as of
March 16 1992, amending the Indenture described in
Exhibit 4.2 above (filed as Exhibit 4.2 to Registration
No. 33-46418 and incorporated herein by reference).
4.4 Form of Second Supplemental Indenture, dated as of
March 16, 1995, amending the Indenture described in
Exhibit 4.2 above (filed as Exhibit 4.3 to
the Company's Annual Report on Form 10-K for
49
the year ended December 31, 1994 and incorporated herein by
reference).
4.5 Indenture, dated as of December 1, 1986, between the Company and
National City Bank of Minneapolis, as trustee, relating to
$25,000,000 principal amount of Subordinated Debentures Series
87/88 (filed as Exhibit 4.1 to Registration No. 33-10558 and
incorporated herein by reference).
4.6 Indenture, dated as of September, 1985, between the Company and
American National Bank and Trust Company, as trustee, relating to
$14,000,000 principal amount of Subordinated Debentures, Series
1985 (filed as Exhibit 4 to Registration No. 2-99100 and
incorporated herein by reference).
10.1 Michael Foods, Inc. 1987 Incentive Stock Option Plan and Incentive
Stock Option Agreement (filed as Exhibit 10.15 to Michael Foods,
Inc., a Delaware corporation's Registration Statement on Form S-1
Registration No. 33-12949 and incorporated herein by reference).
10.2 Michael Foods, Inc. 1987 Non-Qualified Stock Option Plan and
Non-Qualified Stock Option Agreement (filed as Exhibit 10.16 to
Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-1 Registration No. 33-12949 and incorporated
herein by reference).
10.3 Form of Michael Foods, Inc. Director Stock Option Agreement (filed
as Exhibit 10.25 to Michael Foods, Inc., a Delaware corporation's
Registration Statement on Form S-1 Registration No. 33-12949 and
incorporated herein by reference).
10.4 Retirement Compensation Agreement between Milton G. Waldbaum Company
and Daniel W. Gardner, dated September 24, 1987 (filed as Exhibit
10.40 to Michael Foods, Inc., a Delaware corporation's Annual Report
on Form 10-K for the year ended December 31, 1989 and incorporated
herein by reference).
10.5 Loan Agreement and Promissory Note between Metropolitan Life
Insurance Company and Michael Foods, Inc., dated December 1, 1989
(filed as Exhibit 10.43 to Michael Foods, Inc., a Delaware
corporation's Annual Report on Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference).
10.6 Amendment to Michael Foods, Inc. Incentive and Non-Qualified Stock
Option Plans, dated November 21, 1989 (filed as Exhibit 4.6 to
Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-8 effective November 21, 1989, Registration No.
33-31914 and incorporated herein by reference).
10.7 License Agreement between Michael Foods, Inc. and North Carolina
State University, dated November 28, 1989 (filed as Exhibit 10.56
to Michael Foods, Inc., a Delaware corporation's Annual Report on
Form 10-K for the year ended December 31, 1990 and incorporated
herein by reference).
10.8 * Amendment dated December 18, 1996 to License Agreement between
Michael Foods, Inc., a Delaware corporation, and North Carolina
State University, dated November 28, 1989.
10.9 Severance Plan for Eligible Employees of Michael Foods, Inc. and
its Subsidiaries (incorporated by reference from the Michael
Foods, Inc., a Delaware corporation's Form 8, Amendment No. 1 to
Report on Form 10-K for the year ended December 31, 1990).
10.10 First Amendment to December 1, 1989 Loan Agreement and Promissory
Note between Michael Foods, Inc. and Metropolitan Life Insurance
Company, dated October 14, 1992 (filed as Exhibit 10.67 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1992 and incorporated herein
by reference).
50
10.11 Amendment to the Michael Foods, Inc. Non-Qualified Stock Option
Plan (filed as Exhibit 4.7 to the Michael Foods, Inc., a Delaware
corporation's Registration Statement on Form S-8 effective June 9,
1993 Registration No. 33-64078 and incorporated by reference).
10.12 Stock Option Plan for Non-Employee Directors (filed as Exhibit 4.1
to the Michael Foods, Inc., a Delaware corporation's Registration
Statement on Form S-8 effective June 9, 1993 Registration No.
33-64076 and incorporated herein by reference).
10.13 Michael Foods, Inc. 1994 Executive Incentive Plan (filed as
Exhibit 10.76 to Michael Foods, Inc., a Delaware corporation's
Annual Report on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.14 Michael Foods, Inc. 1994 Executive Performance Stock Award Plan
(filed as Exhibit 10.77 to Michael Foods, Inc., a Delaware
corporation's Annual Report on Form 10-K for the year ended
December 31,1993 and incorporated herein by reference).
10.15 Employment Agreement between Michael Foods, Inc. and Gregg A.
Ostrander, dated January 31, 1994 (filed as Exhibit 10.79 to
Michael Foods, Inc., a Delaware corporation's Annual Report
on Form 10-K for the year ended December 31, 1993 and
incorporated herein by reference).
10.16 Second Amendment to December 1, 1989 Loan Agreement and Promissory
Note between Michael Foods, Inc. and Metropolitan Life Insurance
Company, dated February 23, 1994 (filed as Exhibit 10.81 to Michael
Foods, Inc., a Delaware corporation's Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated herein by
reference).
10.17 Michael Foods, Inc. Employee Stock Purchase Plan (filed as Exhibit
10.88 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.18 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Gregg A. Ostrander, dated December 31, 1994 (filed as Exhibit
10.89 to the Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference).
10.19 Employment Agreement between Michael Foods, Inc. and Jeffrey M.
Shapiro, dated December 31, 1994 (filed as Exhibit 10.90 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.20 Employment Agreement between Michael Foods, Inc. and Norman A.
Rodriguez, dated December 31, 1994 (filed as Exhibit 10.92 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.21 Employment Agreement between Michael Foods, Inc. and James J.
Kohler dated December 31, 1994 (filed as Exhibit 10.93 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.22 Employment Agreement between Michael Foods, Inc. and Kevin O.
Kelly, dated December 31, 1994 (filed as Exhibit 10.94 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.23 Employment Agreement between Michael Foods, Inc. and John D. Reedy,
dated December 31, 1994 (filed as Exhibit 10.95 to Michael
Foods, Inc., a Delaware corporation's Annual Report on Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference).
51
10.24 Michael Foods, Inc. 1994 Executive Incentive Plan, as Amended
Effective January 1, 1995 (filed as Exhibit 10.97 to Michael Foods,
Inc., a Delaware corporation's Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference).
10.25 Michael Foods, Inc. 1994 Executive Incentive Plan, as Amended
Effective January 1, 1996 (filed as Exhibit 10.98 to Michael Foods,
Inc., a Delaware corporation's Annual Report on Form 10-K for the
year ended December 31, 1995 and incorporated herein by reference).
10.26 Employment Agreement between Michael Foods, Inc. and Bill L.
Goucher, dated December 31, 1995 (filed as Exhibit 10.99 to
Michael Foods, Inc., a Delaware corporation's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein
by reference).
10.27 Resolution adopted by the Michael Foods, Inc. Board of Directors on
July 27, 1995 extending the termination date of the Severance Plan
for Eligible Employees of Michael Foods, Inc. and its Subsidiaries
for one additional year (filed as Exhibit 10.98 to Michael Foods,
Inc., a Delaware corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995 and incorporated herein by
reference).
10.28 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Jeffrey M. Shapiro, dated December 31, 1995 (filed as Exhibit
10.101 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.29 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Norman A. Rodriguez, dated December 31, 1995 (filed as Exhibit
10.102 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.30 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and James J. Kohler, dated December 31, 1995 (filed as Exhibit
10.103 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.31 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and Kevin O. Kelly, dated December 31, 1995 (filed as Exhibit
10.104 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.32 Amendment No. 1 to Employment Agreement between Michael Foods, Inc.
and John D. Reedy, dated December 31, 1995 (filed as Exhibit 10.105
to Michael Foods, Inc., a Delaware corporation's Annual Report on
Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
10.33 Amendment No. 2 to Employment Agreement between Michael Foods, Inc.
and Gregg A. Ostrander, dated December 31, 1995 (filed as Exhibit
10.106 to Michael Foods, Inc., a Delaware corporation's Annual
Report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.34 Resolution adopted by the Board of Directors on June 26, 1996,
amending the Severance Plan for Eligible Employees of Michael
Foods, Inc. and Subsidiaries and extending its termination date for
one additional year (filed as Exhibit 10.107 to Michael Foods,
Inc., a Delaware corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, and incorporated herein by
reference).
10.35 Agreement and Plan of Reorganization, and Amendment No. 1, by and
among Michael Foods, Inc., M. G. Waldbaum Company and Papetti's
Hygrade Egg Products, Inc., and Quaker State Farms, Inc., Papetti's
of Iowa Food Products, Inc., Monark Egg
52
Corporation, Egg Specialties, Inc., Papetti Foods, Inc.,
Casa Trucking Limited Partnership, Papetti Transport Leasing
Limited Partnership, and Papetti Equipment Leasing Partnership
(filed as Exhibit 10.111 to Michael Foods, Inc., a Delaware
corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996, and incorporated herein by
reference).
10.36 Amendment No. 2, dated February 26, 1997, to Agreement and Plan of
Reorganization by and among Michael Foods, Inc., a Delaware
corporation, M. G. Waldbaum Company and Papetti's Hygrade Egg
Products, Inc., and Quaker State Farms, Inc., Papetti's of Iowa Food
Products, Inc., Monark Egg Corporation, Egg Specialties, Inc.,
Papetti Foods, Inc., Casa Trucking Limited Partnership, Papetti
Transport Leasing Limited Partnership, and Papetti Equipment Leasing
Partnership (filed as Exhibit B to Arthur J. Papetti Schedule 13D
relating to Michael Foods, Inc. filed March 7, 1997 and incorporated
herein by reference).
10.37 * Form of Employment Agreement, dated February 26, 1997, by and
between Arthur J. Papetti and Michael Foods, Inc.
10.38 Shareholder Agreement, dated February 26, 1997, by and among Michael
Foods, Inc., a Delaware corporation and Arthur N. Papetti as
Representative of and attorney-in-fact for the Shareholders and
Sellers Listed on Schedule I (filed as Exhibit D to Arthur J.
Papetti Schedule 13D filed March 7, 1997 and incorporated herein by
reference).
10.39 * Form of Loan Agreement dated as of February 26, 1997 between Michael
Foods, Inc., a Delaware corporation and various Lenders with regard
to $125,000,000 of 7.58% Senior Notes due February 26, 2009,
including form of Note and Novation and Assumption Agreement.
10.40 * Form of Amendment Agreement dated as of February 26, 1997 between
Michael Foods, Inc., a Delaware corporation and Metropolitan Life
Insurance Company regarding up to $50,000,000 of 9.5% Senior Notes
due December 1, 1999, including form of Note and Novation and
Assumption Agreement.
10.41 * Form of Revolving Loan Agreement dated as of February 28, 1997 among
Michael Foods, Inc., a Delaware corporation, the Listed Banks and
Bank of America National Trust, including exhibits.
10.42 * Form of Employment Agreement between Michael Foods, Inc., a Delaware
corporation and Stephen Papetti dated February 26, 1997.
10.43 * Form of Employment Agreement between Michael Foods, Inc., a Delaware
corporation and Arthur N. Papetti dated February 26, 1997.
10.44 * Lease by and between ASA Company, as Landlord and Michael Foods,
Inc., a Delaware corporation as Tenant dated February 26, 1997.
10.45 * Lease by and between Rechsteiner/Papetti, et al., as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.46 * Lease by and between Jersey Pride Urban Renewal, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.47 * Lease by and between Papetti Holding Company, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.48 * Lease by and between Papetti Holding Company, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.49 * Lease by and between Papetti Holding Company, Jack Bernstein,
Sherwood Weiser and Estate of David Levinson, as Landlord and
Michael Foods, Inc., a Delaware corporation as Tenant dated February
26, 1997.
10.50 * Lease by and between A & A Urban Renewal, as Landlord and Michael
Foods, Inc., a Delaware corporation as Tenant dated February 26,
1997.