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RAB HOLDINGS INC - 10-K - 20000706 - PART_I
PART I
Item 1. Business
(a) General Development of Business
On May 6, 1996, R.A.B. Holdings, Inc., a Delaware corporation
("Holdings"), was formed to build a fully integrated specialty food business by
acquiring food manufacturers with strong brand names and integrating their
products with a strong distribution network. On March 31, 1997, Holdings
acquired Millbrook Distribution Services Inc., a Delaware corporation
("Millbrook"), which is one of the nation's largest value-added full service
independent distributors of specialty foods, health and beauty care products and
general merchandise. On January 26, 1998, Holdings formed a wholly-owned
subsidiary, R.A.B. Enterprises, Inc., a Delaware corporation ("Enterprises"). On
May 1, 1998, Enterprises acquired The B. Manischewitz Company, LLC, a Delaware
limited liability company ("Manischewitz"). Manischewitz is among the nation's
leading manufacturers of processed kosher food products including matzos,
noodles, crackers, cake mixes, cookies, soups and processed fish products.
Concurrent with the Manischewitz acquisition, Holdings contributed its
wholly-owned subsidiary Millbrook to Enterprises. The contribution was accounted
for as an "as if" pooling of interests. Prior to the acquisitions of Millbrook
and Manischewitz, Holdings and Enterprises had no operations.
On January 31, 2000, Millbrook acquired certain of the assets and
operation of I. Epstein & Sons, Inc. ("Epstein") for a purchase price of
approximately $15.4 million, including transaction costs. Epstein was a full
service distributor of kosher and specialty food products, including its
Season(R) brand of canned fish, vegetables and other specialty food products.
Concurrent with the acquisition, the management and ownership of the Season
brand was assumed by Manischewitz.
(b) Financial Information about Industry Segments
Industry segment information with respect to the operations of Holdings
and Enterprises is included in Note 14 to the Consolidated Financial Statements
of Holdings and Enterprises for the years ended March 31, 2000, 1999 and 1998
included in Item 8 herein.
(c) Narrative Description of Business
Millbrook Distribution Services Inc.
The Industry. Distributors provide valuable services to both manufacturers
and retailers. Manufacturers benefit from distributors' broad geographic
coverage, efficient order processing and inventory management. Distributors
provide retailers access to broad product lines, the ability to place small
quantity orders and shelf and inventory management. Large distributors with
broad geographic coverage and an extensive offering of items generally have a
competitive advantage.
Due to consolidations over the past several years, the number of
manufacturers and retailers has decreased. Additionally, retailers have
increasingly focused on reducing their supply chain costs and therefore
improving their margins. As a result, we believe that manufacturers and
retailers are increasingly dependent on distributors to provide a range of
in-store retailing and merchandising functions previously performed by retail
and/or manufacturer personnel. Distributors increasingly are participating in
all stages of marketing for the products distributed, including category
management, promotions, schematic design and display of products. To efficiently
provide such services, technological innovation has become an essential element
in the distribution industry. For smaller distributors, the costs of the
required investments in technology can be prohibitive.
1
Millbrook is one of only a few distributors that focuses specifically on
the distribution of specialty foods, health and beauty care products and general
merchandise. Specialty foods typically generate higher margins for retailers
than those realized on other products sold in supermarkets. As a result,
supermarkets are adding new specialty food items to their product offerings and
aggressively promoting such items to capture these higher margins.
Retailers are employing a number of marketing techniques to increase the
sales of high margin specialty food items. Stores are using kiosks and free
standing displays to attractively present the products to the consumer. In
addition, retailers are beginning to segregate specialty foods into specific
categories, such as ethnic foods, cookies and sauces. By utilizing a
"store-within-a-store" approach for specialty food, the products receive prime
shelf space within the store. Merchandising expertise is a key selection
criteria for determining the retailer's choice of a specialty food distributor.
The health and beauty care segment includes baby care, cosmetics,
deodorants, first-aid, hair care, over-the-counter medications, toiletries, oral
hygiene and skin care products. The general merchandise segment covers a wide
variety of non-food products including housewares, pet supplies, stationery,
baby needs, photo and cleaning supplies. Competition in both the health and
beauty care and general merchandise categories has been intense due to the
growth of mass merchandisers that have captured market share by offering larger
assortments at "everyday low pricing." Despite losing market share, supermarkets
have maintained a stable base of customers and are expected to continue to be a
key outlet for health and beauty care products and general merchandise by
expanding product variety and offering customers one-stop shopping.
Products Distributed. Through its comprehensive product offerings,
Millbrook distributes a wide variety of products to its customers.
Specialty Foods. For the years ended March 31, 2000, 1999 and 1998,
specialty food sales were approximately $192.9 million, $141.1 million and
$123.2 million and represented 35.9%, 30.3% and 26.2% of Millbrook's total
revenues, respectively. Millbrook's specialty food segment consists of
approximately 11,500 items including ethnic, gourmet, and natural foods and
supplements. Millbrook offers ethnic foods such as kosher, Asian, Italian,
Irish, Mexican, Greek and German products, and gourmet foods such as teas,
coffees, spices, baking ingredients, condiments, candies, crackers, cookies,
jams and jellies. Millbrook's natural food products and supplements include
items such as grains, cereals, snacks, beverages, energy bars, baking
ingredients, pasta and sauces.
Millbrook continues to view its specialty food segment as an opportunity
for future growth. Due to the higher margins associated with specialty foods,
supermarkets continue to add new specialty food items to their product
offerings. To accommodate its retail customers' desire for a broader offering of
specialty foods, Millbrook carries a wide variety of specialty food products. We
believe that Millbrook's product breadth, together with its merchandising
expertise and advanced technology in supply chain management, will continue to
enable its retail customers to capture the advantages of this product category.
Health and Beauty Care. The health and beauty care segment has
traditionally been Millbrook's largest segment in terms of sales. For the years
ended March 31, 2000, 1999 and 1998, health and beauty care sales were
approximately $244.0 million, $234.2 million and $240.3 million and represented
45.4%, 50.4% and 51.1% of Millbrook's total revenues, respectively. Millbrook
currently carries approximately 15,400 health and beauty care items, including a
full line of national and private label brands. Millbrook's private label health
and beauty care products are offered under its ValuStar(R) brand, which
represents less than 1% of Millbrook's total revenues.
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Health and beauty care product offerings have grown due to new product
introductions and the growth in over-the-counter medications. This creates the
need for retailers to maximize variety in minimal shelf space. In recent years,
supermarkets, Millbrook's primary customer base, have lost market share in
health and beauty care products to mass merchandisers and drug store chains. In
response to this industry shift, Millbrook's strategy has been to expand its
customer base to include companies such as Ames and Bradlees. However,
supermarkets have begun to recapture lost market share by increasing the shelf
space allocated to health and beauty care items and expanding the variety of
those items carried. We believe that Millbrook's capabilities and extensive
product selection make it qualified to serve both the growing mass merchandiser
demand and meet the needs of the supermarket retailers for health and beauty
care items.
General Merchandise. Millbrook currently carries approximately 10,300
general merchandise items. For the years ended March 31, 2000, 1999 and 1998,
general merchandise accounted for approximately $101.0 million, $89.5 million
and $106.7 million and represented 18.8%, 19.3% and 22.7% of Millbrook's total
revenues, respectively. Although the traditional supermarket cannot afford to
devote as much space to the general merchandise category as compared to the mass
merchandisers, supermarkets have the advantage of more frequent customer
traffic. This consumer traffic ensures that supermarkets will remain a key
outlet for general merchandise. In addition, targeting certain departments such
as pet, bath, candle and stationery as destination categories adds to the
importance of general merchandise in supermarkets.
Retail Services. Millbrook traditionally has supplemented its product
distribution with full supporting services such as schematic development
(including plannogramming), space management, new store installations,
remodeling of existing stores, order writing, stocking, new item placement and
development and management of promotions.
Over time, gross profit margins for these services have eroded principally
as a result of the retail phenomenon of "everyday low pricing." As a result,
Millbrook has developed a system to "unbundle" each of the elements of the
full-service program and use activity-based costing to charge the customer for
each supporting service on a stand-alone basis. In addition, Millbrook offers
these services without product distribution to other retail channels. This
fundamental change in the packaging of the services Millbrook offers to its
customers resulted in the formation of Millbrook Retail Solutions(SM) as a
separate group to focus solely on providing merchandising services.
By using a predominantly part-time hourly workforce, management believes
Millbrook Retail Solutions has cost advantages over manufacturers and retailers.
Consequently, outsourcing these functions to Millbrook Retail Solutions'
experienced personnel, combined with Millbrook's established customer base and
technology infrastructure, position Millbrook to compete effectively in the
third-party retail service industry. In particular, we believe that Millbrook's
advanced technology in planogramming and its category management capabilities
enable it to provide service offerings that are not readily available from the
competition.
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Customers. Millbrook's top ten customers, which collectively represented
approximately 72%, 60% and 50% of its revenues during the years ended March 31,
2000, 1999 and 1998, respectively, have been customers for an average of 16
years. For the year ended March 31, 2000, supermarkets represented approximately
78% of revenues and mass merchandisers represented approximately 22% of
revenues. While Millbrook enjoys long-term relationships with most of its
customers, consistent with industry practice, substantially all of Millbrook's
customer supply agreements are on a month-to-month basis. Millbrook does have
supply agreements with certain of its significant customers. None of these
supply agreements is for a period of greater than three years.
For the years ended March 31, 2000 and 1999, revenues from the Companies'
two largest customers, Shaw's Supermarket/Star Markets and Ames Department
Stores represented approximately 28.9% and 24.4% of total revenues,
respectively.
Suppliers. Millbrook purchases products from leading suppliers in each of
its categories. For the year ended March 31, 2000, the five largest suppliers in
each of Millbrook's three principal product categories were:
(1) for specialty foods, World Finer Foods, BestFoods, T.J. Lipton, R.C.
Bigelow and Hershey Foods;
(2) for health and beauty care products, Procter & Gamble, Johnson &
Johnson, Unilever HPC, Warner-Wellcome and Gillette; and
(3) for general merchandise, Hartz Mountain Corp., Newell Rubbermaid,
Ecko Housewares, Duracell (a division of Gillette), and General
Electric Company.
For the year ended March 31, 2000, the five largest suppliers represented
(i) for specialty foods, 7% of total purchases; (ii) for health and beauty care
products, 20% of total purchases; and (iii) for general merchandise, 3% of total
purchases.
The B. Manischewitz Company, LLC
The Industry. According to Progressive Grocer, the U.S. grocery industry
has been characterized by relatively stable growth based on modest price and
population increases, with total sales of approximately $473 billion in 1999
reflecting a compound annual growth rate of 3.5% for the five years ended 1999.
According to Integrated Marketing Communications, Inc., kosher foods are one of
the fastest growing categories of the specialty food segment and are
characterized by a stable base of loyal consumers represented primarily by the
Jewish population. According to Integrated Marketing Communications, Inc. and
Packaged Facts, since 1992 sales of kosher foods have increased significantly
among non-Jewish consumers due to heightened awareness of the quality of
ingredients, rabbinical supervision and processing techniques used in
manufacturing kosher foods, together with growing interest in healthier foods
and the trend toward healthier lifestyles.
Kosher foods are manufactured in accordance with Jewish dietary laws,
which require strict adherence to quality and cleanliness standards. Achieving
such standards requires specialized knowledge and the supervision of a
designated kosher certification agency. Due to the production methods used,
kosher products generally are considered to contain higher quality and healthier
ingredients. According to Integrated Marketing Communications, Inc.,
approximately 40% of the overall kosher category is kosher for Passover
products, which are prepared under even more stringent guidelines than other
kosher products.
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Products. Manischewitz' core business consists of traditional products
sold primarily to Jewish consumers. Manischewitz is a manufacturer of products
normally consumed during certain Jewish holidays, primarily Passover which
occurs during the spring, and Rosh Hashanah which occurs during the fall.
Manischewitz believes that, among the Jewish population, approximately 100%
recognize the Manischewitz brand name and 90% have tried one or more
Manischewitz products. Manischewitz believes that, among the non-Jewish
population, approximately 80% are familiar with the Manischewitz brand name and
over 50% have tried one or more Manischewitz products.
Manischewitz has built its brand awareness and consumer base by offering a
broad assortment of products that can be consumed throughout the year, as well
as expanding its product offerings to accommodate changing tastes and the
popularity of various food items. Manischewitz' new product offerings include
macaroons with "ice cream" flavors, rice pilafs, various soup mixes and snack
items. Many of the new product offerings are intended to appeal to the
mainstream population to expand the customer base for Manischewitz' product
line.
Manischewitz also licenses its name to other entities for use in the
manufacture, distribution and sale of certain kosher products including wine and
other food products. For the year ended March 31, 2000, licensing represented
less than 2% of Manischewitz' total revenues.
Baked Products. Baked products include daily matzo, Passover matzo (which
is produced to more exacting standards dictated by religious tenets for
Passover) and crackers. The majority of these products are baked at
Manischewitz' Jersey City, New Jersey facilities. Matzo products in this
category are sold under the Manischewitz, Horowitz Margareten and Goodman's
brand names. Matzo sales generated approximately 26.2% and 25.0% of
Manischewitz' total revenues in fiscal 2000 and 1999, respectively. Manischewitz
has a license agreement with Goodman's to use its name on matzo products and
matzo-related products through 2003. In fiscal 2000, matzo products and
matzo-related products sold under the Goodman's name represented less than 2% of
Manischewitz' total revenues.
Manufactured Products. Manufactured products consist of a variety of
soups, fish, borscht and other processed foods. Gefilte fish, sardines and other
canned fish products constitute the second largest product line for Manischewitz
and accounted for approximately 18.9% and 13.5% of its total revenues in fiscal
2000 and 1999, respectively.
Co-Packed Products. Manischewitz markets a number of co-packed products,
including cookies, confectionery products, noodles, pasta, condiments and dry
soup mixes principally under the Manischewitz, Horowitz Margareten, Goodman's
and Season brand names. Manischewitz expects to continue to employ co-packers as
a capital efficient means of bringing its new products to market.
Marketing and Product Development. In fiscal 2000 and 1999, spending on
marketing and trade promotion represented approximately 1.9% and 2.9% of total
revenues, respectively. Management believes, as a percentage of revenues, that
marketing and trade promotion expenses have historically remained substantially
below other food manufacturers. As part of its business strategy, management has
committed to significantly increase spending on advertising, marketing and
promotion of Manischewitz' existing products and new product offerings.
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During the last few years, the Manischewitz product line has been expanded
to strengthen and broaden its popular appeal. Packaging has been updated to
better communicate good taste and high quality, enhance visibility on store
shelves and attract more contemporary Jewish and non-Jewish consumers.
Manischewitz has introduced no-fat and low-fat items to reinforce the positive
health aspects of its products. Where appropriate, recipes have been improved
and new flavors introduced. In addition, Manischewitz has introduced new
products targeted at both Jewish and non-Jewish consumers and has begun to
capitalize on the positive Manischewitz brand image among consumers.
Distribution. Manischewitz principally sells its products to independent
distributors operating throughout the U.S. and Canada. Two of its independent
distributors represented approximately 40.0% and 34.1% of total revenues in
fiscal 2000 and 1999, respectively. Among its customer base, supermarkets
represented approximately 90% of Manischewitz' fiscal 2000 total revenues and
other customers represented approximately 10%. We believe that Manischewitz'
five largest supermarket customers are Kroger, Albertson's, Safeway, Shop Rite
and Royal Ahold. In addition, Manischewitz continues to expand its marketing
arrangement with Wal-Mart to carry Manischewitz' products in its supercenters
and general merchandise stores.
We estimate that its products are sold in a majority of the supermarkets
throughout the U.S. Due to their importance to Jewish consumers, Manischewitz'
products are "must carry" items for many supermarkets in the U.S. We continue to
seek to obtain shelf space from supermarkets in sections other than in the
kosher aisle. The ability to display Manischewitz' products in the non-kosher
supermarket aisles, for products such as crackers, noodles and side dishes, will
enhance awareness of Manischewitz' products, particularly among non-Jewish
consumers. To support these efforts, we intend to increase promotional and
advertising expenditures to enhance product presence and increase sales.
Raw Materials
Manischewitz utilizes a number of raw materials in the manufacture of its
matzo and matzo-related products, principally flour. Manischewitz also utilizes
significant quantities of various fish in the manufacture of its gefilte fish
and the co-packing of its other canned fish products. Supplies of these
ingredients are readily available from a number of sources and are purchased
based on price.
Competition
Millbrook Distribution Services Inc.
Specialty Foods. The competition in the specialty foods segment is
fragmented among over 200 distributors, most of which are small and
geographically limited. Millbrook is able to compete effectively in the
specialty foods segment based on its breadth of products and its logistics
capabilities. Its "piece pick" capability gives Millbrook's retailers product
variety without the inventory investment in slower-moving, high margin specialty
food products. Unlike most other specialty food distributors, Millbrook offers a
single source of supply for specialty foods, health and beauty care products and
general merchandise. This generates transportation and distribution efficiencies
for Millbrook. Millbrook's principal competitors in this segment are Haddon
House and Gourmet Awards.
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Health and Beauty Care. Supermarkets historically have placed health and
beauty care products wherever shelf space was available. As supermarkets do not
have the available shelf space to compete with the breadth of health and beauty
care items carried by mass merchandisers, they have become reliant on delivery
and inventory techniques that maximize product variety. Management is of the
opinion that Millbrook's "piece pick" capability and breadth of health and
beauty care product assortment allows its supermarket customers to effectively
compete with mass merchandisers in this product category. Millbrook's principal
competitors in this segment are SuperValu, Fleming and Associated Wholesale
Grocers.
General Merchandise. Supermarkets are refocusing their efforts to carry
general merchandise specifically matched to their customer profiles and
rethinking the manner in which they allocate shelf space to general merchandise.
We believe product competition in selection and promotion at the retail level
favors distributors such as Millbrook. Millbrook's buying power results in a
large assortment of general merchandise that is continually tailored to meet its
customers' and the consumers' needs. Through Millbrook's "piece pick"
capability, this assortment is available to the retailers with a lower inventory
investment and space allocation. Millbrook's principal competitors in this
segment are SuperValu, Fleming and Associated Wholesale Grocers.
Retail Services. The retail services industry is competitive and is
predominantly comprised of a large number of small organizations that are either
retailer, channel or region specific. In the opinion of management, there are
approximately 120 retail service companies competing with Millbrook Retail
Solutions(SM). We believe that its principal competitors in this segment include
PIMMS, Powerforce and SPAR. The principal competitive factors within the
industry include:
(a) breadth and quality of client services;
(b) price;
(c) the ability to execute specific client priorities rapidly and
consistently over a wide geographical region; and
(d) technological capability.
The combination of the quality of Millbrook Retail Solutions' client
services and Millbrook's breadth of expertise, including its retail-oriented
technology, experience at store level and logistics capabilities is unique in
the industry.
The B. Manischewitz Company, LLC
Manischewitz competes within a small group of branded kosher
manufacturers. In the matzo category, all of the domestic producers have been in
the industry for over 80 years. Manischewitz' brand names, the complexities of
complying with kosher manufacturing requirements and the relatively modest size
of the market have all contributed to the stability of the competitive
environment faced by Manischewitz. Management's business strategy includes
promoting and marketing Manischewitz products in the non-kosher aisles of
supermarkets. However, outside the kosher aisle, Manischewitz products will
compete with the products of a significant number of companies of varying sizes,
including divisions or subsidiaries of larger companies. Many of these
competitors have multiple product lines as well as substantially greater
financial and other resources available to them.
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Manischewitz' primary competitor in the production and distribution of
matzo is Streit's, a New York based family-owned regional marketer. Within the
gefilte fish market, Manischewitz competes with Rokeach and its related brands,
including Mothers, Old Vienna and Mrs. Adlers.
Management believes that Manischewitz' loyal customer base and name
recognition make the brand less vulnerable to competition with respect to its
core products.
Trademarks
Manischewitz owns a number of registered trademarks in the U.S., Canada,
Europe, Israel, South Africa and South America. The registered trademarks in the
U.S. include Manischewitz(R), Horowitz Margareten(R), Onion Tams(R), Passover
Pantry(R), Tam Tam(R), Vege-Matzo(R), Wheat Tams(R), Design Star of David(R),
Star of David & Lion Design(R), Fishlets(R), Design of Star, Lion & Scroll(R),
Deborah Ross & Design(R), Bakit(R), Garlic Tam(R), Horowitz Margareten &
Design(R), Season(R), Season Kosher Select(R) , Gold Boat(R), Atlantic
Gourmet(R) and Moadim(R). Manischewitz has granted exclusive licenses under
certain of its trademarks to others for the manufacture and sale of wine and
other food products. Such licenses are limited in scope to certain territories
and entitle Manischewitz to royalties based on the net sales or revenues of the
licensed products sold. Management is not aware of any facts that would have a
material adverse impact on the continued use of any of its trademarks and trade
names.
(d) Other Matters
Employees
As of March 31, 2000, we had a total of 2,500 full-time employees, 160
part-time employees and the ability to draw upon 450 part-time service
merchandisers nationwide.
Manischewitz has approximately 170 unionized workers. Most of the
unionized workers at Manischewitz are represented under a contract with Bakery,
Confectionery and Tobacco Workers International Union (AFL-CIO, Local 3), which
was ratified in October 1997 and which will expire in September 2000. Millbrook
has approximately 35 unionized workers. The unionized workers at Millbrook are
represented under a contract with Truck Drivers Union, Local No. 170, which was
ratified in March 1999 and which will expire in March 2003.
Management believes that Manischewitz' and Millbrook's relations with
their employees and the unions representing certain groups of employees are
generally good.
(e) Financial Information about Foreign and Domestic Operations
Millbrook provides distribution services to retail locations in 40 states
throughout the United States, primarily east of the Rocky Mountains.
Manischewitz' products are primarily sold through distributors throughout the
United States. Revenues generated by sales to distributors primarily in Canada,
Europe and the Middle East accounted for less than 5% of Manischewitz' revenues
in fiscal 2000.
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Item 2. Properties
Facilities. Millbrook's corporate headquarters are located in Leicester,
Massachusetts, where management and administrative functions are performed.
Millbrook currently uses six distribution centers:
Approximate Lease
Square Expiration
Property Location Own or Lease Footage Date
-------- -------- ------------ ------- ----
National Support Center/Distribution Center......... Harrison, AR Own 1,200,000 --
Corporate Headquarters/Distribution Center.......... Leicester, MA Lease 340,000 11/30/06
Distribution Center................................. Worcester, MA Lease 241,300 08/31/02
Distribution Center................................. Ozark, AL Own 210,000 --
Distribution Center................................. Greenville, NC Lease 110,000 03/31/04
Distribution Center................................. E. Brunswick, NJ Lease 177,600 07/31/08
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In addition, Millbrook uses 115 transfer depots located in 32 states.
Millbrook owns or leases its fleet of approximately 115 tractors, 280
trailers and 290 vans.
Manischewitz' corporate headquarters are located in Jersey City, New
Jersey, where management and administrative functions are performed.
Manischewitz occupies the following properties, all of which are used in
connection with its food business:
Approximate Lease
Square Expiration
Property Location Own or Lease Footage Date
-------- -------- ------------ ------- ----
Bakery.............................................. Jersey City, NJ Own 86,000 --
Manufacturing facility.............................. Vineland, NJ Own 67,700 --
Warehouse........................................... Jersey City, NJ Lease 43,500 08/31/00
Office.............................................. Jersey City, NJ Lease 9,600 08/31/00
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The Jersey City, New Jersey bakery operates on a two-shift basis during
four months of the year and a three-shift basis during seven months of the year.
Each shift consists of eight hours. The plant, which has computerized production
equipment, is shut down for the month of July for maintenance and to prepare the
plant to meet the kosher requirements for Passover production.
The Vineland, New Jersey manufacturing and warehousing facility is located
on a five-acre site. It has the capacity to produce 11,000 pounds of processed
fish per shift. The facility operates on a single shift basis throughout the
year, with its primary maintenance period in April.
Item 3. Legal Proceedings
Holdings and Enterprises are subject to litigation in the ordinary course
of business. Neither Holdings nor Enterprises is a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on their consolidated financial condition or consolidated future
results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
None.
9
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder Matters
None.
Item 6. Selected Financial Data
The selected consolidated financial data of Holdings and Enterprises
presented below as of March 31, 2000 and 1999 and for each of the years in the
three year period ended March 31, 2000 were derived from the audited
consolidated financial statements of Holdings and Enterprises (the "Consolidated
Financial Statements") set forth herein. The audited balance sheet data as of
March 31, 1998 and the audited statement of operations data for the year ended
March 31, 1997 was derived from the financial statements of Millbrook which are
not presented herein. In addition, the selected consolidated financial data
presented below as of and for the year ended March 31, 1996 and the balance
sheet data as of March 31, 1997 were derived from the financial statements of
the predecessor, a wholly-owned subsidiary of McKesson Corporation ("McKesson")
which are not presented herein. The data should be read in conjunction with the
Consolidated Financial Statements, related notes and other financial information
included herein.
Predecessor Holdings
---------------------------- ----------------------------------------
For the years ended March 31, 1996 1997 1998 1999 2000
----------------------------- ---- ---- ---- ---- ----
(Dollars in Thousands) (Dollars in Thousands)
Statement of Operations Data:
Revenues............................ $ 563,099 $ 476,175 $ 470,201 $ 508,293 $ 580,616
Gross profit........................ 132,701 111,413 110,039 122,757 137,226
Operating expenses.................. 119,090 104,038 102,664 112,833 121,261
Operating income.................... 13,611 7,375 7,375 9,924 15,965
Interest expense, net............... 4,708 3,843 5,079 20,020 18,960
Non-operating income, other......... 1,600 69
Provision (benefit) for income
taxes............................ 4,334 1,660 1,122 (3,174) (1,146)
Income (loss) before
extraordinary item............... 6,169 1,941 1,174 (6,922) (1,849)
Extraordinary gain, net
of income taxes.................. 12,914
Net income (loss)................... 6,169 1,941 1,174 (6,922) 11,065
Balance Sheet Data:
Working capital..................... $ 46,540 $ 36,535 $ 30,798 $ 51,288 $ 54,549
Property, plant and equipment, net.. 16,313 15,017 23,395 38,467 37,199
Total assets........................ 113,026 102,731 108,772 297,607 290,008
Total debt.......................... 38,110 184,049 170,089
Enterprises
----------------------------------------
For the years ended March 31, 1998 1999 2000
----------------------------- ---- ---- ----
(Dollars in Thousands)
Statement of Operations Data:
Revenues............................ $ 470,201 $ 508,293 $ 580,570
Gross profit........................ 110,039 122,757 137,180
Operating expenses.................. 102,656 112,833 121,240
Operating income.................... 7,383 9,924 15,940
Interest expense, net............... 5,079 14,949 15,888
Non-operating income, other.........
Provision (benefit) for income
taxes............................ 1,122 (1,399) 288
Income (loss) before
extraordinary item............... 1,182 (3,626) (236)
Extraordinary gain, net
of income taxes.................. 4,742
Net income (loss)................... 1,182 (3,626) 4,506
Balance Sheet Data:
Working capital..................... $ 30,796 $ 46,382 $ 55,066
Property, plant and equipment, net.. 23,395 38,467 37,199
Total assets........................ 108,875 279,453 285,330
Total debt.......................... 38,110 136,049 145,089
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of Holdings' and Enterprises'
financial condition and results of operations should be read in conjunction with
the financial information included in their Consolidated Financial Statements.
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Overview
Holdings was formed in 1996 to build a fully integrated specialty food
business by acquiring food manufacturers with strong brand names and integrating
their products with a strong distribution network. On March 31, 1997, Holdings
acquired Millbrook from McKesson. On May 1, 1998, Enterprises, a wholly-owned
subsidiary of Holdings, acquired Manischewitz. The results of operations of
Manischewitz are included in the consolidated results of operations since its
date of acquisition. Concurrent with the Manischewitz acquisition, Holdings
contributed Millbrook to Enterprises. This contribution was accounted for as an
"as if" pooling of interests. Prior to its acquisition of Millbrook, Holdings
had no operations. Enterprises, which was formed in 1998 to acquire
Manischewitz, had no operations prior to that acquisition. On January 31, 2000,
Millbrook acquired certain of the assets and operation of Epstein. The operating
results of Epstein's distribution business and its Season and related brand
business are reflected in the operating results of Millbrook and Manischewitz,
respectively, since its date of acquisition.
General
Holdings' and Enterprises' operating subsidiaries are Millbrook and
Manischewitz. Operating costs and expenses consist of cost of sales,
distribution and warehousing and selling, general and administrative expenses.
Cost of sales includes the cost of products manufactured and purchased by
Manischewitz, including raw materials, products purchased under co-packing
arrangements and manufacturing payroll and related employee benefit costs, and
the cost of products distributed by Millbrook. Distribution and warehousing
expenses include payroll and related employee benefit costs of Millbrook's
distribution operation and transportation costs. Selling, general and
administrative expenses include payroll and related employee benefit costs of
Millbrook's and Manischewitz' various sales organizations and other general and
administrative functions.
Year Ended March 31, 2000 Compared to the Year Ended March 31, 1999
Revenues. Revenues for the year ended March 31, 2000 increased $72.3
million or 14.2% to $580.6 million as compared to $508.3 million for the year
ended March 31, 1999. Revenues include:
(i) Millbrook's sales of $537.9 million for the year ended March 31,
2000 as compared to $464.8 million for the year ended March 31,
1999;
(ii) Manischewitz' sales of $50.3 million for the year ended March 31,
2000 as compared to $46.5 million for the year ended March 31, 1999;
and
(iii) intersegment sales, which are eliminated in consolidation, of $7.6
million for the year ended March 31, 2000 as compared to $3.0
million for the year ended March 31, 1999.
Millbrook's revenues increased $73.1 million or 15.7% as compared to the
prior year. This increase is principally due to the growth of sales to existing
customers and the addition of new customers.
Manischewitz' revenues increased $3.8 million or 8.2% to $50.3 million as
compared to the eleven month period ended March 31, 1999. Had the comparable
pre-acquisition period been included in the period ended March 31, 1999,
Manischewitz' revenues would have increased $1.6 million or 3.4% for the year
ended March 31, 2000. This increase is principally due to:
(i) sales of Season brand products acquired as part of the Epstein
acquisition since January 31, 2000 ($2.9 million), partially offset
by;
11
(ii) the negative impact on sales of customer account changes in
Manischewitz' northeast distributor network, including the
termination of its largest northeast distributor during the third
quarter of fiscal 2000 ($1.3 million).
Gross Profit. Gross profit for the year ended March 31, 2000 was $137.2
million as compared to $122.8 million for the year ended March 31, 1999, an
increase of $14.4 million or 11.8%. As a percentage of revenues, the gross
profit margin was 23.6% for the year ended March 31, 2000 as compared to 24.2%
for the year ended March 31, 1999.
The increase in gross profit dollars and its impact on gross profit margin
is primarily due to the following:
(i) additional margin dollars associated with Millbrook's increased
sales, partially offset by reduced margins within the health and
beauty care and general merchandise categories of our distribution
business due to sustained competitive pressures and lower gross
margin sales due to the growth of Millbrook's non-serviced customer
base as a percentage of its total customer base ($12.4 million or
(0.3%));
(ii) distribution sales acquired as part of the Epstein acquisition since
January 31, 2000 ($4.1 million or 0.1%);
(iii) the lost gross profit margin on Manischewitz' sales (($0.5 million)
or (0.1%)). Had the comparable pre-acquisition period been included
in the period ended March 31, 1999, Manischewitz' gross profit would
have decreased $1.5 million and its gross profit margin would have
decreased approximately 3.2%. This decline is principally due to the
lower level of sales (excluding Season products) resulting in
underabsorption of manufacturing overhead and a shift in product mix
to lower margin products; and
(iv) the lost gross profit margin on lower third party service
merchandising sales of Millbrook as its focus shifted to the
transition and integration of new customer accounts (($1.4 million)
or (0.2%)).
Operating Expenses. Distribution and warehousing expenses for the year
ended March 31, 2000 were $45.2 million, as compared to $38.1 million for the
year ended March 31, 1999. As a percentage of revenues, distribution and
warehousing expenses increased to 7.8% for the year ended March 31, 2000 as
compared to 7.5% for the comparable period of the prior year. The increase in
distribution and warehousing costs is principally due to:
(i) the labor and transportation costs associated with the revenue
increases generated by Millbrook's existing customers and the
addition of new customers; and
(ii) the reconfiguration of certain of Millbrook's distribution
facilities to accommodate the addition of new customers.
Selling, general and administrative expenses for the year ended March 31,
2000 were $73.0 million, as compared to $72.0 million for the year ended March
31, 1999. As a percentage of revenues, selling, general and administrative
expenses decreased to 12.6% for the year ended March 31, 2000 as compared to
14.2% for the comparable period of the prior year. This dollar increase
primarily consists of:
12
(i) selling, general and administrative costs associated with the
Epstein distribution operations acquired January 31, 2000 ($2.1
million), partially offset by reduced costs of $1.7 million or
(2.6%) associated with Millbrook's operations for the year ended
March 31, 2000. This decrease primarily relates to reduced payroll
and related costs associated with the growth of Millbrook's
non-serviced customer base requiring lower overall headcount; and
(ii) an increase of $0.6 million or 10.1% in costs associated with
Manischewitz' operations for the year ended March 31, 2000. Had the
comparable pre-acquisition period been included in the period ended
March 31, 1999, Manischewitz' selling, general and administrative
expenses would have been consistent with the prior year.
Amortization of intangibles was $3.1 million for the year ended March 31,
2000 as compared to $2.8 million for the year ended March 31, 1999. This
increase resulted from the comparable prior period including only eleven months
of amortization as Manischewitz was acquired on May 1, 1998 and amortization
resulting from the Epstein acquisition since January 31, 2000.
Interest Expense. Interest expense for the year ended March 31, 2000 was
$19.0 million (consisting of $3.1 million for Holdings and $15.9 million for
Enterprises, respectively) as compared to $20.0 million (consisting of $5.1
million for Holdings and $14.9 million for Enterprises, respectively) for the
year ended March 31, 1999. The decrease in interest expense is primarily
attributable to a lower weighted average interest rate on debt outstanding as a
result of Holdings' and Enterprises' repurchases of senior notes replacing such
debt with borrowings under the credit agreement. The average interest rate on
Holdings' and Enterprises' debt outstanding during the year ended March 31, 2000
was 11.1% and 10.7%, respectively.
Taxes. For the year ended March 31, 2000, the benefit for income taxes was
$1.1 million for Holdings and the provision was $0.3 million for Enterprises, as
compared to a benefit of $3.2 million for Holdings and $1.4 million for
Enterprises for the year ended March 31, 1999. The change of $2.1 million and
$1.7 million for Holdings and Enterprises, respectively, principally relates to
the results of operations and the utilization of state net operating loss
carryforwards, which were subject to a valuation allowance in fiscal 1999.
Extraordinary Item - Early Extinguishment of Debt. The extraordinary gain
on early extinguishment of debt for the year ended March 31, 2000 was $12.9
million (consisting of $8.2 million, net of income taxes of $5.4 million for
Holdings and $4.7 million, net of income taxes of $3.1 million for Enterprises).
This gain resulted from Holdings' repurchase of $23.0 million of its outstanding
13% senior notes and Enterprises' repurchase of approximately $20.9 million of
its outstanding 10.5% senior notes.
Net Income. As a result of the foregoing, the net income for the year
ended March 31, 2000 was $11.1 million and $4.5 million for Holdings and
Enterprises, respectively, as compared to net loss of $6.9 million for Holdings
and $3.6 million for Enterprises for the year ended March 31, 1999.
13
Year Ended March 31, 1999 Compared to the Year Ended March 31, 1998
Revenues. Revenues for the year ended March 31, 1999 increased $38.1
million or 8.1% to $508.3 million as compared to $470.2 million for the year
ended March 31, 1998. Revenues include Manischewitz' sales of $46.5 million and
Millbrook's sales of $464.8 million for the year ended March 31, 1999 as
compared to Millbrook's sales of $470.2 million for the year ended March 31,
1998. Intersegment sales, which are eliminated in consolidation, were $3.0
million for the year ended March 31, 1999.
Millbrook's revenues decreased $5.4 million or 1.2% as compared to the
prior year. This decrease is principally due to the addition of new customers
and growth of existing customers ($15.9 million) being more than offset by sales
($21.3 million) to a customer serviced in fiscal 1998 as a result of a
threatened strike of the customer's distribution operations, which were not
replaced in fiscal 1999.
Manischewitz' revenues decreased $2.1 million or 4.2% to $46.5 million
since its acquisition on May 1, 1998 as compared to $48.6 million for the
comparable pre-acquisition period. This decrease is principally comprised of
sales related to Manischewitz' Chicago division which was sold in June 1997
($0.7 million) and a slower sales rate during the first ninety days of
Enterprises' ownership caused by distributor uncertainty resulting from the
acquisition ($1.1 million). Due to Enterprises' ownership of Millbrook,
distributors were initially very cautious about continuing to place product
orders out of concern that Enterprises intended to terminate their right to
distribute Manischewitz products. Following management meetings with a number of
distributors, revenues for the eight months ended March 31, 1999 have generally
been in line with the comparable pre-acquisition period.
Gross Profit. Gross profit for the year ended March 31, 1999 was $122.8
million as compared to $110.0 million for the year ended March 31, 1998, an
increase of $12.8 million or 11.6%. As a percentage of revenues, the gross
profit margin was 24.2% for the year ended March 31, 1999 as compared to 23.4%
for the year ended March 31, 1998.
The increase in gross profit dollars and its impact on gross profit margin
is primarily due to the following:
(i) the contribution of the gross profit on Manischewitz' sales since
its acquisition ($17.0 million or 1.2%); and
(ii) the contribution of the gross profit on the growth in Millbrook's
third-party service merchandising business ($2.1 million or 0.3%);
offset by
(iii) the lost margin on sales to a customer as a result of a threatened
strike of its distribution operations, which sales were not replaced
($5.2 million or 0.0%); and
(iv) the lost margin resulting from the heightened competitive pressures
within the health and beauty care and general merchandise segments
of our distribution business and the shift in sales mix from higher
margin general merchandise to lower margin health and beauty care
products ($0.4 million or (0.8%)).
Operating Expenses. Distribution and warehousing expenses for the year
ended March 31, 1999 were $38.1 million as compared to $37.3 million for the
year ended March 31, 1998.
Selling, general and administrative expenses for the year ended March 31,
1999 were $72.0 million as compared to $65.3 million for the year ended March
31, 1998. The $6.7 million increase as compared to the prior year consisted of
the following:
14
(i) $6.0 million from Manischewitz' operations for the year ended March
31, 1999; and
(ii) a $0.7 million or 1.1% increase from Millbrook's operations for the
year ended March 31, 1999. The increase at Millbrook primarily
relates to increased payroll and related costs associated with the
growth in our third-party service merchandising business partially
offset by reductions in various other selling, general and
administrative costs.
Amortization of intangibles was $2.8 million for the year ended March 31,
1999 as a result of the Manischewitz acquisition. There was no such amortization
for the comparable pre-acquisition period.
Interest Expense. Interest expense for the year ended March 31, 1999 was
$20.0 million (consisting of $5.1 million for Holdings and $14.9 million for
Enterprises, respectively) as compared to $5.1 million for Holdings and
Enterprises for the year ended March 31, 1998. The increased interest expense is
primarily attributable to the $168 million of senior notes which were sold in
May 1998 to fund the acquisition of Manischewitz, resulting in higher average
debt outstanding at higher average interest rates. The average interest rate on
Holdings' and Enterprises' debt outstanding during the year ended March 31, 1999
was 11.7% and 11.1%, respectively.
Taxes. The benefit for income taxes for the year ended March 31, 1999 was
$3.2 million and $1.4 million for Holdings and Enterprises, respectively, as
compared to a provision of $1.1 million for Holdings and Enterprises for the
year ended March 31, 1998. The change of $4.3 million and $2.5 million for
Holdings and Enterprises, respectively, principally relates to the results of
operations.
Net Loss. As a result of the foregoing, the net loss for the year ended
March 31, 1999 was $6.9 million and $3.6 million for Holdings and Enterprises,
respectively, as compared to net income of $1.2 million for Holdings and
Enterprises for the year ended March 31, 1998.
Financial Condition, Liquidity and Capital Resources
Operations for the year ended March 31, 2000, excluding the net gain on
early extinguishment of debt and non-cash charges for depreciation, amortization
and deferred income taxes, provided cash of $11.7 million for Holdings and $11.4
million for Enterprises as compared to providing cash of $0.5 million for
Holdings and $5.3 million for Enterprises, for the year ended March 31, 1999.
During the years ended March 31, 2000 and 1999, other changes in assets and
liabilities resulting from operating activities utilized cash of $13.0 million
for Holdings and $8.2 million for Enterprises and provided cash of $2.5 million
for Holdings and $0.9 million for Enterprises, respectively. This activity
resulted in net cash utilized by operating activities of $1.3 million for
Holdings and net cash provided by operating activities of $3.2 million for
Enterprises as compared to net cash provided by operations of $3.0 million for
Holdings and $6.2 million for Enterprises, respectively, in fiscal 1999.
Investing activities, which principally consisted of the acquisition of I.
Epstein & Sons, Inc. in fiscal 2000, the acquisition of Manischewitz in the
fiscal 1999 period and the acquisitions of plant and equipment, resulted in a
use of cash of $18.3 million and $129.3 million for Holdings and Enterprises for
the years ended March 31, 2000 and 1999, respectively. During the year ended
March 31, 2000, financing activities, which principally consisted of the
repurchase of $23.0 million of senior notes for $8.8 million by Holdings and
$20.9 million of senior notes for $12.2 million by Enterprises, offset by $10.2
million of payments from the interest escrow account by Holdings; additional
borrowings of $29.9 million under the credit agreement by Holdings and
Enterprises; and $3.0 million of proceeds from the issuance of preferred stock
by Holdings, provided cash of $22.2 million for Holdings and $17.6 million for
Enterprises. During the year ended March 31, 1999, financing activities, which
principally consisted of the sales of $168.0 million of senior notes, offset by
debt issuance costs of $6.5 million and $4.8 million by Holdings and
Enterprises, respectively, the funding of a $17.0 million interest escrow
account by Holdings, $3.1 million of payments from the interest escrow account
by Holdings; the repayment of borrowings under the credit agreement of $22.1
million by Holdings and Enterprises; and $0.2 million of proceeds from the
issuance of common stock by Holdings, provided cash of $125.8 million for
Holdings and $122.6 million for Enterprises.
15
At March 31, 2000, outstanding borrowings under the credit agreement were
$45.9 million, consisting of $39.0 million of revolving credit loans and an
amortizing term loan of $6.9 million. Under the terms of the credit agreement,
substantially all of Millbrook's assets and the accounts receivable and
inventory of Manischewitz are pledged to provide collateral for borrowings and
Enterprises is restricted from making distributions to Holdings to pay
dividends. At March 31, 2000, Millbrook and Manischewitz had approximately $4.7
million of cash and approximately $49 million of available borrowing capacity
under the credit agreement. In addition, there were $3.3 million of cumulative
unpaid dividends on Holdings' series A and series B preferred stock.
Following March 31, 2000, Enterprises repurchased approximately $18.8
million of its outstanding 10.5% senior notes. The resulting gain from the early
extinguishment of this debt will be recorded in Enterprises' condensed
consolidated financial statements for the fiscal quarter ending June 30, 2000.
Enterprises' senior notes are fully and unconditionally guaranteed on a joint
and several basis by Millbrook and Manischewitz.
On April 17, 2000, Millbrook acquired substantially all of the assets and
operation of the Miller Buckeye Biscuit Company, Inc. for a purchase price of
approximately 17.1 million. The acquisition was funded through additional
borrowings under the credit agreement.
Holdings and Enterprises expect capital expenditure spending for the year
ending March 31, 2001 to be approximately $5.0 million. Such expenditures
include, among other things, leasehold improvements and the acquisition of
computer equipment and software, manufacturing machinery and equipment. It is
anticipated that these capital commitments for 2001 will be financed through
working capital, operating leases and cash flow from operations.
Interest payments on the senior notes and borrowings under the credit
agreement represent significant obligations of Holdings, Enterprises and their
subsidiaries. The primary source of liquidity of Holdings and Enterprises will
be cash flows from operations of Millbrook and Manischewitz and borrowings under
the credit agreement. Holdings and Enterprises believe that, based on current
and anticipated financial performance, cash flows from operations, borrowings
under the credit agreement and dividends and other distributions available from
their respective subsidiaries will be adequate to meet anticipated requirements
for capital expenditures, working capital and scheduled interest payments on the
senior notes. Holdings and Enterprises are currently in compliance with the
covenants contained in the credit agreement and the indentures relating to the
senior notes and expect to be able to continue to comply. However, the capital
requirements of Holdings and Enterprises may change. Each of Holdings and
Enterprises believes that it has sufficient borrowing capacity and access to
debt markets to pursue acquisition opportunities and fund extraordinary working
capital requirements, if necessary. At March 31, 2000, Holdings and Enterprises
had total outstanding indebtedness of $170.1 million and $145.1 million,
respectively. The ability of Holdings and Enterprises to satisfy capital
requirements, to borrow under the credit agreement and to repay or refinance the
senior notes will depend on future financial performance of Holdings and
Enterprises, which in turn will be subject to general economic conditions and to
financial, business and other factors, including factors beyond Holdings'
control.
16
Effects of Inflation and Other Matters
For the year ended March 31, 2000, Holdings' and Enterprises' cost of
product remained relatively stable. To the extent possible, Holdings' and
Enterprises' objective is to offset the impact of inflation through productivity
enhancements, cost reductions and price increases.
Holdings and Enterprises are not involved in any significant environmental
matters.
Impact of New Accounting Pronouncements - SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities" was issued in June, 1998 and, as
amended, is effective for fiscal years beginning after June 15, 2000. SFAS No.
133 requires the recognition of all derivatives in the consolidated balance
sheet as either assets or liabilities measured at fair value. We will adopt SFAS
No. 133 when it becomes effective. We have not yet determined the impact SFAS
No. 133 will have on our financial position or results of operations when such
statement is adopted.
Forward-Looking Statements
The foregoing discussion in "Management's Discussion and Analysis of
Financial Condition and Result of Operations" contains "forward-looking"
statements. Additionally, written materials issued and oral statements made from
time to time by Holdings and Enterprises may contain forward-looking statements.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts and by their use of words such as
"goals", "expects", "plans", "believes", "estimates", "forecasts", "projects",
"intends" and other words of similar meaning. Execution of business and
acquisition strategies, expansion of product lines and increase of distribution
networks or product sales are areas, among others, whose future success may be
difficult to predict. They are based on management's then-current information,
assumptions, plans, expectations, estimates and projections regarding the food
and wholesale distribution industries. However, such statements are not
guarantees of future performance, and actual results and outcomes may differ
materially from what is expressed depending on a variety of factors, many of
which are outside of Holdings' and Enterprises' control.
Among the factors that could cause actual outcomes or results to differ
materially from what is expressed in these forward-looking statements are
changes in the demand for, supply of, and market prices of Holdings' and
Enterprises' products, the action of current and potential new competitors,
changes in technology and economic conditions.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may impact the consolidated
financial position, results of operations or cash flows of Holdings and
Enterprises due principally to adverse conditions in commodity market prices and
interest rate risk related to debt obligations outstanding. Holdings and
Enterprises do not use financial instruments or derivatives for any trading or
other speculative purposes.
Holdings and Enterprises secure future commitments for certain commodities
based upon historical and projected consumption such that reasonable possible
near term changes in commodity prices would not result in a material effect on
future earnings, fair values or cash flows of Holdings and Enterprises. Holdings
and Enterprises manage interest rate risk through the strategic use of fixed and
variable rate debt. The interest rate on up to $50 million of variable rate
borrowings is capped by an interest rate protection agreement through April
2000.
Item 8. Financial Statements and Supplementary Data
Refer to the Index to Financial Statements on page F-1 for the required
information.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
17
PART III
Item 10. Directors and Executive Officers of the Registrants
The directors and executive officers of Holdings and Enterprises, and
where indicated, the senior executive officer of each of Millbrook and
Manischewitz is as set forth in the table below:
Name Age Position
--------------------------------- ----- ------------------------------------
Richard A. Bernstein* 53 Chairman, President, Chief Executive
Officer and Director
Lewis J. Korman* 55 Vice Chairman and Director
Steven M. Grossman* 39 Executive Vice President, Chief
Financial Officer, Treasurer and
Director
James A. Cohen, Esq.* 54 Senior Vice President - Legal
Affairs and Secretary and Director
of Enterprises
Ira A. Gomberg* 56 Senior Vice President
Hal B. Weiss* 43 Assistant Treasurer
Richard H. Hochman 54 Director of Holdings
Jenny Morgenthau 55 Director of Holdings
Michael A. Pietrangelo 58 Director of Holdings
|
Senior executive officer of Millbrook:
Robert A. Sigel 46 President and Chief Executive
Officer of Millbrook and Director of
Holdings
|
Senior executive officer of Manischewitz:
Dennis M. Newnham 59 President and Chief Executive
Officer of Manischewitz and Director
of Holdings
|
* Titles of these individuals are the same for Holdings and Enterprises
unless otherwise specified.
Richard A. Bernstein has served as Chairman, President and Chief Executive
Officer of Holdings and Enterprises and as a director of Enterprises since its
inception in March, 1998 and of Holdings since its inception in May, 1996. In
addition to his positions with Holdings and Enterprises, Mr. Bernstein is a
member of the Board of Directors and Chairman of Millbrook and is the Chairman
and Manager of Manischewitz. Mr. Bernstein is Chairman and Manager of RABCO
Luxury Holdings LLC, a New York limited liability company ("RABCO"), a
diversified holding entity for luxury products, which has the exclusive right,
through its subsidiaries, to distribute Breguet(R) watches and timepieces and
several other watch brands in the United States, Canada, Mexico, Central and
South America, and throughout the Caribbean. Mr. Bernstein is also President of
P&E Properties, Inc., a private commercial real estate ownership/management
company of which Mr. Bernstein is the sole shareholder. Mr. Bernstein was the
Chairman and Chief Executive Officer and a director of Western Publishing Group,
Inc. from 1984 to May 1996. Mr. Bernstein also served as Chairman of the Board
and Chief Executive Officer of RABCO Health Services, Inc. and General Medical
Corporation, a medical and surgical supply distribution company, from April 1987
through August 1993, and Chairman and Chief Executive Officer of Harris
Wholesale Company, a pharmaceutical and health and beauty care distribution
company, from 1989 through May 1992. Mr. Bernstein devotes substantial time to
other business and charitable activities.
18
Lewis J. Korman has been Vice Chairman of Holdings and Enterprises since
their inception and is a director of Holdings and Enterprises. Mr. Korman is
also an advisor to and an equity owner of a non-affiliated company engaged in
the marketing and distribution of products designed to enhance wellness and
beauty. Mr. Korman is also a member of the Board of Managers and an equity owner
of a non-affiliated company which provides, through on-line and traditional
publishing channels, preparation and testing for (i) occupations which require
certification, and (ii) students and schools where standardized examinations are
administered for assessment or advancement. He also serves as a consultant to
companies involved in the motion picture industry. Mr. Korman also is involved
in the structuring of entrepreneurial transactions in the entertainment
industry. Prior to joining Holdings in January 1997, Mr. Korman was President
and Chief Operating Officer of Savoy Pictures Entertainment, Inc. from its
founding in 1992 until its merger with Silver King Communications, Inc. in
December 1996. Prior thereto, Mr. Korman was Senior Vice President and Chief
Operating Officer of Columbia Pictures Entertainment, Inc. and Chairman of its
Motion Picture Group until its sale to Sony Corporation at the end of 1989.
Steven M. Grossman has been Executive Vice President, Chief Financial
Officer and Treasurer and a director of Holdings and Enterprises since their
inception. In addition to his positions with Enterprises and Holdings, Mr.
Grossman is a member of the Board of Directors and Executive Vice President -
Finance and Administration of Millbrook and is a member of the Board of Managers
and the Executive Vice President, Chief Financial Officer and Treasurer of
Manischewitz. Mr. Grossman is also Executive Vice President and Chief Financial
Officer of RABCO and each of its subsidiaries and Chief Financial Officer of P&E
Properties, Inc. Mr. Grossman was Executive Vice President and Chief Financial
Officer of Western Publishing Group, Inc. from June 1994 to May 1996 and Vice
President - Financial Planning of Western Publishing Group, Inc. from July 1992
to June 1994 and of RABCO Health Services, Inc. from July 1992 to August 1993.
Mr. Grossman is a certified public accountant licensed in New York.
James A. Cohen, Esq. has been Senior Vice President - Legal Affairs and
Secretary of Holdings and Enterprises since their inception and is a director of
Enterprises. In addition to his positions with Enterprises and Holdings, Mr.
Cohen is a member of the Board of Directors and the Senior Vice President -
Legal Affairs of Millbrook and Manischewitz and is a member of Manischewitz'
Board of Managers. Mr. Cohen is also Senior Vice President - Legal Affairs of
RABCO and each of its subsidiaries and a senior executive of P&E Properties,
Inc. Mr. Cohen was Senior Vice President - Legal Affairs and Secretary of
Western Publishing Group, Inc. from 1984 to May 1996 and Senior Vice President -
Legal Affairs and Secretary of RABCO Health Services, Inc. from April 1987
through August 1993.
Ira A. Gomberg has been Senior Vice President of Holdings and Enterprises
since their inception. In addition to his position with Holdings and
Enterprises, Mr. Gomberg is a Senior Vice President of Millbrook and
Manischewitz. Mr. Gomberg is also Senior Vice President of RABCO and each of its
subsidiaries and a senior executive of P&E Properties, Inc. Mr. Gomberg was
Senior Vice President of Western Publishing Group, Inc. from 1986 to May 1996
and Senior Vice President of RABCO Health Services, Inc. from April 1987 through
August 1993.
Hal B. Weiss has been Assistant Treasurer of Holdings and Enterprises
since their inception. In addition to his position with Holdings and
Enterprises, Mr. Weiss is a Vice President and Assistant Treasurer of Millbrook
and Manischewitz. Mr. Weiss is also the Assistant Treasurer of RABCO and each of
its subsidiaries and Controller of P&E Properties, Inc. Mr. Weiss served as
Assistant Treasurer of Western Publishing Group, Inc. from 1990 through May 1996
and Assistant Treasurer of RABCO Health Services, Inc. from April 1987 through
August 1993. Mr. Weiss is a certified public accountant licensed in New York.
19
Richard H. Hochman is Chairman of Regent Capital Management Corp. a
private investment company, making equity and mezzanine investments in
companies, and has served in that capacity since April 1995. From 1990 through
April 1995, he was a Managing Director of the Corporate Finance Department of
Paine Webber Incorporated and served as a member of its Debt and Equity
Commitment Committees. Prior to joining PaineWebber, Mr. Hochman served as a
Managing Director of Drexel Burnham Lambert, Inc. from 1984 through 1990. Mr.
Hochman also serves on the Board of Directors of Cablevision Systems Corp. and
Evercom, Inc.
Jenny Morgenthau has been Chief Executive Officer of The Fresh Air Fund,
one of New York's preeminent charitable corporations, since 1983. Prior to
joining The Fresh Air Fund, Ms. Morgenthau worked for New York City's Special
Services for Children, the Department of City Planning and the New York State
Urban Development Corporation. Ms. Morgenthau serves on the board of directors
of a number of charitable and cultural organizations.
Michael A. Pietrangelo is of Counsel in the Memphis, Tennessee law firm of
Pietrangelo Cook PLC, which he joined in February 1998. Previously, Mr.
Pietrangelo was President of Johnson Products Co., a subsidiary of IVAX
Corporation that manufactured and sold cosmetic and health and beauty care
products, principally intended for the African-American consumer. Mr.
Pietrangelo also has held a number of executive positions in the consumer
products industry at Schering-Plough Corporation, including President of the
Personal Care Products Group, and has served as President and Chief Operating
Officer of Western Publishing Group, Inc. and President and Chief Executive
Officer of Cleo, Inc., a subsidiary of Gibson Greetings, Inc.
Robert A. Sigel has been President, Chief Executive Officer and director
of Millbrook since it was acquired by Holdings from McKesson in March 1997. Mr.
Sigel became a director of Holdings in March 1999. Mr. Sigel has been associated
with Millbrook's business since 1977, having served as Vice President, Sales and
Merchandising, Executive Vice President, President and Chief Executive Officer
of Millbrook Distributors, Inc. and President and Chief Executive Officer of the
service merchandising division of McKesson, which became the current Millbrook.
From 1995 through March 1997, Mr. Sigel also served as a Corporate Vice
President of McKesson and on McKesson's Management Board.
Dennis M. Newnham has been President and Chief Executive Officer of
Manischewitz since January 1999. Mr. Newnham became a director of Holdings in
March 1999. Previously, Mr. Newnham was the President and Chief Executive
Officer of Tsumura International, a manufacturer of personal care and fragrance
products and served in such capacities from March 1996 through December 1998. In
1995, Mr. Newnham served as Chairman, President and Chief Executive Officer of
Adirondack Beverages, Inc., one of the largest independent soft drink bottlers
in the Northeast. From April 1983 through March 1994, Mr. Newnham served as
Chairman, President and Chief Executive Officer of Lea & Perrins, Inc., a
specialty foods company. Mr. Newnham also serves as a member of the Board of
Directors of United Water Resources and NutraMax Products, Inc.
Item 11. Executive Compensation
The following table sets forth the compensation earned or paid, including
deferred compensation of the Chief Executive Officer and the most highly
compensated executive officers of Holdings, Enterprises, Millbrook and
Manischewitz for services rendered for each of the fiscal years indicated.
20
None of Holdings, Enterprises, Millbrook or Manischewitz pays a salary to
Mr. Bernstein. Enterprises reimburses P&E Properties, Inc. ("P&E Properties")
for personal services, including executive services rendered by certain of its
executive officers. Although Mr. Bernstein does not receive any salary from P&E
Properties, a portion of these amounts may be deemed indirect compensation to
Mr. Bernstein. See "Certain Relationships and Related Transactions - Related
Party Transactions" on page 24.
None of Holdings, Enterprises, Millbrook or Manischewitz pays a salary to
Messrs. Grossman or Cohen. Messrs. Grossman and Cohen receive a salary from P&E
Properties for executive services rendered to Holdings and Enterprises.
Annual Compensation Long-Term Compensation
------------------- ----------------------
Other Annual
Compensation Options/SARs
Name and Principal Position Year Salary ($) Bonus ($) ($) (#)
--------------------------- ---- ---------- --------- ----- -----
Holdings and Enterprises
Richard A. Bernstein 2000 $ -- $ -- $ -- --
Chairman, President and Chief 1999 $ -- $ -- $ -- --
Executive Officer 1998 $ -- $ -- $ -- --
Steven M. Grossman 2000 $ 243,750 $ -- $ 5,460 --
Executive Vice President, 1999 $ 225,000 $ -- $ 5,040 --
Chief Financial Officer and 1998 $ 178,750 $ -- $ 5,060 --
Treasurer
James A. Cohen 2000 $ 192,000 $ -- $ 5,040 --
Senior Vice President - Legal 1999 $ 160,000 $ -- $ 4,200 --
Affairs 1998 $ 120,000 $ -- $ 3,680 --
Millbrook
Robert A. Sigel 2000 $ 391,619 $ -- $ 9,771 --
Chief Executive Officer 1999 $ 368,319 $ -- $ 9,548 --
and President of Millbrook 1998 $ 355,623 $ 82,330 (1) $ 8,228 (2) --
Manischewitz
Dennis M. Newnham 2000 $ 426,146 $ -- $ 4,044 --
Chief Executive Officer 1999 $ 97,500(3) $ -- $ -- --
and President of Manischewitz
|
(1) During the year ended March 31, 1998, Mr. Sigel was paid a bonus of
$82,330 which was earned during the year ended March 31, 1997.
(2) Other Annual Compensation excludes any amounts paid to Mr. Sigel, in his
capacity as a Corporate Vice President of McKesson Corporation.
(3) Mr. Newnham became Chief Executive Officer and President of Manischewitz
in January 1999.
21
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table contains, as of March 31, 2000, information regarding
the beneficial ownership of the common stock and preferred stock of Holdings:
(1) by each person who is known by Holdings to own beneficially more
than 5% of the outstanding shares of common stock or preferred stock
of Holdings;
(2) by each of the directors and executive officers of Holdings; and
(3) by all directors and executive officers of Holdings as a group.
Based on information furnished by those owners, we believe that the
beneficial owners of the securities listed below have investment and voting
power for all the shares of common stock and preferred stock of Holdings shown
as being beneficially owned by them. The securities are subject to the voting
agreement described under the heading "Certain Relationships and Related
Transactions--Voting Agreement" on page 23. Holdings owns 200 shares of the
common stock of Enterprises, which represents all of the issued and outstanding
capital stock of Enterprises.
Percentage of
Number of Shares of Percentage of Number of Shares of Total Shares of
Common Stock of Total Shares of Series A Preferred Series A
Name of Holdings Common Stock of Stock of Holdings Preferred Stock
Beneficial Owner Beneficially Owned Holdings Beneficially Owned of Holdings
---------------- ------------------ -------- ------------------ -----------
Richard A. Bernstein........................... 42,500 40.4% 12,500 50.0%
Robert A. Sigel................................ 6,600 6.3 250 1.0
James A. Cohen, Esq............................ 3,610 3.4 150 .6
Steven M. Grossman............................. 3,490 3.3 100 .4
Lewis J. Korman................................ 3,450 3.3 500 2.0
Dennis M. Newnham.............................. 3,000 2.9 -- --
Ira A. Gomberg................................. 2,850 2.7 250 1.0
Hal B. Weiss................................... 1,460 1.4 150 .6
Richard H. Hochman............................. 1,200 1.1 500 2.0
Michael A. Pietrangelo......................... 360 .3 150 .6
Jenny Morgenthau............................... 300 .3 125 .5
All directors and executive
officers as a group (11 persons)............... 68,820 65.5% 14,675 58.7%
Number of Shares Percentage of
of Series B Total Shares of
Preferred Stock of Series B
Name of Holdings Preferred Stock
Beneficial Owner Beneficially Owned of Holdings
---------------- ------------------ -----------
Richard A. Bernstein........................... 1,000 100.0%
Robert A. Sigel................................
James A. Cohen, Esq............................
Steven M. Grossman.............................
Lewis J. Korman................................
Dennis M. Newnham..............................
Ira A. Gomberg.................................
Hal B. Weiss...................................
Richard H. Hochman.............................
Michael A. Pietrangelo.........................
Jenny Morgenthau...............................
All directors and executive
officers as a group (11 persons)............... 1,000 100.0%
|
22
Name of Address of
Beneficial Owner Beneficial Owner
---------------- ----------------
Richard A. Bernstein
James A. Cohen, Esq.
Steven M. Grossman
Lewis J. Korman
Ira A. Gomberg
Hal B. Weiss........................ R.A.B. Holdings, Inc.
444 Madison Avenue, Suite 601
New York, New York 10022
Robert A. Sigel..................... Millbrook Distribution Services Inc.
Route 56
88 Huntoon Memorial Highway
Leicester, Massachusetts 01524
Dennis M. Newnham................... The B. Manischewitz Company, LLC
One Manischewitz Plaza
Jersey City, New Jersey 07302
Richard H. Hochman.................. Regent Capital Management Corp.
505 Park Avenue, 17th Floor
New York, New York 10022
Michael A. Pietrangelo.............. Pietrangelo Cook PLC
International Plaza
6410 Poplar, Suite 190
Memphis, Tennessee 38119
Jenny Morgenthau.................... The Fresh Air Fund
1040 Avenue of the Americas
New York, New York 10018
|
Item 13. Certain Relationships and Related Transactions
Voting Agreement
Mr. Bernstein is a party to a voting agreement with each of the holders of
the series A preferred stock and common stock of Holdings. Under the voting
agreement these stockholders agreed to vote all of their shares of series A
preferred stock and common stock as Mr. Bernstein directs or, if Mr. Bernstein
does not give direction, in a manner consistent with the manner in which he
votes his shares of series A preferred stock and common stock. The voting
agreement also provides that the stockholders shall execute any written consent
of holders of series A preferred stock or common stock as Mr. Bernstein directs
or, if Mr. Bernstein does not give direction, in a manner which is consistent
with his vote or written consent on the matter. Pursuant to the voting
agreement, the stockholders have agreed not to execute any other consent of
holders of series A preferred stock or common stock.
23
In the event that a stockholder fails to comply with the voting provisions
above, Mr. Bernstein holds a proxy to vote the stockholder's shares or execute a
written consent in any manner as he may determine in his discretion. Under the
voting agreement, Mr. Bernstein shall not be liable to any stockholder or anyone
making a claim under that stockholder as a result of any vote or the exercise of
any proxy by Mr. Bernstein. This is true even if that vote or exercise of proxy
adversely affects, or results in the decrease in the value of, such
stockholder's shares.
The voting agreement shall terminate on the earliest of (i) the date a
stockholder, and that stockholder's heirs, personal representatives, donees and
trustees of any trusts in which that stockholder has an interest, during the
stockholder's life or when he or she dies, ceases to own any of the shares of
Holdings; (ii) the date on which the common stock of Holdings is listed or
admitted to trade on any national securities exchange or is quoted on the NASDAQ
system or similar means; and (iii) 10 years from the date of the voting
agreement.
Related Party Transactions
At the time of the acquisition of Millbrook by Holdings and the
acquisition of Manischewitz by Enterprises, Millbrook and Manischewitz entered
into separate arrangements with P&E Properties, an entity of which Mr. Bernstein
is the sole shareholder. In these arrangements, Millbrook agreed to pay a
quarterly management fee of $100,000 and Millbrook and Manischewitz agreed to
reimburse P&E Properties for reasonable services and out-of-pocket and other
expenses incurred on Millbrook's and Manischewitz' behalf. These services
include among other things, treasury, cash management, certain financial
reporting, legal, labor and lease negotiation and employee benefits
administration. For the year ended March 31, 2000, P&E Properties was (i) paid
$400,000 in management fees by Millbrook; (ii) reimbursed $875,000 for
reasonable services provided to Millbrook; and (iii) reimbursed approximately
$428,000 for reasonable services provided to Manischewitz.
Enterprises reimburses P&E Properties for personal services, including
executive services, rendered by certain of its executive officers. Mr. Bernstein
does not receive a salary from P&E Properties. Messrs. Grossman and Cohen
receive a salary from P&E Properties for executive services rendered to
Holdings, Enterprises, Millbrook and Manischewitz. The reasonable services
provided are based upon (i) the number of hours incurred at the applicable pay
rate; and (ii) out-of-pocket expenses, related to the services provided. In
addition, in fiscal 2000, Millbrook and Manischewitz reimbursed P&E Properties
approximately $97,000 and $16,000, respectively for use of an airplane owned by
P&E Properties. When commercial flights were reasonably available to the
destination, the reimbursement was determined at the rate of the normal first
class fare. When commercial flights were not available, the reimbursement amount
was equal to the hourly variable costs of the airplane multiplied by the number
of hours of use.
In the opinion of management, these methodologies provided a reasonable
basis for such allocations. In addition, each of Holdings, Enterprises,
Millbrook and Manischewitz believe that the terms of the arrangement with P&E
Properties were no less favorable than could have been obtained from
unaffiliated third parties on an arm's length basis.
At March 31, 2000, Dennis M. Newnham, the Chief Executive Officer and
President of Manischewitz, had an outstanding loan with Holdings in the amount
of $76,300 related to his equity interest in Holdings.
24
Shareholders Agreements
Each employee of Millbrook or Manischewitz who owns shares of the common
stock of Holdings is a party to a shareholders agreement with Holdings. These
agreements prohibit transfer of such shares other than to a member of the
employee shareholder's immediate family or a trustee of a trust for the benefit
of the employee shareholder or his immediate family. In the event of the
termination of such employee, Holdings has the option or obligation, under
certain circumstances, to purchase all the employee shareholder's shares at
prices not greater than their fair market value.
25
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. The financial statements listed in the accompanying Index to
Financial Statements and Schedules are filed as part of this
report.
2. The exhibits listed in the accompanying Index to Exhibits are
filed as part of this report.
(b) Reports on Form 8-K filed in Fourth Quarter of fiscal 2000.
None.
(c) Index to Exhibits.
Exhibit No. Description of Document
----------- -----------------------
2.1 Purchase Agreement dated as of March 3, 1998 among
R.A.B. Food Holdings, Inc., MANO Holdings I, LLC, KBMC
Acquisition Company, L.P., MANO Holdings Corporation and
the stockholders of MANO Holdings Corporation
(incorporated by reference to Exhibit 2.1 to the
Registrants' Registration Statement No. 333-66221 on
Form S-4, filed on October 28, 1998 (the "Registration
Statement")).
3.1 Certificate of Incorporation of R.A.B. Holdings, Inc.
(incorporated by reference to Exhibit 3.1 to the
Registration Statement).
3.2 Certificate of Amendment of Certificate of Incorporation
of R.A.B. Holdings, Inc. (incorporated by reference to
Exhibit 3.2 to the Registration Statement).
*3.2.1 Certificate of Designation of R.A.B. Holdings, Inc. for
the Series A Preferred Stock.
*3.2.2 Certificate of Designation of R.A.B. Holdings, Inc. for
the Series B Preferred Stock.
3.3 Bylaws of R.A.B. Holdings, Inc. (incorporated by
reference to Exhibit 3.3 to the Registration Statement).
3.4 Certificate of Incorporation of R.A.B. Enterprises, Inc.
(incorporated by reference to Exhibit 3.4 to the
Registration Statement).
3.5 Amendment of Certificate of Incorporation of R.A.B.
Enterprises, Inc. (incorporated by reference to Exhibit
3.5 to the Registration Statement).
3.6 Bylaws of R.A.B. Enterprises, Inc. (incorporated by
reference to Exhibit 3.6 to the Registration Statement).
3.7 Certificate of Incorporation of Millbrook Distribution
Services Inc. (incorporated by reference to Exhibit 3.7
to the Registration Statement).
3.8 Bylaws of Millbrook Distribution Services Inc.
(incorporated by reference to Exhibit 3.8 to the
Registration Statement).
|
26
Exhibit No. Description of Document
----------- -----------------------
3.9 Certificate of Formation of The B. Manischewitz Company,
LLC (incorporated by reference to Exhibit 3.9 to the
Registration Statement).
3.10 Operating Agreement of The B. Manischewitz Company, LLC
(incorporated by reference to Exhibit 3.10 to the
Registration Statement).
4.1 Indenture, dated as of May 1, 1998, among R.A.B.
Holdings, Inc. and PNC Bank, National Association, as
Trustee, relating to the Holdings Notes (incorporated by
reference to Exhibit 4.1 to the Registration Statement).
4.2 Form of Old Holdings Note (included as Exhibit A to
Exhibit 4.1 to the Registration Statement) (incorporated
by reference to Exhibit 4.2 to the Registration
Statement).
4.3 Form of New Holdings Note (included as Exhibit B to
Exhibit 4.1 to the Registration Statement) (incorporated
by reference to Exhibit 4.3 to the Registration
Statement).
4.4 Indenture, dated as of May 1, 1998, among R.A.B.
Enterprises, Inc. and PNC Bank, National Association, as
Trustee, relating to the Old Enterprises Notes
(incorporated by reference to Exhibit 4.4 to the
Registration Statement).
4.5 Form of Old Enterprises Note (included as Exhibit A to
Exhibit 4.4 hereto) (incorporated by reference to
Exhibit 4.5 to the Registration Statement).
4.6 Form of New Enterprises Note (included as Exhibit B to
Exhibit 4.4 hereto) (incorporated by reference to
Exhibit 4.6 to the Registration Statement).
4.7 Exchange and Registration Rights Agreement, dated as of
May 1, 1998 between Holdings and Chase Securities Inc.
relating to the Old Holdings Notes (incorporated by
reference to Exhibit 4.7 to the Registration Statement).
4.8 Exchange and Registration Rights Agreement, dated as of
May 1, 1998 among Enterprises, the Guarantors named
therein and Chase Securities Inc. relating to the Old
Enterprises Notes (incorporated by reference to Exhibit
4.8 to the Registration Statement).
4.9 Purchase Agreement, dated April 28, 1998 among Holdings,
Enterprises, Millbrook and Chase Securities, Inc.
(incorporated by reference to Exhibit 4.9 to the
Registration Statement).
9.1 Form of Voting Agreement (incorporated by reference to
Exhibit 9.1 to Amendment No. 1 to the Registration
Statement, filed on December 29, 1998).
|
27
Exhibit No. Description of Document
----------- -----------------------
10.1 Credit Agreement, dated as of May 1, 1998 among
Millbrook, Manischewitz, the Lenders party thereto, The
Chase Manhattan Bank, as administrative and collateral
agent for the Lenders, and NationsBank, N.A., as
Co-Agent and Documentation Agent (the "Amended and
Restated Credit Agreement") (incorporated by reference
to Exhibit 10.1 to the Registration Statement).
10.1.1 Amendment dated as of February 8, 1999 to the Amended
and Restated Credit Agreement, dated as of May 1, 1998.
(incorporated by reference to Exhibit 10.1.1 to the
Registrants' Annual Report on Form 10-K for the fiscal
year 1999 (the "1999 Form 10-K")).
10.1.2 Amendment dated as of February 19, 1999 to the Amended
and Restated Credit Agreement, dated as of May 1, 1998.
(incorporated by reference to Exhibit 10.1.2 to the 1999
Form 10-K).
10.1.3 Amendment dated as of March 24, 1999 to the Amended and
Restated Credit Agreement, dated as of May 1, 1998.
(incorporated by reference to Exhibit 10.1.3 to the 1999
Form 10-K).
*10.1.4 Amendment dated as of April 5, 1999 to the Amended and
Restated Credit Agreement, dated as of May 1, 1998.
*10.1.5 Amendment dated as of January 31, 2000 to the Amended
and Restated Credit Agreement, dated as of May 1, 1998.
10.2 Stock Purchase Agreement dated as of February 21, 1997
between R.A.B. Holdings, Inc. and McKesson Corporation
(incorporated by reference to Exhibit 10.2 to Amendment
No. 1 to the Registration Statement, filed on December
29, 1998).
21.1 List of subsidiaries of the Co-Registrants (incorporated
by reference to Exhibit 21.1 to the Registration
Statement).
*27.1 Financial Data Schedule of R.A.B. Holdings, Inc.
*27.2 Financial Data Schedule of R.A.B. Enterprises, Inc.
|
*Filed herewith.
(d) Financial Statement Schedules.
The financial statements schedules are listed in the accompanying
Index to Financial Statements and Schedules.
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
city of New York, state of New York on the 6th day of July, 2000.
R.A.B HOLDINGS, INC.
/s/ Richard A. Bernstein
------------------------------------------
Richard A. Bernstein, President
and Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/s/ Richard A. Bernstein Chairman, President, Chief Executive Officer July 6, 2000
--------------------------- and Director
Richard A. Bernstein (principal executive officer)
/s/ Steven M. Grossman Executive Vice President, Chief Financial July 6, 2000
--------------------------- Officer, Treasurer and Director
Steven M. Grossman (principal financial and accounting officer)
/s/ Lewis J. Korman Vice Chairman and Director July 6, 2000
---------------------------
Lewis J. Korman
/s/ Robert A. Sigel Director July 6, 2000
---------------------------
Robert A. Sigel
/s/ Dennis M. Newnham Director July 6, 2000
---------------------------
Dennis M. Newnham
/s/ Richard H. Hochman Director July 6, 2000
---------------------------
Richard H. Hochman
/s/ Jenny Morgenthau Director July 6, 2000
---------------------------
Jenny Morgenthau
/s/ Michael A. Pietrangelo Director July 6, 2000
---------------------------
Michael A. Pietrangelo
|
Supplemental information to be furnished with reports filed pursuant to Section
15(d) of the Act by registrants which have not registered securities pursuant to
Section 12 of the Act.
No annual report or proxy material has been sent to security holders of each
registrant.
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of New
York, state of New York on the 6th day of July, 2000.
R.A.B ENTERPRISES, INC.
/s/ Richard A. Bernstein
------------------------------------------
Richard A. Bernstein, President
and Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/s/ Richard A. Bernstein Chairman, President, Chief Executive Officer July 6, 2000
--------------------------- and Director
Richard A. Bernstein (principal executive officer)
/s/ Steven M. Grossman Executive Vice President, Chief Financial July 6, 2000
--------------------------- Officer, Treasurer and Director
Steven M. Grossman (principal financial and accounting officer)
/s/ Lewis J. Korman Vice Chairman and Director July 6, 2000
---------------------------
Lewis J. Korman
/s/ James A. Cohen Senior Vice President - Legal Affairs, July 6, 2000
--------------------------- Secretary and Director
James A. Cohen
|
Supplemental information to be furnished with reports filed pursuant to Section
15(d) of the Act by registrants which have not registered securities pursuant to
Section 12 of the Act.
No annual report or proxy material has been sent to security holders of each
registrant.
30
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Financial Statements Page
-------------------- ----
Consolidated Financial Statements of R.A.B. Holdings, Inc. And Subsidiaries and
R.A.B. Enterprises, Inc. And Subsidiaries
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets as of March 31, 2000 and 1999.................................................. F-3
Consolidated Statements of Operations for the Years Ended
March 31, 2000, 1999 and 1998........................................................................... F-4
Consolidated Statements of Stockholders' Equity (Holdings) for the Years Ended
March 31, 2000, 1999 and 1998........................................................................... F-5
Consolidated Statements of Stockholder's Equity (Enterprises) for the Years Ended
March 31, 2000, 1999 and 1998........................................................................... F-6
Consolidated Statements of Cash Flows for the Years Ended
March 31, 2000, 1999 and 1998........................................................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
Schedules
---------
I - Condensed Financial Information of Registrants....................................................... S-1
II - Valuation and Qualifying Accounts................................................................... S-5
|
Schedules which are not included have been omitted because either they are
not required or are not applicable or because the required information has been
included elsewhere in the consolidated financial statements or notes thereto.
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
R.A.B. Holdings, Inc.
New York, New York
To the Board of Directors and Stockholder of
R.A.B. Enterprises, Inc.
New York, New York
We have audited the accompanying consolidated financial statements and financial
statement schedules of R.A.B. Holdings, Inc. and subsidiaries and R.A.B.
Enterprises, Inc. (a wholly-owned subsidiary of R.A.B. Holdings, Inc.) and
subsidiaries listed in the foregoing index. These financial statements and
financial statement schedules are the responsibility of the companies'
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial positions of R.A.B. Holdings, Inc. and
subsidiaries and R.A.B. Enterprises, Inc. and subsidiaries as of March 31, 2000
and 1999, and the results of their operations and cash flows for each of the
three years in the period ended March 31, 2000 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
June 27, 2000
New York, New York
F-2
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except for share and per share data)
March 31, 2000
----------------------------------------------------------------------------------------------- -------------------------------
Holdings Enterprises
-------------- --------------
ASSETS
Current assets:
Cash $ 4,637 $ 4,618
Accounts receivable 54,985 54,985
Inventories 65,286 65,286
Restricted investments 3,145 -
Other current assets 5,757 6,805
-------------- --------------
Total current assets 133,810 131,694
Noncurrent assets:
Restricted investments 1,582 -
Other assets 13,158 12,178
-------------- --------------
Total noncurrent assets 14,740 12,178
Property, plant and equipment, net 37,199 37,199
Intangibles, net 104,259 104,259
-------------- --------------
Total assets $ 290,008 $ 285,330
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,946 $ 1,946
Accounts payable 50,581 50,581
Other current liabilities 26,734 24,101
-------------- --------------
Total current liabilities 79,261 76,628
Noncurrent liabilities:
Long-term debt 168,143 143,143
Deferred compensation 9,319 9,319
Deferred income taxes 9,539 9,539
Other liabilities 4,998 4,998
-------------- --------------
Total noncurrent liabilities 191,999 166,999
Commitments and contingencies
Stockholders' equity:
Preferred stock, $500 par value, 100,000 shares authorized,
24,875 and 20,000 shares of Series A issued and
outstanding at March 31, 2000 and March 31, 1999, respectively 12,344 -
1,000 shares of Series B issued and outstanding
at March 31, 2000 500 -
Common stock, $.01 and $1.00 par value, 1,000,000 shares
and 200 shares authorized, issued 105,100 shares and
200 shares at March 31, 2000 and 104,100 shares and
200 shares at March 31, 1999, respectively 1 -
Additional paid-in capital 428 39,482
Retained earnings (deficit) 5,317 2,062
Accumulated other comprehensive income 159 159
-------------- --------------
18,749 41,703
Less common stock in treasury - 700 shares 1 -
-------------- --------------
Total stockholders' equity 18,748 41,703
-------------- --------------
Total liabilities and stockholders' equity $ 290,008 $ 285,330
============== ==============
March 31, 1999
----------------------------------------------------------------------------------------------- ------------------------------
Holdings Enterprises
-------------- --------------
ASSETS
Current assets:
Cash $ 2,088 $ 2,078
Accounts receivable 52,989 52,989
Inventories 62,061 62,061
Restricted investments 5,805 -
Other current assets 12,304 10,512
-------------- --------------
Total current assets 135,247 127,640
Noncurrent assets:
Restricted investments 8,880 -
Other assets 14,935 13,268
-------------- --------------
Total noncurrent assets 23,815 13,268
Property, plant and equipment, net 38,467 38,467
Intangibles, net 100,078 100,078
-------------- --------------
Total assets $ 297,607 $ 279,453
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,291 $ 1,291
Accounts payable 56,530 56,530
Other current liabilities 26,138 23,437
-------------- --------------
Total current liabilities 83,959 81,258
Noncurrent liabilities:
Long-term debt 182,758 134,758
Deferred compensation 9,095 9,095
Deferred income taxes 8,860 8,860
Other liabilities 8,304 8,304
-------------- --------------
Total noncurrent liabilities 209,017 161,017
Commitments and contingencies
Stockholders' equity:
Preferred stock, $500 par value, 100,000 shares authorized,
24,875 and 20,000 shares of Series A issued and
outstanding at March 31, 2000 and March 31, 1999, respectively 9,906 -
1,000 shares of Series B issued and outstanding
at March 31, 2000 - -
Common stock, $.01 and $1.00 par value, 1,000,000 shares
and 200 shares authorized, issued 105,100 shares and
200 shares at March 31, 2000 and 104,100 shares and
200 shares at March 31, 1999, respectively 1 -
Additional paid-in capital 332 39,482
Retained earnings (deficit) (5,748) (2,444)
Accumulated other comprehensive income 140 140
-------------- --------------
4,631 37,178
Less common stock in treasury - 700 shares - -
-------------- --------------
Total stockholders' equity 4,631 37,178
-------------- --------------
Total liabilities and stockholders' equity $ 297,607 $ 279,453
============== ==============
|
See notes to Consolidated Financial Statements
F-3
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
For the years ended March 31, 2000 1999
------------------------------------------------------------- -------------------------------- --------------------------------
Holdings Enterprises Holdings Enterprises
--------------- -------------- -------------- ---------------
Revenues $ 580,616 $ 580,570 $ 508,293 $ 508,293
Costs and expenses:
Cost of sales 443,390 443,390 385,536 385,536
Selling 48,305 48,305 48,115 48,115
Distribution and warehousing 45,224 45,224 38,067 38,067
General and administrative 24,646 24,625 23,861 23,861
Amortization of intangibles 3,086 3,086 2,790 2,790
--------------- -------------- -------------- ---------------
Total costs and expenses 564,651 564,630 498,369 498,369
--------------- -------------- -------------- ---------------
Operating income 15,965 15,940 9,924 9,924
Interest expense, net 18,960 15,888 20,020 14,949
--------------- -------------- -------------- ---------------
(Loss) income before (benefit) provision for income taxes (2,995) 52 (10,096) (5,025)
(Benefit) provision for income taxes (1,146) 288 (3,174) (1,399)
--------------- -------------- -------------- ---------------
(Loss) income before extraordinary item (1,849) (236) (6,922) (3,626)
Extraordinary gain on early extinguishment of debt,
net of income taxes of $8.5 million and
$3.1 million, respectively 12,914 4,742 - -
--------------- -------------- -------------- ---------------
Net income (loss) $ 11,065 $ 4,506 $ (6,922) $ (3,626)
=============== ============== ============== ===============
For the years ended March 31, 1998
------------------------------------------------------------- --------------------------------
Holdings Enterprises
--------------- --------------
Revenues $ 470,201 $ 470,201
Costs and expenses:
Cost of sales 360,162 360,162
Selling 43,766 43,766
Distribution and warehousing 37,339 37,339
General and administrative 21,559 21,551
Amortization of intangibles - -
--------------- --------------
Total costs and expenses 462,826 462,818
--------------- --------------
Operating income 7,375 7,383
Interest expense, net 5,079 5,079
--------------- --------------
(Loss) income before (benefit) provision for income taxes 2,296 2,304
(Benefit) provision for income taxes 1,122 1,122
--------------- --------------
(Loss) income before extraordinary item 1,174 1,182
Extraordinary gain on early extinguishment of debt,
net of income taxes of $8.5 million and
$3.1 million, respectively - -
--------------- --------------
Net income (loss) $ 1,174 $ 1,182
=============== ==============
|
See notes to Consolidated Financial Statements
F-4
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands except for share data)
For the years ended March 31, 2000 1999
---------------------------------------------------------------- ------------------------------- -------------------------------
Shares Amounts Shares Amounts
-------------- -------------- -------------- --------------
Preferred stock, $500 par value, 100,000
shares authorized:
Series A:
Balance at beginning of period 20,000 $ 9,906 20,000 $ 9,906
Issuance of stock 4,875 2,438 - -
-------------- -------------- -------------- --------------
Balance at end of period 24,875 12,344 20,000 9,906
-------------- -------------- -------------- --------------
Series B:
Balance at beginning of period - - - -
Issuance of stock 1,000 500 - -
-------------- -------------- -------------- --------------
Balance at end of period 1,000 500 - -
-------------- -------------- -------------- --------------
Common stock, $.01 par value, 1,000,000
shares authorized:
Balance at beginning of period 104,100 1 100,000 1
Issuance of stock 1,000 - 4,100 -
-------------- -------------- -------------- --------------
Total 105,100 1 104,100 1
-------------- -------------- -------------- --------------
Treasury shares at beginning of period - - (1,600) (2)
Purchase of treasury shares (900) (1) (2,800) (4)
Issuance of stock 200 - 4,400 6
-------------- -------------- -------------- --------------
Treasury shares at end of period (700) (1) - -
-------------- -------------- -------------- --------------
Balance at end of period 104,400 - 104,100 1
-------------- -------------- -------------- --------------
Additional paid-in capital:
Balance at beginning of period 332 98
Issuance of treasury shares and common stock 96 234
-------------- --------------
Balance at end of period 428 332
-------------- --------------
Retained earnings (deficit):
Balance at beginning of period (5,748) 1,174
Net (loss) income 11,065 (6,922)
-------------- --------------
Balance at end of period 5,317 (5,748)
-------------- --------------
Other comprehensive income (loss):
Unrealized gain on securities
available-for-sale 159 214
Minimum pension liability adjustment - (74)
-------------- --------------
Other comprehensive income 159 140
-------------- --------------
Total stockholders' equity $ 18,748 $ 4,631
============== ==============
For the years ended March 31, 1998
---------------------------------------------------------------- -------------------------------
Shares Amounts
--------------- --------------
Preferred stock, $500 par value, 100,000
shares authorized:
Series A:
Balance at beginning of period 20,000 $9,906
Issuance of stock - -
--------------- --------------
Balance at end of period 20,000 9,906
--------------- --------------
Series B:
Balance at beginning of period - -
Issuance of stock - -
--------------- --------------
Balance at end of period - -
--------------- --------------
Common stock, $.01 par value, 1,000,000
shares authorized:
Balance at beginning of period 99,000 1
Issuance of stock 1,000 -
--------------- --------------
Total 100,000 1
--------------- --------------
Treasury shares at beginning of period - -
Purchase of treasury shares (1,600) (2)
Issuance of stock - -
--------------- --------------
Treasury shares at end of period (1,600) (2)
--------------- --------------
Balance at end of period 98,400 (1)
--------------- --------------
Additional paid-in capital:
Balance at beginning of period 97
Issuance of treasury shares and common stock 1
--------------
Balance at end of period 98
--------------
Retained earnings (deficit):
Balance at beginning of period -
Net (loss) income 1,174
--------------
Balance at end of period 1,174
--------------
Other comprehensive income (loss):
Unrealized gain on securities
available-for-sale -
Minimum pension liability adjustment -
--------------
Other comprehensive income -
--------------
Total stockholders' equity $ 11,177
==============
|
See notes to Consolidated Financial Statements
F-5
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(In thousands except for share data)
For the years ended March 31, 2000 1999
---------------------------------------------------------------- ------------------------------- -------------------------------
Shares Amounts Shares Amounts
-------------- -------------- -------------- --------------
Common stock, $1.00 par value, 200
shares authorized:
Balance at beginning of period 200 $ - 200 $ -
Issuance of stock - - - -
-------------- -------------- -------------- --------------
Balance at end of period 200 - 200 -
-------------- -------------- -------------- --------------
Additional paid-in capital:
Balance at beginning of period 39,482 10,100
Equity investment from Holdings - 29,382
-------------- --------------
Balance at end of period 39,482 39,482
-------------- --------------
Retained earnings (deficit):
Balance at beginning of period (2,444) 1,182
Net income (loss) 4,506 (3,626)
-------------- --------------
Balance at end of period 2,062 (2,444)
-------------- --------------
Other comprehensive income (loss):
Unrealized gain on securities
available-for-sale 159 214
Minimum pension liability adjustment - (74)
-------------- --------------
Other comprehensive income 159 140
-------------- --------------
Total stockholder's equity $ 41,703 $ 37,178
============== ==============
For the years ended March 31, 1998
---------------------------------------------------------------- -------------------------------
Shares Amounts
-------------- --------------
Common stock, $1.00 par value, 200
shares authorized:
Balance at beginning of period 200 $ -
Issuance of stock - -
-------------- --------------
Balance at end of period 200 -
-------------- --------------
Additional paid-in capital:
Balance at beginning of period 10,100
Equity investment from Holdings -
--------------
Balance at end of period 10,100
--------------
Retained earnings (deficit):
Balance at beginning of period -
Net income (loss) 1,182
--------------
Balance at end of period 1,182
--------------
Other comprehensive income (loss):
Unrealized gain on securities
available-for-sale -
Minimum pension liability adjustment -
--------------
Other comprehensive income -
--------------
Total stockholder's equity $ 11,282
==============
|
See notes to Consolidated Financial Statements
F-6
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the years ended March 31, 2000 1999
------------------------------------------------------------ ------------------------------------- -----------------
Holdings Enterprises Holdings
----------------- ----------------- -----------------
Cash flows from operating activities:
Net income (loss) $ 11,065 $ 4,506 $ (6,922)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 6,651 6,522 7,027
Amortization of intangibles 3,086 3,086 2,790
Extraordinary gain on early extinguishment of debt,
net of income taxes (12,914) (4,742) -
Loss (gain) on disposition of equipment 57 57 (82)
Deferred income taxes 3,810 2,035 (2,388)
Changes in assets and liabilities:
Accounts receivable (1,996) (1,996) (8,461)
Inventories 3,779 3,779 (13,750)
Other current assets 2,824 1,759 (2,606)
Accounts payable (5,949) (5,949) 22,995
Other current liabilities (1,098) (1,030) 6,786
Other assets and liabilities (10,599) (4,790) (2,398)
----------------- ----------------- -----------------
Net cash provided by (used in) operating activities (1,284) 3,237 2,991
----------------- ----------------- -----------------
Cash flows from investing activities:
Purchase of I. Epstein & Sons, Inc. (14,986) (14,986) -
Purchase of The B. Manischewitz Company, LLC,
net of cash acquired - - (126,155)
Acquisitions of plant and equipment (3,373) (3,373) (3,419)
Proceeds from disposition of equipment 38 38 233
----------------- ----------------- -----------------
Net cash used in investing activities (18,321) (18,321) (129,341)
----------------- ----------------- -----------------
Cash flows from financing activities:
Proceeds from issuance and (repurchase of)
long-term debt (21,016) (12,266) 168,000
Payment of debt issuance costs - - (6,489)
Funding of interest escrow account - - (16,991)
Payment from interest escrow account 10,247 - 3,120
Borrowings (repayments) under Credit Agreement 29,890 29,890 (22,061)
Proceeds from the issuance of preferred stock 3,000 - -
Proceeds from issuance and
repurchase of common stock 33 - 236
Equity investment from Holdings - - -
----------------- ----------------- -----------------
Net cash provided by (used in) financing activities 22,154 17,624 125,815
----------------- ----------------- -----------------
Net increase (decrease) in cash 2,549 2,540 (535)
Cash, beginning of year 2,088 2,078 2,623
----------------- ----------------- -----------------
Cash, end of year $ 4,637 $ 4,618 $ 2,088
================= ================= =================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 19,504 $ 14,950 $ 11,229
Income taxes $ 1,073 $ 196 $ 828
|
For the years ended March 31, 1999 1998
------------------------------------------------------------ ----------------- --------------------------------------
Enterprises Holdings Enterprises
----------------- ----------------- -----------------
Cash flows from operating activities:
Net income (loss) $ (3,626) $ 1,174 $ 1,182
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 6,758 4,471 4,471
Amortization of intangibles 2,790 - -
Extraordinary gain on early extinguishment of debt,
net of income taxes - - -
Loss (gain) on disposition of equipment (82) (20) (20)
Deferred income taxes (613) (106) (106)
Changes in assets and liabilities:
Accounts receivable (8,461) 1,950 1,950
Inventories (13,750) 10,457 10,457
Other current assets (2,486) 3,773 3,545
Accounts payable 22,995 1,952 1,952
Other current liabilities 4,087 3,729 4,789
Other assets and liabilities (1,378) (1,477) (1,584)
----------------- ----------------- -----------------
Net cash provided by (used in) operating activities 6,234 25,903 26,636
----------------- ----------------- -----------------
Cash flows from investing activities:
Purchase of I. Epstein & Sons, Inc. - - -
Purchase of The B. Manischewitz Company, LLC,
net of cash acquired (126,155) - -
Acquisitions of plant and equipment (3,419) (2,309) (2,309)
Proceeds from disposition of equipment 233 83 83
----------------- ----------------- -----------------
Net cash used in investing activities (129,341) (2,226) (2,226)
----------------- ----------------- -----------------
Cash flows from financing activities:
Proceeds from issuance and (repurchase of)
long-term debt 120,000 - -
Payment of debt issuance costs (4,759) - -
Funding of interest escrow account - - -
Payment from interest escrow account - - -
Borrowings (repayments) under Credit Agreement (22,061) (23,690) (23,690)
Proceeds from the issuance of preferred stock - - -
Proceeds from issuance and
repurchase of common stock - (1) -
Equity investment from Holdings 29,382 - -
----------------- ----------------- -----------------
Net cash provided by (used in) financing activities 122,562 (23,691) (23,690)
----------------- ----------------- -----------------
Net increase (decrease) in cash (545) (14) 720
Cash, beginning of year 2,623 2,637 1,903
----------------- ----------------- -----------------
Cash, end of year $ 2,078 $ 2,623 $ 2,623
================= ================= =================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 8,109 $ 4,054 $ 4,054
Income taxes $ 828 $ 1,392 $ 1,392
|
See notes to Consolidated Financial Statements
F-7
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary Of Significant Accounting Policies
The Summary of Significant Accounting Policies below and the other
notes to the consolidated financial statements on the following pages are
integral parts of the accompanying consolidated financial statements of
R.A.B. Holdings, Inc. ("Holdings") and R.A.B. Enterprises, Inc.
("Enterprises"), its direct wholly-owned subsidiary (the "Consolidated
Financial Statements"). Holdings is a holding company with no substantial
assets or operations other than its investment in Enterprises. Enterprises
is a holding company with no substantial assets or operations other than
its investments in Millbrook Distribution Services Inc. ("Millbrook") and
The B. Manischewitz Company, LLC ("Manischewitz").
Millbrook is one of the nation's largest independent value-added
distributors of health and beauty care, general merchandise and specialty
food products. Manischewitz manufactures processed kosher and other ethnic
foods including, among others, matzos, cake mixes, cookies, soups, noodles
and processed fish products and also licenses its name to third parties
for which it receives royalties. Holdings and Enterprises are referred to
collectively as the "Companies".
Principles of Consolidation - The Consolidated Financial Statements
include the accounts of the Companies and their subsidiaries. All
significant intercompany transactions and balances are eliminated in
consolidation. Certain reclassifications have been made in the prior year
financial statements to conform with the current year presentation.
Use of Estimates - 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, the 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. Actual
results could differ from these estimates.
Concentration of Credit Risk - Trade accounts receivable potentially
subject the Companies to credit risk. The Companies extend credit to their
customers, principally in the U.S. supermarket industry, based upon an
evaluation of the customer's financial condition and credit history and
generally do not require collateral. The Companies' allowances for
doubtful accounts are based upon the expected collectability of trade
accounts receivable.
Fiscal Year - The Companies' fiscal years end on March 31.
Inventories - Inventories are stated at the lower of cost or market.
Cost is determined by the last-in, first-out ("LIFO") method. At March 31,
2000 and 1999, the replacement cost of inventories valued using the LIFO
method exceeded the net carrying amount of such inventories by
approximately $999,000 and $322,000, respectively. For the year ended
March 31, 2000, the liquidation of certain LIFO layers decreased costs of
products sold by approximately $250,000.
Marketable Securities - Marketable securities held by the Companies
are classified as available-for-sale. The aggregate excess of fair value
over cost, net of related income taxes is included as a separate component
of stockholders' equity.
F-8
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary Of Significant Accounting Policies (Continued)
Property, Plant and Equipment - Property, plant and equipment are
recorded at cost. For financial reporting purposes, depreciation is
provided on the straight-line method over the following estimated useful
lives:
Buildings and improvements....... 5-35 years
Machinery and equipment.......... 2-15 years
Rolling stock.................... 3-8 years
|
Expenditures which significantly increase value or extend useful
lives are capitalized, while ordinary maintenance and repairs are expensed
as incurred. The cost and related accumulated depreciation of assets
replaced, retired or disposed of are removed from the accounts and any
related gains or losses are reflected in operations.
Intangibles - Intangibles, which include trademarks, trade names,
distributorship and trademark license agreements and the excess of cost
over net assets acquired, are amortized on a straight-line basis over
their estimated useful lives ranging from 4 to 40 years.
Long-Lived Assets - The Companies review their long-lived assets and
related intangibles for impairment whenever changes in circumstances
indicate that the carrying amount of an asset may not be fully
recoverable. Such changes in circumstances may include, among other
factors, a significant change in technology that may render an asset
obsolete or noncompetitive or a significant change in the extent or manner
in which an asset is used. The assessment for potential impairment is
based upon the Companies' abilities to recover the unamortized balance of
their long-lived assets from expected future cash flows on an undiscounted
basis (without interest charges). If such expected future cash flows are
less than the carrying amount of the asset, an impairment loss would be
recorded.
Revenue Recognition - Revenue is recognized when products are
shipped or services are provided to customers. Provisions for returns and
allowances and bad debts are based upon historical experience and known
events.
Royalty Income - The Companies have licensing agreements under which
they receive royalty payments. Royalty payments due under licensing
agreements are recognized as income either based upon shipment reports
from manufacturers, where available, or estimated shipments by such
manufacturers.
Income Taxes - Deferred income taxes result primarily from temporary
differences between financial and tax reporting and acquisition basis
differences.
Comprehensive (Loss) Income - For the years ended March 31, 2000,
1999 and 1998, Holdings' and Enterprises' comprehensive (loss) income was
$11,084,000 and $4,525,000, respectively, ($6,782,000) and ($3,486,000),
respectively, and $1,174,000 and $1,182,000, respectively.
F-9
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary Of Significant Accounting Policies (Continued)
Accounting Pronouncements - Statement of Financial Accounting
Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and
Hedging Activities" was issued in June 1998 and is effective for fiscal
years beginning after June 15, 2000. SFAS No. 133 requires the recognition
of all derivatives in the consolidated balance sheet as either assets or
liabilities measured at fair value. The Companies will adopt SFAS No. 133
when it becomes effective. The Companies have not yet determined the
impact SFAS No. 133 will have on their financial positions or results of
operations when such statement is adopted.
2. Formation And Acquisition
On May 6, 1996, Holdings, a Delaware corporation, was formed. On
March 31, 1997, Holdings acquired Millbrook for a purchase price of
approximately $67 million, including transaction costs. Holdings had no
operations prior to April 1, 1997. The acquisition was accounted for as a
purchase and, accordingly, the purchase price was allocated to the assets
and liabilities of Millbrook based upon their fair values at the date of
acquisition. The fair values of assets acquired (approximately $129
million) and liabilities assumed (approximately $53 million) were based
upon third party appraisals and other valuation analyses. The fair value
of the net assets acquired exceeded the purchase price by approximately $9
million. The resulting negative goodwill reduced the fair value assigned
to Millbrook's property, plant and equipment.
On January 26, 1998, Holdings formed Enterprises, a wholly-owned
subsidiary and Delaware corporation. Effective March 3, 1998, Enterprises
entered into a purchase agreement with MANO Holdings I, LLC, KBMC
Acquisition Company, L.P., MANO Holdings Corporation ("MANO") and the
stockholders of MANO to acquire all of the outstanding membership
interests of Manischewitz. On May 1, 1998, Enterprises acquired all of the
outstanding interests of Manischewitz for approximately $126.2 million
through the issuance of $120 million Senior Notes due 2005 bearing
interest at 10.5% ("10.5% Notes") and the issuance by Holdings of $48
million Senior Notes due 2008 bearing interest at 13% ("13% Notes"). The
10.5% Notes are fully and unconditionally guaranteed on a joint and
several basis by Millbrook and Manischewitz. Accordingly, as the combined
financial statements of the subsidiaries guaranteeing the 10.5% Notes (the
Companies' only consequential subsidiaries) are substantially equivalent
to the consolidated financial statements of Enterprises, no separate
financial statements of Millbrook and Manischewitz are presented since
management has determined that such information is not material to
investors.
The 13% Notes pay interest for the first three years, semi-annually,
from an interest escrow account which was established upon their issuance.
The interest escrow account consists of treasury securities which have
been accounted for as held-to-maturity and are classified on the
consolidated balance sheets as Restricted investments. These Restricted
investments, which mature November 1 and May 1 during each of the first
three years the 13% Notes are outstanding, may only be used to pay the
semi-annual interest due.
F-10
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Formation And Acquisition (Continued)
The acquisition of Manischewitz was accounted for as a purchase and,
accordingly, the purchase price was allocated to the assets and
liabilities of Manischewitz based upon their fair values at the date of
acquisition. The fair values of assets acquired, including identified
intangibles (approximately $126 million), and liabilities assumed
(approximately $70 million) were based upon third party appraisals and
other valuation analyses. The purchase price exceeded the fair value of
the net assets acquired by approximately $56 million. The consolidated
statements of operations include the operating results of Manischewitz
since its date of acquisition. Concurrent with the Manischewitz
acquisition, Holdings contributed its wholly-owned subsidiary Millbrook to
Enterprises. This contribution was accounted for as an "as if" pooling of
interests.
The pro forma consolidated historical results, as if the
Manischewitz business had been acquired at the beginning of each of the
periods presented, are as follows (in thousands):
For the years ended March 31, 1999 1998
----------------------------- -------------------------------------- --------------------------------------
Holdings Enterprises Holdings Enterprises
---------------- ---------------- ---------------- ----------------
Revenues $ 512,730 $ 512,730 $ 524,575 $ 524,575
Net loss $ (7,772) $ (4,176) $ (4,585) $ (989)
|
On January 31, 2000, Millbrook acquired certain of the assets and
operation of I. Epstein & Sons, Inc. ("Epstein") for a purchase price of
approximately $15.4 million, including transaction costs. Epstein was a
full service distributor of kosher and specialty food products, including
its Season brand of canned fish, vegetables and other specialty food
products. Concurrent with the acquisition, the management and ownership of
the Season brand was assumed by the Companies' Manischewitz subsidiary.
The acquisition of Epstein was accounted for as a purchase and,
accordingly, the purchase price was allocated to the assets and
liabilities of Epstein based upon their fair values at the date of
acquisition. The fair value of the assets acquired (approximately $17
million) and liabilities assumed (approximately $2 million) were based
upon third party appraisals and other valuation analyses. The purchase
price exceeded the fair value of the net assets acquired by approximately
$7 million which is being amortized over 25 years. The liabilities assumed
include a $900,000 provision for a minor restructuring of the Epstein
operations as a result of the acquisition. This liability is primarily
comprised of a portion of future lease payments. As of March 31, 2000,
this provision has been included as a component of Other Current
Liabilities and Other Liabilities on the Companies' balance sheets. The
consolidated statements of operations include the operating results of
Epstein since its date of acquisition. Pro forma historical operating
results have not been included as the impact of the acquisition was not
considered significant on a consolidated basis.
F-11
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Accounts Receivable
Accounts receivable for Holdings and Enterprises consisted of the
following (in thousands):
March 31, 2000 1999
------------------------------------------ --------- ---------
Accounts receivable....................... $ 59,236 $ 56,292
Allowance for doubtful accounts........... (4,251) (3,303)
--------- ---------
$ 54,985 $ 52,989
========= =========
4. Inventories
|
Inventories for Holdings and Enterprises consisted of the following
(in thousands):
March 31, 2000 1999
------------------------------------------ --------- ---------
Raw materials............................. $ 1,815 $ 1,219
Finished goods............................ 63,471 60,842
--------- ---------
$ 65,286 $ 62,061
========= =========
5. Property, Plant & Equipment
|
Property, plant and equipment for Holdings and Enterprises consisted
of the following (in thousands):
March 31, 2000 1999
------------------------------------------ --------- ---------
Land...................................... $ 2,929 $ 2,936
Buildings and improvements................ 17,364 16,679
Machinery and equipment................... 28,803 24,630
Rolling stock............................. 3,296 3,277
Work in progress.......................... - 54
--------- ---------
52,392 47,576
Less accumulated depreciation and
amortization......................... 15,193 9,109
--------- ---------
$ 37,199 $ 38,467
========= =========
|
F-12
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Intangibles
Intangibles for Holdings and Enterprises consisted of the following
(in thousands):
March 31, 2000 1999
------------------------------------------ --------- ---------
Trademarks and trade names................ $ 42,000 $ 42,000
Distributorship and trademark license
agreements........................... 4,400 4,400
Excess of cost over net assets acquired... 63,735 56,468
--------- ---------
110,135 102,868
Less accumulated amortization............. 5,876 2,790
--------- ---------
$ 104,259 $ 100,078
========= =========
7. Other Current Liabilities
|
Other current liabilities for Holdings and Enterprises consisted of
the following (in thousands):
March 31, 2000 1999
---------------------------------------- ---------------------------------- -----------------------------------
Holdings Enterprises Holdings Enterprises
--------------- --------------- --------------- ---------------
Accrued compensation and
fringe benefits.................... $ 11,358 $ 11,358 $ 9,306 $ 9,306
Accrued interest........................ 6,116 4,747 8,098 5,491
Accrued liabilities..................... 9,260 7,996 8,734 8,640
--------------- --------------- --------------- ---------------
$ 26,734 $ 24,101 $ 26,138 $ 23,437
=============== =============== =============== ===============
|
8. Long-term Debt
Long-term debt for Holdings and Enterprises consisted of the
following (in thousands):
March 31, 2000 1999
---------------------------------------- ---------------------------------- -----------------------------------
Holdings Enterprises Holdings Enterprises
--------------- --------------- --------------- ---------------
10.5% Notes due 2005.................... $ 99,150 $ 99,150 $ 120,000 $ 120,000
13% Notes due 2008...................... 25,000 - 48,000 -
Revolving credit facility............... 39,000 39,000 7,673 7,673
Term loan............................... 6,939 6,939 8,376 8,376
--------------- --------------- --------------- ---------------
170,089 145,089 184,049 136,049
Less current maturities................. 1,946 1,946 1,291 1,291
--------------- --------------- --------------- ---------------
$ 168,143 $ 143,143 $ 182,758 $ 134,758
=============== =============== =============== ===============
|
F-13
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Long-term Debt (Continued)
On March 31, 1997, Millbrook entered into a credit agreement, as
subsequently amended, with a group of commercial lending institutions
providing for a credit facility in the aggregate amount of $100 million
consisting of revolving credit loans up to $90.2 million and an amortizing
term loan of $9.8 million (the "Credit Agreement"). Effective May 1, 1998,
the Credit Agreement was amended and restated to include Manischewitz. On
April 24, 2000, the Credit Agreement was amended to provide for revolving
credit loans up to $115 million. Borrowings under this long-term facility,
which expires March 31, 2003, are supported by specified assets in
accordance with a borrowing base formula, as defined in the Credit
Agreement. Enterprises pledged Millbrook's stock and Manischewitz'
interests under the terms of the Credit Agreement. Additionally, the
Credit Agreement requires the maintenance of a minimum level of cash flow,
as defined and imposes restrictions on investments, capital expenditures,
cash dividends, management fees and advances to the parent and other
indebtedness. At March 31, 2000, substantially all of the assets of
Enterprises' subsidiaries are unavailable for dividends. At March 31,
2000, Millbrook and Manischewitz had available, under the Credit
Agreement, unused borrowing capacity of approximately $49 million, net of
outstanding letters of credit of approximately $1.9 million.
Borrowings under the Credit Agreement bear interest at either the
London interbank offered ("LIBO") rate plus a margin or the bank's
alternate base rate plus a margin (up to 2.50%). The margin, which ranged
from 1.50% to 1.75% at March 31, 2000, is based upon availability pursuant
to the borrowing base calculation. At March 31, 2000, borrowings under the
LIBO option were $45,939,000. At March 31, 1999, borrowings under the LIBO
and alternate base rate options were $15,376,000 and $673,000,
respectively. At March 31, 2000, the interest rate on the outstanding LIBO
and alternate base rate loans ranged from 7.50% to 7.99%. In addition, on
May 1, 1997, Millbrook entered into a three-year interest rate protection
agreement that effectively caps rates on a notional principal amount up to
$50 million of borrowings at a LIBO rate of 7.625%, as required by the
Credit Agreement to manage interest rate exposure to market fluctuations.
The Companies (i) do not engage in derivative activity for trading or
speculative purposes; (ii) periodically evaluate the financial position of
the counterparty; and (iii) do not expect non-performance by the
counterparty. At March 31, 2000 and 1999, Millbrook's and Manischewitz'
outstanding debt under the Credit Agreement and the interest rate
protection agreement approximate fair value. The recognition of the fair
value of the interest rate protection agreement is not required since it
is accounted for as a hedge. At March 31, 2000, the fair value of
Holdings' 13% Notes and Enterprises' 10.5% Notes was $12.5 million and
$67.4 million, respectively.
F-14
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. Long-term Debt (Continued)
During the year ended March 31, 2000, Enterprises repurchased
approximately $20.9 million of its outstanding 10.5% Notes resulting in a
gain of approximately $4.7 million, net of income taxes of approximately
$3.1 million. In addition, the stockholders of Holdings purchased $3.0
million of additional preferred stock to partially fund Holdings'
repurchase of $23.0 million of its outstanding 13% Notes resulting in a
gain of approximately $8.2 million, net of income taxes of approximately
$5.4 million. These transactions were recorded as extraordinary items.
Following March 31, 2000, Enterprises repurchased approximately
$18.8 million of its outstanding 10.5% Notes. The resulting gain from
early extinguishment of this debt will be recorded in the Companies
consolidated financial statements for the fiscal quarter ending June 30,
2000.
Future maturities of long-term debt at March 31, 2000 were as
follows (in thousands):
Holdings Enterprises
--------------- ---------------
2001....................... $ 1,946 $ 1,946
2002....................... 1,946 1,946
2003....................... 42,047 42,047
2004....................... - -
2005....................... - -
Thereafter................. 124,150 99,150
------------- --------------
$ 170,089 $ 145,089
============= ==============
9. Stockholders' Equity
|
In conjunction with its acquisition of Millbrook in 1997, Holdings
sold 20,000 shares of Series A Preferred Stock at $500 per share and
100,000 shares of Common Stock at $1.00 per share. During the year ended
March 31, 2000, Holdings sold an additional 5,000 shares of Series A
Preferred Stock at $500 per share and 1,000 shares of Series B Preferred
Stock at $500 per share.
The holders of the Series A and B Preferred Stock are entitled to
cumulative preferential cash dividends of $50 per year (10%), per share.
At March 31, 2000, the amount of accumulated unpaid dividends per share on
the Series A Preferred Stock was $150 for shares issued in 1997 and $50
for each of the Series A and B Preferred Stock issued in 1999. Unless all
accumulated and unpaid dividends on the Series A and B Preferred Stock are
paid, no dividends shall be declared or paid on Holdings' Common Stock.
The Series A and B Preferred Stock are each subject to an optional
redemption by Holdings at any time, in whole or in part, at the redemption
price per share of $500 plus an amount equal to all accumulated and unpaid
dividends.
F-15
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Commitments And Contingencies
Leases
The Companies lease certain facilities, machinery and vehicles under
various non-cancelable operating lease agreements. The Companies are
required to pay property taxes, insurance and normal maintenance costs for
certain of their facilities. Future minimum lease payments required under
such leases in effect at March 31, 2000 were as follows (in thousands):
2001.................................................. $ 4,366
2002.................................................. 4,115
2003.................................................. 3,184
2004.................................................. 2,218
2005.................................................. 1,908
Thereafter............................................ 4,546
-------
$20,337
=======
|
Total rent expense for all operating leases was $5.7 million, $4.9
million and $4.3 million for the years ended March 31, 2000, 1999, and
1998, respectively.
Commitments
At March 31, 2000 and 1999, Manischewitz had approximately $1.2
million and $1.5 million, respectively, of purchase commitments with
certain vendors.
Contingencies
The Companies are subject to pending claims and legal proceedings in
the normal course of their business. While it is not feasible to predict
or determine the outcome of these claims and proceedings, it is the
opinion of management that their outcome, to the extent not provided for
through insurance or otherwise, will not have a materially adverse effect
on the Companies' financial position or future results of operations.
F-16
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Income Taxes
The provision (benefit) for income taxes consisted of the following
(in thousands):
March 31, 2000 1999
----------------------------------------------- --------------------------------- ---------------------------------
Holdings Enterprises Holdings Enterprises
------------ --------------- ------------ ---------------
Currently (receivable) payable:
Federal.................................. $ (4,329) $ (1,564) $ (671) $ (671)
State.................................... (627) (183) (115) (115)
------------ --------------- ------------ ---------------
(4,956) (1,747) (786) (786)
------------ --------------- ------------ ---------------
Deferred (benefit) liability:
Federal.................................. $ 3,759 $ 1,984 (2,582) $ (807)
State.................................... 51 51 194 194
------------ --------------- ------------ ---------------
3,810 2,035 (2,388) (613)
------------ --------------- ------------ ---------------
$ (1,146) $ 288 $ (3,174) $ (1,399)
============ =============== ============ ===============
March 31, 1998
----------------------------------------------- ---------------
Holdings and
Enterprises
---------------
Currently (receivable) payable:
Federal.................................. $ 1,075
State.................................... 153
---------------
1,228
---------------
Deferred (benefit) liability:
Federal.................................. $ (93)
State.................................... (13)
---------------
(106)
---------------
$ 1,122
===============
|
A reconciliation of the statutory United States Federal income tax
rate to the Companies effective income tax (benefit) rates follows:
For the years ended
March 31, 2000 1999
-------------------------------------------- ----------------------------------- -----------------------------------
Holdings Enterprises Holdings Enterprises
--------------- ----------------- --------------- -----------------
Statutory rate............................... (35.0%) 35.0% (35.0%) (35.0%)
State income taxes, net of
Federal benefit........................ (2.6) 116.6 .5 1.0
Nondeductible amortization of
intangibles............................ 16.4 945.0 4.5 9.0
Change in valuation
allowances............................. (23.3) (657.7) - -
Other, principally meals and
disallowances in 1998.................. 6.2 115.3 (1.4) (2.8)
--------------- ----------------- --------------- -----------------
(38.3%) 554.2% (31.4%) (27.8%)
=============== ================= =============== =================
For the years ended
March 31, 1998
-------------------------------------------- ---------------------------------
Holdings Enterprises
--------------- ---------------
Statutory rate............................... 35.0% 35.0%
State income taxes, net of
Federal benefit........................ 4.6 4.6
Nondeductible amortization of
intangibles............................ - -
Change in valuation
allowances............................. - -
Other, principally meals and
disallowances in 1998.................. 9.2 9.1
--------------- ---------------
48.8% 48.7%
=============== ===============
|
F-17
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Income Taxes (Continued)
The income tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities were as
follows (in thousands):
2000
---------------------- 1999
Holdings and ------------------------------------
March 31, Enterprises Holdings Enterprises
----------------------------------------------------------- ---------------------- ---------------- ------------------
Deferred Tax Assets:
Accounts receivable, principally due to
allowances for doubtful accounts................... $ 1,701 $ 1,883 $ 1,883
Deferred compensation................................ 3,982 3,800 3,800
Net operating loss carryforwards..................... - 5,164 3,034
Liability accruals................................... 4,049 6,123 6,123
Other, net........................................... 682 623 623
Deferred Tax Liabilities:
Inventories, principally due to
acquisition basis differences and
financial statement allowances..................... (4,886) (5,651) (5,651)
Property, plant & equipment, principally
due to basis differences........................... (5,979) (6,846) (6,846)
Identified intangibles, due to
basis differences.................................. (9,135) (9,456) (9,456)
---------------- ------------- ----------------
Net deferred tax liabilities before
valuation allowances............................... (9,586) (4,360) (6,490)
Valuation allowances................................. - (697) (342)
---------------- ------------- ----------------
Net deferred tax liabilities......................... $ (9,586) $ (5,057) $ (6,832)
================ ============= ================
|
At March 31, 2000, Holdings and Enterprises had no consolidated net
operating loss carryforwards for Federal or state income tax purposes as
these carryforwards were utilized to partially offset the gain on early
extinguishment of debt. In addition, the valuation allowances established
during the year ended March 31, 1999 were reversed due to the gain on
early extinguishment of debt at Holdings and Enterprises.
At March 31, 1999, Holdings and Enterprises had consolidated net
operating loss carryforwards for Federal income tax purposes of $12.2
million and $7.1 million, respectively. The Federal net operating loss
carryforwards were to expire March 31, 2019. At March 31, 1999, Holdings
and Enterprises had consolidated net operating loss carryforwards for
state income tax purposes of $12.4 million and $7.3 million, respectively.
The state net operating loss carryforwards were to expire at various dates
through 2019. The valuation allowances represented state net operating
loss carryforwards, which management believed that it was more likely than
not that the carryforward benefits would not be realized, as Holdings and
Enterprises file separate state income tax returns which do not have
income from operations.
F-18
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Employee Benefit Plans
Retirement and Savings Plan
The Companies have a retirement and savings plan ("401(k) Plan")
covering substantially all of their employees. The 401(k) Plan provides
for matching contributions by the Companies. In addition, the Companies
may make annual discretionary contributions to employee accounts based, in
part, on the Companies' financial performance. For each of the years ended
March 31, 2000, 1999 and 1998, the Companies' provided approximately $1.8
million, $1.8 million and $2.3 million, respectively, for matching and
discretionary contributions.
Deferred Compensation
Deferred compensation principally relates to a compensation
arrangement implemented in 1984 by a predecessor of Millbrook in the form
of a non-qualified defined benefit plan and a supplemental retirement plan
which permitted former officers and certain management employees, at the
time, to defer portions of their compensation and to earn specified
maximum benefits upon retirement. The future benefit obligations, which
are fixed in accordance with the plan, have been recorded at a discount
rate of 8%. These plans do not allow new participants.
In an effort to provide for the benefits associated with these
plans, Millbrook's predecessor purchased whole-life insurance contracts on
the plan participants. The value of these policies is included in Other
assets. At March 31, 2000, future payment obligations under the deferred
compensation arrangement were approximately $406,000, $403,000, $401,000,
$401,000 and $401,000 for the years ending March 31, 2001, 2002, 2003,
2004 and 2005, respectively.
F-19
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Employee Benefit Plans (Continued)
Pension Plan and Other Postretirement Benefits
An analysis of Manischewitz' pension plan and accumulated benefit
obligation for its postretirement health plan follows (in thousands):
For the period ended March 31, 2000 1999
---------------------------------------------------- ---- ----
Other Post- Other Post-
Pension Retirement Pension Retirement
Benefits Benefits Benefits Benefits
-------- -------- -------- --------
Change in benefit obligation
Benefit obligation at beginning of period........... $ 13,481 $ 1,697 $ 13,138 $ 1,622
Service cost........................................ 157 21 223 24
Interest cost....................................... 876 112 818 101
Actuarial (gain) loss............................... (1,224) (134) 522 35
Amendments.......................................... - - (381) -
Benefits paid....................................... (1,138) (88) (839) (85)
------------ ------------ ------------ ------------
Benefit obligation at end of period................. 12,152 1,608 13,481 1,697
------------ ------------ ------------ ------------
Change in plan assets
Fair value of plan assets at beginning
of period......................................... 11,391 - 10,442 -
Actual return on plan assets........................ 1,893 - 873 -
Employer contributions.............................. 1,000 88 915 85
Benefits paid....................................... (1,138) (88) (839) (85)
------------ ------------ ------------ ------------
Fair value of plan assets at end of period.......... 13,145 - 11,391 -
------------ ------------ ------------ ------------
Funded status....................................... 993 (1,608) (2,090) (1,697)
Unrecognized actuarial (gain) loss.................. (2,097) (99) 175 35
------------ ------------ ------------ ------------
Net amount recognized............................... $ (1,104) $ (1,707) $ (1,915) $ (1,662)
============ ============ ============ ============
Amount recognized in the statement
of financial position consists of:
Accrued benefit liability........................... $ (1,104) $ (1,707) $ (1,915) $ (1,662)
Accumulated other comprehensive income.............. - - (122) -
------------ ------------ ------------ ------------
Net amount recognized............................... $ (1,104) $ (1,707) $ (2,037) $ (1,662)
============ ============ ============ ============
Weighted-average assumptions:
Discount rate....................................... 7.75% 7.75% 6.75% 6.75%
Expected return on assets........................... 7.50% - 7.50% -
Rate of compensation increase....................... 4.00% - 4.00% -
|
For measurement purposes, an 8% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 2000. The rate
was assumed to decrease by one quarter of 1% per year to 5% in 2010 and
remain at that level thereafter.
F-20
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Employee Benefit Plans (Continued)
For the period ended March 31, 2000 1999
----------------------------------------------- ---- ----
Other Post- Other Post-
Pension Retirement Pension Retirement
Benefits Benefits Benefits Benefits
-------- -------- -------- --------
Components of net periodic benefit cost
Service cost...................................... $ 157 $ 21 $ 223 $ 24
Interest cost..................................... 876 112 818 101
Expected return on assets......................... (845) - (725) -
------------ ------------ ------------ ------------
Net periodic pension cost......................... $ 188 $ 133 $ 316 $ 125
============ ============ ============ ============
|
The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the pension plan with accumulated benefit
obligations in excess of plan assets were $12,152,000, $12,139,000 and
$13,145,000, respectively, as of the end of the period, and $13,481,000,
$13,428,000 and $11,391,000, respectively, as of the beginning of the
period.
Manischewitz provides health benefits to eligible retired employees
under its postretirement health care plan. Assumed health care cost trend
rates have a significant effect on the amounts reported for the health
care plan. A one-percentage-point change in assumed health care cost trend
rates would have the following effect:
1-Percentage-Point
------------------
Increase Decrease
-------- --------
(In thousands)
Effect on total of service and interest cost components........... $ 3 $ (3)
Effect on postretirement benefit obligation....................... $ 46 $ (42)
|
F-21
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Related Party Transactions
Concurrent with Millbrook's acquisition by Holdings, Millbrook
entered into an arrangement with an entity owned by the controlling
shareholder of Holdings whereby Millbrook agreed (i) to pay a quarterly
management fee of $100,000; and (ii) to reimburse the entity for
reasonable services provided and out-of-pocket and other expenses incurred
on its behalf. Concurrent with Manischewitz' acquisition by Enterprises,
Manischewitz entered into an arrangement with the entity owned by the
controlling shareholder of Holdings whereby Manischewitz agreed to
reimburse the entity for reasonable services provided and out-of-pocket
and other expenses incurred on its behalf. The services provided under
both arrangements include, among other things, treasury, cash management,
certain financial reporting, legal, labor and lease negotiation and
employee benefits administration. For each of the years ended March 31,
2000, 1999 and 1998, Millbrook paid $400,000 for management fees and
$875,000, $800,000 and $800,000, respectively, for reasonable services
provided by this entity pursuant to its aforementioned arrangement. For
the year ended March 31, 2000 and the period ended March 31, 1999,
Manischewitz paid approximately $428,000 and $150,000, respectively, for
reasonable services provided by this entity pursuant to its aforementioned
arrangement. The reasonable services provided under each of these
arrangements are based upon (i) the number of hours incurred at the
applicable pay rate; and (ii) out-of-pocket expenses, related to the
services provided.
In addition, during the years ended March 31, 2000 and 1999,
Millbrook reimbursed the aforementioned entity approximately $97,000 and
$169,000, respectively, and Manischewitz reimbursed the aforementioned
entity approximately $16,000 and $25,000, respectively, for use of its
airplane. When commercial flights were available to the destination, the
reimbursement was determined at the rate of the normal first class fare.
When commercial flights were not available, the reimbursement amount was
equal to the hourly variable costs of the airplane multiplied by the
number of hours of use.
In the opinion of management, these methodologies provided a
reasonable basis for such allocations. In addition, the Companies believe
that the terms of the arrangement with this entity were no less favorable
than could have been obtained from unaffiliated third parties on an arm's
length basis.
14. Segment Reporting
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", established standards for reporting information
about operating segments in financial statements. Operating segments are
defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker, or decision-making group, in deciding how to
allocate resources and in assessing performance. The Companies' chief
decision-maker is its Chairman and Chief Executive Officer.
F-22
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Segment Reporting (Continued)
The Companies' reportable operating segments are Millbrook and
Manischewitz. The operating segments are managed separately as each
operating segment represents a strategic business entity. The accounting
policies of these operating segments are the same as those described in
the Summary Of Significant Accounting Policies except that the
disaggregated financial results have been prepared using a management
approach, which is consistent with the basis and manner in which each
company's management internally disaggregates financial information for
the purposes of assisting in making internal operating decisions. The
Companies evaluate performance based on each business entity's stand-alone
operating income before depreciation of property, plant and equipment and
amortization of intangibles, non-recurring items, corporate charges,
including certain bad debt and profit sharing costs, management fees and
services provided to the operating segments by an entity owned by
Holdings' majority stockholder. Intersegment sales are generally accounted
for as sales to third parties.
For the years ended March 31, 2000 1999 1998
----------------------------- ------------------------- ------------------------- -------------------------
Holdings Enterprises Holdings Enterprises Holdings Enterprises
----------- ----------- ----------- ----------- ----------- -----------
Revenues
Millbrook ............................. $ 537,872 $ 537,872 $ 464,785 $ 464,785 $ 470,201 $ 470,201
Manischewitz .......................... 50,321 50,321 46,549 46,549 - -
----------- ----------- ----------- ----------- ----------- -----------
Total segment revenues .............. 588,193 588,193 511,334 511,334 470,201 470,201
Corporate items, principally
the elimination of of
intercompany sales .................. (7,577) (7,623) (3,041) (3,041) - -
----------- ----------- ----------- ----------- ----------- -----------
$ 580,616 $ 580,570 $ 508,293 $ 508,293 $ 470,201 $ 470,201
=========== =========== =========== =========== =========== ===========
Operating income
Millbrook ............................. $ 15,009 $ 15,009 $ 7,985 $ 7,985 $ 12,914 $ 12,914
Manischewitz .......................... 11,666 11,666 12,520 12,520 - -
----------- ----------- ----------- ----------- ----------- -----------
Total segment operating income ...... 26,675 26,675 20,505 20,505 12,914 12,914
Corporate items and eliminations ...... (10,710) (10,735) (10,581) (10,581) (5,539) (5,531)
----------- ----------- ----------- ----------- ----------- -----------
$ 15,965 $ 15,940 $ 9,924 $ 9,924 $ 7,375 $ 7,383
=========== =========== =========== =========== =========== ===========
Identifiable assets
Millbrook ............................. $ 132,687 $ 132,687 $ 126,334 $ 126,334 $ 108,768 $ 108,875
Manischewitz .......................... 49,199 49,199 47,324 47,324 - -
----------- ----------- ----------- ----------- ----------- -----------
Total segment assets ................ 181,886 181,886 173,658 173,658 108,768 108,875
Corporate items, principally
intangibles not allocated
to segments ......................... 108,122 103,444 123,949 105,975 4 -
----------- ----------- ----------- ----------- ----------- -----------
$ 290,008 $ 285,330 $ 297,607 $ 279,453 $ 108,772 $ 108,875
=========== =========== =========== =========== =========== ===========
|
F-23
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
15. Significant Customers
For the years ended March 31, 2000 and 1999, revenues from the Companies'
two largest customers, Shaw's Supermarket/Star Markets and Ames Department
Stores represented approximately 28.9% and 24.4% of total revenues,
respectively.
16. Subsequent Event
On April 17, 2000, Millbrook acquired substantially all of the assets and
operation of the Miller Buckeye Biscuit Company, Inc. for a purchase price
of approximately $17.5 million, including transaction costs. The
acquisition, which was funded through additional borrowings under the
Company's Credit Agreement, was accounted for as a purchase. Accordingly,
the purchase price was allocated to the assets purchased and liabilities
assumed based upon their estimated fair values at the date of acquisition,
utilizing preliminary allocations of purchase price which are subject to
further refinement and adjustment, including appraisals and other
valuation analyses. The excess of cost over the fair value of net assets
acquired represents goodwill which, when finalized, will be amortized on a
straight-line basis over its estimated useful life.
F-24
R.A.B. HOLDINGS, INC. - PARENT ONLY
R.A.B. ENTERPRISES, INC. - PARENT ONLY
BALANCE SHEETS
(In thousands except for share and per share data)
-------------------------------------------------------------------------------------------------------------------------------
March 31, 2000 1999
------------------------------------------------------------------ ----------------------- -------------------------
Holdings Enterprises Holdings Enterprises
-------- ----------- -------- -----------
ASSETS
Current assets:
Cash $ 19 $ - $ 10 $ -
Restricted investments 3,145 - 5,805 -
Other current assets 8 41 1,801 1,722
-------- --------- -------- ---------
Total current assets 3,172 41 7,616 1,722
Noncurrent assets:
Restricted investments 1,582 - 8,880 -
Intercompany notes receivable - 64,502 - 64,322
Other assets 980 2,853 1,798 4,189
-------- --------- -------- ---------
Total noncurrent assets 2,562 67,355 10,678 68,511
Investments in subsidiaries 41,703 77,822 37,178 92,912
-------- --------- -------- ---------
Total assets $ 47,437 $ 145,218 $ 55,472 $ 163,145
======== ========= ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued interest $ 1,369 $ 4,348 $ 2,613 $ 5,277
Other current liabilities 2,320 17 228 690
-------- --------- -------- ---------
Total current liabilities 3,689 4,365 2,841 5,967
Noncurrent liabilities:
Long-term debt 25,000 99,150 48,000 120,000
-------- --------- -------- ---------
Total noncurrent liabilities 25,000 99,150 48,000 120,000
Stockholders' equity:
Preferred stock, $500 par value, 100,000 shares
authorized, 24,875 and 20,000 shares of Series A
issued and outstanding at March 31, 2000 and
March 31, 1999, respectively 12,344 - 9,906 -
1,000 shares of Series B issued and outstanding
at March 31, 2000 500 - - -
Common stock, $.01 and $1.00 par value, 1,000,000
shares and 200 shares authorized, issued 105,100
shares and 200 shares at March 31, 2000 and 104,100
shares and 200 shares at March 31, 1999, respectively 1 - 1 -
Additional paid-in capital 428 39,482 332 39,482
Retained earnings (deficit) 5,317 2,062 (5,748) (2,444)
Accumulated other comprehensive income 159 159 140 140
-------- --------- -------- ---------
18,749 41,703 4,631 37,178
Less common stock in treasury - 700 shares 1 - - -
-------- --------- -------- ---------
Total stockholders' equity 18,748 41,703 4,631 37,178
-------- --------- -------- ---------
Total liabilities and stockholders' equity $ 47,437 $ 145,218 $ 55,472 $ 163,145
======== ========= ======== =========
|
See notes to parent only financial statement schedules
S-1
R.A.B. HOLDINGS, INC. - PARENT ONLY
R.A.B. ENTERPRISES, INC. - PARENT ONLY
STATEMENTS OF OPERATIONS
(In thousands)
------------------------------------------------------------------------------------------------------------------------------
For the years ended March 31, 2000 1999
------------------------------------------------------------------- --------------------------------------------------------
Holdings Enterprises Holdings Enterprises
------------ ------------- ------------ ------------
Equity in net income (loss) of subsidiaries $ 4,506 $ 1,386 $ (3,626) $ (449)
Revenues 46 - - -
-------- ------- -------- --------
4,552 1,386 (3,626) (449)
General and administrative expenses 20 17 - -
-------- ------- -------- --------
Operating income (loss) 4,532 1,369 (3,626) (449)
Interest expense, net of Holdings' interest
income of $368 and $931 and Enterprises'
intercompany interest income of $8,502 and $7,266 3,073 3,032 5,071 4,887
-------- ------- -------- --------
Income (loss) before benefit for income taxes 1,459 (1,663) (8,697) (5,336)
Benefit for income taxes (1,434) (1,427) (1,775) (1,710)
-------- ------- -------- --------
Income (loss) before extraordinary item 2,893 (236) (6,922) (3,626)
Extraordinary gain on early extinguishment of debt,
net of income taxes of $5.4 million and
$3.1 million, respectively 8,172 4,742 - -
-------- ------- -------- --------
Net income (loss) $ 11,065 $ 4,506 $ (6,922) $ (3,626)
======== ======= ======== ========
|
See notes to parent only financial statement schedules
S-2
R.A.B. HOLDINGS, INC. - PARENT ONLY
R.A.B. ENTERPRISES, INC. - PARENT ONLY
STATEMENTS OF CASH FLOWS
(In thousands)
----------------------------------------------------------------------------------------------------------------------------------
For the years ended March 31, 2000 1999
-------------------------------------------------------------------- ------------------------ --------- -----------
Holdings Enterprises Holdings Enterprises
--------- ----------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 11,065 $ 4,506 $(6,922) $ (3,626)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in net (income) loss of subsidiaries (4,506) (1,386) 3,626 449
Amortization 129 628 269 576
Extraordinary gain on early extiguishment of debt,
net of income taxes (8,172) (4,742) - -
Deferred income taxes 1,775 1,710 (1,775) (1,710)
Changes in assets and liabilities:
Intercompany notes receivable - - - -
Accrued interest (1,244) (929) 2,613 5,277
-------- -------- -------- --------
Net cash provided by (used in) operating activities (953) (213) (2,189) 966
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of The B. Manischewitz Company, LLC,
net of cash acquired - - - (124,255)
Equity investment in Enterprises - - (29,382) -
-------- -------- -------- --------
Net cash used in investing activities - - (29,382) (124,255)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - - 48,000 120,000
Repurchase of long-term debt (8,750) (12,266) - -
Payment of debt issuance costs - - (1,730) (4,759)
Funding of interest escrow account - - (16,991) -
Payment from interest escrow account 10,247 - 3,120 -
Funding of intercompany note receivable - - - (21,300)
Proceeds from issuance of purchased stock 3,000 - - -
Proceeds from issuance and repurchase
of common stock 33 - 236 -
Equity investment from Holdings - - - 29,382
Distributions from subsidiaries - 16,495 - 3,875
Other (3,568) (4,016) (1,054) (3,909)
-------- -------- -------- --------
Net cash provided by (used in) financing activities 962 213 31,581 123,289
-------- -------- -------- --------
Net increase (decrease) in cash 9 - 10 -
Cash, beginning of year 10 - - -
-------- -------- -------- --------
Cash, end of year $ 19 $ - $ 10 $ -
======== ======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 4,554 $ 11,946 $ 3,120 $ 6,300
Income taxes $ 876 $ - $ 1 $ 4
|
See notes to parent only financial statement schedules
S-3
R.A.B. HOLDINGS, INC. - PARENT ONLY
R.A.B. ENTERPRISES, INC. - PARENT ONLY
NOTES TO PARENT ONLY FINANCIAL STATEMENT SCHEDULES
Basis of Presentation
The accompanying financial statements are presented on the basis of
recording investments in subsidiaries on the equity method of accounting.
Certain reclassifications have been made in the prior year financial statements
to conform with the current year presentation.
R.A.B. Enterprises, Inc. ("Enterprises") is a wholly owned-subsidiary
of R.A.B. Holdings, Inc. ("Holdings"). On January 26, 1998, Holdings formed
Enterprises and on May 1, 1998 contributed its wholly-owned subsidiary Millbrook
Distribution Services Inc. to Enterprises. This contribution was accounted for
as an "as if" pooling of interests.
S-4
R.A.B. HOLDINGS, INC. AND SUBSIDIARIES
R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 2000, 1999 AND 1998
(In thousands)
----------------------------------------------------------------------------------------------------------------------------------
Additions
------------------------
Balance at Charged to Charged to Balance at
beginning costs and other end
Description of period expenses accounts(1) Deductions(2) of period
--------------------------------------------------- ----------- -------- ----------- ------------- ---------
Year ended March 31, 2000
Allowance for doubtful accounts $ 3,303 1,032 - (84) $ 4,251
Year ended March 31, 1999
Allowance for doubtful accounts $ 2,441 152 879 (169) $ 3,303
Year ended March 31, 1998
Allowance for doubtful accounts $ 2,251 415 30 (225) $ 2,441
|
(1) For the year ended March 31, 1999, the amount principally relates to the
acquisition of The B. Manishewitz Company, LLC.
(2) Amounts written off.
S-5
Exhibit 3.2.1
CERTIFICATE OF DESIGNATION
OF
R.A.B. HOLDINGS, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
SERIES A PREFERRED STOCK
R.A.B. Holdings, Inc., a Delaware corporation (the "Corporation"),
hereby certifies that the following resolution has been duly adopted by the
Board of Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board of Directors")
by the provisions of the Certificate of Incorporation of the Corporation (as
from time to time amended, the "Certificate of Incorporation"), there hereby is
created, out of the 100,000 shares of preferred stock, without par value, of the
Corporation authorized by the FOURTH Article of the Certificate of Incorporation
of the Corporation (the "Preferred Stock"), a series of the Preferred Stock of
the Corporation consisting of 25,000 shares, which series shall have the
following powers, designations, preferences and relative, participating,
optional and other special rights, and the following qualifications, limitations
and restrictions:
1. Designation. This series of preferred stock shall be designated
"Series A Preferred Stock."
2. Dividends. (a) The holders of shares of Series A Preferred Stock
shall be entitled to receive, when and as declared by the Board of Directors,
out of any funds legally available for that purpose, cumulative preferential
dividends in cash at the rate of $50 a year per share, and no more, payable
quarterly on [the last day of each March, June, July and December] in each year
(each such date being called a "Dividend Payment Date"), beginning with the
first such date following the issuance of any shares of Series A Preferred
Stock. Dividends on the shares of Series A Preferred Stock shall be cumulative
from the date of issue whether or not declared and whether or not in any
dividend period or periods there shall be net profits or net assets of the
Corporation legally available for the payment of those dividends. Accumulated
and unpaid dividends on the Series A Preferred Stock shall not bear interest.
The term "accumulated and unpaid dividends" with respect to Series A Preferred
Stock shall mean the amount of unpaid dividends on all outstanding shares of
Series A Preferred Stock from the respective dates from
which those dividends shall accrue to the Dividend Payment Dates as of which
accumulated and unpaid dividends are being determined.
(a) Unless all dividends shall be declared and paid or set apart
for payment in full on all outstanding shares of Series A Preferred Stock for
all previous quarterly dividend periods and for the then current quarterly
dividend period, (i) no dividends shall be declared or paid on, and no assets
shall be distributed or set apart for, shares of the Corporation's common stock
or any other class of stock ranking junior to the shares of Series A Preferred
Stock as to dividends (other than dividends payable solely in stock ranking
junior to the shares of Series A Preferred Stock as to dividends), and (ii) no
sum or sums shall be set aside for or applied to the purchase, redemption or
other acquisition of fewer than all shares of Series A Preferred Stock then
outstanding or of any shares of the Corporation's common stock or any other
class of stock ranking on a parity with or junior to the Series A Preferred
Stock as to dividends or as to the distribution of assets upon liquidation
(except that the Corporation may purchase shares of its common stock from any
employee of the Corporation or any subsidiary of the Corporation pursuant to an
agreement between the Corporation and any such employee relating to the
employee's ownership of common stock of the Corporation).
(b) Whenever dividends are not paid in full on the shares of Series
A Preferred Stock or on any other series of preferred stock ranking on a parity
with the Series A Preferred Stock as to dividends, all dividends declared or
paid on the shares of Series A Preferred Stock and any such other series of
preferred stock shall be declared or paid pro rata, so that the ratio of the
amount of dividends per share declared or paid on the Series A Preferred Stock
to the amount of dividends per share declared or paid on such other series of
preferred stock shall be the same as the ratio of the amount of accumulated and
unpaid dividends per share on the shares of Series A Preferred Stock to the
amount of accumulated and unpaid dividends per share on such other series of
preferred stock.
3. Redemption. (a) Subject to the provisions of section 2(b) hereof,
the Corporation may, at its option, redeem all or any part of the Series A
Preferred Stock at any time and from time to time. The redemption price per
share of the Series A Preferred Stock (the "Redemption Price") shall be an
amount equal to the sum of $500 plus an amount equal to all accumulated and
unpaid dividends per share (including a prorated quarterly dividend from the
last preceding Dividend Payment Date to the Redemption Date (as defined in
section 3(b) hereof). If fewer than all the outstanding shares of Series A
Preferred Stock are to be redeemed, the redemption shall be pro rata among the
holders of Series A Preferred Stock and subject to such other provisions as may
be determined by the Board of Directors.
(a) Written notice of any redemption of shares of Series A
Preferred Stock, specifying the time and place of redemption, shall be mailed by
certified mail, return receipt requested, at least ten (10), and not more than
ninety (90), days prior to the date specified for redemption (the "Redemption
Date"), to each registered holder of the shares at such holder's last address as
it appears on the Corporation's books. If fewer than all the shares owned by any
stockholder are to be redeemed, the notice shall also specify the number of
shares that are to be redeemed and the numbers of the certificates representing
those shares. On or after the Redemption Date, each holder of shares of Series A
Preferred Stock called for redemption shall
-2-
surrender to the Corporation such holder's certificates for the shares of Series
A Preferred Stock at the place specified in the notice and shall then be paid
the Redemption Price.
(b) Unless the Corporation defaults in the payment in full of the
Redemption Price, dividends on the shares of Series A Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and all rights of
the holders of the shares by reason of their ownership of the shares shall cease
on the Redemption Date, except the right to receive the Redemption Price for the
shares on surrender to the Corporation of the certificates representing the
shares. After the Redemption Date, the shares of Series A Preferred Stock shall
not be deemed to be outstanding and shall not be transferable on the books of
the Corporation, except to the Corporation.
(c) The Corporation may, at its option, at any time after the
mailing of the notice of redemption pursuant to section 3(b), deposit the
aggregate Redemption Price payable on redemption of the shares of Series A
Preferred Stock called for redemption with a bank or trust company (the
"Depositary") having its principal office in New York, New York and having a
combined capital and surplus (as shown by its then most recent published
financial statement) of at least $50,000,000, designated by the Board of
Directors, to be held in trust by the Depositary for payment to the holders of
the shares to be redeemed. The Corporation shall then be released and discharged
from any obligation to pay the redemption price of the shares to be redeemed and
all rights of the holders of the shares by reason of their ownership of the
shares shall cease on the date of the deposit with the Depositary (the "Deposit
Date"), except the right to receive from the Depositary only, and not from the
Corporation, the amount payable upon redemption of the shares on surrender to
the Depositary of the certificates representing the shares. After the Deposit
Date, the shares shall not be transferable on the books of the Corporation,
except to the Corporation. Any money so deposited with the Depositary that is
not claimed after five (5) years from the Redemption Date shall be repaid to the
Corporation by the Depositary on demand, and the holder of any of the shares
shall thereafter look only to the Corporation for any payment to which the
holder may be entitled. Any interest accrued on money deposited with the
Depositary shall belong to the Corporation and shall be paid to the Corporation
from time to time by the Depositary on demand.
(d) Any shares of Series A Preferred Stock redeemed or purchased by
the Corporation shall be canceled and shall have the status of authorized and
unissued shares of preferred stock, without designation as to series.
4. Conversion Rights. (a) Each holder of shares of Series A Preferred
Stock shall have the right at any time, at such holder's option (except that, in
respect of any shares of Series A Preferred Stock called for redemption, such
right shall terminate at the close of business on the Redemption Date fixed for
such redemption unless the Corporation defaults in the payment of the Redemption
Price due upon the redemption), to convert any or all of such holder's shares of
Series A Preferred Stock into a number of shares of the Corporation's common
stock determined by multiplying the Formula Number (as defined in section 4(c))
by the number of shares of Series A Preferred Stock to be converted. Upon
conversion, the Corporation shall make no payment or adjustment on account of
accumulated and unpaid dividends on the converted shares except as provided in
the calculation of the Formula Number pursuant to section 4(c).
-3-
(a) In order to convert shares of Series A Preferred Stock into
common stock, the holder (the "Converting Holder") of Series A Preferred Stock
shall give written notice to the Corporation at 444 Madison Avenue, Suite 601
New York, New York 10036, Attention: Senior Vice President Legal Affairs,
accompanied by the certificate or certificates for the shares to be converted.
The conversion of the shares shall become effective immediately prior to the
close of business on the date such certificate or certificates have been
received by the Corporation if such date is a business day, or if such date is
not a business day, immediately prior to the close of business on the next day
which is a business day. The person or persons entitled to receive common stock
upon conversion of shares of Series A Preferred Stock shall be treated for all
purposes as the record holder or holders of the common stock on the date on
which the conversion occurs.
(b) The term "Formula Number" means an amount determined by
dividing $500 by a conversion price (the "Conversion Price") equal to 120% of
the price to the public (without reduction for underwriting discounts or
commissions or any other expenses) of one share of common stock as set forth on
the cover page of the prospectus or prospectus supplement required to be filed
with the Securities and Exchange Commission under Rule 424(b) (as amended from
time to time) under the Securities Act of 1933, as amended, in connection with
the initial underwritten offering (the "Initial Public Offering") of shares of
the Corporation's common stock.
(c) The Conversion Price shall be subject to adjustment from time
to time after the Initial Public Offering as follows:
(1) In case the Corporation shall (i) pay a dividend or make a
distribution in shares of its capital stock (whether shares of common stock or
of capital stock of any other class) to all holders of its common stock, (ii)
subdivide its outstanding shares of common stock, (iii) combine its outstanding
shares of common stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of common stock (including any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing corporation) any shares of capital stock of the
Corporation, the Conversion Price in effect immediately prior to such action
shall be adjusted so that holders of any Series A Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
capital stock of the Corporation which such holder would have owned immediately
following such action had such Series A Preferred stock been converted
immediately prior to the effectiveness of any adjustment on account of such
action. An adjustment made pursuant to this subsection 4(d)(1) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this subsection 4(d)(1), the holder of any Series
A Preferred Stock thereafter surrendered for conversion shall become entitled to
receive shares of two or more classes of capital stock of the Corporation, the
Board of Directors (whose determination shall be conclusive and binding) shall
determine the allocation of the adjusted price between or among shares of such
classes of capital stock.
(2) In case the Corporation shall issue rights, warrants or
options to all holders of common stock entitling them (for a period not
exceeding forty-five (45)
-4-
days from the date of such issuance) to subscribe for or purchase shares of
common stock at a price per share less than the then current market price per
share (as determined pursuant to section 4(f) below) on the record date
mentioned below, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date of issuance of such rights, warrants or options by
a fraction of which the numerator shall be the number of shares of common stock
outstanding on the date of issuance of such rights, warrants or options plus the
number of shares which the aggregate offering price of the total number of
shares so offered for subscription or purchase would purchase at such current
market price, and of which the denominator shall be the number of shares of
common stock outstanding on the date of issuance of such rights, warrants or
options plus the number of additional shares of common stock which are so
offered for subscription or purchase. Such adjustment shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, warrant or options.
(3) In case the Corporation shall distribute to all holders of
common stock assets (other than any cash dividend payable out of earned surplus
or retained earnings) or rights, warrants or options to subscribe (other than
those referred to in subsection 4(d)(2) above) or evidences of indebtedness,
then in each such case the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date of such distribution by a fraction of which the
numerator shall be the current market price per share (determined as provided in
section 4(f) below) of the common stock on the record date mentioned below less
the then fair market value (as determined in good faith in a resolution of the
Board of Directors, which determination shall be conclusive evidence of such
fair market value) of the portion of the assets or evidences of indebtedness so
distributed or of such subscription rights, options or warrants applicable to
one share of common stock, and the denominator shall be such current market
price per share of the common stock. Such adjustment shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such distribution.
(4) In case of any consolidation of the Corporation with, or
merger of the Corporation into, any other corporation (other than a
consolidation or merger in which the Corporation is the continuing corporation),
or in case of any conveyance or transfer of the property and assets of the
Corporation substantially as an entirety, each share of Series A Preferred Stock
shall be convertible into the number and kind of shares of stock and other
securities and property receivable upon such consolidation, merger, conveyance
or transfer by a holder of the number and kind of shares of the Corporation into
which such shares of Series A Preferred Stock might have been converted
immediately prior to such consolidation, merger, conveyance or transfer. The
above provisions of this subsection 4(d)(4) shall similarly apply to successive
consolidations, mergers, conveyances or transfers.
(d) No fractions of shares of common stock or scrip representing
fractions of shares shall be issued upon conversion of Series A Preferred Stock.
If any fraction of a share of common stock would, except for the provisions of
this section 4(e), be issuable on the conversion of any Series A Preferred
Stock, the Corporation shall make payment in lieu thereof of an amount in cash
equal to the current market value of such fraction (determined as provided in
section 4(f) below).
-5-
(e) For the purpose of any computation under sections 4(d) and 4(e)
above, the current market price per share of common stock on any date shall be
deemed to be the average of the daily closing prices for 30 consecutive trading
days commencing 45 trading days before the date in question. The closing price
for each day shall be the last reported sale price regular way or, in case no
such reported sale takes place on such day, the average of the reported closing
bid and asked prices regular way or, in case no such reported sale takes place
on such day, the average of the reported closing bid and asked prices regular
way, in either case on the consolidated tape of the principal national
securities exchange on which the common stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange the
average of the highest reported bid and lowest reported asked prices as reported
by the National Association of Securities Dealers Automatic Quotation System or,
if no so reported then as furnished by the National Quotation Bureau
Incorporation, or if not so available, the fair market price as determined by
the Board of Directors (whose good faith determination shall be conclusive and
binding).
(f) The Corporation shall pay all transfer, documentary, stamp or
other transactional taxes attributable the issuance or delivery of shares of
common stock upon conversion of any shares of Series A Preferred Stock but the
Corporation shall not be required to pay any taxes that may be payable in
respect of any transfer involved in the issuance or delivery of any shares of
common stock in a name other than that of the registered holder of shares of
Series A Preferred Stock.
(g) The Corporation shall reserve and keep available, out of its
treasury stock or authorized an unissued stock, or both, solely for the purpose
of effecting the conversion of shares of Series A Preferred Stock, a number of
shares of common stock the Corporation's Board of Directors determines to be
sufficient to effect the conversion of all shares of Series A Preferred Stock
from time to time outstanding.
5. Sinking Fund. The shares of Series A preferred Stock shall not be
entitled to the benefit of any sinking fund.
6. Voting Rights. Holders of shares of Series A Preferred Stock shall
not be entitled to vote on any matter, except as otherwise required by law or as
expressly provided in this Certificate of Designation. With respect to any
matter on which the holders of shares of Series A Preferred Stock shall be
entitled to vote, holders of shares of Series A Preferred Stock shall be
entitled to one vote for each share held.
7. Consents Required of Holders of Series A Preferred Stock. As long
as any shares of Series A Preferred Stock are outstanding, the Corporation shall
not, by amendment to the Corporation's Certificate of Incorporation, by
resolution of the Board of Directors, by consolidation of the Corporation with,
or merger of the Corporation into, another corporation, or in any other manner,
without the consent of the holders of a majority of the outstanding shares of
Series A Preferred Stock, either given by vote in person or by proxy at a
meeting called for that purpose or given in writing:
(i) authorize, or increase the authorized amount of, any class or
series of stock having preference or priority over the Series
-6-
A Preferred Stock as to dividends or the distribution of assets upon
liquidation; or
(ii) materially and adversely alter any material provision of the
Series A Preferred Stock.
Notwithstanding anything to the contrary contained in this Certificate, the
Board of Directors of the Corporation from time to time without a vote of the
holders of the shares of Series A Preferred Stock, may decrease the number of
shares constituting the Series A Preferred Stock, but not below such number of
shares of Series A Preferred Stock as are actually outstanding at any such time.
8. Liquidation Rights. (a) Upon the voluntary or involuntary
dissolution, liquidation or winding-up of the Corporation, the holders of shares
of Series A Preferred Stock shall be entitled to receive out of the assets of
the Corporation, for each such share of Series A Preferred Stock, cash in an
amount equal to the sum of $500 plus an amount equal to all accumulated and
unpaid dividends per share (whether or not earned or declared) for all dividend
periods (including a prorated quarterly dividend from the last preceding
Dividend Payment Date to the date of final distribution on those shares of
Series A Preferred Stock) before any payment or distribution shall be made on
the common stock or any other class or series of stock ranking junior to the
Series A Preferred Stock upon liquidation.
(a) If the Corporation's assets available for distribution to the
holders of shares of Series A Preferred Stock upon any dissolution, liquidation
or winding-up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which holders of Series A Preferred
Stock are entitled pursuant to this section 8, no such distribution shall be
made on account of any shares of any other class of stock or series of preferred
stock ranking on a parity with the shares of Series A Preferred Stock unless the
distribution is made pro rata, so that the ratio of the amount distributed per
share on the Series A Preferred Stock to the amount distributed per share on
such other class or series shall be the same as the ratio of the amount of the
liquidation preference per share of the Series A Preferred Stock to the amount
of the liquidation preference per share of such other class or series.
(b) For purposes of this section 8, the sale or other disposition
(for cash, shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Corporation shall be deemed a
dissolution, liquidation or winding-up of the Corporation, but the merger or
consolidation of the Corporation into or with any other corporation into or with
the Corporation, shall not be deemed to be a dissolution, liquidation or
winding-up of the Corporation.
(c) After the payment in cash to the holders of shares of Series A
Preferred Stock of the full preferential amounts set forth above, the holders of
shares of Series A Preferred Stock as such shall have no right or claim to any
of the remaining assets of the Corporation.
-7-
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation to be signed by its President and Chief Executive
Officer this 27th day of March, 1997.
R.A.B. HOLDINGS, INC.
By: /s/ Richard A. Bernstein
--------------------------------------
Richard A. Bernstein
President and Chief Executive Officer
|
-8-
Exhibit 3.2.2
CERTIFICATE OF DESIGNATION
OF
R.A.B. HOLDINGS, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
SERIES B PREFERRED STOCK
R.A.B. Holdings, Inc., a Delaware corporation (the "Corporation"),
hereby certifies that the following resolution has been duly adopted by the
Board of Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation (the "Board of Directors")
by the provisions of the Certificate of Incorporation of the Corporation (as
from time to time amended, the "Certificate of Incorporation"), there hereby is
created, out of the 100,000 shares of preferred stock, without par value, of the
Corporation authorized by the FOURTH Article of the Certificate of Incorporation
of the Corporation (the "Preferred Stock"), a series of the Preferred Stock of
the Corporation consisting of 1,000 shares, which series shall have the
following powers, designations, preferences and relative, participating,
optional and other special rights, and the following qualifications, limitations
and restrictions:
1. Designation. This series of preferred stock shall be designated
"Series B Preferred Stock."
2. Dividends. (a) The holders of shares of Series B Preferred Stock
shall be entitled to receive, when and as declared by the Board of Directors,
out of any funds legally available for that purpose, cumulative preferential
dividends in cash at the rate of $50 a year per share, and no more, payable
quarterly on the last day of each March, June, July and December in each year
(each such date being called a "Dividend Payment Date"), beginning with the
first such date following the issuance of any shares of Series B Preferred
Stock. Dividends on the shares of Series B Preferred Stock shall be cumulative
from the date of issue whether or not declared and whether or not in any
dividend period or periods there shall be net profits or net assets of the
Corporation legally available for the payment of those dividends. Accumulated
and unpaid dividends on the Series B Preferred Stock shall not bear interest.
The term "accumulated and unpaid dividends" with respect to Series B Preferred
Stock shall mean the amount of unpaid dividends on all outstanding shares of
Series B Preferred Stock from the respective dates from which those dividends
shall accrue to the Dividend Payment Dates or other date as of which accumulated
and unpaid dividends are being determined.
(b) Unless all dividends shall be declared and paid or set apart
for payment in full on all outstanding shares of Series B Preferred Stock for
all previous quarterly dividend periods and for the then current quarterly
dividend period, (i) no dividends shall be declared or paid on, and no assets
shall be distributed or set apart for, shares of the Corporation's common stock
or any other class of stock ranking junior to the shares of Series B Preferred
Stock as to dividends (other than dividends payable solely in stock ranking
junior to the shares of Series B Preferred Stock as to dividends), and (ii) no
sum or sums shall be set aside for or applied to the purchase, redemption or
other acquisition of fewer than all shares of Series B Preferred Stock then
outstanding or of any shares of the Corporation's common stock or any other
class of stock ranking on a parity with or junior to the Series B Preferred
Stock as to dividends or as to the distribution of assets upon liquidation
(except that the Corporation may purchase shares of its common stock from any
employee of the Corporation or any subsidiary of the Corporation pursuant to an
agreement between the Corporation and any such employee relating to the
employee's ownership of common stock of the Corporation). The payment of any
dividends on or any distribution of any assets in respect of the Series B
Preferred Stock shall be made prior to the payment of any dividends on or any
distribution of any assets in respect of the Corporation's Series A Preferred
Stock, par value $0.01 per share (the "Series A Preferred Stock").
(c) Whenever dividends are not paid in full on the shares of Series
B Preferred Stock or on any other series of preferred stock ranking on a parity
with the Series B Preferred Stock as to dividends, all dividends declared or
paid on the shares of Series B Preferred Stock and any such other series of
preferred stock shall be declared or paid pro rata, so that the ratio of the
amount of dividends per share declared or paid on the Series B Preferred Stock
to the amount of dividends per share declared or paid on such other series of
preferred stock shall be the same as the ratio of the amount of accumulated and
unpaid dividends per share on the shares of Series B Preferred Stock to the
amount of accumulated and unpaid dividends per share on such other series of
preferred stock.
3. Redemption. (a) Subject to the provisions of section 2(b) hereof,
the Corporation may, at its option, redeem all or any part of the Series B
Preferred Stock at any time and from time to time. The redemption price per
share of the Series B Preferred Stock (the "Redemption Price") shall be an
amount equal to the sum of $500 plus an amount equal to all accumulated and
unpaid dividends per share (including a prorated quarterly dividend from the
last preceding Dividend Payment Date to the Redemption Date (as defined in
section 3(b) hereof). If fewer than all the outstanding shares of Series B
Preferred Stock are to be redeemed, the redemption shall be pro rata among the
holders of Series B Preferred Stock and subject to such other provisions as may
be determined by the Board of Directors. The Corporation shall not redeem all or
any part of the Series A Preferred Stock unless and until all of the Series B
Preferred Stock has been redeemed or there are no shares of Series B Preferred
Stock outstanding.
(b) Written notice of any redemption of shares of Series B Preferred
Stock, specifying the time and place of redemption, shall be mailed by certified
mail, return receipt requested, at least ten (10), and not more than ninety
(90), days prior to the date specified for redemption (the "Redemption Date"),
to each registered holder of the shares of Series B
-2-
Preferred Stock at such holder's last address as it appears on the Corporation's
books. If fewer than all the shares owned by any stockholder are to be redeemed,
the notice shall also specify the number of shares that are to be redeemed and
the numbers of the certificates representing those shares. On or after the
Redemption Date, each holder of shares of Series B Preferred Stock called for
redemption shall surrender to the Corporation such holder's certificates for the
shares of Series B Preferred Stock at the place specified in the notice and
shall then be paid the Redemption Price.
(c) Unless the Corporation defaults in the payment in full of the
Redemption Price, dividends on the shares of Series B Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and all rights of
the holders of the shares by reason of their ownership of the shares shall cease
on the Redemption Date, except the right to receive the Redemption Price for the
shares on surrender to the Corporation of the certificates representing the
shares. After the Redemption Date, the shares of Series B Preferred Stock shall
not be deemed to be outstanding and shall not be transferable on the books of
the Corporation, except to the Corporation.
(d) The Corporation may, at its option, at any time after the
mailing of the notice of redemption pursuant to section 3(b), deposit the
aggregate Redemption Price payable on redemption of the shares of Series B
Preferred Stock called for redemption with a bank or trust company (the
"Depositary") having its principal office in New York, New York and having a
combined capital and surplus (as shown by its then most recent published
financial statement) of at least $50,000,000, designated by the Board of
Directors, to be held in trust by the Depositary for payment to the holders of
the shares to be redeemed. The Corporation shall then be released and discharged
from any obligation to pay the redemption price of the shares to be redeemed and
all rights of the holders of the shares by reason of their ownership of the
shares shall cease on the date of the deposit with the Depositary (the "Deposit
Date"), except the right to receive from the Depositary only, and not from the
Corporation, the amount payable upon redemption of the shares on surrender to
the Depositary of the certificates representing the shares. After the Deposit
Date, the shares shall not be transferable on the books of the Corporation,
except to the Corporation. Any money so deposited with the Depositary that is
not claimed after five (5) years from the Redemption Date shall be repaid to the
Corporation by the Depositary on demand, and the holder of any of the shares
shall thereafter look only to the Corporation for any payment to which the
holder may be entitled. Any interest accrued on money deposited with the
Depositary shall belong to the Corporation and shall be paid to the Corporation
from time to time by the Depositary on demand.
(e) Any shares of Series B Preferred Stock redeemed or purchased by
the Corporation shall be canceled and shall have the status of authorized and
unissued shares of preferred stock, without designation as to series.
4. Conversion Rights. (a) Each holder of shares of Series B Preferred
Stock shall have the right at any time, at such holder's option (except that, in
respect of any shares of Series B Preferred Stock called for redemption, such
right shall terminate at the close of business on the Redemption Date fixed for
such redemption, unless the Corporation defaults in the payment of the
Redemption Price due upon the redemption), to convert any or all of such
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holder's shares of Series B Preferred Stock into a number of shares of the
Corporation's common stock determined by multiplying the Formula Number (as
defined in section 4(c)) by the number of shares of Series B Preferred Stock to
be converted. Upon conversion, the Corporation shall make no payment or
adjustment on account of accumulated and unpaid dividends on the converted
shares, except as provided in the calculation of the Formula Number pursuant to
section 4(c).
(b) In order to convert shares of Series B Preferred Stock into
common stock, the holder (the "Converting Holder") of Series B Preferred Stock
shall give written notice to the Corporation at 444 Madison Avenue, Suite 601
New York, New York 10036, Attention: Senior Vice President Legal Affairs,
accompanied by the certificate or certificates for the shares to be converted.
The conversion of the shares shall become effective immediately prior to the
close of business on the date such certificate or certificates have been
received by the Corporation if such date is a business day, or if such date is
not a business day, immediately prior to the close of business on the next day
which is a business day. The person or persons entitled to receive common stock
upon conversion of shares of Series B Preferred Stock shall be treated for all
purposes as the record holder or holders of the common stock on the date on
which the conversion occurs.
(c) The term "Formula Number" means an amount determined by
dividing $500 by a conversion price (the "Conversion Price") equal to 120% of
the price to the public (without reduction for underwriting discounts or
commissions or any other expenses) of one share of common stock as set forth on
the cover page of the prospectus or prospectus supplement required to be filed
with the Securities and Exchange Commission under Rule 424(b) (as amended from
time to time) under the Securities Act of 1933, as amended, in connection with
the initial underwritten offering (the "Initial Public Offering") of shares of
the Corporation's common stock.
(d) The Conversion Price shall be subject to adjustment from time
to time after the Initial Public Offering as follows:
(1) In case the Corporation shall (i) pay a dividend or make a
distribution in shares of its capital stock (whether shares of common stock or
of capital stock of any other class) to all holders of its common stock, (ii)
subdivide its outstanding shares of common stock, (iii) combine its outstanding
shares of common stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of common stock (including any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing corporation) any shares of capital stock of the
Corporation, the Conversion Price in effect immediately prior to such action
shall be adjusted so that holders of any Series B Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
capital stock of the Corporation which such holder would have owned immediately
following such action had such Series B Preferred stock been converted
immediately prior to the effectiveness of any adjustment on account of such
action. An adjustment made pursuant to this subsection 4(d)(1) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made
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pursuant to this subsection 4(d)(1), the holder of any Series B Preferred Stock
thereafter surrendered for conversion shall become entitled to receive shares of
two or more classes of capital stock of the Corporation, the Board of Directors
of the Corporation (whose determination shall be conclusive and binding) shall
determine the allocation of the adjusted price between or among shares of such
classes of capital stock.
(2) In case the Corporation shall issue rights, warrants or options
to all holders of common stock entitling them (for a period not exceeding
forty-five (45) days from the date of such issuance) to subscribe for or
purchase shares of common stock at a price per share less than the then current
market price per share (as determined pursuant to section 4(f) below) on the
record date mentioned below, the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of issuance of such rights, warrants or
options by a fraction of which the numerator shall be the number of shares of
common stock outstanding on the date of issuance of such rights, warrants or
options plus the number of shares which the aggregate offering price of the
total number of shares so offered for subscription or purchase would purchase at
such current market price, and of which the denominator shall be the number of
shares of common stock outstanding on the date of issuance of such rights,
warrants or options plus the number of additional shares of common stock which
are so offered for subscription or purchase. Such adjustment shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, warrant or options.
(3) In case the Corporation shall distribute to all holders of
common stock assets (other than any cash dividend payable out of earned surplus
or retained earnings) or rights, warrants or options to subscribe (other than
those referred to in subsection 4(d)(2) above) or evidences of indebtedness,
then in each such case the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
immediately prior to the date of such distribution by a fraction of which the
numerator shall be the current market price per share (determined as provided in
section 4(f) below) of the common stock on the record date mentioned below less
the then fair market value (as determined in good faith in a resolution of the
Board of Directors of the Corporation (which determination shall be conclusive
evidence of such fair market value), of the portion of the assets or evidences
of indebtedness so distributed or of such subscription rights, options or
warrants applicable to one share of common stock, and the denominator shall be
such current market price per share of the common stock. Such adjustment shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(4) In case of any consolidation of the Corporation with, or merger
of the Corporation into, any other corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation), or in case of
any conveyance or transfer of the property and assets of the Corporation
substantially as an entirety, each share of Series B Preferred Stock shall be
convertible into the number and kind of shares of stock and other securities and
property receivable upon such consolidation, merger, conveyance or transfer by a
holder of the number and kind of shares of the Corporation into which such
shares of Series B Preferred Stock might have been converted immediately prior
to such consolidation, merger,
-5-
conveyance or transfer. The above provisions of this subsection 4(d)(4) shall
similarly apply to successive consolidations, mergers, conveyances or transfers.
(e) No fractions of shares of common stock or scrip representing
fractions of shares shall be issued upon conversion of Series B Preferred Stock.
If any fraction of a share of common stock would, except for the provisions of
this section 4(e), be issuable on the conversion of any Series B Preferred
Stock, the Corporation shall make payment in lieu thereof of an amount in cash
equal to the current market value of such fraction (determined as provided in
section 4(f) below).
(f) For the purpose of any computation under sections 4(d) and 4(e)
above, the current market price per share of common stock on any date shall be
deemed to be the average of the daily closing prices for 30 consecutive trading
days commencing 45 trading days before the date in question. The closing price
for each day shall be the last reported sale price regular way or, in case no
such reported sale takes place on such day, the average of the reported closing
bid and asked prices regular way or, in case no such reported sale takes place
on such day, the average of the reported closing bid and asked prices regular
way, in either case on the consolidated tape of the principal national
securities exchange on which the common stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange the
average of the highest reported bid and lowest reported asked prices as reported
by the National Association of Securities Dealers Automatic Quotation System or,
if no so reported, then as furnished by the National Quotation Bureau
Incorporation, or if not so available, the fair market price as determined by
the Board of Directors of the Corporation (whose good faith determination shall
be conclusive and binding).
(g) The Corporation shall pay all transfer, documentary, stamp or
other transactional taxes attributable the issuance or delivery of shares of
common stock upon conversion of any shares of Series B Preferred Stock, but the
Corporation shall not be required to pay any taxes that may be payable in
respect of any transfer involved in the issuance or delivery of any shares of
common stock in a name other than that of the registered holder of shares of
Series B Preferred Stock.
(h) The Corporation shall reserve and keep available, out of its
treasury stock or authorized an unissued stock, or both, solely for the purpose
of effecting the conversion of shares of Series B Preferred Stock, a number of
shares of common stock the Corporation's Board of Directors determines to be
sufficient to effect the conversion of all shares of Series B Preferred Stock
from time to time outstanding.
5. Sinking Fund. The shares of Series B preferred Stock shall not be
entitled to the benefit of any sinking fund.
6. Voting Rights. Holders of shares of Series B Preferred Stock shall
not be entitled to vote on any matter, except as otherwise required by law or as
expressly provided in this Certificate of Designation. With respect to any
matter on which the holders of shares of Series B Preferred Stock shall be
entitled to vote, holders of shares of Series B Preferred Stock shall be
entitled to one vote for each share held.
-6-
7. Consents Required of Holders of Series B Preferred Stock. As long as
any shares of Series B Preferred Stock are outstanding, the Corporation shall
not, by amendment to the Corporation's Certificate of Incorporation, by
resolution of the Board of Directors of the Corporation, by consolidation of the
Corporation with, or merger of the Corporation into, another corporation, or in
any other manner, without the consent of the holders of a majority of the
outstanding shares of Series B Preferred Stock, either given by vote in person
or by proxy at a meeting called for that purpose or given in writing:
(i) authorize, or increase the authorized amount of, any class
or series of stock having preference or priority over the Series B
Preferred Stock as to dividends, the distribution of assets upon
liquidation or redemption; or
(ii) materially and adversely alter any material provision of
the Series B Preferred Stock.
Notwithstanding anything to the contrary contained in this Certificate, the
Board of Directors of the Corporation from time to time without a vote of the
holders of the shares of Series B Preferred Stock, may decrease the number of
shares constituting the Series B Preferred Stock, but not below such number of
shares of Series B Preferred Stock as are actually outstanding at any such time.
8. Liquidation Rights. (a) Upon the voluntary or involuntary
dissolution, liquidation or winding-up of the Corporation, the holders of shares
of Series B Preferred Stock shall be entitled to receive out of the assets of
the Corporation, for each such share of Series B Preferred Stock, cash in an
amount equal to the sum of $500 plus an amount equal to all accumulated and
unpaid dividends per share (whether or not earned or declared) for all dividend
periods (including a prorated quarterly dividend from the last preceding
Dividend Payment Date to the date of final distribution on those shares of
Series B Preferred Stock) before any payment or distribution shall be made on
the common stock or any other class or series of stock ranking junior to the
Series B Preferred Stock upon liquidation. The payment or distribution of any
assets upon the voluntary or involuntary dissolution, liquidation or winding-up
of the Corporation in respect of the Series B Preferred Stock shall be made
prior to the payment or distribution of any assets upon the voluntary or
involuntary dissolution, liquidation or winding-up of the Corporation in respect
of the Series A Preferred Stock.
(b) If the Corporation's assets available for distribution to the
holders of shares of Series B Preferred Stock upon any dissolution, liquidation
or winding-up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which holders of Series B Preferred
Stock are entitled pursuant to this section 8, no such distribution shall be
made on account of any shares of any other class of stock or series of preferred
stock ranking on a parity with the shares of Series B Preferred Stock unless the
distribution is made pro rata, so that the ratio of the amount distributed per
share on the Series B Preferred Stock to the amount distributed per share on
such other class or series shall be the
-7-
same as the ratio of the amount of the liquidation preference per share of the
Series B Preferred Stock to the amount of the liquidation preference per share
of such other class or series.
(c) For purposes of this section 8, the sale or other disposition
(for cash, shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Corporation shall be deemed a
dissolution, liquidation or winding-up of the Corporation, but the merger or
consolidation of the Corporation into or with any other corporation into or with
the Corporation, shall not be deemed to be a dissolution, liquidation or
winding-up of the Corporation.
(d) After the payment in cash to the holders of shares of Series B
Preferred Stock of the full preferential amounts set forth above, the holders of
shares of Series B Preferred Stock as such shall have no right or claim to any
of the remaining assets of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation to be signed by its President and Chief Executive
Officer as of the 1st day of April, 1999.
R.A.B. HOLDINGS, INC.
By: /s/ Richard A. Bernstein
--------------------------------------
Richard A. Bernstein
President and Chief Executive Officer
|
-8-
Exhibit 10.1.4
AMENDMENT TO CREDIT AGREEMENT
AMENDMENT, dated as of April 5, 1999 (this "Amendment"), to
the Amended and Restated Credit Agreement, dated as of May 1, 1998 (as amended,
modified or supplemented from time to time in accordance with its terms, the
"Credit Agreement"), by and among Millbrook Distribution Services Inc., a
Delaware corporation ("Millbrook"), The B. Manischewitz Company, LLC, a Delaware
limited liability company ("Manischewitz" and, together with Millbrook, the
"Borrowers"), the lenders (the "Lenders") named in Schedules 2.01(a) and 2.01(b)
to the Credit Agreement (as hereinafter defined), The Chase Manhattan Bank, as
administrative and collateral agent (in such capacity, the "Agent") for the
Lenders, and NationsBank, N.A., as co-agent and documentation agent.
WHEREAS, the Borrowers have requested that the Required
Lenders amend a provision of the Credit Agreement and the Required Lenders have
so agreed to amend such provision as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise specifically defined
herein, all capitalized terms used herein shall have the respective meanings
ascribed to such terms in the Credit Agreement.
2. Amendment to Credit Agreement. Subject to the conditions
as to effectiveness set forth in Paragraph 5 of this Amendment, Section 7.04 of
the Credit Agreement is hereby amended by adding a new clause (w) immediately
preceding clause (x) of said Section which reads as follows:
"(w) the Borrowers may make distributions or dividends to
Enterprises so that Enterprises can repurchase the Senior
Notes and/or that Enterprises can make distributions or
dividends to Holdings so that Holdings can repurchase the
Interest Reserve Notes; provided, however, that (i) in no
event shall the aggregate amount so distributed by the
Borrowers to Enterprises with the proceeds of a Revolving
Credit Loan exceed $18,000,000, (ii) in the event that
Enterprises does not retire the Senior Notes upon their
repurchase, Enterprises shall cause such Senior Notes to be
pledged to the Agent (for the ratable benefit of the Lenders)
pursuant to the Pledge Agreement and (iii) in no event shall
(A) the Borrowers make any such distribution to Enterprises or
(B) Enterprises make any such distribution to Holdings, if, in
either case, such distribution is not permitted by the terms
of the Indenture, dated as of May 1, 1998, among Enterprises,
the guarantors named therein and The Chase Manhattan Bank, as
successor to PNC Bank, National Association, as amended."
3. Covenant. The Borrowers hereby agree that upon the making
of the distribution to Enterprises referred to in Paragraph 2 above, the
Borrowers shall deliver to the Agent an accounting of the Senior Notes and/or
Interest Reserve Notes that were purchased with the proceeds of such
distribution.
4. Representations and Warranties. The Borrowers hereby
represent and warrant as of the date hereof as follows (which representations
and warranties shall survive the execution and delivery of this Amendment):
(1) All representations and warranties made by the
Borrowers in Article IV of the Credit Agreement and each of the other Loan
Documents are true and correct in all material respects as of the date hereof
with the same force and effect as if made on such date (except to the extent
that any such representation or warranty relates expressly to an earlier date).
(2) Each Borrower has the requisite power to execute,
deliver and carry out the terms and provisions of this Amendment.
(3) This Amendment has been duly executed and delivered
and constitutes the legal, valid and binding obligation of the Borrowers, and is
enforceable in accordance with its terms subject (i) as to enforcement of
remedies, to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally,
from time to time in effect, and (ii) to general principles of equity.
(4) No event has occurred and is continuing which
constitutes or would constitute a Default or an Event of Default under the
Credit Agreement.
5. Conditions Precedent. Notwithstanding any term or
provision of this Amendment to the contrary, Paragraph 2 hereof shall not become
effective until (i) the Agent shall have received counterparts of this
Amendment, duly executed and delivered on behalf of the Borrowers, Enterprises,
the Agent and the Lenders and (ii) the Borrowers shall have paid a fee equal to
$15,000 to each Lender signing this Amendment .
6. Fees and Expenses of Agent. The Borrowers agree to pay
all reasonable fees and out-of-pocket expenses incurred by the Agent in
connection with this Amendment, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel to the Agent.
7. References to Credit Agreements. The term "Agreement",
"hereof", "herein" and similar terms as used in the Credit Agreement, and
references in the other Loan Documents to the Credit Agreement, shall mean and
refer to, from and after the effective date of the amendment contained herein as
determined in accordance with Paragraph 5 hereof, the Credit Agreement as
amended by this Amendment.
2
8. Continued Effectiveness. Nothing herein shall be deemed
to be a waiver of any covenant or agreement contained in, or any Default or
Event of Default under, the Credit Agreement, and each of the parties hereto
agrees that, as amended by this Amendment, all of the covenants and agreements
and other provisions contained in the Credit Agreement and the other Loan
Documents shall remain in full force and effect from and after the date of this
Amendment.
9. Counterparts. This Amendment may be executed in two or
more counterparts, each of which shall be an original, and all of which, taken
together, shall constitute a single instrument. Delivery of an executed
counterpart of a signature page to this Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this Amendment.
10. Governing Law. This Amendment shall be construed in
accordance with and governed by the laws of the State of New York (other than
the conflicts of laws principles thereof).
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
MILLBROOK DISTRIBUTION SERVICES INC.
By: /s/ Richard A. Bernstein
---------------------------------
Name: Richard A. Bernstein
Title: Chief Executive Officer
|
THE B. MANISCHEWITZ COMPANY, LLC
By: Richard A. Bernstein, its managing member
/s/ Richard A. Bernstein
---------------------------------------
Richard A. Bernstein
|
3
THE CHASE MANHATTAN BANK, as Agent and
Lender
By: /s/ Michael J. Miller
-----------------------------------
Name: Michael J. Miller
Title: Vice President
|
NATIONSBANK, N.A., as Lender and Co-Agent
By: /s/ Thomas A. Buckelew
-----------------------------------
Name: Thomas A. Buckelew
Title: Vice President
|
FLEET BUSINESS CREDIT CORPORATION, as
Lender
By: /s/ Peter L. Skavta
------------------------------------
Name: Peter L. Skavta
Title: Senior Vice President
|
FLEET NATIONAL BANK, as Lender
By: /s/ Edward M. Powers
------------------------------------
Name: Edward M. Powers
Title: Vice President
|
LASALLE BUSINESS CREDIT CORPORATION, as
Lender
By: /s/ Lawrence P Garni
------------------------------------
Name: Lawrence P. Garni
Title: Senior Vice President
|
4
As to Paragraph 2 only:
R.A.B. ENTERPRISES, INC.
By: /s/ Richard A. Bernstein
------------------------------------------
Name: Richard A. Bernstein
Title: Chief Executive Officer
|
Exhibit 10.1.5
CONSENT AND AMENDMENT AGREEMENT
CONSENT AND AMENDMENT AGREEMENT, dated as of January 31, 2000
(this "Agreement"), to the Amended and Restated Credit Agreement, dated as of
May 1, 1998 (as heretofore amended and supplemented and as it in the future may
be amended, modified or supplemented from time to time in accordance with its
terms, the "Credit Agreement"), by and among Millbrook Distribution Services
Inc., a Delaware corporation ("Millbrook"), The B. Manischewitz Company, LLC, a
Delaware limited liability company ("Manischewitz" and, together with Millbrook,
the "Borrowers"), the lenders (the "Lenders") named in Schedules 2.01(a) and
2.01(b) to the Credit Agreement (as hereinafter defined), The Chase Manhattan
Bank, as administrative and collateral agent (in such capacity, the "Agent") for
the Lenders, and Bank of America, N.A., as co-agent and documentation agent.
WHEREAS, Millbrook is acquiring certain assets pursuant to the
terms and provisions of an Asset Purchase Agreement, dated as of January 6, 2000
(as amended, the "Asset Purchase Agreement"), by and among I. Epstein & Sons,
Inc., I. Epstein & Sons/New York, Inc., Gold Boat Corporation, Atlantic Gourmet
Inc., the Shareholders (as such term is defined in the Asset Purchase Agreement)
and Millbrook (such transaction being referred to herein as the "Transaction").
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise specifically defined
herein, all capitalized terms used herein shall have the respective meanings
ascribed to such terms in the Credit Agreement.
2. Consent under Credit Agreement. Subject to the conditions
as to effectiveness set forth in Paragraph 7 of this Agreement, the Required
Lenders hereby consent to the terms and provisions of the Transaction.
3. Schedules to Credit Agreement. Subject to the conditions
as to effectiveness set forth in Paragraph 7 of this Agreement, Schedules 4.01,
4.09, 4.19 and 7.06 to the Credit Agreement are hereby replaced in their
entirety by Schedules 4.01, 4.09, 4.19 and 7.06 attached hereto.
4. Security Agreement (Millbrook). Subject to the conditions
as to effectiveness set forth in Paragraph 7 of this Agreement, Schedule I to
the Security Agreement (Millbrook) is hereby amended by adding thereto the
locations of Collateral set forth on Schedule 1 attached hereto.
5. Security Agreement - Patents and Trademarks
(Manischewitz). Subject to the conditions as to effectiveness set forth in
Paragraph 7 of this Agreement, Schedule A to the Security
Agreement - Patents and Trademarks (Manischewitz) is hereby amended by adding
thereto the registered U.S. Trademarks and Trademark applications set forth on
Schedule 2 attached hereto.
6. Representations and Warranties. The Borrowers hereby
represent and warrant as of the date hereof as follows (which representations
and warranties shall survive the execution and delivery of this Agreement):
(1) All representations and warranties made by the
Borrowers in Article IV of the Credit Agreement and each of the other Loan
Documents, after taking into account the effect of this Agreement, are true and
correct in all material respects as of the date hereof with the same force and
effect as if made on such date (except to the extent that any such
representation or warranty relates expressly to an earlier date).
(2) Each Borrower has the requisite power to execute,
deliver and carry out the terms and provisions of this Agreement.
(3) This Agreement has been duly executed and delivered
by the Borrowers and constitutes the legal, valid and binding obligation of the
Borrowers, and is enforceable against the Borrowers in accordance with its terms
subject (i) as to enforcement of remedies, to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally, from time to time in effect, and (ii) to general
principles of equity.
(4) After giving effect to this Agreement, no event has
occurred and is continuing which constitutes or would constitute a Default or an
Event of Default under the Credit Agreement.
7. Conditions Precedent. Notwithstanding any term or
provision of this Agreement to the contrary, Paragraphs 2, 3, 4 and 5 hereof
shall not become effective until:
(1) the Agent shall have received counterparts of this
Agreement, duly executed and delivered on behalf of the Borrowers, Enterprises,
the Agent and the Lenders;
(2) the Agent shall have received evidence satisfactory
to it of the assignment by Millbrook to Manischewitz of all of Millbrook's
right, title and interest in and to all of the Trademarks and Trademark
applications acquired by Millbrook in connection with the Transaction;
(3) the Agent shall have received an Assignment for
Security (Trademarks), in substantially the same form as Exhibit 2 to the
Security Agreement - Patents and Trademarks (Manischewitz), with respect to all
of the Trademarks and Trademark applications acquired by Millbrook in connection
with the Transaction (which Trademarks and Trademark applications have been
assigned to Manischewitz);
2
(4) the Agent shall have received a written opinion of
Parker Chapin Flattau & Klimpl, LLP, counsel for the Borrowers, in form and
substance satisfactory to the Agent and its counsel;
(5) the Agent shall have received an acknowledgment copy,
or other evidence satisfactory to it, of each filing, registration or
recordation (including, without limitation, UCC-1 Financing Statements) required
by law or requested by the Agent to be filed, registered or recorded in order to
create in favor of the Agent for its own benefit and for the benefit of the
Lenders a first priority perfected security interest in the Collateral acquired
in connection with the Transaction;
(6) with respect to any Liens on the assets being
acquired pursuant to the Transaction which are not permitted by Section 7.01 of
the Credit Agreement, the Agent shall have received evidence, in form and
substance satisfactory to it, of the termination of all such Liens;
(7) the Agent shall have copies of all lease agreements
assumed by Millbrook in connection with the Transaction, together with
appropriate landlord waivers with respect thereto in form and substance
satisfactory to the Agent;
(8) the Agent shall have (i) received a certified copy of
the Asset Purchase Agreement, including all amendments and schedules thereto, as
well as all agreements, document and instruments executed and delivered in
connection therewith (including opinions of legal counsel), (ii) received
evidence that the Asset Purchase Agreement is in full force and effect and all
consents, filings and approvals required by applicable law in connection
therewith shall have been obtained and made, (iii) determined that the terms and
provisions of all agreements and documents in connection with the Transaction,
including, without limitation, the Asset Purchase Agreement, are satisfactory in
form and substance and shall have determined to its satisfaction that the
consummation of the Transaction and other transactions contemplated by the Asset
Purchase Agreement are in compliance with all applicable laws and regulations
and (iv) received evidence satisfactory to it that no Default or Event of
Default would occur as a result of the Transaction;
(9) the Borrowers shall have paid a fee equal to $15,000
to each Lender signing this Agreement; and
(10) the Agent shall have received such other documents
as the Lenders or the Agent or the Agent's counsel shall reasonably deem
necessary.
8. Fees and Expenses of Agent. The Borrowers agree to pay
all reasonable fees and out-of-pocket expenses incurred by the Agent in
connection with the preparation and negotiation of this Agreement, including,
without limitation, the field examination performed in connection with the
Transaction and the reasonable fees and out-of-pocket expenses of counsel to the
Agent.
3
9. References to Agreements. The term "Agreement", "hereof",
"herein" and similar terms as used in the Security Agreement (Millbrook) or in
the Security Agreement - Patents and Trademarks (Millbrook), and references in
the Credit Agreement and the other Loan Documents to the Security Agreement
(Millbrook) and the Security Agreement -Patents and Trademarks (Millbrook),
shall mean and refer to, from and after the effective date of the amendments
contained herein as determined in accordance with Paragraph 6 hereof, such
agreements as amended by this Agreement.
10. Continued Effectiveness. Nothing herein shall be deemed
to be a waiver of any covenant or agreement contained in, or any Default or
Event of Default under, the Credit Agreement or any of the other Loan Documents,
except as expressly provided for hereby, and each of the parties hereto agrees
that, as amended by this Agreement, all of the covenants and agreements and
other provisions contained in the Security Agreement (Millbrook), the Security
Agreement - Patents and Trademarks (Millbrook) and the other Loan Documents
shall remain in full force and effect from and after the date of this Agreement.
11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original, and all of which, when
taken together, shall constitute a single instrument. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Agreement.
[Remainder of Page Left Intentionally Blank]
4
12. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the tate of New York (other than the
conflicts of laws principles thereof).
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
MILLBROOK DISTRIBUTION SERVICES INC.
By: /s/ Richard A. Bernstein
-----------------------------------
Name: Richard A. Bernstein
Title: Chief Executive Officer
|
THE B. MANISCHEWITZ COMPANY, LLC
By: Richard A. Bernstein, its managing
member
/s/ Richard A. Bernstein
-----------------------------------
Richard A. Bernstein
|
THE CHASE MANHATTAN BANK, as Agent and
Lender
By: /s/ Michael J. Miller
-----------------------------------
Name: Michael J. Miller
Title: Vice President
|
BANK OF AMERICA, N.A., as Lender and
Co-Agent
By: /s/ Frank Palmieri
-----------------------------------
Name: Frank Palmieri
Title: Vice President
|
5
FLEET BUSINESS CREDIT CORPORATION, as
Lender
By: /s/ Alan F. Lyster, Jr.
-----------------------------------
Name: Alan F. Lyster, Jr.
Title: Vice President
|
FLEET NATIONAL BANK, as Lender
By: /s/ Melissa A. Post
-----------------------------------
Name: Melissa A. Post
Title: Banking Officer
|
LASALLE BUSINESS CREDIT CORPORATION, as
Lender
By: /s/ Lawrence P. Garni
-----------------------------------
Name: Lawrence P. Garni
Title: First Vice President
|
6
|
ARTICLE 5
|
|
|
|
CIK: 1067702
|
|
NAME: R.A.B. HOLDINGS, INC.
|
|
MULTIPLIER: 1,000
|
|
|
|
PERIOD TYPE
|
12 MOS
|
|
FISCAL YEAR END
|
MAR 31 2000
|
|
PERIOD START
|
APR 01 1999
|
|
PERIOD END
|
MAR 31 2000
|
|
CASH
|
4,637
|
|
SECURITIES
|
3,145
|
|
RECEIVABLES
|
59,236
|
|
ALLOWANCES
|
(4,251)
|
|
INVENTORY
|
65,286
|
|
CURRENT ASSETS
|
133,810
|
|
PP&E
|
52,392
|
|
DEPRECIATION
|
(15,193)
|
|
TOTAL ASSETS
|
290,008
|
|
CURRENT LIABILITIES
|
79,261
|
|
BONDS
|
124,150
|
|
PREFERRED MANDATORY
|
0
|
|
PREFERRED
|
12,844
|
|
COMMON
|
1
|
|
OTHER SE
|
5,903
|
|
TOTAL LIABILITY AND EQUITY
|
290,008
|
|
SALES
|
0
|
|
TOTAL REVENUES
|
580,616
|
|
CGS
|
443,390
|
|
TOTAL COSTS
|
121,261
|
|
OTHER EXPENSES
|
564,651
|
|
LOSS PROVISION
|
0
|
|
INTEREST EXPENSE
|
18,960
|
|
INCOME PRETAX
|
(2,995)
|
|
INCOME TAX
|
(1,146)
|
|
INCOME CONTINUING
|
(1,849)
|
|
DISCONTINUED
|
0
|
|
EXTRAORDINARY
|
12,914
|
|
CHANGES
|
0
|
|
NET INCOME
|
11,065
|
|
EPS BASIC
|
0
|
|
EPS DILUTED
|
0
|
|
ARTICLE 5
|
|
|
|
CIK: 1067700
|
|
NAME: R.A.B. ENTERPRISES, INC
|
|
MULTIPLIER: 1,000
|
|
|
|
PERIOD TYPE
|
12 MOS
|
|
FISCAL YEAR END
|
MAR 31 2000
|
|
PERIOD START
|
APR 01 1999
|
|
PERIOD END
|
MAR 31 2000
|
|
CASH
|
4,618
|
|
SECURITIES
|
0
|
|
RECEIVABLES
|
59,236
|
|
ALLOWANCES
|
(4,251)
|
|
INVENTORY
|
65,286
|
|
CURRENT ASSETS
|
131,694
|
|
PP&E
|
52,392
|
|
DEPRECIATION
|
(15,193)
|
|
TOTAL ASSETS
|
285,330
|
|
CURRENT LIABILITIES
|
76,628
|
|
BONDS
|
99,150
|
|
PREFERRED MANDATORY
|
0
|
|
PREFERRED
|
0
|
|
COMMON
|
0
|
|
OTHER SE
|
41,703
|
|
TOTAL LIABILITY AND EQUITY
|
285,330
|
|
SALES
|
0
|
|
TOTAL REVENUES
|
580,570
|
|
CGS
|
443,390
|
|
TOTAL COSTS
|
121,240
|
|
OTHER EXPENSES
|
564,630
|
|
LOSS PROVISION
|
0
|
|
INTEREST EXPENSE
|
15,888
|
|
INCOME PRETAX
|
52
|
|
INCOME TAX
|
288
|
|
INCOME CONTINUING
|
(236)
|
|
DISCONTINUED
|
0
|
|
EXTRAORDINARY
|
4,742
|
|
CHANGES
|
0
|
|
NET INCOME
|
4,506
|
|
EPS BASIC
|
0
|
|
EPS DILUTED
|
0
|
|
|
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